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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)
Sheri Morris 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: | 10/31/16 |
Item 1. Report to Stockholders.
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![]() | Semiannual Report to Shareholders
| October 31, 2016 | ||
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Invesco American Value Fund
| ||||
Nasdaq: | ||||
A: MSAVX ∎ B: MGAVX ∎ C: MSVCX ∎ R: MSARX ∎ Y: MSAIX ∎ R5: MSAJX ∎ R6: MSAFX | ||||
| ||||
| ||||
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.
| ||||
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance
Performance summary
| ||
Fund vs. Indexes | ||
Cumulative total returns, 4/30/16 to 10/31/16, 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 | 2.79% | |
Class B Shares | 2.78 | |
Class C Shares | 2.39 | |
Class R Shares | 2.63 | |
Class Y Shares | 2.89 | |
Class R5 Shares | 2.95 | |
Class R6 Shares | 3.00 | |
S&P 500 Indexq (Broad Market Index) | 4.06 | |
Russell Midcap Value Indexq (Style-Specific Index) | 4.53 | |
Lipper Mid-Cap Value Funds Index∎ (Peer Group Index) | 3.44 | |
Source(s): qFactSet 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.
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For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco American Value Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (10/18/93) | 8.90 | % | ||
10 Years | 6.00 | |||
5 Years | 9.76 | |||
1 Year | -6.23 | |||
Class B Shares | ||||
Inception (8/1/95) | 8.82 | % | ||
10 Years | 6.49 | |||
5 Years | 10.74 | |||
1 Year | -5.36 | |||
Class C Shares | ||||
Inception (10/18/93) | 8.38 | % | ||
10 Years | 5.82 | |||
5 Years | 10.19 | |||
1 Year | -2.38 | |||
Class R Shares | ||||
Inception (3/20/07) | 5.71 | % | ||
5 Years | 10.72 | |||
1 Year | -1.04 | |||
Class Y Shares | ||||
Inception (2/7/06) | 7.37 | % | ||
10 Years | 6.86 | |||
5 Years | 11.28 | |||
1 Year | -0.52 | |||
Class R5 Shares | ||||
10 Years | 6.86 | % | ||
5 Years | 11.42 | |||
1 Year | -0.42 | |||
Class R6 Shares | ||||
10 Years | 6.79 | % | ||
5 Years | 11.41 | |||
1 Year | -0.30 |
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, prior to June 1, 2010, 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.
Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (10/18/93) | 9.06 | % | ||
10 Years | 6.62 | |||
5 Years | 13.30 | |||
1 Year | 1.40 | |||
Class B Shares | ||||
Inception (8/1/95) | 8.99 | % | ||
10 Years | 7.11 | |||
5 Years | 14.38 | |||
1 Year | 2.37 | |||
Class C Shares | ||||
Inception (10/18/93) | 8.54 | % | ||
10 Years | 6.44 | |||
5 Years | 13.75 | |||
1 Year | 5.54 | |||
Class R Shares | ||||
Inception (3/20/07) | 6.06 | % | ||
5 Years | 14.31 | |||
1 Year | 7.04 | |||
Class Y Shares | ||||
Inception (2/7/06) | 7.70 | % | ||
10 Years | 7.49 | |||
5 Years | 14.88 | |||
1 Year | 7.56 | |||
Class R5 Shares | ||||
10 Years | 7.50 | % | ||
5 Years | 15.03 | |||
1 Year | 7.73 | |||
Class R6 Shares | ||||
10 Years | 7.42 | % | ||
5 Years | 15.01 | |||
1 Year | 7.81 |
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.
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 1.32%, 1.32%, 2.06%, 1.57%, 1.07%, 0.95% and 0.86%, 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 1.33%, 1.33%, 2.07%, 1.58%, 1.08%, 0.96% and 0.87%, 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2018. See current prospectus for more information. |
3 Invesco American Value Fund
Letters to Shareholders
| ||
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the |
fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive.
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term |
decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. 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, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.40% |
| |||||||
Aerospace & Defense–3.24% | ||||||||
Textron Inc. | 1,468,061 | $ | 58,839,885 | |||||
Alternative Carriers–2.15% | ||||||||
Level 3 Communications, Inc.(b) | 694,894 | 39,018,298 | ||||||
Apparel Retail–0.89% | ||||||||
Ascena Retail Group, Inc.(b) | 3,287,293 | 16,074,863 | ||||||
Application Software–1.99% | ||||||||
Citrix Systems, Inc.(b) | 426,366 | 36,155,841 | ||||||
Automotive Retail–2.30% | ||||||||
Advance Auto Parts, Inc. | 298,207 | 41,772,837 | ||||||
Broadcasting–2.16% | ||||||||
Scripps Networks Interactive Inc.–Class A | 521,022 | 33,532,976 | ||||||
TEGNA Inc. | 290,819 | 5,705,869 | ||||||
39,238,845 | ||||||||
Building Products–4.65% | ||||||||
Johnson Controls International PLC | 1,447,701 | 58,371,304 | ||||||
Owens Corning | 532,710 | 25,985,594 | ||||||
84,356,898 | ||||||||
Communications Equipment–2.73% | ||||||||
Ciena Corp.(b) | 2,553,314 | 49,483,225 | ||||||
Construction & Engineering–2.59% | ||||||||
Fluor Corp. | 903,384 | 46,966,934 | ||||||
Construction Materials–2.16% | ||||||||
Eagle Materials Inc. | 483,305 | �� | 39,133,206 | |||||
Diversified Banks–2.39% | ||||||||
Comerica Inc. | 830,909 | 43,282,050 | ||||||
Diversified Chemicals–3.01% | ||||||||
Eastman Chemical Co. | 758,837 | 54,567,969 | ||||||
Diversified REIT’s–3.54% | ||||||||
Forest City Realty Trust, Inc.–Class A | 2,974,036 | 64,209,437 | ||||||
Electric Utilities–3.85% | ||||||||
Edison International | 615,404 | 45,219,886 | ||||||
FirstEnergy Corp. | 716,726 | 24,576,534 | ||||||
69,796,420 | ||||||||
Electronic Equipment & Instruments–4.78% | ||||||||
Keysight Technologies, Inc.(b) | 1,548,594 | 50,793,883 | ||||||
Zebra Technologies Corp.–Class A(b) | 545,463 | 35,913,284 | ||||||
86,707,167 | ||||||||
Environmental & Facilities Services–1.99% | ||||||||
Clean Harbors, Inc.(b) | 762,646 | 36,088,409 |
Shares | Value | |||||||
Health Care Distributors–1.73% | ||||||||
AmerisourceBergen Corp. | 446,004 | $ | 31,363,001 | |||||
Health Care Facilities–7.23% | ||||||||
Brookdale Senior Living Inc.(b) | 2,266,817 | 32,710,169 | ||||||
HealthSouth Corp. | 1,178,711 | 47,325,247 | ||||||
Universal Health Services, Inc.–Class B | 422,778 | 51,033,532 | ||||||
131,068,948 | ||||||||
Heavy Electrical Equipment–0.65% | ||||||||
Babcock & Wilcox Enterprises, Inc.(b) | 754,196 | 11,871,045 | ||||||
Hotels, Resorts & Cruise Lines–3.39% | ||||||||
Royal Caribbean Cruises Ltd. | 800,216 | 61,512,604 | ||||||
Industrial Machinery–2.06% | ||||||||
Ingersoll-Rand PLC | 555,731 | 37,395,139 | ||||||
Insurance Brokers–5.48% | ||||||||
Arthur J. Gallagher & Co. | 861,866 | 41,567,797 | ||||||
Willis Towers Watson PLC | 458,703 | 57,750,708 | ||||||
99,318,505 | ||||||||
Investment Banking & Brokerage–2.18% | ||||||||
Stifel Financial Corp.(b) | 1,009,451 | 39,509,912 | ||||||
IT Consulting & Other Services–2.26% | ||||||||
Teradata Corp.(b) | 1,518,702 | 40,944,206 | ||||||
Marine–0.59% | ||||||||
Kirby Corp.(b) | 182,769 | 10,774,232 | ||||||
Oil & Gas Equipment & Services–3.44% | ||||||||
Amec Foster Wheeler PLC (United Kingdom) | 3,028,146 | 16,512,663 | ||||||
Baker Hughes Inc. | 828,410 | 45,893,914 | ||||||
62,406,577 | ||||||||
Oil & Gas Exploration & Production–3.24% | ||||||||
Devon Energy Corp. | 1,553,074 | 58,845,974 | ||||||
Packaged Foods & Meats–3.16% | ||||||||
ConAgra Foods, Inc. | 1,189,855 | 57,327,214 | ||||||
Property & Casualty Insurance–2.99% | ||||||||
FNF Group | 1,510,834 | 54,254,049 | ||||||
Regional Banks–7.38% | ||||||||
BB&T Corp. | 1,429,277 | 56,027,658 | ||||||
Wintrust Financial Corp. | 890,530 | 48,044,094 | ||||||
Zions Bancorp. | 926,006 | 29,826,653 | ||||||
133,898,405 | ||||||||
Retail REIT’s–1.85% | ||||||||
Kimco Realty Corp. | 1,260,108 | 33,531,474 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco American Value Fund
Shares | Value | |||||||
Specialty Chemicals–1.85% | ||||||||
W.R. Grace & Co. | 501,203 | $ | 33,560,553 | |||||
Technology Hardware, Storage & Peripherals–1.48% | ||||||||
Diebold, Inc. | 1,229,142 | 26,795,296 | ||||||
Trucking–2.02% | ||||||||
Swift Transportation Co.(b) | 1,635,052 | 36,592,464 | ||||||
Total Common Stocks & Other Equity Interests |
| 1,766,661,882 | ||||||
Money Market Funds–1.78% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(c) | 19,332,811 | 19,332,811 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(c) | 12,888,540 | 12,888,540 | ||||||
Total Money Market Funds |
| 32,221,351 | ||||||
TOTAL INVESTMENTS–99.18% |
| 1,798,883,233 | ||||||
OTHER ASSETS LESS LIABILITIES–0.82% |
| 14,876,202 | ||||||
NET ASSETS–100.00% |
| $ | 1,813,759,435 |
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2016
Financials | 25.8 | % | ||
Industrials | 17.8 | |||
Information Technology | 13.2 | |||
Health Care | 9.0 | |||
Consumer Discretionary | 8.7 | |||
Materials | 7.0 | |||
Energy | 6.7 | |||
Utilities | 3.8 | |||
Consumer Staples | 3.2 | |||
Telecommunication Services | 2.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.6 |
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, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $1,642,980,479) | $ | 1,766,661,882 | ||
Investments in affiliated money market funds, at value and cost | 32,221,351 | |||
Total investments, at value (Cost $1,675,201,830) | 1,798,883,233 | |||
Foreign currencies, at value (Cost $5,574) | 5,581 | |||
Receivable for: | ||||
Investments sold | 26,856,875 | |||
Fund shares sold | 2,847,326 | |||
Dividends | 464,126 | |||
Investment for trustee deferred compensation and retirement plans | 161,851 | |||
Other assets | 86,326 | |||
Total assets | 1,829,305,318 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 7,901,496 | |||
Fund shares reacquired | 6,083,619 | |||
Accrued fees to affiliates | 1,301,186 | |||
Accrued trustees’ and officers’ fees and benefits | 3,476 | |||
Accrued other operating expenses | 68,981 | |||
Trustee deferred compensation and retirement plans | 187,125 | |||
Total liabilities | 15,545,883 | |||
Net assets applicable to shares outstanding | $ | 1,813,759,435 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 1,665,128,043 | ||
Undistributed net investment income | 15,348,240 | |||
Undistributed net realized gain | 9,601,742 | |||
Net unrealized appreciation | 123,681,410 | |||
$ | 1,813,759,435 |
Net Assets: |
| |||
Class A | $ | 1,045,203,048 | ||
Class B | $ | 10,232,591 | ||
Class C | $ | 97,584,658 | ||
Class R | $ | 51,294,855 | ||
Class Y | $ | 339,400,221 | ||
Class R5 | $ | 113,267,055 | ||
Class R6 | $ | 156,777,007 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 29,899,128 | |||
Class B | 330,094 | |||
Class C | 3,304,964 | |||
Class R | 1,478,592 | |||
Class Y | 9,631,589 | |||
Class R5 | 3,208,640 | |||
Class R6 | 4,435,042 | |||
Class A: | ||||
Net asset value per share | $ | 34.96 | ||
Maximum offering price per share | ||||
(Net asset value of $34.96 ¸ 94.50%) | $ | 36.99 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 31.00 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 29.53 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 34.69 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 35.24 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 35.30 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 35.35 |
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, 2016
(Unaudited)
Investment income: |
| |||
Dividends | $ | 21,169,493 | ||
Dividends from affiliated money market funds | 92,932 | |||
Other income | 21,226 | |||
Total investment income | 21,283,651 | |||
Expenses: | ||||
Advisory fees | 6,835,828 | |||
Administrative services fees | 220,421 | |||
Distribution fees: | ||||
Class A | 1,410,563 | |||
Class B | 15,338 | |||
Class C | 505,510 | |||
Class R | 149,019 | |||
Transfer agent fees — A, B, C, R and Y | 1,869,704 | |||
Transfer agent fees — R5 | 63,401 | |||
Transfer agent fees — R6 | 6,882 | |||
Trustees’ and officers’ fees and benefits | 25,401 | |||
Registration and filing fees | 80,136 | |||
Reports to shareholders | 108,429 | |||
Professional services fees | 19,443 | |||
Other | 20,428 | |||
Total expenses | 11,330,503 | |||
Less: Fees waived and expense offset arrangement(s) | (39,996 | ) | ||
Net expenses | 11,290,507 | |||
Net investment income | 9,993,144 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 18,642,233 | |||
Foreign currencies | (80,027 | ) | ||
18,562,206 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 31,656,097 | |||
Foreign currencies | (7 | ) | ||
31,656,090 | ||||
Net realized and unrealized gain | 50,218,296 | |||
Net increase in net assets resulting from operations | $ | 60,211,440 |
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, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income | $ | 9,993,144 | $ | 6,649,648 | ||||
Net realized gain | 18,562,206 | 29,113,547 | ||||||
Change in net unrealized appreciation (depreciation) | 31,656,090 | (263,401,831 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 60,211,440 | (227,638,636 | ) | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (267,252 | ) | |||||
Class B | — | (4,958 | ) | |||||
Class Y | — | (467,049 | ) | |||||
Class R5 | — | (104,916 | ) | |||||
Class R6 | — | (206,950 | ) | |||||
Total distributions from net investment income | — | (1,051,125 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (77,822,348 | ) | |||||
Class B | — | (1,235,547 | ) | |||||
Class C | — | (8,687,666 | ) | |||||
Class R | — | (4,617,643 | ) | |||||
Class Y | — | (34,116,638 | ) | |||||
Class R5 | — | (6,570,735 | ) | |||||
Class R6 | — | (9,743,181 | ) | |||||
Total distributions from net realized gains | — | (142,793,758 | ) | |||||
Share transactions–net: | ||||||||
Class A | (109,136,090 | ) | 83,722,233 | |||||
Class B | (3,367,587 | ) | (7,667,419 | ) | ||||
Class C | (8,696,991 | ) | 651,894 | |||||
Class R | (16,721,906 | ) | 1,561,228 | |||||
Class Y | (128,620,376 | ) | (1,702,438 | ) | ||||
Class R5 | (19,243,534 | ) | 47,360,783 | |||||
Class R6 | 9,843,352 | 24,141,535 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (275,943,132 | ) | 148,067,816 | |||||
Net increase (decrease) in net assets | (215,731,692 | ) | (223,415,703 | ) | ||||
Net assets: | ||||||||
Beginning of period | 2,029,491,127 | 2,252,906,830 | ||||||
End of period (includes undistributed net investment income of $15,348,240 and $5,355,096, respectively) | $ | 1,813,759,435 | $ | 2,029,491,127 |
Notes to Financial Statements
October 31, 2016
(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 Y shares are available only to certain investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y,
9 Invesco American Value Fund
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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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
10 Invesco American Value Fund
are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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
11 Invesco American Value Fund
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 forward 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 | .72% | ||||||
Next $535 million | 0 | .715% | ||||||
Next $31.965 billion | 0 | .65% | ||||||
Over $33 billion | 0 | .64% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.69%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $36,204.
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, 2016, 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, 2016, 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, 2016, 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, 2016, IDI advised the Fund that IDI retained $205,725 in front-end sales commissions from the sale of Class A shares and $10,122, $593 and $2,790 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $5,487 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
12 Invesco American Value 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, 2016. 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 | |||||||||||||
Common Stocks & Other Equity Interests | $ | 1,750,149,219 | $ | 16,512,663 | $ | — | $ | 1,766,661,882 | ||||||||
Money Market Funds | 32,221,351 | — | — | 32,221,351 | ||||||||||||
Total Investments | $ | 1,782,370,570 | $ | 16,512,663 | $ | — | $ | 1,798,883,233 |
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, 2016, the Fund engaged in securities purchases of $1,670,454.
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $3,792.
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 were eligible to participate in a retirement plan that provided 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.
13 Invesco American 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 eight 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 carryforwards 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, 2016.
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, 2016 was $402,743,833 and $666,950,188, 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 | $ | 275,102,010 | ||
Aggregate unrealized (depreciation) of investment securities | (153,386,657 | ) | ||
Net unrealized appreciation of investment securities | $ | 121,715,353 |
Cost of investments for tax purposes is $1,677,167,880.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 2,171,026 | $ | 75,748,743 | 7,137,696 | $ | 258,087,074 | ||||||||||
Class B | 3,299 | 103,166 | 16,426 | 533,330 | ||||||||||||
Class C | 246,002 | 7,254,699 | 699,117 | 21,849,862 | ||||||||||||
Class R | 143,868 | 4,994,711 | 823,663 | 29,130,609 | ||||||||||||
Class Y | 2,119,841 | 75,276,369 | 4,256,340 | 155,553,783 | ||||||||||||
Class R5 | 771,472 | 27,462,395 | 2,050,968 | 72,210,351 | ||||||||||||
Class R6 | 853,357 | 30,490,605 | 1,185,460 | 44,450,761 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 2,278,232 | 74,938,723 | ||||||||||||
Class B | — | — | 41,391 | 1,207,602 | ||||||||||||
Class C | — | — | 294,279 | 8,222,165 | ||||||||||||
Class R | — | — | 141,203 | 4,615,933 | ||||||||||||
Class Y | — | — | 912,244 | 30,244,433 | ||||||||||||
Class R5 | — | — | 199,420 | 6,618,773 | ||||||||||||
Class R6 | — | — | 299,276 | 9,949,333 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 65,237 | 2,276,708 | 180,123 | 6,522,318 | ||||||||||||
Class B | (73,581 | ) | (2,276,708 | ) | (202,032 | ) | (6,522,318 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (5,334,485 | ) | (187,161,541 | ) | (7,323,337 | ) | (255,825,882 | ) | ||||||||
Class B | (38,252 | ) | (1,194,045 | ) | (88,825 | ) | (2,886,033 | ) | ||||||||
Class C | (537,699 | ) | (15,951,690 | ) | (978,954 | ) | (29,420,133 | ) | ||||||||
Class R | (624,165 | ) | (21,716,617 | ) | (906,869 | ) | (32,185,314 | ) | ||||||||
Class Y | (5,707,740 | ) | (203,896,745 | ) | (5,375,982 | ) | (187,500,654 | ) | ||||||||
Class R5 | (1,306,606 | ) | (46,705,929 | ) | (846,727 | ) | (31,468,341 | ) | ||||||||
Class R6 | (585,521 | ) | (20,647,253 | ) | (855,945 | ) | (30,258,559 | ) | ||||||||
Net increase (decrease) in share activity | (7,833,947 | ) | $ | (275,943,132 | ) | 3,937,167 | $ | 148,067,816 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 33% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
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 (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 10/31/16 | $ | 34.01 | $ | 0.17 | $ | 0.78 | $ | 0.95 | $ | — | $ | — | $ | — | $ | 34.96 | 2.79 | % | $ | 1,045,203 | 1.20 | %(d) | 1.20 | %(d) | 0.93 | %(d) | 21 | % | ||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.44 | 0.09 | (4.06 | ) | (3.97 | ) | (0.01 | ) | (2.45 | ) | (2.46 | ) | 34.01 | (9.62 | ) | 1,122,286 | 1.19 | 1.20 | 0.26 | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 40.11 | 0.00 | 4.23 | 4.23 | (0.02 | ) | (3.88 | ) | (3.90 | ) | 40.44 | 11.27 | 1,242,480 | 1.19 | 1.20 | 0.01 | 34 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 35.77 | 0.06 | 7.14 | 7.20 | (0.12 | ) | (2.74 | ) | (2.86 | ) | 40.11 | 20.62 | 1,086,506 | 1.19 | 1.20 | 0.15 | 46 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 30.90 | 0.17 | 4.86 | 5.03 | (0.16 | ) | — | (0.16 | ) | 35.77 | 16.35 | 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 | 700,857 | 1.31 | 1.32 | 0.52 | 30 | ||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 30.16 | 0.15 | 0.69 | 0.84 | — | — | — | 31.00 | 2.78 | (e) | 10,233 | 1.20 | (d)(e) | 1.20 | (d)(e) | 0.93 | (d)(e) | 21 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 36.18 | 0.08 | (3.64 | ) | (3.56 | ) | (0.01 | ) | (2.45 | ) | (2.46 | ) | 30.16 | (9.62 | )(e) | 13,230 | 1.19 | (e) | 1.20 | (e) | 0.26 | (e) | 28 | |||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 36.28 | 0.00 | 3.80 | 3.80 | (0.02 | ) | (3.88 | ) | (3.90 | ) | 36.18 | 11.27 | (e) | 24,302 | 1.19 | (e) | 1.20 | (e) | 0.01 | (e) | 34 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 32.58 | 0.05 | 6.50 | 6.55 | (0.11 | ) | (2.74 | ) | (2.85 | ) | 36.28 | 20.63 | (e) | 32,127 | 1.19 | (e) | 1.20 | (e) | 0.15 | (e) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.15 | 0.16 | 4.42 | 4.58 | (0.15 | ) | — | (0.15 | ) | 32.58 | 16.33 | (e) | 36,720 | 1.22 | (e) | 1.23 | (e) | 0.54 | (e) | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 27.19 | 0.14 | 0.90 | 1.04 | (0.08 | ) | — | (0.08 | ) | 28.15 | 3.84 | (e) | 43,561 | 1.27 | (e) | 1.28 | (e) | 0.56 | (e) | 30 | ||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 28.83 | 0.03 | 0.67 | 0.70 | — | — | — | 29.53 | 2.43 | (f) | 97,585 | 1.92 | (d)(f) | 1.92 | (d)(f) | 0.21 | (d)(f) | 21 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 34.95 | (0.15 | ) | (3.52 | ) | (3.67 | ) | — | (2.45 | ) | (2.45 | ) | 28.83 | (10.28 | )(f) | 103,706 | 1.93 | (f) | 1.94 | (f) | (0.48 | )(f) | 28 | |||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 35.41 | (0.26 | ) | 3.68 | 3.42 | — | (3.88 | ) | (3.88 | ) | 34.95 | 10.44 | (f) | 125,201 | 1.92 | (f) | 1.93 | (f) | (0.72 | )(f) | 34 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 32.00 | (0.20 | ) | 6.37 | 6.17 | (0.02 | ) | (2.74 | ) | (2.76 | ) | 35.41 | 19.76 | (f) | 111,455 | 1.91 | (f) | 1.92 | (f) | (0.57 | )(f) | 46 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 27.70 | (0.06 | ) | 4.36 | 4.30 | — | — | — | 32.00 | 15.52 | 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 | (f) | 76,053 | 2.03 | (f) | 2.04 | (f) | (0.20 | )(f) | 30 | |||||||||||||||||||||||||||||||||||||
Class R |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 33.80 | 0.12 | 0.77 | 0.89 | — | — | — | 34.69 | 2.63 | 51,295 | 1.45 | (d) | 1.45 | (d) | 0.68 | (d) | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.29 | 0.00 | (4.04 | ) | (4.04 | ) | — | (2.45 | ) | (2.45 | ) | 33.80 | (9.82 | ) | 66,207 | 1.44 | 1.45 | 0.01 | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 40.06 | (0.10 | ) | 4.21 | 4.11 | — | (3.88 | ) | (3.88 | ) | 40.29 | 10.97 | 76,594 | 1.44 | 1.45 | (0.24 | ) | 34 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 35.74 | (0.04 | ) | 7.15 | 7.11 | (0.05 | ) | (2.74 | ) | (2.79 | ) | 40.06 | 20.34 | 67,420 | 1.44 | 1.45 | (0.10 | ) | 46 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 30.87 | 0.10 | 4.86 | 4.96 | (0.09 | ) | — | (0.09 | ) | 35.74 | 16.08 | 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 | 36,695 | 1.56 | 1.57 | 0.27 | 30 | ||||||||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 34.25 | 0.21 | 0.78 | 0.99 | — | — | — | 35.24 | 2.89 | 339,400 | 0.95 | (d) | 0.95 | (d) | 1.18 | (d) | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.62 | 0.18 | (4.07 | ) | (3.89 | ) | (0.03 | ) | (2.45 | ) | (2.48 | ) | 34.25 | (9.36 | ) | 452,703 | 0.94 | 0.95 | 0.51 | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 40.26 | 0.11 | 4.24 | 4.35 | (0.11 | ) | (3.88 | ) | (3.99 | ) | 40.62 | 11.55 | 545,456 | 0.94 | 0.95 | 0.26 | 34 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 35.90 | 0.16 | 7.16 | 7.32 | (0.22 | ) | (2.74 | ) | (2.96 | ) | 40.26 | 20.91 | 452,580 | 0.94 | 0.95 | 0.40 | 46 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 31.01 | 0.25 | 4.88 | 5.13 | (0.24 | ) | — | (0.24 | ) | 35.90 | 16.65 | 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 | 259,308 | 1.06 | 1.07 | 0.77 | 30 | ||||||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 34.29 | 0.23 | 0.78 | 1.01 | — | — | — | 35.30 | 2.95 | 113,267 | 0.83 | (d) | 0.83 | (d) | 1.30 | (d) | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.63 | 0.22 | (4.07 | ) | (3.85 | ) | (0.04 | ) | (2.45 | ) | (2.49 | ) | 34.29 | (9.26 | ) | 128,357 | 0.82 | 0.83 | 0.63 | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 40.28 | 0.15 | 4.24 | 4.39 | (0.16 | ) | (3.88 | ) | (4.04 | ) | 40.63 | 11.66 | 95,082 | 0.82 | 0.83 | 0.38 | 34 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 35.91 | 0.20 | 7.18 | 7.38 | (0.27 | ) | (2.74 | ) | (3.01 | ) | 40.28 | 21.06 | 72,753 | 0.84 | 0.85 | 0.50 | 46 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 31.02 | 0.29 | 4.89 | 5.18 | (0.29 | ) | — | (0.29 | ) | 35.91 | 16.81 | 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 | 12,340 | 0.87 | 0.88 | 0.96 | 30 | ||||||||||||||||||||||||||||||||||||||||
Class R6 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 34.32 | 0.25 | 0.78 | 1.03 | — | — | — | 35.35 | 3.00 | 156,777 | 0.74 | (d) | 0.74 | (d) | 1.39 | (d) | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.64 | 0.25 | (4.07 | ) | (3.82 | ) | (0.05 | ) | (2.45 | ) | (2.50 | ) | 34.32 | (9.19 | ) | 143,003 | 0.73 | 0.74 | 0.72 | 28 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 40.28 | 0.19 | 4.25 | 4.44 | (0.20 | ) | (3.88 | ) | (4.08 | ) | 40.64 | 11.77 | 143,793 | 0.73 | 0.74 | 0.47 | 34 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 35.90 | 0.23 | 7.18 | 7.41 | (0.29 | ) | (2.74 | ) | (3.03 | ) | 40.28 | 21.19 | 85,325 | 0.75 | 0.76 | 0.59 | 46 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13(g) | 31.40 | 0.22 | 4.45 | 4.67 | (0.17 | ) | — | (0.17 | ) | 35.90 | 14.92 | 53,538 | 0.75 | (h) | 0.76 | (h) | 1.01 | (h) | 28 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended 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. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $1,119,251, $12,171, $103,812, $59,122, $407,816, $125,831 and $150,837 for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares, respectively. |
(e) | 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%, 0.25%, 0.25%, 0.25% and 0.21% for the six months ended October 31, 2016 and the years ended April 30, 2016, 2015, 2014, 2013, and 2012, respectively. |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.97%, 0.99%, 0.98%, 0.98%, and 0.97% for the six months ended October 31, 2016 and the years ended April 30, 2016, 2015, 2014 and 2012, respectively. |
(g) | Commencement date of September 24, 2012 for Class R6 shares. |
(h) | Annualized. |
15 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,027.90 | $ | 6.13 | $ | 1,019.16 | $ | 6.11 | 1.20 | % | ||||||||||||
B | 1,000.00 | 1,027.80 | 6.13 | 1,019.16 | 6.11 | 1.20 | ||||||||||||||||||
C | 1,000.00 | 1,023.90 | 9.79 | 1,015.53 | 9.75 | 1.92 | ||||||||||||||||||
R | 1,000.00 | 1,026.30 | 7.41 | 1,017.90 | 7.38 | 1.45 | ||||||||||||||||||
Y | 1,000.00 | 1,028.90 | 4.86 | 1,020.42 | 4.84 | 0.95 | ||||||||||||||||||
R5 | 1,000.00 | 1,029.50 | 4.25 | 1,021.02 | 4.23 | 0.83 | ||||||||||||||||||
R6 | 1,000.00 | 1,030.00 | 3.79 | 1,021.48 | 3.77 | 0.74 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, 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 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge performance universe and against the Lipper Mid-Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the fifth quintile of its performance universe for the one year period, the fourth quintile for the three year period, and the third quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one year, three year and five year periods. Advisers noted that concerns over the global economy drove investors to lower risk stocks versus the less defensive/more cyclically exposed stocks in which the Fund invested. The Trustees also
17 Invesco American Value Fund
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 Broadridge expense group at a common asset level. The Board noted that the contractual management fee rate for Class A shares of the Fund was at the median contractual management fee rate of funds in its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the effective advisory fee rate of one mutual fund advised by Invesco Advisers. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of five mutual funds sub-advised by Invesco Advisers. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage other client accounts using an investment process substantially similar to the investment process used for 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco
Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered that the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and was advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
18 Invesco American Value Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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, 2016 | ||
| ||||
Invesco Comstock Fund
| ||||
Nasdaq: | ||||
A: ACSTX ∎ B: ACSWX ∎ C: ACSYX ∎ R: ACSRX ∎ Y: ACSDX ∎ R5: ACSHX ∎ R6: ICSFX | ||||
| ||||
| ||||
2 Fund Performance | ||||
4 Letters to Shareholders | ||||
5 Schedule of Investments | ||||
8 Financial Statements | ||||
10 Notes to Financial Statements | ||||
18 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, 4/30/16 to 10/31/16, 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 | 4.61% | |
Class B Shares | 4.61 | |
Class C Shares | 4.22 | |
Class R Shares | 4.47 | |
Class Y Shares | 4.74 | |
Class R5 Shares | 4.74 | |
Class R6 Shares | 4.84 | |
S&P 500 Indexq (Broad Market Index) | 4.06 | |
Russell 1000 Value Indexq (Style-Specific Index) | 4.36 | |
Lipper Large-Cap Value Funds Index∎ (Peer Group Index) | 4.12 | |
Source(s): qFactSet 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 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.
|
For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco Comstock Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (10/7/68) | 10.58 | % | ||
10 Years | 4.67 | |||
5 Years | 10.62 | |||
1 Year | -3.12 | |||
Class B Shares | ||||
Inception (10/19/92) | 9.41 | % | ||
10 Years | 5.14 | |||
5 Years | 11.53 | |||
1 Year | -2.09 | |||
Class C Shares | ||||
Inception (10/26/93) | 8.70 | % | ||
10 Years | 4.48 | |||
5 Years | 11.04 | |||
1 Year | 0.84 | |||
Class R Shares | ||||
Inception (10/1/02) | 8.47 | % | ||
10 Years | 5.00 | |||
5 Years | 11.60 | |||
1 Year | 2.25 | |||
Class Y Shares | ||||
Inception (10/29/04) | 6.70 | % | ||
10 Years | 5.53 | |||
5 Years | 12.16 | |||
1 Year | 2.78 | |||
Class R5 Shares | ||||
10 Years | 5.51 | % | ||
5 Years | 12.27 | |||
1 Year | 2.84 | |||
Class R6 Shares | ||||
10 Years | 5.46 | % | ||
5 Years | 12.29 | |||
1 Year | 2.99 |
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, prior to June 1, 2010, 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 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (10/7/68) | 10.62 | % | ||
10 Years | 5.01 | |||
5 Years | 13.30 | |||
1 Year | 5.88 | |||
Class B Shares | ||||
Inception (10/19/92) | 9.49 | % | ||
10 Years | 5.47 | |||
5 Years | 14.25 | |||
1 Year | 7.04 | |||
Class C Shares | ||||
Inception (10/26/93) | 8.78 | % | ||
10 Years | 4.81 | |||
5 Years | 13.72 | |||
1 Year | 10.16 | |||
Class R Shares | ||||
Inception (10/1/02) | 8.59 | % | ||
10 Years | 5.34 | |||
5 Years | 14.30 | |||
1 Year | 11.75 | |||
Class Y Shares | ||||
Inception (10/29/04) | 6.82 | % | ||
10 Years | 5.87 | |||
5 Years | 14.86 | |||
1 Year | 12.27 | |||
Class R5 Shares | ||||
10 Years | 5.85 | % | ||
5 Years | 14.99 | |||
1 Year | 12.39 | |||
Class R6 Shares | ||||
10 Years | 5.80 | % | ||
5 Years | 14.99 | |||
1 Year | 12.55 |
fees applicable to Class A shares.
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.
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 0.85%, 0.85%, 1.57%, 1.10%, 0.60%, 0.50% and 0.40%, 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 0.86%, 0.86%, 1.58%, 1.11%, 0.61%, 0.51% 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2018. See current prospectus for more information. |
3 Invesco Comstock Fund
Letters to Shareholders
| ||
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive. |
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, |
visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Comstock Fund
Schedule of Investments(a)
October 31, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.03% |
| |||||||
Aerospace & Defense–1.35% | ||||||||
Textron Inc. | 3,859,648 | $ | 154,694,692 | |||||
Aluminum–0.96% | ||||||||
Arconic Inc. | 3,839,974 | 110,284,053 | ||||||
Apparel, Accessories & Luxury Goods–0.29% | ||||||||
Michael Kors Holdings Ltd.(b) | 641,883 | 32,594,819 | ||||||
Asset Management & Custody Banks–3.09% | ||||||||
Bank of New York Mellon Corp. (The) | 3,301,690 | 142,864,126 | ||||||
State Street Corp. | 3,003,603 | 210,882,967 | ||||||
353,747,093 | ||||||||
Auto Parts & Equipment–0.17% | ||||||||
Adient PLC(b) | 428,062 | 19,481,115 | ||||||
Automobile Manufacturers–1.83% | ||||||||
General Motors Co. | 6,626,239 | 209,389,152 | ||||||
Automotive Retail–0.46% | ||||||||
Advance Auto Parts, Inc. | 376,718 | 52,770,657 | ||||||
Biotechnology–2.46% | ||||||||
AbbVie Inc. | 1,378,906 | 76,915,377 | ||||||
Biogen Inc.(b) | 423,867 | 118,759,056 | ||||||
Gilead Sciences, Inc. | 1,159,631 | 85,383,630 | ||||||
281,058,063 | ||||||||
Broadcasting–0.59% | ||||||||
CBS Corp.–Class B | 1,201,042 | 68,002,998 | ||||||
Building Products–1.51% | ||||||||
Johnson Controls International PLC | 4,280,623 | 172,594,719 | ||||||
Cable & Satellite–1.78% | ||||||||
Charter Communications, Inc.– | 323,689 | 80,886,644 | ||||||
Comcast Corp.–Class A | 1,993,203 | 123,219,810 | ||||||
204,106,454 | ||||||||
Communications Equipment–2.57% | ||||||||
Cisco Systems, Inc. | 9,604,277 | 294,659,218 | ||||||
Construction Machinery & Heavy Trucks–1.92% | ||||||||
Caterpillar Inc. | 2,638,375 | 220,198,777 | ||||||
Consumer Finance–1.36% | ||||||||
Ally Financial Inc. | 8,612,879 | 155,634,723 | ||||||
Data Processing & Outsourced Services–0.79% | ||||||||
PayPal Holdings, Inc.(b) | 2,176,633 | 90,678,531 | ||||||
Diversified Banks–15.33% | ||||||||
Bank of America Corp. | 23,877,956 | 393,986,274 | ||||||
Citigroup Inc. | 12,185,621 | 598,923,272 |
Shares | Value | |||||||
Diversified Banks–(continued) | ||||||||
JPMorgan Chase & Co. | 7,217,866 | $ | 499,909,399 | |||||
U.S. Bancorp | 1,171,819 | 52,450,619 | ||||||
Wells Fargo & Co. | 4,562,202 | 209,906,914 | ||||||
1,755,176,478 | ||||||||
Drug Retail–0.97% | ||||||||
CVS Health Corp. | 1,322,169 | 111,194,413 | ||||||
Electric Utilities–0.82% | ||||||||
FirstEnergy Corp. | 2,213,779 | 75,910,482 | ||||||
PG&E Corp. | 294,645 | 18,303,347 | ||||||
94,213,829 | ||||||||
Electrical Components & Equipment–1.91% | ||||||||
Eaton Corp. PLC | 1,457,671 | 92,955,680 | ||||||
Emerson Electric Co. | 2,470,517 | 125,205,801 | ||||||
218,161,481 | ||||||||
Fertilizers & Agricultural Chemicals–0.52% | ||||||||
CF Industries Holdings, Inc. | 2,460,665 | 59,080,567 | ||||||
General Merchandise Stores–1.09% | ||||||||
Target Corp. | 1,816,905 | 124,875,881 | ||||||
Health Care Equipment–0.86% | ||||||||
Medtronic PLC | 1,197,450 | 98,214,849 | ||||||
Hotels, Resorts & Cruise Lines–2.84% | ||||||||
Carnival Corp. | 6,624,271 | 325,251,706 | ||||||
Hypermarkets & Super Centers–1.11% | ||||||||
Wal-Mart Stores, Inc. | 1,821,190 | 127,519,724 | ||||||
Industrial Conglomerates–1.26% | ||||||||
General Electric Co. | 4,951,590 | 144,091,269 | ||||||
Industrial Machinery–0.70% | ||||||||
Ingersoll-Rand PLC | 1,195,421 | 80,439,879 | ||||||
Integrated Oil & Gas–9.32% | ||||||||
BP PLC–ADR (United Kingdom) | 6,166,353 | 219,213,849 | ||||||
Chevron Corp. | 1,992,250 | 208,688,188 | ||||||
Occidental Petroleum Corp. | 1,565,476 | 114,138,855 | ||||||
Royal Dutch Shell PLC–Class A–ADR (United Kingdom) | 4,692,617 | 233,739,253 | ||||||
Suncor Energy, Inc. (Canada) | 9,706,253 | 291,381,715 | ||||||
1,067,161,860 | ||||||||
Integrated Telecommunication Services–0.88% | ||||||||
Frontier Communications Corp. | 25,016,592 | 100,566,700 | ||||||
Internet Software & Services–1.59% | ||||||||
eBay Inc.(b) | 5,030,623 | 143,423,062 | ||||||
Yahoo! Inc.(b) | 937,589 | 38,956,823 | ||||||
182,379,885 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Comstock Fund
Shares | Value | |||||||
Investment Banking & Brokerage–2.76% | ||||||||
Goldman Sachs Group, Inc. (The) | 657,287 | $ | 117,154,835 | |||||
Morgan Stanley | 5,937,515 | 199,322,378 | ||||||
316,477,213 | ||||||||
Life & Health Insurance–2.87% | ||||||||
Aflac, Inc. | 1,566,550 | 107,888,298 | ||||||
MetLife, Inc. | 4,706,161 | 221,001,321 | ||||||
328,889,619 | ||||||||
Managed Health Care–0.99% | ||||||||
Anthem, Inc. | 933,248 | 113,725,601 | ||||||
Movies & Entertainment–1.10% | ||||||||
Twenty-First Century Fox, Inc.–Class B | 4,769,565 | 125,868,820 | ||||||
Multi-Line Insurance–1.50% | ||||||||
American International Group, Inc. | 2,774,968 | 171,215,526 | ||||||
Oil & Gas Equipment & Services–2.19% | ||||||||
Halliburton Co. | 2,889,043 | 132,895,978 | ||||||
Weatherford International PLC(b) | 24,322,408 | 117,234,007 | ||||||
250,129,985 | ||||||||
Oil & Gas Exploration & Production–4.95% | ||||||||
Canadian Natural Resources Ltd. (Canada) | 3,324,971 | 105,531,419 | ||||||
Devon Energy Corp. | 4,711,966 | 178,536,392 | ||||||
Hess Corp. | 2,442,724 | 117,177,470 | ||||||
Marathon Oil Corp. | 5,345,591 | 70,454,889 | ||||||
QEP Resources Inc. | 5,897,936 | 94,779,832 | ||||||
566,480,002 | ||||||||
Packaged Foods & Meats–0.32% | ||||||||
Mondelez International, Inc.–Class A | 804,618 | 36,159,533 | ||||||
Paper Packaging–0.81% | ||||||||
International Paper Co. | 2,058,409 | 92,690,157 | ||||||
Personal Products–0.58% | ||||||||
Unilever N.V.–New York Shares (United Kingdom) | 1,580,129 | 66,080,995 | ||||||
Pharmaceuticals–5.90% | ||||||||
Merck & Co., Inc. | 2,958,210 | 173,706,091 | ||||||
Novartis AG (Switzerland) | 1,430,885 | 101,625,241 | ||||||
Pfizer Inc. | 7,232,861 | 229,354,023 | ||||||
Sanofi–ADR (France) | 4,403,826 | 171,264,793 | ||||||
675,950,148 |
Shares | Value | |||||||
Property & Casualty Insurance–1.47% | ||||||||
Allstate Corp. (The) | 2,470,403 | $ | 167,740,364 | |||||
Regional Banks–4.83% | ||||||||
Citizens Financial Group, Inc. | 4,126,582 | 108,694,170 | ||||||
Fifth Third Bancorp | 8,990,852 | 195,640,939 | ||||||
KeyCorp | 2,774,141 | 39,170,871 | ||||||
PNC Financial Services Group, Inc. (The) | 2,185,646 | 208,947,758 | ||||||
552,453,738 | ||||||||
Semiconductors–1.39% | ||||||||
Intel Corp. | 4,134,445 | 144,168,097 | ||||||
QUALCOMM, Inc. | 224,001 | 15,393,349 | ||||||
159,561,446 | ||||||||
Soft Drinks–0.47% | ||||||||
Coca-Cola Co. (The) | 1,274,727 | 54,048,425 | ||||||
Systems Software–1.86% | ||||||||
Microsoft Corp. | 2,858,966 | 171,309,242 | ||||||
Symantec Corp. | 1,677,361 | 41,984,346 | ||||||
213,293,588 | ||||||||
Technology Hardware, Storage & Peripherals–2.25% | ||||||||
HP Inc. | 5,025,154 | 72,814,481 | ||||||
NetApp, Inc. | 5,451,975 | 185,040,032 | ||||||
257,854,513 | ||||||||
Wireless Telecommunication Services–0.46% | ||||||||
Vodafone Group PLC (United Kingdom) | 19,237,284 | 52,811,593 | ||||||
Total Common Stocks & Other Equity Interests |
| 11,109,654,851 | ||||||
Money Market Funds–3.07% |
| |||||||
Government & Agency Portfolio– Institutional Class, 0.29%(c) | 210,950,154 | 210,950,154 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(c) | 140,633,436 | 140,633,436 | ||||||
Total Money Market Funds |
| 351,583,590 | ||||||
TOTAL INVESTMENTS–100.10% |
| 11,461,238,441 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.10)% |
| (11,865,389 | ) | |||||
NET ASSETS–100.00% |
| $ | 11,449,373,052 |
Investment Abbreviations:
ADR | – American Depositary Receipt |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Comstock Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2016
Financials | 33.2 | % | ||
Energy | 16.5 | |||
Information Technology | 10.5 | |||
Consumer Discretionary | 10.2 | |||
Health Care | 10.2 | |||
Industrials | 8.6 | |||
Consumer Staples | 3.4 | |||
Materials | 2.3 | |||
Telecommunication Services | 1.3 | |||
Utilities | 0.8 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.0 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Comstock Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $10,031,299,502) | $ | 11,109,654,851 | ||
Investments in affiliated money market funds, at value and cost | 351,583,590 | |||
Total investments, at value (Cost $10,382,883,092) | 11,461,238,441 | |||
Foreign currencies, at value (Cost $1,498) | 1,491 | |||
Receivable for: | ||||
Investments sold | 24,960,752 | |||
Fund shares sold | 10,016,078 | |||
Dividends | 11,497,683 | |||
Investment for trustee deferred compensation and retirement plans | 797,988 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 9,700,970 | |||
Other assets | 175,638 | |||
Total assets | 11,518,389,041 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 24,588,801 | |||
Fund shares reacquired | 33,947,666 | |||
Amount due custodian | 1,837,950 | |||
Accrued fees to affiliates | 7,153,596 | |||
Accrued trustees’ and officers’ fees and benefits | 13,070 | |||
Accrued other operating expenses | 455,886 | |||
Trustee deferred compensation and retirement plans | 958,685 | |||
Unrealized depreciation on forward foreign currency contracts outstanding | 60,335 | |||
Total liabilities | 69,015,989 | |||
Net assets applicable to shares outstanding | $ | 11,449,373,052 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 9,638,172,584 | ||
Undistributed net investment income | 74,774,451 | |||
Undistributed net realized gain | 648,549,450 | |||
Net unrealized appreciation | 1,087,876,567 | |||
$ | 11,449,373,052 |
Net Assets: |
| |||
Class A | $ | 6,247,173,545 | ||
Class B | $ | 55,116,114 | ||
Class C | $ | 495,341,144 | ||
Class R | $ | 322,067,050 | ||
Class Y | $ | 2,926,490,636 | ||
Class R5 | $ | 756,118,546 | ||
Class R6 | $ | 647,066,017 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 275,699,230 | |||
Class B | 2,433,261 | |||
Class C | 21,868,097 | |||
Class R | 14,214,891 | |||
Class Y | 129,140,380 | |||
Class R5 | 33,376,772 | |||
Class R6 | 28,569,279 | |||
Class A: | ||||
Net asset value per share | $ | 22.66 | ||
Maximum offering price per share | ||||
(Net asset value of $22.66 ¸ 94.50%) | $ | 23.98 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 22.65 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 22.65 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 22.66 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 22.66 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 22.65 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 22.65 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Comstock Fund
Statement of Operations
For the six months ended October 31, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $3,031,672) | $ | 168,481,642 | ||
Dividends from affiliated money market funds | 458,547 | |||
Other income | 115,651 | |||
Total investment income | 169,055,840 | |||
Expenses: | ||||
Advisory fees | 22,284,741 | |||
Administrative services fees | 420,022 | |||
Distribution fees: | ||||
Class A | 8,100,484 | |||
Class B | 80,057 | |||
Class C | 2,546,400 | |||
Class R | 871,050 | |||
Transfer agent fees — A, B, C, R and Y | 9,691,492 | |||
Transfer agent fees — R5 | 391,027 | |||
Transfer agent fees — R6 | 17,275 | |||
Trustees’ and officers’ fees and benefits | 104,656 | |||
Registration and filing fees | 166,761 | |||
Reports to shareholders | 406,628 | |||
Professional services fees | 58,613 | |||
Other | 111,963 | |||
Total expenses | 45,251,169 | |||
Less: Fees waived and expense offset arrangement(s) | (226,889 | ) | ||
Net expenses | 45,024,280 | |||
Net investment income | 124,031,560 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities (includes net gains from securities sold to affiliates of $11,066,231) | 428,638,985 | |||
Foreign currencies | (129,218 | ) | ||
Forward foreign currency contracts | 59,527,631 | |||
488,037,398 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (98,040,518 | ) | ||
Foreign currencies | (61,642 | ) | ||
Forward foreign currency contracts | 23,412,666 | |||
(74,689,494 | ) | |||
Net realized and unrealized gain | 413,347,904 | |||
Net increase in net assets resulting from operations | $ | 537,379,464 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
9 Invesco Comstock Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income | $ | 124,031,560 | $ | 242,641,918 | ||||
Net realized gain | 488,037,398 | 534,575,427 | ||||||
Change in net unrealized appreciation (depreciation) | (74,689,494 | ) | (1,736,473,522 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 537,379,464 | (959,256,177 | ) | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (57,755,574 | ) | (105,206,606 | ) | ||||
Class B | (572,621 | ) | (1,437,179 | ) | ||||
Class C | (2,724,282 | ) | (4,505,794 | ) | ||||
Class R | (2,666,282 | ) | (5,356,689 | ) | ||||
Class Y | (30,330,698 | ) | (55,413,940 | ) | ||||
Class R5 | (8,556,811 | ) | (15,019,301 | ) | ||||
Class R6 | (6,887,984 | ) | (12,141,275 | ) | ||||
Total distributions from net investment income | (109,494,252 | ) | (199,080,784 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (562,668,484 | ) | |||||
Class B | — | (7,384,068 | ) | |||||
Class C | — | (46,615,384 | ) | |||||
Class R | — | (35,892,409 | ) | |||||
Class Y | — | (254,406,075 | ) | |||||
Class R5 | — | (65,901,013 | ) | |||||
Class R6 | — | (49,927,542 | ) | |||||
Total distributions from net realized gains | — | (1,022,794,975 | ) | |||||
Share transactions–net: | ||||||||
Class A | (599,337,999 | ) | 122,928,142 | |||||
Class B | (17,699,178 | ) | (39,500,740 | ) | ||||
Class C | (55,445,774 | ) | (4,553,788 | ) | ||||
Class R | (49,402,429 | ) | (47,437,654 | ) | ||||
Class Y | (217,449,485 | ) | 150,211,762 | |||||
Class R5 | (97,689,065 | ) | 131,211,582 | |||||
Class R6 | 406,835 | 127,733,563 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (1,036,617,095 | ) | 440,592,867 | |||||
Net increase (decrease) in net assets | (608,731,883 | ) | (1,740,539,069 | ) | ||||
Net assets: | ||||||||
Beginning of period | 12,058,104,935 | 13,798,644,004 | ||||||
End of period (includes undistributed net investment income of $74,774,451 and $60,237,143, respectively) | $ | 11,449,373,052 | $ | 12,058,104,935 |
Notes to Financial Statements
October 31, 2016
(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.
10 Invesco Comstock Fund
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 Y shares are available only to certain investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y, 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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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
11 Invesco Comstock Fund
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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon
12 Invesco Comstock Fund
exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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 forward 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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.38%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $213,257.
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, 2016, 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, 2016, 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, 2016, 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
13 Invesco Comstock Fund
proceeds prior to remittance to the shareholder. During the six months ended October 31, 2016, IDI advised the Fund that IDI retained $292,044 in front-end sales commissions from the sale of Class A shares and $15,573, $1,748 and $7,252 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $18,003 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, 2016. 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 | |||||||||||||
Common Stocks & Other Equity Interests | $ | 10,955,218,017 | $ | 154,436,834 | $ | — | $ | 11,109,654,851 | ||||||||
Money Market Funds | 351,583,590 | — | — | 351,583,590 | ||||||||||||
Total Investments | 11,306,801,607 | 154,436,834 | — | 11,461,238,441 | ||||||||||||
Forward Foreign Currency Contracts* | — | 9,640,635 | — | 9,640,635 | ||||||||||||
Total | $ | 11,306,801,607 | $ | 164,077,469 | $ | — | $ | 11,470,879,076 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a Fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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, 2016:
Value | ||||
Derivative Assets | Currency Risk | |||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 9,700,970 | ||
Derivatives not subject to master netting agreements | — | |||
Total Derivative Assets subject to master netting agreements | $ | 9,700,970 | ||
Value | ||||
Derivative Liabilities | Currency Risk | |||
Unrealized depreciation on forward foreign currency contracts outstanding | $ | (60,335 | ) | |
Derivatives not subject to master netting agreements | — | |||
Total Derivative Liabilities subject to master netting agreements | $ | (60,335 | ) |
14 Invesco Comstock Fund
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions October 31, 2016.
Financial Derivative Assets | Financial Derivative Liabilities | Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts | Forward Foreign Currency Contracts | Net Value of Derivatives | Non-Cash | Cash | Net amount | ||||||||||||||||||
Barclays Bank PLC | $ | 2,466,530 | $ | (16,484 | ) | $ | 2,450,046 | $ | — | $ | — | $ | 2,450,046 | |||||||||||
CIBC World Markets Corp. | 2,388,439 | (19,655 | ) | 2,368,784 | — | — | 2,368,784 | |||||||||||||||||
Goldman Sachs International | 2,403,239 | (15,652 | ) | 2,387,587 | — | — | 2,387,587 | |||||||||||||||||
RBC Capital Markets Corp. | 2,442,762 | (8,544 | ) | 2,434,218 | — | — | 2,434,218 | |||||||||||||||||
Total | $ | 9,700,970 | $ | (60,335 | ) | $ | 9,640,635 | $ | — | $ | — | $ | 9,640,635 |
Effect of Derivative Investments for the six months ended October 31, 2016
The table below summarizes the gains on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations | ||||
Currency Risk | ||||
Realized Gain: | ||||
Forward foreign currency contracts | $ | 59,527,631 | ||
Change in Net Unrealized Appreciation: | ||||
Forward foreign currency contracts | 23,412,666 | |||
Total | $ | 82,940,297 |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts | ||||
Average notional value | $ | 1,084,450,184 |
Forward Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement Date | Counterparty | Contract to | Notional Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
11/18/16 | Barclays Bank PLC | CAD | 107,106,468 | USD | 81,893,649 | $ | 79,865,068 | $ | 2,028,581 | |||||||||||||||||
11/18/16 | Barclays Bank PLC | CHF | 22,652,495 | USD | 22,896,040 | 22,912,524 | (16,484 | ) | ||||||||||||||||||
11/18/16 | Barclays Bank PLC | EUR | 90,250,378 | USD | 99,279,657 | 99,143,343 | 136,314 | |||||||||||||||||||
11/18/16 | Barclays Bank PLC | GBP | 47,199,814 | USD | 58,084,421 | 57,782,786 | 301,635 | |||||||||||||||||||
11/18/16 | CIBC World Markets Corp. | CAD | 107,106,262 | USD | 81,845,286 | 79,864,914 | 1,980,372 | |||||||||||||||||||
11/18/16 | CIBC World Markets Corp. | CHF | 22,652,493 | USD | 22,892,868 | 22,912,523 | (19,655 | ) | ||||||||||||||||||
11/18/16 | CIBC World Markets Corp. | EUR | 90,250,379 | USD | 99,251,049 | 99,143,344 | 107,705 | |||||||||||||||||||
11/18/16 | CIBC World Markets Corp. | GBP | 47,200,021 | USD | 58,083,402 | 57,783,040 | 300,362 | |||||||||||||||||||
11/18/16 | Goldman Sachs International | CAD | 107,106,469 | USD | 81,890,000 | 79,865,069 | 2,024,931 | |||||||||||||||||||
11/18/16 | Goldman Sachs International | CHF | 22,653,313 | USD | 22,897,700 | 22,913,352 | (15,652 | ) | ||||||||||||||||||
11/18/16 | Goldman Sachs International | EUR | 90,250,378 | USD | 99,247,438 | 99,143,343 | 104,095 | |||||||||||||||||||
11/18/16 | Goldman Sachs International | GBP | 47,200,019 | USD | 58,057,250 | 57,783,037 | 274,213 | |||||||||||||||||||
11/18/16 | RBC Capital Markets Corp. | CAD | 107,106,468 | USD | 81,899,454 | 79,865,068 | 2,034,386 | |||||||||||||||||||
11/18/16 | RBC Capital Markets Corp. | CHF | 22,652,493 | USD | 22,903,979 | 22,912,523 | (8,544 | ) | ||||||||||||||||||
11/18/16 | RBC Capital Markets Corp. | EUR | 90,250,528 | USD | 99,270,166 | 99,143,508 | 126,658 | |||||||||||||||||||
11/18/16 | RBC Capital Markets Corp. | GBP | 47,200,019 | USD | 58,064,755 | 57,783,037 | 281,718 | |||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk | $ | 9,640,635 |
Currency Abbreviations:
CAD | – Canadian Dollar | |
CHF | – Swiss Franc | |
EUR | – Euro | |
GBP | – British Pound Sterling | |
USD | – U.S. Dollar |
15 Invesco Comstock 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, 2016, the Fund engaged in securities purchases of $4,006,282 and securities sales of $21,651,299, which resulted in net realized gains of $11,066,231.
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $13,632.
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 were eligible to participate in a retirement plan that provided 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 eight 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 carryforwards 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, 2016, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 2,171,613 | $ | — | $ | 2,171,613 | ||||||
April 30, 2018 | 6,626,068 | — | 6,626,068 | |||||||||
$ | 8,797,681 | $ | — | $ | 8,797,681 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
16 Invesco Comstock Fund
NOTE 10—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2016 was $1,246,915,728 and $2,105,753,495, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 1,965,072,449 | ||
Aggregate unrealized (depreciation) of investment securities | (893,892,637 | ) | ||
Net unrealized appreciation of investment securities | $ | 1,071,179,812 |
Cost of investments for tax purposes is $10,390,058,629.
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 8,323,146 | $ | 183,955,254 | 32,160,583 | $ | 742,312,009 | ||||||||||
Class B | 11,944 | 266,108 | 28,190 | 661,460 | ||||||||||||
Class C | 418,328 | 9,197,429 | 2,110,453 | 49,441,501 | ||||||||||||
Class R | 1,091,209 | 24,059,796 | 4,830,506 | 112,910,807 | ||||||||||||
Class Y | 13,056,633 | 290,835,669 | 25,974,703 | 595,989,119 | ||||||||||||
Class R5 | 1,673,820 | 37,073,817 | 8,083,776 | 188,964,768 | ||||||||||||
Class R6 | 2,872,632 | 64,709,305 | 9,355,472 | 215,842,096 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 2,465,161 | 53,777,355 | 29,208,783 | 629,408,125 | ||||||||||||
Class B | 25,215 | 549,261 | 395,739 | 8,539,004 | ||||||||||||
Class C | 112,697 | 2,459,053 | 2,196,248 | 47,119,505 | ||||||||||||
Class R | 132,229 | 2,890,807 | 1,916,330 | 41,248,008 | ||||||||||||
Class Y | 1,313,599 | 28,654,653 | 13,674,987 | 295,158,296 | ||||||||||||
Class R5 | 366,836 | 8,000,097 | 3,750,536 | 80,915,802 | ||||||||||||
Class R6 | 331,527 | 7,218,848 | 2,876,832 | 62,068,817 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 600,744 | 13,234,187 | 1,515,806 | 34,981,774 | ||||||||||||
Class B | (600,979 | ) | (13,234,187 | ) | (1,516,131 | ) | (34,981,774 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (38,234,426 | ) | (850,304,795 | ) | (55,976,831 | ) | (1,283,773,766 | ) | ||||||||
Class B | (238,438 | ) | (5,280,360 | ) | (588,444 | ) | (13,719,430 | ) | ||||||||
Class C | (3,020,130 | ) | (67,102,256 | ) | (4,443,065 | ) | (101,114,794 | ) | ||||||||
Class R | (3,426,495 | ) | (76,353,032 | ) | (9,000,597 | ) | (201,596,469 | ) | ||||||||
Class Y | (24,043,210 | ) | (536,939,807 | ) | (32,245,007 | ) | (740,935,653 | ) | ||||||||
Class R5 | (6,379,538 | ) | (142,762,979 | ) | (6,019,494 | ) | (138,668,988 | ) | ||||||||
Class R6 | (3,204,090 | ) | (71,521,318 | ) | (6,526,230 | ) | (150,177,350 | ) | ||||||||
Net increase (decrease) in share activity | (46,351,586 | ) | $ | (1,036,617,095 | ) | 21,763,145 | $ | 440,592,867 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 38% 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. |
17 �� 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(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 to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | $ | 21.86 | $ | 0.23 | $ | 0.77 | $ | 1.00 | $ | (0.20 | ) | $ | — | $ | (0.20 | ) | $ | 22.66 | 4.61 | % | $ | 6,247,174 | 0.83 | %(d) | 0.83 | %(d) | 2.02 | %(d) | 11 | % | ||||||||||||||||||||||||||
Year ended 04/30/16 | 26.04 | 0.44 | (2.29 | ) | (1.85 | ) | (0.36 | ) | (1.97 | ) | (2.33 | ) | 21.86 | (6.90 | ) | 6,613,286 | 0.84 | 0.85 | 1.87 | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.29 | 0.32 | 1.84 | 2.16 | (0.41 | ) | — | (0.41 | ) | 26.04 | 8.98 | 7,698,790 | 0.82 | 0.83 | 1.30 | 17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.25 | 0.36 | 3.96 | 4.32 | (0.28 | ) | — | (0.28 | ) | 24.29 | 21.47 | 7,356,633 | 0.81 | 0.82 | 1.59 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.27 | 3.32 | 3.59 | (0.27 | ) | — | (0.27 | ) | 20.25 | 21.46 | 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 | ) | 5,473,149 | 0.88 | 0.88 | 1.55 | 17 | |||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 21.85 | 0.23 | 0.77 | 1.00 | (0.20 | ) | — | (0.20 | ) | 22.65 | 4.61 | (e) | 55,116 | 0.83 | (d)(e) | 0.83 | (d)(e) | 2.02 | (d)(e) | 11 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 26.03 | 0.44 | (2.29 | ) | (1.85 | ) | (0.36 | ) | (1.97 | ) | (2.33 | ) | 21.85 | (6.91 | )(e) | 70,701 | 0.84 | (e) | 0.85 | (e) | 1.87 | (e) | 15 | |||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.28 | 0.32 | 1.84 | 2.16 | (0.41 | ) | — | (0.41 | ) | 26.03 | 8.98 | (e) | 127,988 | 0.82 | (e) | 0.83 | (e) | 1.30 | (e) | 17 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.23 | 0.32 | 3.97 | 4.29 | (0.24 | ) | — | (0.24 | ) | 24.28 | 21.31 | (e) | 184,409 | 0.96 | (e) | 0.97 | (e) | 1.44 | (e) | 11 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.23 | 3.30 | 3.53 | (0.23 | ) | — | (0.23 | ) | 20.23 | 21.11 | 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 | )(e) | 343,166 | 0.88 | (e) | 0.88 | (e) | 1.55 | (e) | 17 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 21.85 | 0.14 | 0.78 | 0.92 | (0.12 | ) | — | (0.12 | ) | 22.65 | 4.22 | (f) | 495,341 | 1.57 | (d)(f) | 1.57 | (d)(f) | 1.28 | (d)(f) | 11 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 26.03 | 0.27 | (2.29 | ) | (2.02 | ) | (0.19 | ) | (1.97 | ) | (2.16 | ) | 21.85 | (7.59 | )(f) | 532,230 | 1.56 | (f) | 1.57 | (f) | 1.15 | (f) | 15 | |||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.28 | 0.13 | 1.84 | 1.97 | (0.22 | ) | — | (0.22 | ) | 26.03 | 8.17 | 637,579 | 1.57 | 1.58 | 0.55 | 17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.24 | 0.19 | 3.96 | 4.15 | (0.11 | ) | — | (0.11 | ) | 24.28 | 20.57 | 589,910 | 1.56 | 1.57 | 0.84 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.14 | 3.31 | 3.45 | (0.14 | ) | — | (0.14 | ) | 20.24 | 20.52 | 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 | ) | 448,866 | 1.63 | 1.63 | 0.80 | 17 | |||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 21.86 | 0.20 | 0.77 | 0.97 | (0.17 | ) | — | (0.17 | ) | 22.66 | 4.47 | 322,067 | 1.08 | (d) | 1.08 | (d) | 1.77 | (d) | 11 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 26.04 | 0.38 | (2.29 | ) | (1.91 | ) | (0.30 | ) | (1.97 | ) | (2.27 | ) | 21.86 | (7.14 | ) | 358,835 | 1.09 | 1.10 | 1.62 | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.29 | 0.26 | 1.84 | 2.10 | (0.35 | ) | — | (0.35 | ) | 26.04 | 8.71 | 486,154 | 1.07 | 1.08 | 1.05 | 17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.24 | 0.30 | 3.97 | 4.27 | (0.22 | ) | — | (0.22 | ) | 24.29 | 21.22 | 335,562 | 1.06 | 1.07 | 1.34 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.23 | 3.31 | 3.54 | (0.23 | ) | — | (0.23 | ) | 20.24 | 21.11 | 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 | ) | 191,685 | 1.13 | 1.13 | 1.30 | 17 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 21.86 | 0.25 | 0.78 | 1.03 | (0.23 | ) | — | (0.23 | ) | 22.66 | 4.74 | 2,926,491 | 0.58 | (d) | 0.58 | (d) | 2.27 | (d) | 11 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 26.04 | 0.49 | (2.28 | ) | (1.79 | ) | (0.42 | ) | (1.97 | ) | (2.39 | ) | 21.86 | (6.67 | ) | 3,034,620 | 0.59 | 0.60 | 2.12 | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.29 | 0.39 | 1.84 | 2.23 | (0.48 | ) | — | (0.48 | ) | 26.04 | 9.26 | 3,422,401 | 0.57 | 0.58 | 1.55 | 17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.25 | 0.41 | 3.97 | 4.38 | (0.34 | ) | — | (0.34 | ) | 24.29 | 21.77 | 2,941,152 | 0.56 | 0.57 | 1.84 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.32 | 3.31 | 3.63 | (0.31 | ) | — | (0.31 | ) | 20.25 | 21.76 | 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 | 2,135,728 | 0.63 | 0.63 | 1.80 | 17 | ||||||||||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 21.85 | 0.26 | 0.78 | 1.04 | (0.24 | ) | — | (0.24 | ) | 22.65 | 4.79 | 756,119 | 0.49 | (d) | 0.49 | (d) | 2.36 | (d) | 11 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 26.04 | 0.51 | (2.29 | ) | (1.78 | ) | (0.44 | ) | (1.97 | ) | (2.41 | ) | 21.85 | (6.61 | ) | 824,228 | 0.49 | 0.50 | 2.22 | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.29 | 0.41 | 1.84 | 2.25 | (0.50 | ) | — | (0.50 | ) | 26.04 | 9.36 | 830,574 | 0.49 | 0.50 | 1.63 | 17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.24 | 0.43 | 3.97 | 4.40 | (0.35 | ) | — | (0.35 | ) | 24.29 | 21.92 | 631,780 | 0.49 | 0.50 | 1.91 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.93 | 0.34 | 3.31 | 3.65 | (0.34 | ) | — | (0.34 | ) | 20.24 | 21.85 | 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 | 397,292 | 0.44 | 0.44 | 1.99 | 17 | |||||||||||||||||||||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 21.85 | 0.27 | 0.78 | 1.05 | (0.25 | ) | — | (0.25 | ) | 22.65 | 4.84 | 647,066 | 0.40 | (d) | 0.40 | (d) | 2.45 | (d) | 11 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 26.03 | 0.54 | (2.29 | ) | (1.75 | ) | (0.46 | ) | (1.97 | ) | (2.43 | ) | 21.85 | (6.48 | ) | 624,206 | 0.39 | 0.40 | 2.32 | 15 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 24.28 | 0.44 | 1.83 | 2.27 | (0.52 | ) | — | (0.52 | ) | 26.03 | 9.46 | 595,160 | 0.39 | 0.40 | 1.73 | 17 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 20.25 | 0.45 | 3.95 | 4.40 | (0.37 | ) | — | (0.37 | ) | 24.28 | 21.92 | 360,178 | 0.40 | 0.41 | 2.00 | 11 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13(g) | 17.67 | 0.22 | 2.54 | 2.76 | (0.18 | ) | — | (0.18 | ) | 20.25 | 15.73 | 148,859 | 0.41 | (h) | 0.41 | (h) | 2.01 | (h) | 12 |
(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 $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 Fund into the Fund. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $6,443,021, $63,524, $513,632, $345,580, $2,979,891, $801,905 and $625,632 for Class A, Class B, Class C, Class R, Class Y, Class R5 and Class R6 shares, respectively. |
(e) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.25% for the six months ended October 31, 2016 and the years ended April 30, 2016 and April 30, 2015, 0.40% for the year ended April 30, 2014 and 0.25% for the year ended April 30, 2012. |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income to average net assets reflect actual 12b-1 fees of 0.98% for the six months ended October 31, 2016 and 0.97% for the year ended April 30, 2016. |
(g) | Commencement date of September 24, 2012. |
(h) | Annualized. |
18 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,046.10 | $ | 4.28 | $ | 1,021.02 | $ | 4.23 | 0.83 | % | ||||||||||||
B | 1,000.00 | 1,046.10 | 4.28 | 1,021.02 | 4.23 | 0.83 | ||||||||||||||||||
C | 1,000.00 | 1,042.20 | 8.08 | 1,017.29 | 7.98 | 1.57 | ||||||||||||||||||
R | 1,000.00 | 1,044.70 | 5.57 | 1,019.76 | 5.50 | 1.08 | ||||||||||||||||||
Y | 1,000.00 | 1,047.40 | 2.99 | 1,022.28 | 2.96 | 0.58 | ||||||||||||||||||
R5 | 1,000.00 | 1,047.40 | 2.53 | 1,022.74 | 2.50 | 0.49 | ||||||||||||||||||
R6 | 1,000.00 | 1,048.40 | 2.07 | 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, 2016 through October 31, 2016, 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. |
19 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge performance universe and against the Lipper Large-Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of its performance universe for the one and three year periods and was in the third quintile of its performance universe 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. Invesco Advisers noted that concerns over the global economy drove investors to lower risk stocks versus the more cyclically
20 Invesco Comstock Fund
exposed stocks in which the Fund invested. 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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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 funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund, based on net asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rate of one such mutual fund and below the rate of an offshore fund advised by Invesco Advisers using a similar investment process. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of seven mutual funds sub-advised by Invesco Advisers.
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 types of 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 similar, reflecting a similar scope of services.
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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered that the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and was advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
21 Invesco Comstock Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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-COM-SAR-1 | Invesco Distributors, Inc. |
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![]() | Semiannual Report to Shareholders
| October 31, 2016 | ||
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Invesco Dividend Income Fund
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Nasdaq: | ||||
A: IAUTX ∎ B: IBUTX ∎ C: IUTCX ∎ Y: IAUYX ∎ Investor: FSTUX ∎ R5: FSIUX ∎ R6: IFUTX | ||||
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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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance
Performance summary
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Fund vs. Indexes | ||
Cumulative total returns, 4/30/16 to 10/31/16, 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.
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Class A Shares | 1.22% | |
Class B Shares | 0.79 | |
Class C Shares | 0.79 | |
Class Y Shares | 1.34 | |
Investor Class Shares | 1.21 | |
Class R5 Shares | 1.32 | |
Class R6 Shares | 1.41 | |
S&P 500 Indexq (Broad Market Index) | 4.06 | |
Dow Jones U.S. Select Dividend Indexq (Style-Specific Index) | 4.30 | |
Russell 1000 Value Indexq (Style-Specific Index) | 4.36 | |
Lipper Equity Income Funds Index∎ (Peer-Group Index) | 3.21 | |
Source(s): qFactSet Research Systems Inc.; ∎Lipper 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 Funds 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.
|
For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco Dividend Income Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/28/02) | 8.17 | % | ||
10 Years | 6.37 | |||
5 Years | 9.90 | |||
1 Year | 2.13 | |||
Class B Shares | ||||
Inception (3/28/02) | 8.15 | % | ||
10 Years | 6.34 | |||
5 Years | 10.03 | |||
1 Year | 2.22 | |||
Class C Shares | ||||
Inception (2/14/00) | 3.22 | % | ||
10 Years | 6.18 | |||
5 Years | 10.32 | |||
1 Year | 6.25 | |||
Class Y Shares | ||||
10 Years | 7.20 | % | ||
5 Years | 11.43 | |||
1 Year | 8.36 | |||
Investor Class Shares | ||||
Inception (6/2/86) | 8.57 | % | ||
10 Years | 6.98 | |||
5 Years | 11.13 | |||
1 Year | 8.04 | |||
Class R5 Shares | ||||
Inception (10/25/05) | 8.64 | % | ||
10 Years | 7.41 | |||
5 Years | 11.48 | |||
1 Year | 8.36 | |||
Class R6 Shares | ||||
10 Years | 7.13 | % | ||
5 Years | 11.45 | |||
1 Year | 8.50 |
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.
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.
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
Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/28/02) | 8.31 | % | ||
10 Years | 6.98 | |||
5 Years | 10.88 | |||
1 Year | 8.36 | |||
Class B Shares | ||||
Inception (3/28/02) | 8.29 | % | ||
10 Years | 6.94 | |||
5 Years | 11.03 | |||
1 Year | 8.81 | |||
Class C Shares | ||||
Inception (2/14/00) | 3.31 | % | ||
10 Years | 6.79 | |||
5 Years | 11.30 | |||
1 Year | 12.79 | |||
Class Y Shares | ||||
10 Years | 7.80 | % | ||
5 Years | 12.42 | |||
1 Year | 14.93 | |||
Investor Class Shares | ||||
Inception (6/2/86) | 8.64 | % | ||
10 Years | 7.59 | |||
5 Years | 12.13 | |||
1 Year | 14.64 | |||
Class R5 Shares | ||||
Inception (10/25/05) | 8.83 | % | ||
10 Years | 8.03 | |||
5 Years | 12.49 | |||
1 Year | 14.98 | |||
Class R6 Shares | ||||
10 Years | 7.73 | % | ||
5 Years | 12.43 | |||
1 Year | 15.07 |
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 1.18%, 1.93%, 1.93%, 0.93%, 1.18%, 0.86% and 0.76%, 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 1.19%, 1.94%, 1.94%, 0.94%, 1.19%, 0.87% and 0.77%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y, Investor Class, 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2018. See current prospectus for more information. |
3 Invesco Dividend Income Fund
Letters to Shareholders
| ||
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive. |
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, |
visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. 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, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–83.62% |
| |||||||
Aerospace & Defense–1.37% | ||||||||
General Dynamics Corp. | 72,170 | $ | 10,878,906 | |||||
Lockheed Martin Corp. | 80,517 | 19,837,778 | ||||||
30,716,684 | ||||||||
Air Freight & Logistics–0.22% | ||||||||
United Parcel Service, Inc.–Class B | 46,340 | 4,993,598 | ||||||
Asset Management & Custody Banks–1.53% | ||||||||
Federated Investors, Inc.–Class B | 503,644 | 13,598,388 | ||||||
Waddell & Reed Financial, Inc.–Class A | 1,313,620 | 20,650,107 | ||||||
34,248,495 | ||||||||
Department Stores–0.18% | ||||||||
Marks & Spencer Group PLC (United Kingdom) | 974,947 | 4,054,078 | ||||||
Drug Retail–0.73% | ||||||||
Walgreens Boots Alliance, Inc. | 195,878 | 16,204,987 | ||||||
Electric Utilities–6.90% | ||||||||
American Electric Power Co., Inc. | 174,671 | 11,325,668 | ||||||
Duke Energy Corp. | 415,433 | 33,242,949 | ||||||
Exelon Corp. | 1,424,909 | 48,546,649 | ||||||
Pinnacle West Capital Corp. | 260,788 | 19,853,790 | ||||||
Portland General Electric Co. | 625,934 | 27,315,760 | ||||||
Xcel Energy, Inc. | 334,003 | 13,877,825 | ||||||
154,162,641 | ||||||||
Electrical Components & Equipment–2.06% | ||||||||
ABB Ltd. (Switzerland) | 800,599 | 16,474,077 | ||||||
Emerson Electric Co. | 584,032 | 29,598,742 | ||||||
46,072,819 | ||||||||
Food Distributors–0.67% | ||||||||
Sysco Corp. | 309,768 | 14,906,036 | ||||||
Gas Utilities–4.74% | ||||||||
National Fuel Gas Co. | 488,080 | 25,565,630 | ||||||
Southwest Gas Corp. | 262,591 | 19,027,344 | ||||||
WGL Holdings Inc. | 971,082 | 61,246,142 | ||||||
105,839,116 | ||||||||
General Merchandise Stores–1.78% | ||||||||
Target Corp. | 579,436 | 39,824,636 | ||||||
Household Products–4.40% | ||||||||
Kimberly-Clark Corp. | 241,427 | 27,621,663 | ||||||
Procter & Gamble Co. (The) | 814,982 | 70,740,438 | ||||||
98,362,101 | ||||||||
Industrial Machinery–1.43% | ||||||||
Kennametal Inc. | 1,132,414 | 32,058,640 |
Shares | Value | |||||||
Integrated Oil & Gas–6.86% | ||||||||
Exxon Mobil Corp. | 350,357 | $ | 29,191,745 | |||||
Royal Dutch Shell PLC–Class B (United Kingdom) | 650,810 | 16,796,928 | ||||||
Suncor Energy, Inc. (Canada) | 2,204,557 | 66,157,256 | ||||||
TOTAL S.A. (France) | 860,514 | 41,179,382 | ||||||
153,325,311 | ||||||||
Integrated Telecommunication Services–7.99% | ||||||||
AT&T Inc. | 1,472,578 | 54,176,145 | ||||||
BT Group PLC (United Kingdom) | 7,941,889 | 36,492,328 | ||||||
CenturyLink Inc. | 494,695 | 13,148,993 | ||||||
Deutsche Telekom AG (Germany) | 2,020,163 | 32,920,776 | ||||||
Verizon Communications Inc. | 869,604 | 41,827,952 | ||||||
178,566,194 | ||||||||
IT Consulting & Other Services–0.11% | ||||||||
Leidos Holdings, Inc. | 57,914 | 2,407,485 | ||||||
Motorcycle Manufacturers–1.25% | ||||||||
Harley-Davidson, Inc. | 491,347 | 28,016,606 | ||||||
Multi-Utilities–8.27% | ||||||||
CMS Energy Corp. | 366,826 | 15,461,716 | ||||||
Dominion Resources, Inc. | 863,028 | 64,899,706 | ||||||
DTE Energy Co. | 120,213 | 11,541,650 | ||||||
National Grid PLC (United Kingdom) | 763,174 | 9,938,410 | ||||||
Public Service Enterprise Group Inc. | 1,436,113 | 60,431,635 | ||||||
Sempra Energy | 210,148 | 22,506,851 | ||||||
184,779,968 | ||||||||
Packaged Foods & Meats–4.68% | ||||||||
Campbell Soup Co. | 395,948 | 21,515,814 | ||||||
General Mills, Inc. | 711,445 | 44,095,361 | ||||||
Kraft Heinz Co. (The) | 438,403 | 38,995,947 | ||||||
104,607,122 | ||||||||
Paper Packaging–2.40% | ||||||||
International Paper Co. | 815,725 | 36,732,097 | ||||||
Sonoco Products Co. | 338,344 | 17,015,320 | ||||||
53,747,417 | ||||||||
Pharmaceuticals–6.14% | ||||||||
Bristol-Myers Squibb Co. | 597,664 | 30,427,074 | ||||||
Eli Lilly and Co. | 548,331 | 40,488,761 | ||||||
Johnson & Johnson | 124,623 | 14,455,022 | ||||||
Merck & Co., Inc. | 884,783 | 51,954,458 | ||||||
137,325,315 | ||||||||
Property & Casualty Insurance–1.00% | ||||||||
Travelers Cos., Inc. (The) | 207,307 | 22,426,471 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Dividend Income Fund
Shares | Value | |||||||
Regional Banks–5.65% | ||||||||
Cullen/Frost Bankers, Inc. | 385,001 | $ | 29,256,226 | |||||
M&T Bank Corp. | 555,962 | 68,233,216 | ||||||
Prosperity Bancshares, Inc. | 519,523 | 28,817,941 | ||||||
126,307,383 | ||||||||
Restaurants–2.66% | ||||||||
Darden Restaurants, Inc. | 167,669 | 10,863,275 | ||||||
McDonald’s Corp. | 431,772 | 48,604,574 | ||||||
59,467,849 | ||||||||
Semiconductors–3.33% | ||||||||
Linear Technology Corp. | 551,184 | 33,104,111 | �� | |||||
Microchip Technology Inc. | 682,286 | 41,312,417 | ||||||
74,416,528 | ||||||||
Soft Drinks–2.81% | ||||||||
Coca-Cola Co. (The) | 1,482,136 | 62,842,567 | ||||||
Specialized REIT’s–1.70% | ||||||||
Weyerhaeuser Co. | 1,270,146 | 38,015,470 |
Shares | Value | |||||||
Tobacco–2.76% | ||||||||
Altria Group, Inc. | 396,480 | $ | 26,215,258 | |||||
Philip Morris International Inc. | 366,874 | 35,381,328 | ||||||
61,596,586 | ||||||||
Total Common Stocks & Other Equity Interests (Cost $1,682,185,111) |
| 1,869,292,103 | ||||||
Money Market Funds–16.05% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(b) | 215,228,830 | 215,228,830 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(b) | 143,485,886 | 143,485,886 | ||||||
Total Money Market Funds |
| 358,714,716 | ||||||
TOTAL INVESTMENTS–99.67% |
| 2,228,006,819 | ||||||
OTHER ASSETS LESS LIABILITIES–0.33% |
| 7,394,304 | ||||||
NET ASSETS–100.00% | $ | 2,235,401,123 |
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By sector, based on Net Assets as of October 31, 2016
Utilities | 19.9 | % | ||
Consumer Staples | 16.0 | |||
Financials | 9.9 | |||
Telecommunication Services | 8.0 | |||
Energy | 6.9 | |||
Health Care | 6.1 | |||
Consumer Discretionary | 5.9 | |||
Industrials | 5.1 | |||
Information Technology | 3.4 | |||
Materials | 2.4 | |||
Money Market Funds Plus Other Assets Less Liabilities | 16.4 |
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, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $1,682,185,111) | $ | 1,869,292,103 | ||
Investments in affiliated money market funds, at value and cost | 358,714,716 | |||
Total investments, at value (Cost $2,040,899,827) | 2,228,006,819 | |||
Foreign currencies, at value (Cost $478,465) | 482,151 | |||
Receivable for: | ||||
Investments sold | 312,403 | |||
Fund shares sold | 12,548,750 | |||
Dividends | 4,140,605 | |||
Investment for trustee deferred compensation and retirement plans | 119,709 | |||
Unrealized appreciation on forward foreign currency contracts outstanding | 1,342,120 | |||
Other assets | 189,089 | |||
Total assets | 2,247,141,646 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 6,258,245 | |||
Fund shares reacquired | 4,184,991 | |||
Accrued fees to affiliates | 1,056,815 | |||
Accrued trustees’ and officers’ fees and benefits | 3,934 | |||
Accrued other operating expenses | 99,513 | |||
Trustee deferred compensation and retirement plans | 137,025 | |||
Total liabilities | 11,740,523 | |||
Net assets applicable to shares outstanding | $ | 2,235,401,123 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 2,031,108,478 | ||
Undistributed net investment income | 1,221,310 | |||
Undistributed net realized gain | 14,643,278 | |||
Net unrealized appreciation | 188,428,057 | |||
$ | 2,235,401,123 |
Net Assets: |
| |||
Class A | $ | 1,238,069,393 | ||
Class B | $ | 5,609,545 | ||
Class C | $ | 266,080,602 | ||
Class Y | $ | 551,200,989 | ||
Investor Class | $ | 92,796,555 | ||
Class R5 | $ | 1,605,457 | ||
Class R6 | $ | 80,038,582 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 55,300,736 | |||
Class B | 249,832 | |||
Class C | 11,740,124 | |||
Class Y | 24,391,313 | |||
Investor Class | 4,107,414 | |||
Class R5 | 71,691 | |||
Class R6 | 3,571,350 | |||
Class A: | ||||
Net asset value per share | $ | 22.39 | ||
Maximum offering price per share | ||||
(Net asset value of $22.39 ¸ 94.50%) | $ | 23.69 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 22.45 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 22.66 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 22.60 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 22.59 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 22.39 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 22.41 |
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, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $259,504) | $ | 28,133,874 | ||
Dividends from affiliated money market funds | 649,049 | |||
Other income | 11,361 | |||
Total investment income | 28,794,284 | |||
Expenses: | ||||
Advisory fees | 6,007,486 | |||
Administrative services fees | 220,224 | |||
Distribution fees: | ||||
Class A | 1,441,801 | |||
Class B | 32,218 | |||
Class C | 1,140,285 | |||
Investor Class | 120,831 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,329,826 | |||
Transfer agent fees — R5 | 451 | |||
Transfer agent fees — R6 | 835 | |||
Trustees’ and officers’ fees and benefits | 24,987 | |||
Registration and filing fees | 146,980 | |||
Reports to shareholders | 67,412 | |||
Professional services fees | 25,869 | |||
Other | 19,882 | |||
Total expenses | 10,579,087 | |||
Less: Fees waived and expense offset arrangement(s) | (256,577 | ) | ||
Net expenses | 10,322,510 | |||
Net investment income | 18,471,774 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | 8,988,538 | |||
Foreign currencies | (45,817 | ) | ||
Forward foreign currency contracts | 362,992 | |||
9,305,713 | ||||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (19,250,976 | ) | ||
Foreign currencies | (9,648 | ) | ||
Forward foreign currency contracts | 2,617,041 | |||
(16,643,583 | ) | |||
Net realized and unrealized gain (loss) | (7,337,870 | ) | ||
Net increase in net assets resulting from operations | $ | 11,133,904 |
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, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income | $ | 18,471,774 | $ | 15,181,047 | ||||
Net realized gain | 9,305,713 | 18,543,217 | ||||||
Change in net unrealized appreciation (depreciation) | (16,643,583 | ) | 66,618,887 | |||||
Net increase in net assets resulting from operations | 11,133,904 | 100,343,151 | ||||||
Distributions to shareholders from net investment income: | ||||||||
Class A | (10,254,096 | ) | (10,154,258 | ) | ||||
Class B | (33,249 | ) | (98,189 | ) | ||||
Class C | (1,180,683 | ) | (927,378 | ) | ||||
Class Y | (4,404,990 | ) | (1,672,559 | ) | ||||
Investor Class | (856,835 | ) | (1,470,492 | ) | ||||
Class R5 | (10,586 | ) | (4,711 | ) | ||||
Class R6 | (800,552 | ) | (1,345,105 | ) | ||||
Total distributions from net investment income | (17,540,991 | ) | (15,672,692 | ) | ||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (10,853,763 | ) | |||||
Class B | — | (165,093 | ) | |||||
Class C | — | (1,501,782 | ) | |||||
Class Y | — | (1,035,782 | ) | |||||
Investor Class | — | (1,626,499 | ) | |||||
Class R5 | — | (5,856 | ) | |||||
Class R6 | — | (1,329,498 | ) | |||||
Total distributions from net realized gains | — | (16,518,273 | ) | |||||
Share transactions–net: | ||||||||
Class A | 373,398,190 | 411,511,840 | ||||||
Class B | (1,158,319 | ) | (3,246,373 | ) | ||||
Class C | 112,406,839 | 86,032,465 | ||||||
Class Y | 304,590,002 | 185,172,547 | ||||||
Investor Class | 3,731,697 | 9,115,847 | ||||||
Class R5 | 1,070,387 | 503,726 | ||||||
Class R6 | 16,975,413 | 8,323,035 | ||||||
Net increase in net assets resulting from share transactions | 811,014,209 | 697,413,087 | ||||||
Net increase in net assets | 804,607,122 | 765,565,273 | ||||||
Net assets: | ||||||||
Beginning of period | 1,430,794,001 | 665,228,728 | ||||||
End of period (includes undistributed net investment income of $1,221,310 and $290,527, respectively) | $ | 2,235,401,123 | $ | 1,430,794,001 |
Notes to Financial Statements
October 31, 2016
(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. Class Y and Investor Class shares are available only to certain 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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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.
10 Invesco Dividend Income Fund
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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for
11 Invesco Dividend Income Fund
physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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 forward 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 $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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.60%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
Effective September 1, 2016, the Adviser has contractually agreed, through at least June 30, 2017, 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 2.00%, 2.75%, 2.75%, 1.75%, 2.00%, 1.75% and 1.75%, respectively, of average daily net assets (the “expense limits”). Prior to September 1, 2016, the Adviser had contractually agreed to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Class A, Class B, Class C, Class Y, Investor Class, Class R5 and Class R6 shares to 1.14%, 1.89%, 1.89%, 0.89%, 1.14%, 0.89% and 0.89%, 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $252,081.
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, 2016, 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, 2016, 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
12 Invesco Dividend Income Fund
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, 2016, 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, 2016, IDI advised the Fund that IDI retained $491,715 in front-end sales commissions from the sale of Class A shares and $15,916, $328 and $17,125 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $1,226 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, 2016. 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 | |||||||||||||
Common Stocks & Other Equity Interests | $ | 1,744,356,900 | $ | 124,935,203 | $ | — | $ | 1,869,292,103 | ||||||||
Money Market Funds | 358,714,716 | — | — | 358,714,716 | ||||||||||||
2,103,071,616 | 124,935,203 | — | 2,228,006,819 | |||||||||||||
Forward Foreign Currency Contracts* | — | 1,342,120 | — | 1,342,120 | ||||||||||||
Total Investments | $ | 2,103,071,616 | $ | 126,277,323 | $ | — | $ | 2,229,348,939 |
* | Unrealized appreciation. |
NOTE 4—Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a Fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
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, 2016:
Value | ||||
Derivative Assets | Currency Risk | |||
Unrealized appreciation on forward foreign currency contracts outstanding | $ | 1,342,120 | ||
Derivatives not subject to master netting agreements | — | |||
Total Derivative Assets subject to master netting agreements | $ | 1,342,120 |
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Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of October 31, 2016.
Financial Derivative Assets | Financial Derivative Liabilities | Net value of derivatives | Collateral (Received)/Pledged | Net amount | ||||||||||||||||||||
Counterparty | Forward foreign currency contracts | Forward foreign currency contracts | Non-Cash | Cash | ||||||||||||||||||||
Fund | ||||||||||||||||||||||||
Citigroup Global Markets Inc. | $ | 467,185 | $ | — | $ | 467,185 | $ | — | $ | — | $ | 467,185 | ||||||||||||
Deutsche Bank Securities Inc. | 443,013 | — | 443,013 | — | — | 443,013 | ||||||||||||||||||
Goldman Sachs International | 431,922 | — | 431,922 | — | — | 431,922 | ||||||||||||||||||
Total | $ | 1,342,120 | $ | — | $ | 1,342,120 | $ | — | $ | — | $ | 1,342,120 |
Effect of Derivative Investments for the six months ended October 31, 2016
The table below summarizes the gains on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations | ||||
Currency Risk | ||||
Realized Gain: | ||||
Forward foreign currency contracts | $ | 362,992 | ||
Change in Net Unrealized Appreciation: | ||||
Forward foreign currency contracts | 2,617,041 | |||
Total | $ | 2,980,033 |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency | ||||
Average notional value | $ | 59,303,284 |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement Date | Counterparty | Contract to | Notional Value | Unrealized Appreciation | ||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
11/18/16 | Citigroup Global Markets Inc. | CAD | 13,835,523 | USD | 10,546,860 | $ | 10,316,604 | $ | 230,256 | |||||||||||||||||
11/18/16 | Citigroup Global Markets Inc. | EUR | 10,670,821 | USD | 11,959,216 | 11,722,287 | 236,929 | |||||||||||||||||||
11/18/16 | Deutsche Bank Securities Inc. | CAD | 11,905,632 | USD | 9,075,106 | 8,877,560 | 197,546 | |||||||||||||||||||
11/18/16 | Deutsche Bank Securities Inc. | EUR | 10,670,892 | USD | 11,967,833 | 11,722,366 | 245,467 | |||||||||||||||||||
11/18/16 | Goldman Sachs International | CAD | 11,905,632 | USD | 9,074,760 | 8,877,560 | 197,200 | |||||||||||||||||||
11/18/16 | Goldman Sachs International | EUR | 11,176,027 | USD | 12,511,997 | 12,277,275 | 234,722 | |||||||||||||||||||
Total Forward Foreign Currency Contracts — Currency Risk | $ | 1,342,120 |
Currency Abbreviations:
CAD | – Canadian Dollar | |
EUR | – Euro | |
USD | – U.S. Dollar |
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $4,496.
14 Invesco Dividend Income 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 were eligible to participate in a retirement plan that provided 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 eight 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 carryforwards 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, 2016.
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, 2016 was $754,168,903 and $26,060,864, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investment Securities on a Tax Basis | ||||
Aggregate unrealized appreciation of investment securities | $ | 221,970,290 | ||
Aggregate unrealized (depreciation) of investment securities | (34,873,621 | ) | ||
Net unrealized appreciation of investment securities | $ | 187,096,669 |
Cost of investments for tax purposes is $2,040,910,150.
15 Invesco Dividend Income Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 24,012,369 | $ | 544,754,229 | 23,155,095 | $ | 495,255,985 | ||||||||||
Class B | 37,644 | 858,387 | 45,769 | 985,278 | ||||||||||||
Class C | 5,636,623 | 129,329,698 | 4,575,659 | 99,778,343 | ||||||||||||
Class Y | 17,642,332 | 403,994,021 | 10,201,141 | 221,042,787 | ||||||||||||
Investor Class | 801,432 | 18,260,933 | 833,236 | 18,217,582 | ||||||||||||
Class R5 | 50,871 | 1,158,017 | 25,368 | 541,396 | ||||||||||||
Class R6 | 744,334 | 16,820,138 | 537,995 | 11,376,017 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | 405,436 | 9,166,081 | 899,704 | 18,705,560 | ||||||||||||
Class B | 1,336 | 30,267 | 11,767 | 244,100 | ||||||||||||
Class C | 44,974 | 1,029,474 | 101,394 | 2,127,305 | ||||||||||||
Class Y | 161,151 | 3,678,242 | 107,947 | 2,287,463 | ||||||||||||
Investor Class | 35,507 | 809,610 | 139,764 | 2,928,943 | ||||||||||||
Class R5 | 463 | 10,467 | 505 | 10,487 | ||||||||||||
Class R6 | 35,397 | 800,552 | 128,598 | 2,674,602 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 56,915 | 1,281,917 | �� | 151,581 | 3,226,925 | |||||||||||
Class B | (56,748 | ) | (1,281,917 | ) | (151,126 | ) | (3,226,925 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (8,046,004 | ) | (181,804,037 | ) | (5,016,182 | ) | (105,676,630 | ) | ||||||||
Class B | (33,799 | ) | (765,056 | ) | (59,164 | ) | (1,248,826 | ) | ||||||||
Class C | (782,948 | ) | (17,952,333 | ) | (740,023 | ) | (15,873,183 | ) | ||||||||
Class Y | (4,492,471 | ) | (103,082,261 | ) | (1,767,891 | ) | (38,157,703 | ) | ||||||||
Investor Class | (667,302 | ) | (15,338,846 | ) | (567,954 | ) | (12,030,678 | ) | ||||||||
Class R5 | (4,304 | ) | (98,097 | ) | (2,232 | ) | (48,157 | ) | ||||||||
Class R6 | (28,264 | ) | (645,277 | ) | (273,544 | ) | (5,727,584 | ) | ||||||||
Net increase in share activity | 35,554,944 | $ | 811,014,209 | 32,337,407 | $ | 697,413,087 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 43% 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. |
16 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(a) | Net gains 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 to average net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | $ | 22.32 | $ | 0.21 | $ | 0.06 | $ | 0.27 | $ | (0.20 | ) | $ | — | $ | (0.20 | ) | $ | 22.39 | 1.22 | % | $ | 1,238,069 | 1.01 | %(d) | 1.04 | %(d) | 1.88 | %(d) | 2 | % | ||||||||||||||||||||||||||
Year ended 04/30/16 | 21.03 | 0.40 | 1.77 | 2.17 | (0.41 | ) | (0.47 | ) | (0.88 | ) | 22.32 | 10.72 | 867,596 | 1.13 | 1.17 | 1.91 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 19.88 | 0.41 | 1.37 | 1.78 | (0.42 | ) | (0.21 | ) | (0.63 | ) | 21.03 | 9.07 | 413,896 | 1.12 | 1.22 | 1.99 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.02 | 0.41 | 2.16 | 2.57 | (0.48 | ) | (0.23 | ) | (0.71 | ) | 19.88 | 14.66 | 335,837 | 1.09 | 1.29 | 2.22 | 4 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 22.38 | 0.13 | 0.06 | 0.19 | (0.12 | ) | — | (0.12 | ) | 22.45 | 0.83 | 5,610 | 1.76 | (d) | 1.79 | (d) | 1.13 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 21.09 | 0.25 | 1.77 | 2.02 | (0.26 | ) | (0.47 | ) | (0.73 | ) | 22.38 | 9.87 | 6,746 | 1.88 | 1.92 | 1.16 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 19.93 | 0.25 | 1.38 | 1.63 | (0.26 | ) | (0.21 | ) | (0.47 | ) | 21.09 | 8.30 | 9,578 | 1.87 | 1.97 | 1.24 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.07 | 0.27 | 2.16 | 2.43 | (0.34 | ) | (0.23 | ) | (0.57 | ) | 19.93 | 13.76 | 12,479 | 1.84 | 2.04 | 1.47 | 4 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 22.60 | 0.13 | 0.05 | 0.18 | (0.12 | ) | — | (0.12 | ) | 22.66 | 0.79 | 266,081 | 1.76 | (d) | 1.79 | (d) | 1.13 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 21.28 | 0.25 | 1.80 | 2.05 | (0.26 | ) | (0.47 | ) | (0.73 | ) | 22.60 | 9.94 | 154,584 | 1.88 | 1.92 | 1.16 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 20.11 | 0.26 | 1.39 | 1.65 | (0.27 | ) | (0.21 | ) | (0.48 | ) | 21.28 | 8.29 | 61,818 | 1.87 | 1.97 | 1.24 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.24 | 0.27 | 2.17 | 2.44 | (0.34 | ) | (0.23 | ) | (0.57 | ) | 20.11 | 13.71 | 42,150 | 1.84 | 2.04 | 1.47 | 4 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 22.53 | 0.25 | 0.05 | 0.30 | (0.23 | ) | — | (0.23 | ) | 22.60 | 1.34 | 551,201 | 0.76 | (d) | 0.79 | (d) | 2.13 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 21.22 | 0.47 | 1.78 | 2.25 | (0.47 | ) | (0.47 | ) | (0.94 | ) | 22.53 | 11.01 | 249,625 | 0.88 | 0.92 | 2.16 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 20.06 | 0.47 | 1.37 | 1.84 | (0.47 | ) | (0.21 | ) | (0.68 | ) | 21.22 | 9.34 | 53,878 | 0.87 | 0.97 | 2.24 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.18 | 0.46 | 2.17 | 2.63 | (0.52 | ) | (0.23 | ) | (0.75 | ) | 20.06 | 14.95 | 22,690 | 0.84 | 1.04 | 2.47 | 4 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Investor Class |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 22.52 | 0.22 | 0.05 | 0.27 | (0.20 | ) | — | (0.20 | ) | 22.59 | 1.21 | 92,797 | 1.01 | (d) | 1.04 | (d) | 1.88 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 21.22 | 0.41 | 1.78 | 2.19 | (0.42 | ) | (0.47 | ) | (0.89 | ) | 22.52 | 10.69 | 88,691 | 1.13 | 1.17 | 1.91 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 20.05 | 0.41 | 1.39 | 1.80 | (0.42 | ) | (0.21 | ) | (0.63 | ) | 21.22 | 9.11 | 74,957 | 1.12 | 1.22 | 1.99 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.18 | 0.41 | 2.17 | 2.58 | (0.48 | ) | (0.23 | ) | (0.71 | ) | 20.05 | 14.61 | 70,853 | 1.09 | 1.29 | 2.22 | 4 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 22.32 | 0.25 | 0.06 | 0.31 | (0.24 | ) | — | (0.24 | ) | 22.39 | 1.37 | 1,605 | 0.71 | (d) | 0.74 | (d) | 2.18 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 21.04 | 0.47 | 1.75 | 2.22 | (0.47 | ) | (0.47 | ) | (0.94 | ) | 22.32 | 10.98 | 551 | 0.84 | 0.85 | 2.20 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 19.88 | 0.46 | 1.39 | 1.85 | (0.48 | ) | (0.21 | ) | (0.69 | ) | 21.04 | 9.44 | 21 | 0.82 | 0.83 | 2.29 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.03 | 0.45 | 2.15 | 2.60 | (0.52 | ) | (0.23 | ) | (0.75 | ) | 19.88 | 14.87 | 671 | 0.84 | 0.87 | 2.47 | 4 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class R6 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 22.34 | 0.26 | 0.06 | 0.32 | (0.25 | ) | — | (0.25 | ) | 22.41 | 1.41 | 80,039 | 0.63 | (d) | 0.66 | (d) | 2.26 | (d) | 2 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 21.05 | 0.49 | 1.77 | 2.26 | (0.50 | ) | (0.47 | ) | (0.97 | ) | 22.34 | 11.13 | 63,000 | 0.74 | 0.75 | 2.30 | 9 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 19.89 | 0.48 | 1.38 | 1.86 | (0.49 | ) | (0.21 | ) | (0.70 | ) | 21.05 | 9.49 | 51,080 | 0.78 | 0.79 | 2.33 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.04 | 0.46 | 2.15 | 2.61 | (0.53 | ) | (0.23 | ) | (0.76 | ) | 19.89 | 14.89 | 33,762 | 0.82 | 0.83 | 2.49 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13(e) | 17.55 | 0.34 | 1.58 | 1.92 | (0.33 | ) | (1.10 | ) | (1.43 | ) | 18.04 | 11.58 | 21,141 | 0.89 | (f) | 0.89 | (f) | 3.24 | (f) | 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 period ended 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 omitted) of $1,144,037, $6,391, $226,198, $428,693, $95,877, $1,030 and $73,595 for Class A, Class B, Class C, Class Y, Investor Class, Class R5 and Class R6 shares, respectively. |
(e) | Commencement date of September 24, 2012 for Class R6 shares. |
(f) | Annualized. |
17 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,012.20 | $ | 5.12 | $ | 1,020.11 | $ | 5.14 | 1.01 | % | ||||||||||||
B | 1,000.00 | 1,007.90 | 8.91 | 1,016.33 | 8.94 | 1.76 | ||||||||||||||||||
C | 1,000.00 | 1,007.90 | 8.91 | 1,016.33 | 8.94 | 1.76 | ||||||||||||||||||
Y | 1,000.00 | 1,013.40 | 3.86 | 1,021.37 | 3.87 | 0.76 | ||||||||||||||||||
Investor | 1,000.00 | 1,012.10 | 5.12 | 1,020.11 | 5.14 | 1.01 | ||||||||||||||||||
R5 | 1,000.00 | 1,013.20 | 3.60 | 1,021.63 | 3.62 | 0.71 | ||||||||||||||||||
R6 | 1,000.00 | 1,014.10 | 3.20 | 1,022.03 | 3.21 | 0.63 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund’s expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Fund’s annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
18 Invesco 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 (the Fund) investment advisory agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge performance universe and against the Lipper Equity Income Funds Index. The Board noted that performance of Class A shares of the Fund was in the first 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 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.
19 Invesco Dividend Income Fund
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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory
fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered that the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and was advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
20 Invesco Dividend Income Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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, 2016 | ||
| ||||
Invesco Energy Fund
| ||||
Nasdaq: | ||||
A: IENAX ∎ B: IENBX ∎ C: IEFCX ∎ Y: IENYX ∎ Investor: FSTEX ∎ R5: IENIX | ||||
| ||||
| ||||
2 Fund Performance | ||||
4 Letters to Shareholders | ||||
5 Schedule of Investments | ||||
6 Financial Statements | ||||
8 Notes to Financial Statements | ||||
15 Financial Highlights | ||||
16 Fund Expenses | ||||
17 Approval of Investment Advisory and Sub-Advisory 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, 4/30/16 to 10/31/16, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.
| ||
Class A Shares | -5.95% | |
Class B Shares | -6.28 | |
Class C Shares | -6.29 | |
Class Y Shares | -5.79 | |
Investor Class Shares | -5.94 | |
Class R5 Shares | -5.76 �� | |
S&P 500 Indexq (Broad Market Index) | 4.06 | |
MSCI World Energy Indexq (Style-Specific Index) | 1.39 | |
Lipper Natural Resource Funds Index∎ (Peer Group Index) | 2.61 | |
Source(s): qFactSet 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 designed to capture the performance of energy stocks across developed market countries. 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.
|
For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco Energy Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/28/02) | 5.81 | % | ||
10 Years | -0.31 | |||
5 Years | -6.32 | |||
1 Year | -10.14 | |||
Class B Shares | ||||
Inception (3/28/02) | 5.80 | % | ||
10 Years | -0.35 | |||
5 Years | -6.28 | |||
1 Year | -10.26 | |||
Class C Shares | ||||
Inception (2/14/00) | 7.02 | % | ||
10 Years | -0.50 | |||
5 Years | -5.96 | |||
1 Year | -6.53 | |||
Class Y Shares | ||||
10 Years | 0.46 | % | ||
5 Years | -5.01 | |||
1 Year | -4.62 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 7.52 | % | ||
10 Years | 0.25 | |||
5 Years | -5.25 | |||
1 Year | -4.89 | |||
Class R5 Shares | ||||
Inception (1/31/06) | -0.11 | % | ||
10 Years | 0.66 | |||
5 Years | -4.89 | |||
1 Year | -4.48 |
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower.
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.
The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Performance figures do not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.
Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/28/02) | 6.22 | % | ||
10 Years | 0.50 | |||
5 Years | -1.75 | |||
1 Year | 6.58 | |||
Class B Shares | ||||
Inception (3/28/02) | 6.20 | % | ||
10 Years | 0.46 | |||
5 Years | -1.72 | |||
1 Year | 6.90 | |||
Class C Shares | ||||
Inception (2/14/00) | 7.39 | % | ||
10 Years | 0.31 | |||
5 Years | -1.37 | |||
1 Year | 10.91 | |||
Class Y Shares | ||||
10 Years | 1.27 | % | ||
5 Years | -0.39 | |||
1 Year | 13.05 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 7.71 | % | ||
10 Years | 1.07 | |||
5 Years | -0.63 | |||
1 Year | 12.78 | |||
Class R5 Shares | ||||
Inception (1/31/06) | 0.36 | % | ||
10 Years | 1.48 | |||
5 Years | -0.25 | |||
1 Year | 13.25 |
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower.
The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares was 1.27%, 2.02%, 2.02%, 1.02%, 1.27% 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 and Class R5 shares was 1.28%, 2.03%, 2.03%, 1.03%, 1.28% 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 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
1 | Total annual Fund operating expenses after any contractual fee waivers and/or expense reimbursements by the adviser in effect through at least June 30, 2018. See current prospectus for more information. |
3 Invesco Energy Fund
Letters to Shareholders
| ||
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive. |
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, |
visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Energy Fund
Schedule of Investments(a)
October 31, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–96.51% |
| |||||||
Integrated Oil & Gas–27.89% | ||||||||
BP PLC–ADR (United Kingdom) | 1,010,019 | $ | 35,906,175 | |||||
Cenovus Energy Inc. (Canada) | 2,215,634 | 31,964,599 | ||||||
Chevron Corp. | 359,692 | 37,677,737 | ||||||
Exxon Mobil Corp. | 256,350 | 21,359,082 | ||||||
Occidental Petroleum Corp. | 444,083 | 32,378,092 | ||||||
Royal Dutch Shell PLC–Class A–ADR (United Kingdom) | 750,763 | 37,395,505 | ||||||
Suncor Energy, Inc. (Canada) | 1,492,576 | 44,791,190 | ||||||
241,472,380 | ||||||||
Oil & Gas Drilling–3.92% | ||||||||
Ensco PLC–Class A | 1,285,866 | 10,055,472 | ||||||
Helmerich & Payne, Inc. | 378,022 | 23,856,969 | ||||||
33,912,441 | ||||||||
Oil & Gas Equipment & Services–14.25% | ||||||||
Core Laboratories N.V. | 252,373 | 24,472,610 | ||||||
Halliburton Co. | 375,222 | 17,260,212 | ||||||
Schlumberger Ltd. | 540,172 | 42,257,655 | ||||||
Superior Energy Services, Inc. | 1,212,611 | 17,170,572 | ||||||
Tidewater Inc. | 632,668 | 1,094,515 | ||||||
Weatherford International PLC(b) | 4,371,057 | 21,068,495 | ||||||
123,324,059 | ||||||||
Oil & Gas Exploration & Production–48.26% | ||||||||
Anadarko Petroleum Corp. | 471,936 | 28,051,876 | ||||||
Apache Corp. | 581,250 | 34,572,750 | ||||||
Cabot Oil & Gas Corp. | 1,171,969 | 24,470,713 | ||||||
Canadian Natural Resources Ltd. (Canada) | 1,276,364 | 40,510,580 | ||||||
Cobalt International Energy, Inc.(b) | 8,217,380 | 7,758,028 | ||||||
Concho Resources Inc.(b) | 274,760 | 34,878,034 | ||||||
Continental Resources, Inc.(b) | 185,416 | 9,068,697 | ||||||
Devon Energy Corp. | 1,099,734 | 41,668,921 | ||||||
EOG Resources, Inc. | 359,363 | 32,493,602 |
Shares | Value | |||||||
Oil & Gas Exploration & Production–(continued) | ||||||||
Hess Corp. | 464,874 | $ | 22,300,006 | |||||
Noble Energy, Inc. | 1,100,534 | 37,935,407 | ||||||
Oasis Petroleum Inc.(b) | 624,961 | 6,555,841 | ||||||
PrairieSky Royalty Ltd. (Canada) | 1,489,119 | 32,385,912 | ||||||
Range Resources Corp. | 639,266 | 21,600,798 | ||||||
Tullow Oil PLC (United Kingdom)(b) | 6,051,559 | 19,499,729 | ||||||
Whiting Petroleum Corp.(b) | 2,917,744 | 24,042,211 | ||||||
417,793,105 | ||||||||
Oil & Gas Refining & Marketing–2.19% | ||||||||
Phillips 66 | 233,386 | 18,939,274 | ||||||
Total Common Stocks & Other Equity Interests |
| 835,441,259 | ||||||
Principal Amount | ||||||||
Bonds & Notes–0.67% |
| |||||||
Oil & Gas Exploration & Production–0.67% | ||||||||
Cobalt International Energy, Inc., Sr. Unsec. Conv. Notes, 3.13%, 05/15/2024 | $ | 17,188,000 | 5,800,950 | |||||
Shares | ||||||||
Money Market Funds–2.60% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(c) | 13,495,685 | 13,495,685 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(c) | 8,997,123 | 8,997,123 | ||||||
Total Money Market Funds |
| 22,492,808 | ||||||
TOTAL INVESTMENTS–99.78% |
| 863,735,017 | ||||||
OTHER ASSETS LESS LIABILITIES–0.22% |
| 1,908,443 | ||||||
NET ASSETS–100.00% | $ | 865,643,460 |
Investment Abbreviations:
ADR | – American Depositary Receipt | |||||
Conv. | – Convertible | |||||
Sr. | – Senior | |||||
Unsec. | – Unsecured |
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. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By industry, based on Net Assets
as of October 31, 2016
Oil & Gas Exploration & Production | 48.9 | % | ||
Integrated Oil & Gas | 27.9 | |||
Oil & Gas Equipment & Services | 14.3 | |||
Oil & Gas Drilling | 3.9 | |||
Oil & Gas Refining & Marketing | 2.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.8 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Energy Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $993,151,960) | $ | 841,242,209 | ||
Investments in affiliated money market funds, at value and cost | 22,492,808 | |||
Total investments, at value (Cost $1,015,644,768) | 863,735,017 | |||
Foreign currencies, at value (Cost $58,708) | 58,441 | |||
Receivable for: | ||||
Investments sold | 11,062,283 | |||
Fund shares sold | 898,703 | |||
Dividends and interest | 647,328 | |||
Investment for trustee deferred compensation and retirement plans | 228,787 | |||
Other assets | 43,638 | |||
Total assets | 876,674,197 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 7,597,048 | |||
Fund shares reacquired | 2,316,714 | |||
Accrued fees to affiliates | 773,038 | |||
Accrued trustees’ and officers’ fees and benefits | 2,336 | |||
Accrued other operating expenses | 74,100 | |||
Trustee deferred compensation and retirement plans | 267,501 | |||
Total liabilities | 11,030,737 | |||
Net assets applicable to shares outstanding | $ | 865,643,460 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 1,107,985,956 | ||
Undistributed net investment income | 11,197,560 | |||
Undistributed net realized gain (loss) | (101,622,810 | ) | ||
Net unrealized appreciation (depreciation) | (151,917,246 | ) | ||
$ | 865,643,460 |
Net Assets: |
| |||
Class A | $ | 475,224,904 | ||
Class B | $ | 5,700,128 | ||
Class C | $ | 137,440,990 | ||
Class Y | $ | 45,355,354 | ||
Investor Class | $ | 181,437,429 | ||
Class R5 | $ | 20,484,655 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 18,684,224 | |||
Class B | 256,323 | |||
Class C | 6,362,678 | |||
Class Y | 1,775,320 | |||
Investor Class | 7,163,249 | |||
Class R5 | 782,623 | |||
Class A: | ||||
Net asset value per share | $ | 25.43 | ||
Maximum offering price per share | ||||
(Net asset value of $25.43 ¸ 94.50%) | $ | 26.91 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 22.24 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 21.60 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 25.55 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 25.33 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 26.17 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Energy Fund
Statement of Operations
For the six months ended October 31, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $522,590) | $ | 9,230,658 | ||
Dividends from affiliated money market funds | 60,525 | |||
Interest | 314,423 | |||
Total investment income | 9,605,606 | |||
Expenses: | ||||
Advisory fees | 3,075,663 | |||
Administrative services fees | 119,087 | |||
Custodian fees | 13,319 | |||
Distribution fees: | ||||
Class A | 634,504 | |||
Class B | 35,073 | |||
Class C | 742,699 | |||
Investor Class | 242,559 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,135,909 | |||
Transfer agent fees — R5 | 10,567 | |||
Trustees’ and officers’ fees and benefits | 18,944 | |||
Registration and filing fees | 61,322 | |||
Reports to shareholders | 44,853 | |||
Professional services fees | 13,702 | |||
Other | 10,687 | |||
Total expenses | 6,158,888 | |||
Less: Fees waived and expense offset arrangement(s) | (28,845 | ) | ||
Net expenses | 6,130,043 | |||
Net investment income | 3,475,563 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (90,412,582 | ) | ||
Foreign currencies | (220,964 | ) | ||
(90,633,546 | ) | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | 29,300,738 | |||
Foreign currencies | (2,750 | ) | ||
29,297,988 | ||||
Net realized and unrealized gain (loss) | (61,335,558 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (57,859,995 | ) |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 �� Invesco Energy Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income | $ | 3,475,563 | $ | 8,543,425 | ||||
Net realized gain (loss) | (90,633,546 | ) | 3,895,476 | |||||
Change in net unrealized appreciation (depreciation) | 29,297,988 | (284,807,170 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (57,859,995 | ) | (272,368,269 | ) | ||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (2,628,816 | ) | |||||
Class B | — | (33,895 | ) | |||||
Class C | — | (503,592 | ) | |||||
Class Y | — | (282,334 | ) | |||||
Investor Class | — | (1,144,790 | ) | |||||
Class R5 | — | (103,029 | ) | |||||
Total distributions from net investment income | — | (4,696,456 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (3,869,101 | ) | |||||
Class B | — | (93,593 | ) | |||||
Class C | — | (1,390,565 | ) | |||||
Class Y | — | (362,445 | ) | |||||
Investor Class | — | (1,684,898 | ) | |||||
Class R5 | — | (124,425 | ) | |||||
Total distributions from net realized gains | — | (7,525,027 | ) | |||||
Share transactions–net: | ||||||||
Class A | (15,533,489 | ) | 36,888,020 | |||||
Class B | (2,136,683 | ) | (5,996,349 | ) | ||||
Class C | (9,931,371 | ) | 8,239,159 | |||||
Class Y | (2,274,079 | ) | (12,300,352 | ) | ||||
Investor Class | (16,698,386 | ) | (15,355,448 | ) | ||||
Class R5 | (514,437 | ) | (4,409,440 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (47,088,445 | ) | 7,065,590 | |||||
Net increase (decrease) in net assets | (104,948,440 | ) | (277,524,162 | ) | ||||
Net assets: | ||||||||
Beginning of period | 970,591,900 | 1,248,116,062 | ||||||
End of period (includes undistributed net investment income of $11,197,560 and $7,721,997, respectively) | $ | 865,643,460 | $ | 970,591,900 |
Notes to Financial Statements
October 31, 2016
(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. Class Y and Investor Class shares are available only to certain 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.
8 Invesco Energy Fund
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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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
9 Invesco Energy 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. | 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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying
10 Invesco Energy Fund
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 forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | 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.
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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.66%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $22,923.
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, 2016, 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, 2016, 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, 2016, expenses incurred under the Plan are shown in the Statement of Operations as Distribution fees.
11 Invesco Energy Fund
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2016, IDI advised the Fund that IDI retained $84,642 in front-end sales commissions from the sale of Class A shares and $2,629, $2,004 and $3,954 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $205 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, 2016. 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 | |||||||||||||
Common Stocks & Other Equity Interests | $ | 815,941,530 | $ | 19,499,729 | $ | — | $ | 835,441,259 | ||||||||
Bonds & Notes | — | 5,800,950 | — | 5,800,950 | ||||||||||||
Money Market Funds | 22,492,808 | — | — | 22,492,808 | ||||||||||||
Total Investments | $ | 838,434,338 | $ | 25,300,679 | $ | — | $ | 863,735,017 |
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $5,922.
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 were eligible to participate in a retirement plan that provided 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.
12 Invesco Energy Fund
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 eight 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 carryforwards 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, 2016, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 6,533,157 | $ | — | $ | 6,533,157 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any 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, 2016 was $106,593,116 and $147,776,816, 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 | $ | 99,493,570 | ||
Aggregate unrealized (depreciation) of investment securities | (257,414,689 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (157,921,119 | ) |
Cost of investments for tax purposes is $1,021,656,136.
13 Invesco Energy Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 2,407,375 | $ | 62,584,587 | 6,894,091 | $ | 176,267,338 | ||||||||||
Class B | 5,619 | 128,303 | 21,584 | 477,610 | ||||||||||||
Class C | 403,931 | 8,908,437 | 2,203,746 | 48,361,914 | ||||||||||||
Class Y | 430,302 | 11,239,994 | 1,296,407 | 32,163,137 | ||||||||||||
Investor Class | 532,560 | 13,777,469 | 1,637,230 | 42,164,528 | ||||||||||||
Class R5 | 136,957 | 3,649,554 | 618,487 | 15,480,249 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 262,886 | 6,062,150 | ||||||||||||
Class B | — | — | 5,755 | 116,832 | ||||||||||||
Class C | — | — | 90,762 | 1,789,822 | ||||||||||||
Class Y | — | — | 23,589 | 545,147 | ||||||||||||
Investor Class | — | — | 119,305 | 2,740,428 | ||||||||||||
Class R5 | — | — | 9,584 | 226,565 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 52,446 | 1,334,135 | 127,309 | 3,366,261 | ||||||||||||
Class B | (59,870 | ) | (1,334,135 | ) | (144,636 | ) | (3,366,261 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (3,078,142 | ) | (79,452,211 | ) | (5,728,346 | ) | (148,807,729 | ) | ||||||||
Class B | (40,895 | ) | (930,851 | ) | (136,763 | ) | (3,224,530 | ) | ||||||||
Class C | (850,845 | ) | (18,839,808 | ) | (1,897,549 | ) | (41,912,577 | ) | ||||||||
Class Y | (524,379 | ) | (13,514,073 | ) | (1,663,347 | ) | (45,008,636 | ) | ||||||||
Investor Class | (1,182,304 | ) | (30,475,855 | ) | (2,317,117 | ) | (60,260,404 | ) | ||||||||
Class R5 | (157,331 | ) | (4,163,991 | ) | (709,269 | ) | (20,116,254 | ) | ||||||||
Net increase (decrease) in share activity | (1,924,576 | ) | $ | (47,088,445 | ) | 713,708 | $ | 7,065,590 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 29% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
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 10/31/16 | $ | 27.04 | $ | 0.11 | $ | (1.72 | ) | $ | (1.61 | ) | $ | — | $ | — | $ | — | $ | 25.43 | (5.95 | )% | $ | 475,225 | 1.22 | %(d) | 1.22 | %(d) | 0.85 | %(d) | 12 | % | ||||||||||||||||||||||||||
Year ended 04/30/16 | 35.41 | 0.27 | (8.28 | )(e) | (8.01 | ) | (0.15 | ) | (0.21 | ) | (0.36 | ) | 27.04 | (22.45 | )(e) | 521,910 | 1.26 | 1.27 | 1.05 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 49.87 | 0.29 | (10.33 | ) | (10.04 | ) | (0.13 | ) | (4.29 | ) | (4.42 | ) | 35.41 | (18.60 | ) | 628,443 | 1.16 | 1.17 | 0.69 | 27 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 40.52 | 0.19 | 9.57 | 9.76 | (0.20 | ) | (0.21 | ) | (0.41 | ) | 49.87 | 24.23 | 662,813 | 1.15 | 1.15 | 0.43 | 14 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 23.73 | 0.01 | (1.50 | ) | (1.49 | ) | — | — | — | 22.24 | (6.28 | ) | 5,700 | 1.97 | (d) | 1.97 | (d) | 0.10 | (d) | 12 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 31.28 | 0.07 | (7.33 | )(e) | (7.26 | ) | (0.08 | ) | (0.21 | ) | (0.29 | ) | 23.73 | (23.05 | )(e) | 8,341 | 2.01 | 2.02 | 0.30 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 44.93 | (0.02 | ) | (9.34 | ) | (9.36 | ) | — | (4.29 | ) | (4.29 | ) | 31.28 | (19.20 | ) | 18,940 | 1.91 | 1.92 | (0.06 | ) | 27 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 36.63 | (0.13 | ) | 8.64 | 8.51 | — | (0.21 | ) | (0.21 | ) | 44.93 | 23.31 | 37,293 | 1.90 | 1.90 | (0.32 | ) | 14 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 23.05 | 0.01 | (1.46 | ) | (1.45 | ) | — | — | — | 21.60 | (6.29 | ) | 137,441 | 1.97 | (d) | 1.97 | (d) | 0.10 | (d) | 12 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 30.39 | 0.06 | (7.11 | )(e) | (7.05 | ) | (0.08 | ) | (0.21 | ) | (0.29 | ) | 23.05 | �� | (23.03 | )(e) | 156,964 | 2.01 | 2.02 | 0.30 | 22 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 43.83 | (0.02 | ) | (9.13 | ) | (9.15 | ) | — | (4.29 | ) | (4.29 | ) | 30.39 | (19.21 | ) | 194,893 | 1.91 | 1.92 | (0.06 | ) | 27 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 35.74 | (0.13 | ) | 8.43 | 8.30 | — | (0.21 | ) | (0.21 | ) | 43.83 | 23.31 | 177,502 | 1.90 | 1.90 | (0.32 | ) | 14 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 27.12 | 0.15 | (1.72 | ) | (1.57 | ) | — | — | — | 25.55 | (5.79 | ) | 45,355 | 0.97 | (d) | 0.97 | (d) | 1.10 | (d) | 12 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 35.47 | 0.34 | (8.31 | )(e) | (7.97 | ) | (0.17 | ) | (0.21 | ) | (0.38 | ) | 27.12 | (22.28 | )(e) | 50,706 | 1.01 | 1.02 | 1.30 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 50.00 | 0.38 | (10.37 | ) | (9.99 | ) | (0.25 | ) | (4.29 | ) | (4.54 | ) | 35.47 | (18.38 | ) | 78,476 | 0.91 | 0.92 | 0.94 | 27 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 40.70 | 0.30 | 9.60 | 9.90 | (0.39 | ) | (0.21 | ) | (0.60 | ) | 50.00 | 24.54 | 65,123 | 0.90 | 0.90 | 0.68 | 14 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Investor Class |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 26.93 | 0.11 | (1.71 | ) | (1.60 | ) | — | — | — | 25.33 | (5.94 | ) | 181,437 | 1.22 | (d) | 1.22 | (d) | 0.85 | (d) | 12 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 35.27 | 0.27 | (8.25 | )(e) | (7.98 | ) | (0.15 | ) | (0.21 | ) | (0.36 | ) | 26.93 | (22.45 | )(e) | 210,374 | 1.26 | 1.27 | 1.05 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 49.69 | 0.29 | (10.29 | ) | (10.00 | ) | (0.13 | ) | (4.29 | ) | (4.42 | ) | 35.27 | (18.59 | ) | 295,318 | 1.16 | 1.17 | 0.69 | 27 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 40.38 | 0.19 | 9.53 | 9.72 | (0.20 | ) | (0.21 | ) | (0.41 | ) | 49.69 | 24.22 | 419,142 | 1.15 | 1.15 | 0.43 | 14 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 27.77 | 0.17 | (1.77 | ) | (1.60 | ) | — | — | — | 26.17 | (5.76 | ) | 20,485 | 0.83 | (d) | 0.83 | (d) | 1.24 | (d) | 12 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 36.24 | 0.40 | (8.48 | )(e) | (8.08 | ) | (0.18 | ) | (0.21 | ) | (0.39 | ) | 27.77 | (22.10 | )(e) | 22,298 | 0.84 | 0.85 | 1.47 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 50.97 | 0.44 | (10.57 | ) | (10.13 | ) | (0.31 | ) | (4.29 | ) | (4.60 | ) | 36.24 | (18.30 | ) | 32,046 | 0.79 | 0.80 | 1.06 | 27 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 41.51 | 0.35 | 9.80 | 10.15 | (0.48 | ) | (0.21 | ) | (0.69 | ) | 50.97 | 24.68 | 31,942 | 0.79 | 0.79 | 0.79 | 14 | |||||||||||||||||||||||||||||||||||||||
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 |
(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 $503,465, $6,957, $147,329, $47,225, $192,465 and $20,955 for Class A, Class B, Class C, Class Y, Investor Class and Class R5 shares, respectively. |
(e) | Includes litigation proceeds received during the period. Had these litigation proceeds not been received, Net gains (losses) on securities (both realized and unrealized) per share would have been $(8.21), $(7.26), $(7.04), $(8.24), $(8.18) and $(8.41). Total returns would have been lower. |
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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 940.50 | $ | 5.97 | $ | 1,019.06 | $ | 6.21 | 1.22 | % | ||||||||||||
B | 1,000.00 | 937.20 | 9.62 | 1,015.27 | 10.01 | 1.97 | ||||||||||||||||||
C | 1,000.00 | 937.10 | 9.62 | 1,015.27 | 10.01 | 1.97 | ||||||||||||||||||
Y | 1,000.00 | 942.10 | 4.75 | 1,020.32 | 4.94 | 0.97 | ||||||||||||||||||
Investor | 1,000.00 | 940.60 | 5.97 | 1,019.06 | 6.21 | 1.22 | ||||||||||||||||||
R5 | 1,000.00 | 942.40 | 4.06 | 1,021.02 | 4.23 | 0.83 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 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 Broadridge performance universe and against the Lipper Natural Resources Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of its performance universe for the one, three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. Invesco Advisers advised the Trustees that the Lipper Natural Resources category includes many funds that have other natural resource mandates beyond energy making relative performance comparisons difficult. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
17 Invesco Energy Fund
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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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 funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rate of one such fund. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage 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 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates provide to the Invesco Funds and the Fund. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
18 Invesco Energy Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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-ENE-SAR-1 Invesco Distributors, Inc. |
|
| |||
Semiannual Report to Shareholders
| October 31, 2016 | |||
Invesco Gold & Precious Metals Fund | ||||
Nasdaq: A: IGDAX ∎ B: IGDBX ∎ C: IGDCX ∎ Y: IGDYX ∎ Investor: FGLDX |
| ||
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, 4/30/16 to 10/31/16, 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 | -0.79% | |
Class B Shares | -1.26 | |
Class C Shares | -1.18 | |
Class Y Shares | -0.58 | |
Investor Class Shares | -0.79 | |
S&P 500 Indexq (Broad Market Index) | 4.06 | |
Philadelphia Gold & Silver Index (price only)q (Style-Specific Index) | -6.35 | |
Lipper Precious Metals Equity Funds Index∎ (Peer Group Index) | -1.14 | |
Source(s): qFactSet Research Systems Inc.; ∎Lipper 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.
|
For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco Gold & Precious Metals Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (3/28/02) | 6.72 | % | ||
10 Years | -0.24 | |||
5 Years | -12.51 | |||
1 Year | 52.28 | |||
Class B Shares | ||||
Inception (3/28/02) | 6.81 | % | ||
10 Years | -0.28 | |||
5 Years | -12.51 | |||
1 Year | 54.52 | |||
Class C Shares | ||||
Inception (2/14/00) | 7.79 | % | ||
10 Years | -0.46 | |||
5 Years | -12.20 | |||
1 Year | 58.55 | |||
Class Y Shares | ||||
10 Years | 0.51 | % | ||
5 Years | -11.32 | |||
1 Year | 61.51 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 0.69 | % | ||
10 Years | 0.31 | |||
5 Years | -11.52 | |||
1 Year | 61.02 |
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.
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 and Investor Class shares was 1.57%, 2.32%, 2.32%, 1.32% and 1.57%, respectively. The
Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (3/28/02) | 7.23 | % | ||
10 Years | 1.06 | |||
5 Years | -9.80 | |||
1 Year | 73.94 | |||
Class B Shares | ||||
Inception (3/28/02) | 7.32 | % | ||
10 Years | 1.03 | |||
5 Years | -9.81 | |||
1 Year | 77.48 | |||
Class C Shares | ||||
Inception (2/14/00) | 8.24 | % | ||
10 Years | 0.85 | |||
5 Years | -9.48 | |||
1 Year | 81.25 | |||
Class Y Shares | ||||
10 Years | 1.82 | % | ||
5 Years | -8.58 | |||
1 Year | 84.75 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 0.89 | % | ||
10 Years | 1.63 | |||
5 Years | -8.78 | |||
1 Year | 83.90 |
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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
3 Invesco Gold & Precious Metals Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature |
of the services that your funds receive.
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term decision-making. Of course, investing with high conviction can’t guarantee a profit or |
ensure success; no investment strategy can. To learn more about how we invest with high conviction, visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. 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, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–93.15% |
| |||||||
Brazil–1.65% | ||||||||
Yamana Gold Inc. | 1,649,875 | $ | 5,873,555 | |||||
Canada–68.39% | ||||||||
Agnico Eagle Mines Ltd. | 269,381 | 13,684,555 | ||||||
Alamos Gold Inc.–Class A | 1,173,696 | 9,205,802 | ||||||
B2Gold Corp.(a) | 4,012,019 | 11,606,064 | ||||||
Barrick Gold Corp. | 728,267 | 12,810,217 | ||||||
Belo Sun Mining Corp.(a) | 11,902,685 | 8,608,093 | ||||||
Continental Gold Inc.(a) | 4,368,332 | 12,018,002 | ||||||
Detour Gold Corp.(a) | 377,276 | 7,192,505 | ||||||
Eldorado Gold Corp.(a) | 1,024,762 | 3,231,868 | ||||||
Franco-Nevada Corp. | 233,589 | 15,289,303 | ||||||
Goldcorp, Inc. | 988,286 | 15,021,947 | ||||||
Ivanhoe Mines Ltd.–Class A(a) | 5,997,555 | 9,345,677 | ||||||
Kinross Gold Corp.(a) | 2,786,349 | 10,823,395 | ||||||
Lundin Gold Inc.(a) | 1,726,452 | 7,929,129 | ||||||
Lundin Gold Inc. (Acquired 09/26/2016; | 886,464 | 3,867,726 | ||||||
Mandalay Resources Corp. | 4,452,574 | 3,319,720 | ||||||
Nevsun Resources Ltd. | 1,000,498 | 2,901,724 | ||||||
New Gold Inc.(a) | 3,008,555 | 11,865,988 | ||||||
Platinum Group Metals Ltd.(a) | 1,070,003 | 1,842,838 | ||||||
Pretium Resources Inc.(a) | 1,182,274 | 11,556,095 | ||||||
Primero Mining Corp.(a) | 2,446,175 | 3,301,082 | ||||||
Rubicon Minerals Corp.(a) | 5,673,471 | 190,349 | ||||||
Sandstorm Gold Ltd.(a) | 1,200,922 | 5,775,170 | ||||||
SEMAFO Inc.(a) | 1,953,259 | 7,660,125 | ||||||
Silver Wheaton Corp. | 707,324 | 17,053,582 | ||||||
Torex Gold Resources Inc.(a) | 989,525 | 18,407,194 | ||||||
Turquoise Hill Resources Ltd.(a) | 6,181,833 | 19,173,476 | ||||||
243,681,626 | ||||||||
Mali–2.51% | ||||||||
Randgold Resources Ltd.–ADR | 100,820 | 8,945,759 |
Shares | Value | |||||||
Mexico–2.35% | ||||||||
Fresnillo PLC | 417,813 | $ | 8,369,389 | |||||
Monaco–1.42% | ||||||||
Endeavour Mining Corp.(a) | 258,521 | 5,049,954 | ||||||
South Africa–1.62% | ||||||||
Gold Fields Ltd.–ADR | 650,086 | 2,697,857 | ||||||
Petra Diamonds Ltd.(a) | 1,652,837 | 3,072,545 | ||||||
5,770,402 | ||||||||
Tanzania–0.99% | ||||||||
Acacia Mining PLC | 556,795 | 3,533,089 | ||||||
United States–14.22% | ||||||||
Argonaut Gold, Inc.(a) | 1,206,014 | 2,436,755 | ||||||
Boart Longyear Ltd.(a) | 8,242,804 | 873,161 | ||||||
iShares® Gold Trust–ETF(a) | 677,200 | 8,343,104 | ||||||
Newmont Mining Corp. | 399,791 | 14,808,259 | ||||||
SPDR® Gold Trust–ETF(a) | 88,400 | 10,779,496 | ||||||
Tahoe Resources Inc. | 1,120,034 | 13,427,882 | ||||||
50,668,657 | ||||||||
Total Common Stocks & Other Equity Interests |
| 331,892,431 | ||||||
Money Market Funds–7.01% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(c) | 14,977,012 | 14,977,012 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(c) | 9,984,675 | 9,984,675 | ||||||
Total Money Market Funds |
| 24,961,687 | ||||||
TOTAL INVESTMENTS–100.16% |
| 356,854,118 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.16)% |
| (564,701 | ) | |||||
NET ASSETS–100.00% |
| $ | 356,289,417 |
Investment Abbreviations:
ADR | – American Depositary Receipt | |
ETF | – Exchange-Traded Fund | |
SPDR | – Standard & Poor’s Depositary Receipt |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Gold & Precious Metals Fund
Notes to Schedule of Investments:
(a) | Non-income producing security. |
(b) | Security purchased or received in 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, 2016 represented 1.09% of the Fund’s Net Assets. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By industry, based on Net Assets
as of October 31, 2016
Gold | 69.3 | % | ||
Diversified Metals & Mining | 8.0 | |||
Investment Companies-Exchange Traded Funds | 5.4 | |||
Silver | 4.8 | |||
Precious Metals & Minerals | 4.7 | |||
Copper | 0.8 | |||
Construction & Engineering | 0.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 6.8 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Gold & Precious Metals Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $305,264,854) | $ | 331,892,431 | ||
Investments in affiliated money market funds, at value and cost | 24,961,687 | |||
Total investments, at value (Cost $330,226,541) | 356,854,118 | |||
Foreign currencies, at value (Cost $1,001) | 994 | |||
Receivable for: | ||||
Fund shares sold | 371,650 | |||
Dividends | 6,286 | |||
Investment for trustee deferred compensation and retirement plans | 90,426 | |||
Other assets | 37,912 | |||
Total assets | 357,361,386 | |||
Liabilities: |
| |||
Payable for: | ||||
Fund shares reacquired | 635,571 | |||
Accrued fees to affiliates | 269,586 | |||
Accrued trustees’ and officers’ fees and benefits | 1,904 | |||
Accrued other operating expenses | 61,328 | |||
Trustee deferred compensation and retirement plans | 103,580 | |||
Total liabilities | 1,071,969 | |||
Net assets applicable to shares outstanding | $ | 356,289,417 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 518,082,963 | ||
Undistributed net investment income (loss) | (12,770,371 | ) | ||
Undistributed net realized gain (loss) | (175,650,745 | ) | ||
Net unrealized appreciation | 26,627,570 | |||
$ | 356,289,417 |
Net Assets: |
| |||
Class A | $ | 174,732,023 | ||
Class B | $ | 3,293,179 | ||
Class C | $ | 37,295,479 | ||
Class Y | $ | 50,952,470 | ||
Investor Class | $ | 90,016,266 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 34,854,353 | |||
Class B | 702,241 | |||
Class C | 7,440,456 | |||
Class Y | 9,956,771 | |||
Investor Class | 17,860,015 | |||
Class A: | ||||
Net asset value per share | $ | 5.01 | ||
Maximum offering price per share | ||||
(Net asset value of $5.01 ¸ 94.50%) | $ | 5.30 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 4.69 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 5.01 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 5.12 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 5.04 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Gold & Precious Metals Fund
Statement of Operations
For the six months ended October 31, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $87,088) | $ | 557,834 | ||
Dividends from affiliated money market funds | 54,495 | |||
Total investment income | 612,329 | |||
Expenses: | ||||
Advisory fees | 1,389,566 | |||
Administrative services fees | 53,008 | |||
Custodian fees | 27,555 | |||
Distribution fees: | ||||
Class A | 226,215 | |||
Class B | 20,475 | |||
Class C | 196,369 | |||
Investor Class | 123,423 | |||
Transfer agent fees | 436,760 | |||
Trustees’ and officers’ fees and benefits | 13,051 | |||
Registration and filing fees | 41,322 | |||
Reports to shareholders | 22,526 | |||
Professional services fees | 21,767 | |||
Other | 7,837 | |||
Total expenses | 2,579,874 | |||
Less: Fees waived and expense offset arrangement(s) | (21,964 | ) | ||
Net expenses | 2,557,910 | |||
Net investment income (loss) | (1,945,581 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain (loss) from: | ||||
Investment securities | (5,174,662 | ) | ||
Foreign currencies | (31,842 | ) | ||
(5,206,504 | ) | |||
Change in net unrealized appreciation of: | ||||
Investment securities | 2,137,422 | |||
Foreign currencies | 6,797 | |||
2,144,219 | ||||
Net realized and unrealized gain (loss) | (3,062,285 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (5,007,866 | ) |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Gold & Precious Metals Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (1,945,581 | ) | $ | (2,092,674 | ) | ||
Net realized gain (loss) | (5,206,504 | ) | (17,693,783 | ) | ||||
Change in net unrealized appreciation | 2,144,219 | 92,332,389 | ||||||
Net increase (decrease) in net assets resulting from operations | (5,007,866 | ) | 72,545,932 | |||||
Share transactions–net: | ||||||||
Class A | 17,286,033 | 11,477,672 | ||||||
Class B | (973,707 | ) | (1,644,915 | ) | ||||
Class C | 1,652,658 | 1,727,455 | ||||||
Class Y | 9,403,339 | 12,595,354 | ||||||
Investor Class | (7,136,132 | ) | (4,178,893 | ) | ||||
Net increase in net assets resulting from share transactions | 20,232,191 | 19,976,673 | ||||||
Net increase in net assets | 15,224,325 | 92,522,605 | ||||||
Net assets: | ||||||||
Beginning of period | 341,065,092 | 248,542,487 | ||||||
End of period (includes undistributed net investment income (loss) of $(12,770,371) and $(10,824,790), respectively) | $ | 356,289,417 | $ | 341,065,092 |
Notes to Financial Statements
October 31, 2016
(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. Class Y and Investor Class shares are available only to certain 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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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
9 Invesco Gold & Precious Metals Fund
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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
10 Invesco Gold & Precious Metals 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. |
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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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 forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | 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.
11 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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.74%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $18,746.
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, 2016, 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, 2016, 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, 2016, 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, 2016, IDI advised the Fund that IDI retained $53,976 in front-end sales commissions from the sale of Class A shares and $685, $137 and $2,285 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 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, 2016. 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 | $ | 5,873,555 | $ | — | $ | — | $ | 5,873,555 | ||||||||
Canada | 239,623,551 | 3,867,726 | 190,349 | 243,681,626 | ||||||||||||
Mali | 8,945,759 | — | — | 8,945,759 | ||||||||||||
Mexico | — | 8,369,389 | — | 8,369,389 | ||||||||||||
Monaco | 5,049,954 | — | — | 5,049,954 | ||||||||||||
South Africa | 5,770,402 | — | — | 5,770,402 | ||||||||||||
Tanzania | 3,533,089 | — | — | 3,533,089 | ||||||||||||
United States | 49,795,496 | 873,161 | — | 50,668,657 | ||||||||||||
Money Market Funds | 24,961,687 | — | — | 24,961,687 | ||||||||||||
Total Investments | $ | 343,553,493 | $ | 13,110,276 | $ | 190,349 | $ | 356,854,118 |
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $3,218.
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 were eligible to participate in a retirement plan that provided 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.
13 Invesco Gold & Precious Metals 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 eight 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 carryforwards 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, 2016 as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration | $ | 9,502,750 | $ | 142,762,733 | $ | 152,265,483 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any 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, 2016 was $54,593,628 and $38,441,943, 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 | $ | 33,755,316 | ||
Aggregate unrealized (depreciation) of investment securities | (55,824,382 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (22,069,066 | ) |
Cost of investments for tax purposes is $378,923,184.
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 11,915,214 | $ | 62,494,626 | 14,133,878 | $ | 48,723,945 | ||||||||||
Class B | 66,031 | 323,883 | 77,565 | 247,146 | ||||||||||||
Class C | 1,513,057 | 7,968,849 | 2,689,631 | 9,463,131 | ||||||||||||
Class Y | 4,349,186 | 23,387,775 | 7,119,077 | 25,614,495 | ||||||||||||
Investor Class | 1,231,494 | 6,534,621 | 3,342,494 | 11,422,719 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 138,087 | 720,282 | 268,752 | 958,771 | ||||||||||||
Class B | (147,350 | ) | (720,282 | ) | (285,280 | ) | (958,771 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (8,957,113 | ) | (45,928,875 | ) | (11,106,343 | ) | (38,205,044 | ) | ||||||||
Class B | (120,315 | ) | (577,308 | ) | (292,125 | ) | (933,290 | ) | ||||||||
Class C | (1,201,291 | ) | (6,316,191 | ) | (2,321,893 | ) | (7,735,676 | ) | ||||||||
Class Y | (2,631,065 | ) | (13,984,436 | ) | (3,680,711 | ) | (13,019,141 | ) | ||||||||
Investor Class | (2,595,457 | ) | (13,670,753 | ) | (4,625,611 | ) | (15,601,612 | ) | ||||||||
Net increase in share activity | 3,560,478 | $ | 20,232,191 | 5,319,434 | $ | 19,976,673 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 21% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The 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 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 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 |
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Six months ended 10/31/16 | $ | 5.05 | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.04 | ) | $ | — | $ | — | $ | — | $ | 5.01 | (0.79 | )% | $ | 174,732 | 1.32 | %(e) | 1.33 | %(e) | (0.99 | )%(e) | 11 | % | |||||||||||||||||||||||||
Year ended 04/30/16 | 4.00 | (0.03 | ) | 1.08 | 1.05 | — | — | — | 5.05 | 26.25 | 160,494 | 1.54 | 1.54 | (0.90 | ) | 23 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 4.75 | (0.04 | ) | (0.71 | ) | (0.75 | ) | — | — | — | 4.00 | (15.79 | ) | 113,862 | 1.45 | 1.46 | (0.89 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 5.44 | (0.02 | ) | (0.67 | ) | (0.69 | ) | — | — | — | 4.75 | (12.68 | ) | 141,237 | 1.45 | 1.46 | (0.47 | ) | 18 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 4.75 | (0.04 | ) | (0.02 | ) | (0.06 | ) | — | — | — | 4.69 | (1.26 | ) | 3,293 | 2.07 | (e) | 2.08 | (e) | (1.74 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 3.79 | (0.05 | ) | 1.01 | 0.96 | — | — | — | 4.75 | 25.33 | 4,289 | 2.29 | 2.29 | (1.65 | ) | 23 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 4.52 | (0.07 | ) | (0.66 | ) | (0.73 | ) | — | — | — | 3.79 | (16.15 | ) | 5,314 | 2.20 | 2.21 | (1.64 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 5.24 | (0.06 | ) | (0.66 | ) | (0.72 | ) | — | — | — | 4.52 | (13.74 | ) | 9,733 | 2.20 | 2.21 | (1.22 | ) | 18 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 5.07 | (0.05 | ) | (0.01 | ) | (0.06 | ) | — | — | — | 5.01 | (1.18 | ) | 37,295 | 2.07 | (e) | 2.08 | (e) | (1.74 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 4.05 | (0.06 | ) | 1.08 | 1.02 | — | — | — | 5.07 | 25.19 | 36,157 | 2.29 | 2.29 | (1.65 | ) | 23 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 4.84 | (0.07 | ) | (0.72 | ) | (0.79 | ) | — | — | — | 4.05 | (16.32 | ) | 27,351 | 2.20 | 2.21 | (1.64 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 5.60 | (0.06 | ) | (0.70 | ) | (0.76 | ) | — | — | — | 4.84 | (13.57 | ) | 32,640 | 2.20 | 2.21 | (1.22 | ) | 18 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 5.15 | (0.02 | ) | (0.01 | ) | (0.03 | ) | — | — | — | 5.12 | (0.58 | ) | 50,952 | 1.07 | (e) | 1.08 | (e) | (0.74 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 4.07 | (0.02 | ) | 1.10 | 1.08 | — | — | — | 5.15 | 26.54 | 42,446 | 1.29 | 1.29 | (0.65 | ) | 23 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 4.82 | (0.03 | ) | (0.72 | ) | (0.75 | ) | — | — | — | 4.07 | (15.56 | ) | 19,530 | 1.20 | 1.21 | (0.64 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 5.52 | (0.01 | ) | (0.69 | ) | (0.70 | ) | — | — | — | 4.82 | (12.68 | ) | 36,328 | 1.20 | 1.21 | (0.22 | ) | 18 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 5.08 | (0.03 | ) | (0.01 | ) | (0.04 | ) | — | — | — | 5.04 | (0.79 | ) | 90,016 | 1.32 | (e) | 1.33 | (e) | (0.99 | )(e) | 11 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 4.02 | (0.03 | ) | 1.09 | 1.06 | — | — | — | 5.08 | 26.37 | 97,678 | 1.54 | 1.54 | (0.90 | ) | 23 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 4.77 | (0.04 | ) | (0.71 | ) | (0.75 | ) | — | — | — | 4.02 | (15.72 | ) | 82,486 | 1.45 | 1.46 | (0.89 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 5.48 | (0.02 | ) | (0.69 | ) | (0.71 | ) | — | — | — | 4.77 | (12.96 | ) | 101,153 | 1.45 | 1.46 | (0.47 | ) | 18 | |||||||||||||||||||||||||||||||||||||
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 |
(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 the fiscal year ended April 30, 2012. |
(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 $179,496, $4,062, $38,954, $49,782 and $97,933 for Class A, Class B, Class C, Class Y and Investor Class shares, respectively. |
15 Invesco Gold & Precious Metals Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 992.10 | $ | 6.63 | $ | 1,018.55 | $ | 6.72 | 1.32 | % | ||||||||||||
B | 1,000.00 | 987.40 | 10.37 | 1,014.77 | 10.51 | 2.07 | ||||||||||||||||||
C | 1,000.00 | 988.20 | 10.37 | 1,014.77 | 10.51 | 2.07 | ||||||||||||||||||
Y | 1,000.00 | 994.20 | 5.38 | 1,019.81 | 5.45 | 1.07 | ||||||||||||||||||
Investor | 1,000.00 | 992.10 | 6.63 | 1,018.55 | 6.72 | 1.32 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, 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 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solution, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 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 Broadridge performance universe and against the Lipper Precious Metals Equity Funds Index. The Board noted that performance of Class A shares of the Fund was in the fourth quintile of its performance universe for the one year period and the first quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was 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
17 Invesco Gold & Precious Metals Fund
management fee rates of funds in the Fund’s Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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 funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rate of one off-shore 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 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The
Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
18 Invesco Gold & Precious Metals Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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. |
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Semiannual Report to Shareholders
| October 31, 2016 | |||
Invesco Mid Cap Growth Fund | ||||
Nasdaq: A: VGRAX ∎ B: VGRBX ∎ C: VGRCX ∎ R: VGRRX ∎ Y: VGRDX ∎ R5: VGRJX ∎ R6: VGRFX |
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2 Fund Performance | ||
4 Letters to Shareholders | ||
5 Schedule of Investments | ||
8 Financial Statements | ||
10 Notes to Financial Statements | ||
16 Financial Highlights | ||
17 Fund Expenses | ||
18 Approval of Investment Advisory and Sub-Advisory 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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance
Performance summary
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Fund vs. Indexes | ||||
Cumulative total returns, 4/30/16 to 10/31/16, 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.
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Class A Shares | 2.14% | |||
Class B Shares | 2.19 | |||
Class C Shares | 1.81 | |||
Class R Shares | 2.04 | |||
Class Y Shares | 2.30 | |||
Class R5 Shares | 2.37 | |||
Class R6 Shares | 2.42 | |||
S&P 500 Indexq (Broad Market Index) | 4.06 | |||
Russell Midcap Growth Indexq (Style-Specific Index) | 1.97 | |||
Lipper Mid-Cap Growth Funds Index∎ (Peer Group Index) | 2.08 | |||
Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc. | ||||
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.
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For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
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2 Invesco Mid Cap Growth Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (12/27/95) | 10.84 | % | ||
10 Years | 6.58 | |||
5 Years | 8.58 | |||
1 Year | -8.12 | |||
Class B Shares | ||||
Inception (12/27/95) | 10.85 | % | ||
10 Years | 7.03 | |||
5 Years | 9.58 | |||
1 Year | -7.20 | |||
Class C Shares | ||||
Inception (12/27/95) | 10.35 | % | ||
10 Years | 6.41 | |||
5 Years | 9.04 | |||
1 Year | -4.33 | |||
Class R Shares | ||||
Inception (7/11/08) | 7.56 | % | ||
5 Years | 9.56 | |||
1 Year | -3.02 | |||
Class Y Shares | ||||
Inception (8/12/05) | 7.76 | % | ||
10 Years | 7.46 | |||
5 Years | 10.10 | |||
1 Year | -2.53 | |||
Class R5 Shares | ||||
10 Years | 7.44 | % | ||
5 Years | 10.26 | |||
1 Year | -2.38 | |||
Class R6 Shares | ||||
10 Years | 7.35 | % | ||
5 Years | 10.15 | |||
1 Year | -2.29 |
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, prior to June 1, 2010, 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
Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (12/27/95) | 11.11 | % | ||
10 Years | 7.44 | |||
5 Years | 12.33 | |||
1 Year | 1.61 | |||
Class B Shares | ||||
Inception (12/27/95) | 11.12 | % | ||
10 Years | 7.87 | |||
5 Years | 13.40 | |||
1 Year | 2.62 | |||
Class C Shares | ||||
Inception (12/27/95) | 10.62 | % | ||
10 Years | 7.26 | |||
5 Years | 12.79 | |||
1 Year | 5.83 | |||
Class R Shares | ||||
Inception (7/11/08) | 8.19 | % | ||
5 Years | 13.32 | |||
1 Year | 7.27 | |||
Class Y Shares | ||||
Inception (8/12/05) | 8.22 | % | ||
10 Years | 8.32 | |||
5 Years | 13.90 | |||
1 Year | 7.81 | |||
Class R5 Shares | ||||
10 Years | 8.29 | % | ||
5 Years | 14.05 | |||
1 Year | 7.94 | |||
Class R6 Shares | ||||
10 Years | 8.20 | % | ||
5 Years | 13.93 | |||
1 Year | 8.04 |
fees applicable to Class A shares.
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.
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 1.21%, 1.21%, 1.93%, 1.46%, 0.96%, 0.82% and 0.73%, 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
3 Invesco Mid Cap Growth Fund
Letters to Shareholders
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Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive. |
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure |
success; no investment strategy can. To learn more about how we invest with high conviction, visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. 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, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–98.33% |
| |||||||
Aerospace & Defense–1.02% | ||||||||
Raytheon Co. | 188,453 | $ | 25,744,564 | |||||
Alternative Carriers–1.20% | ||||||||
Zayo Group Holdings, Inc.(b) | 945,925 | 30,439,867 | ||||||
Apparel Retail–2.74% | ||||||||
American Eagle Outfitters, Inc. | 755,729 | 12,877,622 | ||||||
Burlington Stores, Inc.(b) | 517,652 | 38,792,841 | ||||||
Foot Locker, Inc. | 266,895 | 17,820,579 | ||||||
69,491,042 | ||||||||
Apparel, Accessories & Luxury Goods–0.40% | ||||||||
Under Armour, Inc.–Class A(b)(c) | 327,044 | 10,171,068 | ||||||
Application Software–4.96% | ||||||||
Cadence Design Systems, Inc.(b) | 1,577,347 | 40,348,536 | ||||||
Mobileye N.V.(b) | 604,044 | 22,458,356 | ||||||
SS&C Technologies Holdings, Inc. | 816,998 | 26,086,746 | ||||||
Tyler Technologies, Inc.(b) | 228,087 | 36,585,155 | ||||||
125,478,793 | ||||||||
Asset Management & Custody Banks–0.85% | ||||||||
Affiliated Managers Group, Inc.(b) | 162,508 | 21,558,311 | ||||||
Automobile Manufacturers–0.52% | ||||||||
Tesla Motors, Inc.(b) | 66,488 | 13,146,672 | ||||||
Automotive Retail–2.58% | ||||||||
Advance Auto Parts, Inc. | 145,665 | 20,404,753 | ||||||
O’Reilly Automotive, Inc.(b) | 170,309 | 45,036,512 | ||||||
65,441,265 | ||||||||
Biotechnology–2.21% | ||||||||
BioMarin Pharmaceutical Inc.(b) | 416,747 | 33,556,469 | ||||||
Neurocrine Biosciences, Inc.(b) | 513,221 | 22,463,683 | ||||||
56,020,152 | ||||||||
Building Products–5.36% | ||||||||
A.O. Smith Corp. | 662,897 | 29,943,057 | ||||||
Allegion PLC | 399,259 | 25,488,694 | ||||||
Lennox International Inc. | 136,813 | 19,959,649 | ||||||
Masco Corp. | 902,367 | 27,865,093 | ||||||
Owens Corning | 664,287 | 32,403,920 | ||||||
135,660,413 | ||||||||
Casinos & Gaming–0.80% | ||||||||
Wynn Resorts Ltd.(c) | 213,029 | 20,141,892 | ||||||
Communications Equipment–1.83% | ||||||||
F5 Networks, Inc.(b) | 253,332 | 35,013,016 | ||||||
Palo Alto Networks, Inc.(b) | 73,720 | 11,340,347 | ||||||
46,353,363 |
Shares | Value | |||||||
Construction Machinery & Heavy Trucks–0.48% | ||||||||
WABCO Holdings Inc.(b) | 122,405 | $ | 12,051,996 | |||||
Construction Materials–0.82% | ||||||||
Vulcan Materials Co. | 183,801 | 20,806,273 | ||||||
Consumer Electronics–0.49% | ||||||||
Harman International Industries, Inc. | 156,140 | 12,445,919 | ||||||
Data Processing & Outsourced Services–3.34% | ||||||||
Broadridge Financial Solutions, Inc. | 370,601 | 23,963,061 | ||||||
Fidelity National Information Services, Inc. | 527,387 | 38,984,447 | ||||||
Vantiv, Inc.–Class A(b) | 371,223 | 21,664,574 | ||||||
84,612,082 | ||||||||
Department Stores–0.75% | ||||||||
Nordstrom, Inc.(c) | 363,282 | 18,890,664 | ||||||
Distillers & Vintners–2.25% | ||||||||
Constellation Brands, Inc.–Class A | 340,426 | 56,891,993 | ||||||
Diversified Support Services–1.62% | ||||||||
KAR Auction Services Inc. | 962,100 | 40,966,218 | ||||||
Electrical Components & Equipment–1.11% | ||||||||
Acuity Brands, Inc. | 125,712 | 28,105,432 | ||||||
Electronic Components–2.21% | ||||||||
Amphenol Corp.–Class A | 850,813 | 56,094,101 | ||||||
Electronic Manufacturing Services–0.70% | ||||||||
Flex Ltd.(b) | 1,248,849 | 17,721,167 | ||||||
Environmental & Facilities Services–0.81% | ||||||||
Republic Services, Inc. | 390,803 | 20,567,962 | ||||||
Financial Exchanges & Data–3.79% | ||||||||
CBOE Holdings Inc. | 328,702 | 20,777,253 | ||||||
Intercontinental Exchange, Inc. | 154,317 | 41,725,774 | ||||||
S&P Global Inc. | 275,571 | 33,578,326 | ||||||
96,081,353 | ||||||||
General Merchandise Stores–0.96% | ||||||||
Dollar Tree, Inc.(b) | 321,801 | 24,312,066 | ||||||
Health Care Equipment–6.01% | ||||||||
Boston Scientific Corp.(b) | 1,664,131 | 36,610,882 | ||||||
DexCom Inc.(b) | 469,532 | 36,736,184 | ||||||
Hologic, Inc.(b) | 1,393,037 | 50,163,262 | ||||||
Penumbra, Inc.(b) | 434,447 | 28,651,780 | ||||||
152,162,108 | ||||||||
Health Care Facilities–1.37% | ||||||||
VCA Inc.(b) | 565,076 | 34,729,571 | ||||||
Health Care Services–1.28% | ||||||||
Team Health Holdings, Inc.(b) | 759,404 | 32,540,461 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Mid Cap Growth Fund
Shares | Value | |||||||
Home Entertainment Software–1.67% | ||||||||
Electronic Arts Inc.(b) | 539,921 | $ | 42,394,597 | |||||
Homebuilding–0.66% | ||||||||
D.R. Horton, Inc. | 575,749 | 16,598,844 | ||||||
Housewares & Specialties–1.40% | ||||||||
Newell Brands, Inc. | 740,681 | 35,567,502 | ||||||
Industrial Conglomerates–1.03% | ||||||||
Carlisle Cos. Inc. | 248,738 | 26,080,179 | ||||||
Industrial Machinery–1.39% | ||||||||
Stanley Black & Decker Inc. | 308,952 | 35,171,096 | ||||||
Integrated Telecommunication Services–1.71% | ||||||||
SBA Communications Corp.–Class A(b) | 381,254 | 43,188,453 | ||||||
Internet Software & Services–1.36% | ||||||||
CoStar Group Inc.(b) | 183,523 | 34,340,824 | ||||||
Investment Banking & Brokerage–1.73% | ||||||||
E*TRADE Financial Corp.(b) | 1,553,538 | 43,747,630 | ||||||
IT Consulting & Other Services–0.97% | ||||||||
Gartner, Inc.(b) | 284,948 | 24,516,926 | ||||||
Leisure Products–1.17% | ||||||||
Brunswick Corp. | 678,461 | 29,513,054 | ||||||
Life Sciences Tools & Services–3.85% | ||||||||
INC Research Holdings, Inc.–Class A(b) | 743,409 | 33,973,791 | ||||||
Patheon N.V.(b) | 918,092 | 23,310,356 | ||||||
VWR Corp.(b) | 1,463,153 | 40,251,339 | ||||||
97,535,486 | ||||||||
Managed Health Care–1.81% | ||||||||
Centene Corp.(b) | 732,564 | 45,770,599 | ||||||
Metal & Glass Containers–0.94% | ||||||||
Berry Plastics Group Inc.(b) | 544,235 | 23,810,281 | ||||||
Movies & Entertainment–1.54% | ||||||||
Cinemark Holdings, Inc. | 981,423 | 39,060,635 | ||||||
Oil & Gas Exploration & Production–2.42% | ||||||||
Diamondback Energy Inc.(b) | 342,699 | 31,284,992 | ||||||
Pioneer Natural Resources Co. | 167,224 | 29,936,440 | ||||||
61,221,432 | ||||||||
Oil & Gas Storage & Transportation–1.89% | ||||||||
Cheniere Energy, Inc.(b) | 633,634 | 23,888,002 | ||||||
Targa Resources Corp. | 543,809 | 23,873,215 | ||||||
47,761,217 | ||||||||
Packaged Foods & Meats–0.93% | ||||||||
Pinnacle Foods Inc. | 459,985 | 23,652,429 | ||||||
Pharmaceuticals–0.41% | ||||||||
Pacira Pharmaceuticals, Inc.(b)(c) | 326,284 | 10,375,831 |
Shares | Value | |||||||
Property & Casualty Insurance–0.85% | ||||||||
Progressive Corp. (The) | 680,504 | $ | 21,442,681 | |||||
Restaurants–2.53% | ||||||||
Chipotle Mexican Grill, Inc.(b) | 59,024 | 21,293,498 | ||||||
Domino’s Pizza, Inc. | 253,197 | 42,851,061 | ||||||
64,144,559 | ||||||||
Semiconductors–5.19% | ||||||||
Cirrus Logic, Inc.(b) | 314,649 | 16,984,753 | ||||||
Microsemi Corp.(b) | 782,323 | 32,959,268 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 618,429 | 61,842,900 | ||||||
Qorvo, Inc.(b) | 351,095 | 19,538,437 | ||||||
131,325,358 | ||||||||
Soft Drinks–1.70% | ||||||||
Monster Beverage Corp.(b) | 298,012 | 43,015,052 | ||||||
Specialized REIT’s–3.40% | ||||||||
CoreSite Realty Corp. | 288,620 | 21,282,839 | ||||||
CubeSmart | 831,545 | 21,678,378 | ||||||
Equinix, Inc. | 120,935 | 43,207,657 | ||||||
86,168,874 | ||||||||
Specialty Chemicals–1.41% | ||||||||
PPG Industries, Inc. | 382,335 | 35,606,859 | ||||||
Specialty Stores–1.57% | ||||||||
Tractor Supply Co. | 251,089 | 15,725,704 | ||||||
Ulta Salon, Cosmetics & Fragrance, Inc.(b) | 99,093 | 24,113,291 | ||||||
39,838,995 | ||||||||
Systems Software–2.34% | ||||||||
ServiceNow, Inc.(b) | 673,144 | 59,176,089 | ||||||
Total Common Stocks & Other Equity Interests |
| 2,489,652,250 | ||||||
Money Market Funds–1.97% |
| |||||||
Government & Agency Portfolio– | 29,939,704 | 29,939,704 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(d) | 19,959,803 | 19,959,803 | ||||||
Total Money Market Funds |
| 49,899,507 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–100.30% |
| 2,539,551,757 | ||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–1.06% |
| |||||||
Government & Agency Portfolio– | 26,780,055 | 26,780,055 | ||||||
TOTAL INVESTMENTS–101.36% |
| 2,566,331,812 | ||||||
OTHER ASSETS LESS LIABILITIES–(1.36)% |
| (34,353,872 | ) | |||||
NET ASSETS–100.00% |
| $ | 2,531,977,940 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Mid Cap Growth Fund
Investment Abbreviations:
REIT | – Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at October 31, 2016. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
(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, 2016
Information Technology | 24.6 | % | ||
Consumer Discretionary | 18.1 | |||
Health Care | 16.9 | |||
Industrials | 12.8 | |||
Financials | 10.6 | |||
Consumer Staples | 4.9 | |||
Energy | 4.3 | |||
Materials | 3.2 | |||
Telecommunication Services | 2.9 | |||
Money Market Funds Plus Other Assets Less Liabilities | 1.7 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Mid Cap Growth Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $2,147,988,864)* | $ | 2,489,652,250 | ||
Investments in affiliated money market funds, at value and cost | 76,679,562 | |||
Total investments, at value (Cost $2,224,668,426) | 2,566,331,812 | |||
Receivable for: | ||||
Investments sold | 813,599 | |||
Fund shares sold | 2,348,086 | |||
Dividends | 927,568 | |||
Fund expenses absorbed | 5,563 | |||
Investment for trustee deferred compensation and retirement plans | 585,780 | |||
Other assets | 237,277 | |||
Total assets | 2,571,249,685 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 6,110,374 | |||
Fund shares reacquired | 3,608,787 | |||
Amount due custodian | 20,790 | |||
Collateral upon return of securities loaned | 26,780,055 | |||
Accrued fees to affiliates | 1,881,081 | |||
Accrued trustees’ and officers’ fees and benefits | 4,501 | |||
Accrued other operating expenses | 184,813 | |||
Trustee deferred compensation and retirement plans | 681,344 | |||
Total liabilities | 39,271,745 | |||
Net assets applicable to shares outstanding | $ | 2,531,977,940 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 2,158,298,243 | ||
Undistributed net investment income (loss) | (13,516,964 | ) | ||
Undistributed net realized gain | 45,533,275 | |||
Net unrealized appreciation | 341,663,386 | |||
$ | 2,531,977,940 |
Net Assets: |
| |||
Class A | $ | 2,109,022,481 | ||
Class B | $ | 33,393,399 | ||
Class C | $ | 138,830,537 | ||
Class R | $ | 26,913,374 | ||
Class Y | $ | 84,082,257 | ||
Class R5 | $ | 91,142,754 | ||
Class R6 | $ | 48,593,138 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 62,260,191 | |||
Class B | 1,172,708 | |||
Class C | 5,243,716 | |||
Class R | 814,330 | |||
Class Y | 2,393,690 | |||
Class R5 | 2,574,113 | |||
Class R6 | 1,368,221 | |||
Class A: | ||||
Net asset value per share | $ | 33.87 | ||
Maximum offering price per share | ||||
(Net asset value of $33.87 ¸ 94.50%) | $ | 35.84 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 28.48 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 26.48 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 33.05 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 35.13 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 35.41 | ||
Class R6: | ||||
Net asset value and offering price per share | $ | 35.52 |
* | At October 31, 2016, securities with an aggregate value of $26,234,835 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, 2016
(Unaudited)
Investment income: |
| |||
Dividends | $ | 8,377,358 | ||
Dividends from affiliated money market funds (includes securities lending income of $157,771) | 296,339 | |||
Other income | 141,566 | |||
Total investment income | 8,815,263 | |||
Expenses: | ||||
Advisory fees | 9,058,056 | |||
Administrative services fees | 264,339 | |||
Distribution fees: | ||||
Class A | 2,780,065 | |||
Class B | 50,594 | |||
Class C | 712,943 | |||
Class R | 73,182 | |||
Transfer agent fees — A, B, C, R and Y | 2,799,032 | |||
Transfer agent fees — R5 | 42,298 | |||
Transfer agent fees — R6 | 2,148 | |||
Trustees’ and officers’ fees and benefits | 36,720 | |||
Registration and filing fees | 79,059 | |||
Reports to shareholders | 141,243 | |||
Professional services fees | 29,740 | |||
Other | 35,505 | |||
Total expenses | 16,104,924 | |||
Less: Fees waived and expenses reimbursed | (67,643 | ) | ||
Net expenses | 16,037,281 | |||
Net investment income (loss) | (7,222,018 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities (includes net gains (losses) from securities sold to affiliates of $(245,038)) | 95,861,815 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (29,817,132 | ) | ||
Net realized and unrealized gain | 66,044,683 | |||
Net increase in net assets resulting from operations | $ | 58,822,665 |
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, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (7,222,018 | ) | $ | (14,146,796 | ) | ||
Net realized gain | 95,861,815 | 113,017,507 | ||||||
Change in net unrealized appreciation (depreciation) | (29,817,132 | ) | (321,151,557 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 58,822,665 | (222,280,846 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (171,450,054 | ) | |||||
Class B | — | (4,921,422 | ) | |||||
Class C | — | (15,142,609 | ) | |||||
Class R | — | (2,437,421 | ) | |||||
Class Y | — | (5,895,511 | ) | |||||
Class R5 | — | (6,484,545 | ) | |||||
Class R6 | — | (3,672,306 | ) | |||||
Total distributions from net realized gains | — | (210,003,868 | ) | |||||
Share transactions–net: | ||||||||
Class A | (117,710,606 | ) | 49,575,046 | |||||
Class B | (11,059,735 | ) | (21,326,268 | ) | ||||
Class C | (12,958,221 | ) | 2,196,193 | |||||
Class R | (3,281,869 | ) | (349,819 | ) | ||||
Class Y | 6,228,014 | 7,660,539 | ||||||
Class R5 | (2,810,677 | ) | 18,682,817 | |||||
Class R6 | (2,089,402 | ) | (3,350,161 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (143,682,496 | ) | 53,088,347 | |||||
Net increase (decrease) in net assets | (84,859,831 | ) | (379,196,367 | ) | ||||
Net assets: | ||||||||
Beginning of period | 2,616,837,771 | 2,996,034,138 | ||||||
End of period (includes undistributed net investment income (loss) of $(13,516,964) and $(6,294,946), respectively) | $ | 2,531,977,940 | $ | 2,616,837,771 |
Notes to Financial Statements
October 31, 2016
(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. Class Y shares are available only to certain investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y, 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. |
10 Invesco Mid Cap Growth Fund
A security listed or traded on an exchange (except convertible securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 |
11 Invesco Mid Cap Growth Fund
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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. | 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. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on 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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.68%.
12 Invesco Mid Cap Growth Fund
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 2.00%, 2.75%, 2.75%, 2.25%, 1.75%, 1.75% and 1.75%, respectively, of average daily net assets (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $50,904.
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, 2016, 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, 2016, 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, 2016, 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, 2016, IDI advised the Fund that IDI retained $144,210 in front-end sales commissions from the sale of Class A shares and $6,012, $1,612 and $2,597 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $3,390 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. |
As of October 31, 2016, 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
13 Invesco Mid Cap Growth Fund
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, 2016, the Fund engaged in securities sales of $4,249,501, which resulted in net realized gains (losses) of $(245,038).
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 year ended October 31, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $16,739.
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 were eligible to participate in a retirement plan that provided 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 eight 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 carryforwards 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, 2016, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 55,213,273 | $ | — | $ | 55,213,273 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 9—Investment Securities
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the six months ended October 31, 2016 was $751,862,484 and $866,874,829, 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 | $ | 431,128,272 | ||
Aggregate unrealized (depreciation) of investment securities | (95,225,193 | ) | ||
Net unrealized appreciation of investment securities | $ | 335,903,079 |
Cost of investments for tax purposes is $2,230,428,733.
14 Invesco Mid Cap Growth Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 1,852,175 | $ | 63,674,404 | 5,892,996 | $ | 209,757,836 | ||||||||||
Class B | 4,900 | 142,736 | 27,849 | 854,005 | ||||||||||||
Class C | 181,307 | 4,883,705 | 783,132 | 22,663,540 | ||||||||||||
Class R | 93,866 | 3,165,711 | 225,301 | 7,971,324 | ||||||||||||
Class Y | 791,545 | 28,384,765 | 621,771 | 23,246,797 | ||||||||||||
Class R5 | 253,505 | 9,081,873 | 707,552 | 26,431,020 | ||||||||||||
Class R6 | 66,038 | 2,388,395 | 168,238 | 6,339,325 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 4,849,844 | 163,342,799 | ||||||||||||
Class B | — | — | 170,151 | 4,816,968 | ||||||||||||
Class C | — | — | 540,776 | 14,325,141 | ||||||||||||
Class R | — | — | 73,999 | 2,436,780 | ||||||||||||
Class Y | — | — | 144,326 | 5,029,788 | ||||||||||||
Class R5 | — | — | 184,366 | 6,467,555 | ||||||||||||
Class R6 | — | — | 104,418 | 3,671,357 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 243,678 | 8,327,553 | 560,593 | 19,924,603 | ||||||||||||
Class B | (289,876 | ) | (8,327,553 | ) | (662,016 | ) | (19,924,603 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (5,505,047 | ) | (189,712,563 | ) | (9,705,298 | ) | (343,450,192 | ) | ||||||||
Class B | (99,421 | ) | (2,874,918 | ) | (233,040 | ) | (7,072,638 | ) | ||||||||
Class C | (662,247 | ) | (17,841,926 | ) | (1,248,083 | ) | (34,792,488 | ) | ||||||||
Class R | (191,676 | ) | (6,447,580 | ) | (306,528 | ) | (10,757,923 | ) | ||||||||
Class Y | (619,411 | ) | (22,156,751 | ) | (566,796 | ) | (20,616,046 | ) | ||||||||
Class R5 | (330,225 | ) | (11,892,550 | ) | (385,584 | ) | (14,215,758 | ) | ||||||||
Class R6 | (124,540 | ) | (4,477,797 | ) | (363,803 | ) | (13,360,843 | ) | ||||||||
Net increase (decrease) in share activity | (4,335,429 | ) | $ | (143,682,496 | ) | 1,584,164 | $ | 53,088,347 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 27% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
15 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(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 10/31/16 | $ | 33.16 | $ | (0.09 | ) | $ | 0.80 | $ | 0.71 | $ | — | $ | 33.87 | 2.14 | % | $ | 2,109,022 | 1.18 | %(d) | 1.19 | %(d) | (0.52 | )%(d) | 29 | % | |||||||||||||||||||||||
Year ended 04/30/16 | 38.74 | (0.18 | ) | (2.66 | ) | (2.84 | ) | (2.74 | ) | 33.16 | (7.43 | ) | 2,177,520 | 1.20 | 1.21 | (0.49 | ) | 60 | ||||||||||||||||||||||||||||||
Year ended 04/30/15 | 37.30 | (0.15 | ) | 5.18 | 5.03 | (3.59 | ) | 38.74 | 14.39 | 2,482,328 | 1.14 | 1.19 | (0.38 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 31.09 | (0.16 | ) | 7.27 | 7.11 | (0.90 | ) | 37.30 | 22.99 | 2,384,362 | 1.16 | 1.21 | (0.44 | ) | 95 | |||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.15 | (0.03 | )(e) | 2.97 | 2.94 | — | 31.09 | 10.44 | 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 | ) | 1,199,482 | 1.31 | 1.31 | (0.57 | ) | 109 | ||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 27.87 | (0.08 | ) | 0.69 | 0.61 | — | 28.48 | 2.19 | (f) | 33,393 | 1.18 | (d)(f) | 1.19 | (d)(f) | (0.52 | )(d)(f) | 29 | |||||||||||||||||||||||||||||||
Year ended 04/30/16 | 33.03 | (0.15 | ) | (2.27 | ) | (2.42 | ) | (2.74 | ) | 27.87 | (7.44 | )(f) | 43,403 | 1.20 | (f) | 1.21 | (f) | (0.49 | )(f) | 60 | ||||||||||||||||||||||||||||
Year ended 04/30/15 | 32.30 | (0.13 | ) | 4.45 | 4.32 | (3.59 | ) | 33.03 | 14.42 | (f) | 74,463 | 1.14 | (f) | 1.19 | (f) | (0.38 | )(f) | 61 | ||||||||||||||||||||||||||||||
Year ended 04/30/14 | 27.03 | (0.14 | ) | 6.31 | 6.17 | (0.90 | ) | 32.30 | 22.96 | (f) | 97,068 | 1.16 | (f) | 1.21 | (f) | (0.44 | )(f) | 95 | ||||||||||||||||||||||||||||||
Year ended 04/30/13 | 24.47 | (0.03 | )(e) | 2.59 | 2.56 | — | 27.03 | 10.46 | (f) | 106,586 | 1.29 | (f) | 1.29 | (f) | (0.11 | )(e)(f) | 88 | |||||||||||||||||||||||||||||||
Year ended 04/30/12 | 29.11 | (0.11 | ) | (2.51 | ) | (2.62 | ) | (2.02 | ) | 24.47 | (8.29 | )(f) | 109,449 | 1.21 | (f) | 1.21 | (f) | (0.47 | )(f) | 109 | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 26.01 | (0.17 | ) | 0.64 | 0.47 | — | 26.48 | 1.81 | (g) | 138,831 | 1.89 | (d)(g) | 1.90 | (d)(g) | (1.23 | )(d)(g) | 29 | |||||||||||||||||||||||||||||||
Year ended 04/30/16 | 31.24 | (0.35 | ) | (2.14 | ) | (2.49 | ) | (2.74 | ) | 26.01 | (8.12 | )(g) | 148,892 | 1.92 | (g) | 1.93 | (g) | (1.21 | )(g) | 60 | ||||||||||||||||||||||||||||
Year ended 04/30/15 | 30.95 | (0.35 | ) | 4.23 | 3.88 | (3.59 | ) | 31.24 | 13.59 | (g) | 176,447 | 1.86 | (g) | 1.91 | (g) | (1.10 | )(g) | 61 | ||||||||||||||||||||||||||||||
Year ended 04/30/14 | 26.11 | (0.34 | ) | 6.08 | 5.74 | (0.90 | ) | 30.95 | 22.12 | (g) | 170,355 | 1.88 | (g) | 1.93 | (g) | (1.16 | )(g) | 95 | ||||||||||||||||||||||||||||||
Year ended 04/30/13 | 23.82 | (0.20 | )(e) | 2.49 | 2.29 | — | 26.11 | 9.62 | 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 | ) | 95,998 | 2.06 | 2.06 | (1.32 | ) | 109 | ||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 32.39 | (0.13 | ) | 0.79 | 0.66 | — | 33.05 | 2.04 | 26,913 | 1.43 | (d) | 1.44 | (d) | (0.77 | )(d) | 29 | ||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 38.01 | (0.26 | ) | (2.62 | ) | (2.88 | ) | (2.74 | ) | 32.39 | (7.69 | ) | 29,547 | 1.45 | 1.46 | (0.74 | ) | 60 | ||||||||||||||||||||||||||||||
Year ended 04/30/15 | 36.74 | (0.24 | ) | 5.10 | 4.86 | (3.59 | ) | 38.01 | 14.14 | 34,942 | 1.39 | 1.44 | (0.63 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 30.72 | (0.24 | ) | 7.16 | 6.92 | (0.90 | ) | 36.74 | 22.64 | 36,184 | 1.41 | 1.46 | (0.69 | ) | 95 | |||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 27.88 | (0.10 | )(e) | 2.94 | 2.84 | — | 30.72 | 10.19 | 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 | ) | 16,080 | 1.56 | 1.56 | (0.82 | ) | 109 | ||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 34.34 | (0.05 | ) | 0.84 | 0.79 | — | 35.13 | 2.30 | 84,082 | 0.93 | (d) | 0.94 | (d) | (0.27 | )(d) | 29 | ||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 39.92 | (0.09 | ) | (2.75 | ) | (2.84 | ) | (2.74 | ) | 34.34 | (7.21 | ) | 76,291 | 0.95 | 0.96 | (0.24 | ) | 60 | ||||||||||||||||||||||||||||||
Year ended 04/30/15 | 38.23 | (0.05 | ) | 5.33 | 5.28 | (3.59 | ) | 39.92 | 14.70 | 80,736 | 0.89 | 0.94 | (0.13 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 31.78 | (0.07 | ) | 7.42 | 7.35 | (0.90 | ) | 38.23 | 23.24 | 62,398 | 0.91 | 0.96 | (0.19 | ) | 95 | |||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.70 | 0.04 | (e) | 3.04 | 3.08 | — | 31.78 | 10.73 | 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 | ) | 52,408 | 1.06 | 1.06 | (0.32 | ) | 109 | ||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 34.59 | (0.03 | ) | 0.85 | 0.82 | — | 35.41 | 2.37 | 91,143 | 0.81 | (d) | 0.81 | (d) | (0.15 | )(d) | 29 | ||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.14 | (0.04 | ) | (2.77 | ) | (2.81 | ) | (2.74 | ) | 34.59 | (7.08 | ) | 91,700 | 0.82 | 0.82 | (0.11 | ) | 60 | ||||||||||||||||||||||||||||||
Year ended 04/30/15 | 38.39 | (0.02 | ) | 5.36 | 5.34 | (3.59 | ) | 40.14 | 14.80 | 86,090 | 0.81 | 0.81 | (0.05 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 31.87 | (0.04 | ) | 7.46 | 7.42 | (0.90 | ) | 38.39 | 23.40 | 79,584 | 0.83 | 0.83 | (0.11 | ) | 95 | |||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 28.73 | 0.10 | (e) | 3.04 | 3.14 | — | 31.87 | 10.93 | 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 | ) | 2,656 | 0.85 | 0.85 | (0.11 | ) | 109 | ||||||||||||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 34.68 | (0.01 | ) | 0.85 | 0.84 | — | 35.52 | 2.42 | 48,593 | 0.73 | (d) | 0.73 | (d) | (0.07 | )(d) | 29 | ||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 40.21 | (0.01 | ) | (2.78 | ) | (2.79 | ) | (2.74 | ) | 34.68 | (7.02 | ) | 49,485 | 0.73 | 0.73 | (0.02 | ) | 60 | ||||||||||||||||||||||||||||||
Year ended 04/30/15 | 38.41 | 0.02 | 5.37 | 5.39 | (3.59 | ) | 40.21 | 14.93 | 61,029 | 0.72 | 0.72 | 0.04 | 61 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/14(h) | 34.50 | (0.01 | ) | 4.82 | 4.81 | (0.90 | ) | 38.41 | 14.05 | 77,395 | 0.73 | (i) | 0.73 | (i) | (0.01 | )(i) | 95 |
(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 years ended April 30, 2014 and 2013, the portfolio turnover calculation excludes the value of securities purchased of $641,584,142 and $463,100,189 and sold of $469,954,370 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. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $2,205,921, $40,145, $147,923, $29,034, $80,974, $94,657 and $50,335 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 significant 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 significant 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) | 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%, 0.25%, 0.25%, 0.25% and 0.15% for the six months ended October 31, 2016 and the years ended April 30, 2016, 2015, 2014, 2013 and 2012, respectively. |
(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 0.96%, 0.98%, 0.97% and 0.96% for the six months ended October 31, 2016 and the years ended April 30, 2016, 2015 and 2014, respectively. |
(h) | Commencement date of July 15, 2013 for Class R6 shares. |
(i) | Annualized. |
16 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. 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,021.40 | $ | 6.01 | $ | 1,019.26 | $ | 6.01 | 1.18 | % | ||||||||||||
B | 1,000.00 | 1,021.90 | 6.01 | 1,019.26 | 6.01 | 1.18 | ||||||||||||||||||
C | 1,000.00 | 1,018.10 | 9.61 | 1,015.68 | 9.60 | 1.89 | ||||||||||||||||||
R | 1,000.00 | 1,020.40 | 7.28 | 1,018.00 | 7.27 | 1.43 | ||||||||||||||||||
Y | 1,000.00 | 1,023.00 | 4.74 | 1,020.52 | 4.74 | 0.93 | ||||||||||||||||||
R5 | 1,000.00 | 1,023.70 | 4.13 | 1,021.12 | 4.13 | 0.81 | ||||||||||||||||||
R6 | 1,000.00 | 1,024.20 | 3.72 | 1,021.53 | 3.72 | 0.73 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, 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 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge 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 second quintile of its performance universe for the one and three year periods and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one and three year periods and below the performance of the Index for the five year period. Invesco Advisers noted that the research effort for the Fund had been enhanced in 2013. The Trustees also reviewed more
18 Invesco Mid Cap Growth Fund
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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rate of one such mutual fund.
The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory
and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
19 Invesco Mid Cap Growth Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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, 2016 | |||
Invesco Small Cap Value Fund | ||||
Nasdaq: A: VSCAX ∎ B: VSMBX ∎ C: VSMCX ∎ Y: VSMIX |
| ||
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, 4/30/16 to 10/31/16, 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 | 0.68% | |
Class B Shares | 0.23 | |
Class C Shares | 0.32 | |
Class Y Shares | 0.83 | |
S&P 500 Indexq (Broad Market Index) | 4.06 | |
Russell 2000 Value Indexq (Style-Specific Index) | 7.54 | |
Lipper Small-Cap Value Funds Index∎ (Peer Group Index) | 4.70 | |
Source(s): qFactSet 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.
|
For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco Small Cap Value Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (6/21/99) | 9.49 | % | ||
10 Years | 7.05 | |||
5 Years | 10.19 | |||
1 Year | -8.81 | |||
Class B Shares | ||||
Inception (6/21/99) | 9.46 | % | ||
10 Years | 7.25 | |||
5 Years | 10.42 | |||
1 Year | -8.49 | |||
Class C Shares | ||||
Inception (6/21/99) | 9.03 | % | ||
10 Years | 6.86 | |||
5 Years | 10.61 | |||
1 Year | -5.06 | |||
Class Y Shares | ||||
Inception (8/12/05) | 8.71 | % | ||
10 Years | 7.93 | |||
5 Years | 11.72 | |||
1 Year | -3.25 |
Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/21/99) | 9.81 | % | ||
10 Years | 8.06 | |||
5 Years | 15.32 | |||
1 Year | 1.45 | |||
Class B Shares | ||||
Inception (6/21/99) | 9.79 | % | ||
10 Years | 8.28 | |||
5 Years | 15.59 | |||
1 Year | 1.85 | |||
Class C Shares | ||||
Inception (6/21/99) | 9.35 | % | ||
10 Years | 7.87 | |||
5 Years | 15.76 | |||
1 Year | 5.61 | |||
Class Y Shares | ||||
Inception (8/12/05) | 9.21 | % | ||
10 Years | 8.95 | |||
5 Years | 16.91 | |||
1 Year | 7.63 |
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, prior to June 1, 2010, 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 Y shares was 1.12%, 1.87%, 1.87% and 0.87%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. For shares purchased prior to June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the sixth year. For shares purchased on or after June 1, 2010, the CDSC on Class B shares declines from 5% at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
3 Invesco Small Cap Value Fund
Letters to Shareholders
| ||
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive. |
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, |
visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. 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, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks–96.46% |
| |||||||
Advertising–1.58% | ||||||||
MDC Partners Inc.–Class A(b) | 4,547,879 | $ | 38,429,578 | |||||
Agricultural & Farm Machinery–0.32% | ||||||||
AGCO Corp. | 152,094 | 7,768,962 | ||||||
Apparel Retail–1.45% | ||||||||
Tailored Brands, Inc. | 2,242,770 | 35,435,766 | ||||||
Asset Management & Custody Banks–3.33% | ||||||||
Affiliated Managers Group, Inc.(c) | 611,500 | 81,121,590 | ||||||
Auto Parts & Equipment–4.57% | ||||||||
Dana Inc. | 4,487,422 | 69,465,293 | ||||||
Gentex Corp. | 969,251 | 16,390,034 | ||||||
Modine Manufacturing Co.(c) | 2,332,938 | 25,545,671 | ||||||
111,400,998 | ||||||||
Automobile Manufacturers–1.28% | ||||||||
Winnebago Industries, Inc. | 1,104,907 | 31,213,623 | ||||||
Building Products–0.77% | ||||||||
Owens Corning | 80,049 | 3,904,790 | ||||||
Ply Gem Holdings Inc.(c) | 1,081,230 | 14,812,851 | ||||||
18,717,641 | ||||||||
Construction & Engineering–3.05% | ||||||||
AECOM(c) | 2,666,699 | 74,267,567 | ||||||
Construction Machinery & Heavy Trucks–2.92% | ||||||||
Meritor, Inc.(c) | 3,853,998 | 39,619,099 | ||||||
Terex Corp. | 1,206,400 | 28,808,832 | ||||||
WABCO Holdings Inc.(c) | 27,900 | 2,747,034 | ||||||
71,174,965 | ||||||||
Consumer Electronics–2.01% | ||||||||
Harman International Industries, Inc. | 616,200 | 49,117,302 | ||||||
Consumer Finance–3.80% | ||||||||
SLM Corp.(c) | 6,928,900 | 48,848,745 | ||||||
Synchrony Financial | 1,531,800 | 43,794,162 | ||||||
92,642,907 | ||||||||
Diversified Metals & Mining–0.46% | ||||||||
Ferroglobe PLC | 1,203,948 | 11,136,519 | ||||||
Electronic Components–5.83% | ||||||||
Belden Inc. | 1,503,568 | 97,446,242 | ||||||
Vishay Intertechnology, Inc. | 3,169,800 | 44,694,180 | ||||||
142,140,422 | ||||||||
Electronic Equipment & Instruments–2.02% | ||||||||
FLIR Systems, Inc. | 1,498,159 | 49,319,394 |
Shares | Value | |||||||
Electronic Manufacturing Services–2.06% | ||||||||
Flex Ltd.(c) | 2,593,600 | $ | 36,803,184 | |||||
KEMET Corp.(b)(c) | 3,744,102 | 13,329,003 | ||||||
50,132,187 | ||||||||
Environmental & Facilities Services–0.59% | ||||||||
Team, Inc.(c) | 471,709 | 14,505,052 | ||||||
Health Care Facilities–3.72% | ||||||||
Brookdale Senior Living Inc.(c) | 3,666,503 | 52,907,638 | ||||||
Hanger, Inc.(b)(c) | 4,723,233 | 37,785,864 | ||||||
90,693,502 | ||||||||
Health Care Supplies–3.87% | ||||||||
Alere, Inc.(c) | 2,110,852 | 94,312,867 | ||||||
Homebuilding–0.51% | ||||||||
Installed Building Products Inc.(c) | 373,579 | 12,346,786 | ||||||
Hotels, Resorts & Cruise Lines–2.23% | ||||||||
Norwegian Cruise Line Holdings Ltd.(c) | 1,396,600 | 54,285,842 | ||||||
Human Resource & Employment Services–6.07% | ||||||||
Kelly Services, Inc.–Class A | 1,532,695 | 28,707,377 | ||||||
Kforce Inc.(b) | 2,460,511 | 42,689,866 | ||||||
ManpowerGroup Inc. | 999,003 | 76,723,431 | ||||||
148,120,674 | ||||||||
Industrial Machinery–2.07% | ||||||||
Chart Industries, Inc.(c) | 78,600 | 2,180,364 | ||||||
ITT Inc. | 1,082,800 | 38,136,216 | ||||||
Kennametal Inc. | 357,400 | 10,117,994 | ||||||
50,434,574 | ||||||||
Investment Banking & Brokerage–6.70% | ||||||||
E*TRADE Financial Corp.(c) | 2,660,500 | 74,919,680 | ||||||
LPL Financial Holdings, Inc. | 2,277,060 | 70,497,778 | ||||||
TD Ameritrade Holding Corp. | 522,600 | 17,878,146 | ||||||
163,295,604 | ||||||||
IT Consulting & Other Services–0.28% | ||||||||
Ciber, Inc.(b)(c) | 6,808,657 | 6,944,830 | ||||||
Leisure Products–1.29% | ||||||||
Arctic Cat Inc.(b) | 2,095,362 | 31,409,476 | ||||||
Life & Health Insurance–1.10% | ||||||||
CNO Financial Group, Inc. | 1,777,018 | 26,797,431 | ||||||
Oil & Gas Equipment & Services–4.22% | ||||||||
Forum Energy Technologies Inc.(c) | 1,788,100 | 32,185,800 | ||||||
Helix Energy Solutions Group Inc.(c) | 3,004,500 | 26,199,240 | ||||||
Weatherford International PLC(c) | 9,240,909 | 44,541,181 | ||||||
102,926,221 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Small Cap Value Fund
Shares | Value | |||||||
Property & Casualty Insurance–3.42% | ||||||||
AmTrust Financial Services, Inc. | 3,159,008 | $ | 83,366,221 | |||||
Real Estate Services–1.90% | ||||||||
Realogy Holdings Corp. | 2,024,438 | 46,339,386 | ||||||
Regional Banks–5.24% | ||||||||
First Horizon National Corp. | 4,178,467 | 64,390,177 | ||||||
SVB Financial Group(c) | 355,900 | 43,515,893 | ||||||
Zions Bancorp. | 620,300 | 19,979,863 | ||||||
127,885,933 | ||||||||
Reinsurance–1.99% | ||||||||
Reinsurance Group of America, Inc. | 412,494 | 44,491,603 | ||||||
Validus Holdings, Ltd. | 79,700 | 4,072,670 | ||||||
48,564,273 | ||||||||
Research & Consulting Services–3.42% | ||||||||
Huron Consulting Group Inc.(c) | 49,755 | 2,788,767 | ||||||
Navigant Consulting, Inc.(c) | 1,623,647 | 37,993,340 | ||||||
Resources Connection Inc.(b) | 2,865,628 | 42,554,576 | ||||||
83,336,683 | ||||||||
Semiconductor Equipment–0.77% | ||||||||
Brooks Automation, Inc. | 1,236,264 | 16,108,520 | ||||||
Lam Research Corp. | 28,617 | 2,771,843 | ||||||
18,880,363 | ||||||||
Semiconductors–3.79% | ||||||||
ON Semiconductor Corp.(c) | 7,921,491 | 92,443,800 |
Shares | Value | |||||||
Specialty Chemicals–1.25% | ||||||||
Flotek Industries, Inc.(c) | 2,380,500 | $ | 28,042,290 | |||||
Kraton Corp.(c) | 90,607 | 2,322,257 | ||||||
30,364,547 | ||||||||
Steel–4.01% | ||||||||
Allegheny Technologies, Inc. | 2,682,500 | 36,589,300 | ||||||
Carpenter Technology Corp. | 1,939,078 | 61,294,256 | ||||||
97,883,556 | ||||||||
Thrifts & Mortgage Finance–1.88% | ||||||||
BofI Holding, Inc.(c) | 2,454,412 | 45,725,696 | ||||||
Trading Companies & Distributors–0.69% | ||||||||
DXP Enterprises, Inc.(c) | 776,022 | 16,909,519 | ||||||
Total Common Stocks | 2,351,792,257 | |||||||
Money Market Funds–3.11% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(d) | 45,550,378 | 45,550,378 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(d) | 30,366,919 | 30,366,919 | ||||||
Total Money Market Funds | 75,917,297 | |||||||
TOTAL INVESTMENTS–99.57% |
| 2,427,709,554 | ||||||
OTHER ASSETS LESS LIABILITIES–0.43% |
| 10,517,380 | ||||||
NET ASSETS–100.00% |
| $ | 2,438,226,934 |
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) | Affiliated company during the period. The Investment Company Act of 1940 defines an “affiliated person” as an issuance 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, 2016 was $213,143,193, which represented 8.74% of the Fund’s Net Assets. See Note 4. |
(c) | Non-income producing security. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By sector, based on Net Assets as of October 31, 2016
Financials | 29.4 | % | ||
Industrials | 19.9 | |||
Consumer Discretionary | 14.9 | |||
Information Technology | 14.8 | |||
Health Care | 7.6 | |||
Materials | 5.7 | |||
Energy | 4.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 3.5 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Small Cap Value Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $1,868,632,189) | $ | 2,138,649,064 | ||
Investments in affiliates, at value (Cost $438,891,696) | 289,060,490 | |||
Total investments, at value (Cost $2,307,523,885) | 2,427,709,554 | |||
Receivable for: | ||||
Investments sold | 21,746,284 | |||
Fund shares sold | 2,465,918 | |||
Dividends | 381,281 | |||
Fund expenses absorbed | 6,614 | |||
Investment for trustee deferred compensation and retirement plans | 225,830 | |||
Other assets | 52,694 | |||
Total assets | 2,452,588,175 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 4,351,302 | |||
Fund shares reacquired | 7,309,298 | |||
Amount due custodian | 595,982 | |||
Accrued fees to affiliates | 338,664 | |||
Accrued trustees’ and officers’ fees and benefits | 4,470 | |||
Accrued other operating expenses | 1,495,478 | |||
Trustee deferred compensation and retirement plans | 266,047 | |||
Total liabilities | 14,361,241 | |||
Net assets applicable to shares outstanding | $ | 2,438,226,934 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 2,266,294,185 | ||
Undistributed net investment income | 6,586,041 | |||
Undistributed net realized gain | 45,161,039 | |||
Net unrealized appreciation | 120,185,669 | |||
$ | 2,438,226,934 |
Net Assets: |
| |||
Class A | $ | 1,128,190,834 | ||
Class B | $ | 8,987,582 | ||
Class C | $ | 92,097,187 | ||
Class Y | $ | 1,208,951,331 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 69,133,420 | |||
Class B | 690,157 | |||
Class C | 7,344,124 | |||
Class Y | 71,425,542 | |||
Class A: | ||||
Net asset value per share | $ | 16.32 | ||
Maximum offering price per share | ||||
(Net asset value of $16.32 ¸ 94.50%) | $ | 17.27 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 13.02 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 12.54 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 16.93 |
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, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $297,532) | $ | 11,577,801 | ||
Dividends from affiliates | 3,216,409 | |||
Total investment income | 14,794,210 | |||
Expenses: | ||||
Advisory fees | 8,360,329 | |||
Administrative services fees | 254,511 | |||
Distribution fees: | ||||
Class A | 1,549,854 | |||
Class B | 55,568 | |||
Class C | 493,975 | |||
Transfer agent fees | 2,293,530 | |||
Trustees’ and officers’ fees and benefits | 29,893 | |||
Registration and filing fees | 71,146 | |||
Reports to shareholders | 90,346 | |||
Professional services fees | 20,555 | |||
Other | 29,090 | |||
Total expenses | 13,248,797 | |||
Less: Fees waived and expense offset arrangement(s) | (119,933 | ) | ||
Net expenses | 13,128,864 | |||
Net investment income | 1,665,346 | |||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities (includes net gains from securities sold to affiliates of $1,905,994) | 59,523,375 | |||
Change in net unrealized appreciation (depreciation) of investment securities | (42,091,137 | ) | ||
Net realized and unrealized gain | 17,432,238 | |||
Net increase in net assets resulting from operations | $ | 19,097,584 |
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, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income | $ | 1,665,346 | $ | 10,034,073 | ||||
Net realized gain | 59,523,375 | 113,416,715 | ||||||
Change in net unrealized appreciation (depreciation) | (42,091,137 | ) | (534,397,359 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 19,097,584 | (410,946,571 | ) | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (687,810 | ) | |||||
Class Y | — | (3,335,002 | ) | |||||
Total distributions from net investment income | — | (4,022,812 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (140,503,127 | ) | |||||
Class B | — | (1,924,940 | ) | |||||
Class C | — | (15,046,944 | ) | |||||
Class Y | — | (137,836,409 | ) | |||||
Total distributions from net realized gains | — | (295,311,420 | ) | |||||
Share transactions–net: | ||||||||
Class A | (201,183,307 | ) | (92,017,771 | ) | ||||
Class B | (3,972,242 | ) | (5,071,758 | ) | ||||
Class C | (15,757,273 | ) | (10,410,051 | ) | ||||
Class Y | (131,009,633 | ) | 49,882,360 | |||||
Net increase (decrease) in net assets resulting from share transactions | (351,922,455 | ) | (57,617,220 | ) | ||||
Net increase (decrease) in net assets | (332,824,871 | ) | (767,898,023 | ) | ||||
Net assets: | ||||||||
Beginning of period | 2,771,051,805 | 3,538,949,828 | ||||||
End of period (includes undistributed net investment income of $6,586,041 and $4,920,695, respectively) | $ | 2,438,226,934 | $ | 2,771,051,805 |
Notes to Financial Statements
October 31, 2016
(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 Y shares are available only to certain 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 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 securities) 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
9 Invesco Small Cap Value Fund
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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 Small Cap Value 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. | 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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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 forward 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 Small Cap Value Fund
NOTE 2—Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the “Adviser” or “Invesco”). 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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.63%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $118,374.
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, 2016, 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, 2016, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
Shares of the Fund are distributed by Invesco Distributors, Inc. (“IDI”). The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, and a service plan (collectively, the “Plans”) for Class A shares, Class B shares and Class C shares to compensate IDI for the sale, distribution, shareholder servicing and maintenance of shareholder accounts for these shares. Under the Plans, the Fund will incur annual fees of up to 0.25% of Class A average daily net assets and up to 1.00% each of Class B and Class C average daily net assets.
With respect to Class B and Class C shares, the Fund is authorized to reimburse in future years any distribution related expenses that exceed the maximum annual reimbursement rate for such class, so long as such reimbursement does not cause the Fund to exceed the Class B and Class C maximum annual reimbursement rate, respectively. With respect to Class A shares, distribution related expenses that exceed the maximum annual reimbursement rate for such class are not carried forward to future years and the Fund will not reimburse IDI for any such expenses.
For the six months ended October 31, 2016, expenses incurred under these arrangements 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, 2016, IDI advised the Fund that IDI retained $14,709 in front-end sales commissions from the sale of Class A shares and $114, $1,022 and $736 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $19,765 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.
12 Invesco Small Cap Value Fund
NOTE 3—Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of October 31, 2016, 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—Investments in Other Affiliates
The 1940 Act defines an “affiliated person” as an issuance 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, 2016.
Value 04/30/16 | Purchases at Cost | Proceeds from Sales | Change in Unrealized Appreciation (Depreciation) | Realized Gain (Loss) | Value 10/31/16 | Dividend Income | ||||||||||||||||||||||
Artic Cat Inc. | $ | 34,845,870 | $ | — | $ | — | $ | (3,436,394 | ) | $ | — | $ | 31,409,476 | $ | — | |||||||||||||
Belden Inc.(a) | 143,132,003 | — | (51,168,993 | ) | (26,071,532 | ) | 31,554,764 | 97,446,242 | 173,353 | |||||||||||||||||||
Ciber, Inc. | 15,796,084 | — | — | (8,851,254 | ) | — | 6,944,830 | — | ||||||||||||||||||||
Elizabeth Arden, Inc. | 54,853,475 | — | (73,661,118 | ) | 57,932,456 | (39,124,813 | ) | — | — | |||||||||||||||||||
Hanger, Inc. | 32,543,075 | — | — | 5,242,789 | — | 37,785,864 | — | |||||||||||||||||||||
Kelly Services, Inc. — Class A(a) | 51,752,550 | — | (23,522,000 | ) | (3,618,849 | ) | 4,095,676 | 28,707,377 | 321,742 | |||||||||||||||||||
KEMET Corp. | 8,686,317 | — | — | 4,642,686 | — | 13,329,003 | — | |||||||||||||||||||||
Kforce, Inc. | 46,281,442 | 457,113 | — | (4,048,689 | ) | — | 42,689,866 | 590,523 | ||||||||||||||||||||
MDC Partners, Inc. — Class A | 99,126,999 | — | (6,270,229 | ) | (54,064,841 | ) | (362,351 | ) | 38,429,578 | 1,686,014 | ||||||||||||||||||
Modine Manufacturing, Co.(a) | 26,336,684 | — | (1,100,919 | ) | 521,730 | (211,824 | ) | 25,545,671 | — | |||||||||||||||||||
Resource Connection Inc. | 50,908,793 | — | (8,849,504 | ) | 614,947 | (119,660 | ) | 42,554,576 | 659,896 | |||||||||||||||||||
Tailored Brands, Inc.(a) | 44,707,664 | — | (5,442,584 | ) | (4,420,322 | ) | 591,008 | 35,435,766 | 923,924 | |||||||||||||||||||
Winnebago Industries, Inc. (a) | 49,362,160 | — | (28,313,970 | ) | 6,891,339 | 3,274,094 | 31,213,623 | 155,044 | ||||||||||||||||||||
Total | $ | 658,333,116 | $ | 457,113 | $ | (198,329,317 | ) | $ | (28,665,934 | ) | $ | (303,106 | ) | $ | 431,491,872 | $ | 4,510,496 |
(a) | As of October 31, 2016, this security is not considered to be an affiliate 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, 2016, the Fund engaged in securities sales of $4,289,339, which resulted in net realized gains of $1,905,994.
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $1,559.
13 Invesco Small Cap Value Fund
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 were eligible to participate in a retirement plan that provided 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 eight 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 carryforwards 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, 2016, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 502,511 | $ | — | $ | 502,511 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any 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, 2016 was $333,915,119 and $677,940,755, 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 | $ | 455,961,743 | ||
Aggregate unrealized (depreciation) of investment securities | (336,560,785 | ) | ||
Net unrealized appreciation of investment securities | $ | 119,400,958 |
Cost of investments for tax purposes is $2,308,308,596.
14 Invesco Small Cap Value Fund
NOTE 11—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 3,835,228 | $ | 61,562,840 | 14,380,494 | $ | 254,657,811 | ||||||||||
Class B | 23 | 300 | 10,504 | 161,454 | ||||||||||||
Class C | 65,517 | 815,280 | 333,290 | 4,532,878 | ||||||||||||
Class Y | 7,294,603 | 121,600,202 | 25,707,776 | 465,855,012 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 8,199,536 | 132,094,525 | ||||||||||||
Class B | — | — | 142,891 | 1,849,010 | ||||||||||||
Class C | — | — | 1,145,564 | 14,273,723 | ||||||||||||
Class Y | — | — | 7,620,047 | 127,026,183 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 129,929 | 2,117,399 | 213,251 | 3,730,270 | ||||||||||||
Class B | (162,541 | ) | (2,117,399 | ) | (262,060 | ) | (3,730,270 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (16,310,704 | ) | (264,863,546 | ) | (27,452,832 | ) | (482,500,377 | ) | ||||||||
Class B | (143,945 | ) | (1,855,143 | ) | (235,675 | ) | (3,351,952 | ) | ||||||||
Class C | (1,331,006 | ) | (16,572,553 | ) | (2,173,846 | ) | (29,216,652 | ) | ||||||||
Class Y | (15,050,320 | ) | (252,609,835 | ) | (31,103,588 | ) | (542,998,835 | ) | ||||||||
Net increase (decrease) in share activity | (21,673,216 | ) | $ | (351,922,455 | ) | (3,474,648 | ) | $ | (57,617,220 | ) |
(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. |
15 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 (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 10/31/16 | $ | 16.21 | $ | 0.00 | $ | 0.11 | $ | 0.11 | $ | — | $ | — | $ | — | $ | 16.32 | 0.68 | % | $ | 1,128,191 | 1.09 | %(e) | 1.10 | %(e) | 0.03 | %(e) | 13 | % | ||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 20.33 | 0.04 | (2.37 | ) | (2.33 | ) | (0.01 | ) | (1.78 | ) | (1.79 | ) | 16.21 | (11.43 | ) | 1,320,826 | 1.11 | 1.11 | 0.24 | 45 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 22.75 | (0.00 | ) | 0.95 | 0.95 | — | (3.37 | ) | (3.37 | ) | 20.33 | 5.59 | 1,751,109 | 1.13 | 1.13 | (0.02 | ) | 44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.53 | (0.06 | ) | 6.11 | 6.05 | — | (1.83 | ) | (1.83 | ) | 22.75 | 33.78 | 1,909,149 | 1.11 | 1.11 | (0.29 | ) | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 17.80 | (0.02 | )(f) | 3.17 | 3.15 | — | (2.42 | ) | (2.42 | ) | 18.53 | 20.27 | 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 | ) | 1,326,668 | 1.03 | 1.17 | (0.24 | ) | 50 | |||||||||||||||||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 12.99 | (0.05 | ) | 0.08 | 0.03 | — | — | — | 13.02 | 0.23 | 8,988 | 1.84 | (e) | 1.85 | (e) | (0.72 | )(e) | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 16.80 | (0.07 | ) | (1.96 | ) | (2.03 | ) | — | (1.78 | ) | (1.78 | ) | 12.99 | (12.06 | ) | 12,942 | 1.86 | 1.86 | (0.51 | ) | 45 | |||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 19.54 | (0.14 | ) | 0.77 | 0.63 | — | (3.37 | ) | (3.37 | ) | 16.80 | 4.81 | 22,527 | 1.88 | 1.88 | (g) | (0.77 | ) | 44 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 16.25 | (0.19 | ) | 5.31 | 5.12 | — | (1.83 | ) | (1.83 | ) | 19.54 | 32.75 | 29,312 | 1.86 | 1.86 | (1.04 | ) | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 16.01 | (0.13 | )(f) | 2.79 | 2.66 | — | (2.42 | ) | (2.42 | ) | 16.25 | 19.44 | 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 | ) | 34,194 | 1.33 | 1.81 | (0.54 | ) | 50 | |||||||||||||||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 12.50 | (0.04 | ) | 0.08 | 0.04 | — | — | — | 12.54 | 0.32 | (g) | 92,097 | 1.82 | (e)(g) | 1.83 | (e)(g) | (0.71 | )(e)(g) | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 16.25 | (0.07 | ) | (1.90 | ) | (1.97 | ) | — | (1.78 | ) | (1.78 | ) | 12.50 | (12.11 | ) | 107,647 | 1.86 | 1.86 | (0.51 | ) | 45 | |||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 19.02 | (0.13 | ) | 0.73 | 0.60 | — | (3.37 | ) | (3.37 | ) | 16.25 | 4.80 | (g) | 151,196 | 1.86 | (g) | 1.86 | (g) | (0.75 | )(g) | 44 | |||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 15.86 | (0.19 | ) | 5.18 | 4.99 | — | (1.83 | ) | (1.83 | ) | 19.02 | 32.75 | 165,438 | 1.86 | 1.86 | (1.04 | ) | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 15.69 | (0.13 | )(f) | 2.72 | 2.59 | — | (2.42 | ) | (2.42 | ) | 15.86 | 19.39 | 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 | ) | 140,342 | 1.76 | 1.90 | (0.97 | ) | 50 | |||||||||||||||||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 16.79 | 0.02 | 0.12 | 0.14 | — | — | — | 16.93 | 0.83 | 1,208,951 | 0.84 | (e) | 0.85 | (e) | 0.28 | (e) | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 20.97 | 0.09 | (2.45 | ) | (2.36 | ) | (0.04 | ) | (1.78 | ) | (1.82 | ) | 16.79 | (11.19 | ) | 1,329,637 | 0.86 | 0.86 | 0.49 | 45 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 23.31 | 0.05 | 0.98 | 1.03 | — | (3.37 | ) | (3.37 | ) | 20.97 | 5.81 | 1,614,118 | 0.88 | 0.88 | 0.23 | 44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 18.90 | (0.01 | ) | 6.25 | 6.24 | — | (1.83 | ) | (1.83 | ) | 23.31 | 34.13 | 1,385,718 | 0.86 | 0.86 | (0.04 | ) | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 18.07 | 0.02 | (f) | 3.23 | 3.25 | — | (2.42 | ) | (2.42 | ) | 18.90 | 20.54 | 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 | ) | 744,163 | 0.78 | 0.92 | 0.01 | 50 |
(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 the year ended April 30, 2012. |
(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. 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 Invesco Special Value Fund, Invesco Small-Mid Special Value Fund, Invesco U.S. Small Cap Value Fund and Invesco U.S. Small-Mid Cap Value Fund into the Fund. |
(e) | Ratios are annualized and based on average daily net assets (000’s omitted) of $1,229,775, $11,023, $99,664 and $1,273,949 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 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 $(0.06) 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) | 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 0.98% and 0.99% for the years ended October 31, 2016 and April 30, 2015, respectively. |
16 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,006.80 | $ | 5.51 | $ | 1,019.71 | $ | 5.55 | 1.09 | % | ||||||||||||
B | 1,000.00 | 1,002.30 | 9.29 | 1,015.93 | 9.35 | 1.84 | ||||||||||||||||||
C | 1,000.00 | 1,003.20 | 9.19 | 1,016.03 | 9.25 | 1.82 | ||||||||||||||||||
Y | 1,000.00 | 1,008.30 | 4.25 | 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, 2016 through October 31, 2016, 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 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge 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 fourth quintile of its performance universe for the one year period and the first quintile for the three and five year periods (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was 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.
18 Invesco Small Cap Value Fund
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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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 and client accounts advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund, based on asset balances as of December 31, 2015. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not advise other mutual funds, but do advise a client account using an investment process substantially similar to the investment process used for the Fund.
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 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco
Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered that the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and was advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
19 Invesco Small Cap Value Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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, 2016 | ||
| ||||
Invesco Technology Fund
| ||||
Nasdaq: | ||||
A: ITYAX ∎ B: ITYBX ∎ C: ITHCX ∎ Y: ITYYX ∎ Investor: FTCHX ∎ R5: FTPIX | ||||
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| ||||
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, 4/30/16 to 10/31/16, 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 | 11.49 | % | ||
Class B Shares | 11.07 | |||
Class C Shares | 11.04 | |||
Class Y Shares | 11.61 | |||
Investor Class Shares | 11.50 | |||
Class R5 Shares | 11.79 | |||
Nasdaq Composite Indexq (Broad Market/Style-Specific Index) | 9.33 | |||
Lipper Science & Technology Funds Index∎ (Peer Group Index) | 13.62 | |||
Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc. | ||||
The Nasdaq Composite Index is a broad-based market index of the common stocks and similar securities listed on the Nasdaq stock market. 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.
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For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us.Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
|
2 Invesco Technology Fund
Average Annual Total Returns |
| |||
As of 10/31/16, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (3/28/02) | 3.23 | % | ||
10 Years | 5.61 | |||
5 Years | 7.72 | |||
1 Year | -6.21 | |||
Class B Shares | ||||
Inception (3/28/02) | 3.20 | % | ||
10 Years | 5.59 | |||
5 Years | 7.83 | |||
1 Year | -6.07 | |||
Class C Shares | ||||
Inception (2/14/00) | -4.20 | % | ||
10 Years | 5.43 | |||
5 Years | 8.13 | |||
1 Year | -2.41 | |||
Class Y Shares | ||||
10 Years | 6.42 | % | ||
5 Years | 9.21 | |||
1 Year | -0.52 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 9.55 | % | ||
10 Years | 6.27 | |||
5 Years | 9.02 | |||
1 Year | -0.66 | |||
Class R5 Shares | ||||
Inception (12/21/98) | 3.57 | % | ||
10 Years | 6.89 | |||
5 Years | 9.57 | |||
1 Year | -0.22 | |||
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower. |
Average Annual Total Returns |
| |||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges |
| |||
Class A Shares | ||||
Inception (3/28/02) | 3.39 | % | ||
10 Years | 5.99 | |||
5 Years | 10.73 | |||
1 Year | 6.13 | |||
Class B Shares | ||||
Inception (3/28/02) | 3.36 | % | ||
10 Years | 5.97 | |||
5 Years | 10.89 | |||
1 Year | 6.46 | |||
Class C Shares | ||||
Inception (2/14/00) | -4.11 | % | ||
10 Years | 5.80 | |||
5 Years | 11.15 | |||
1 Year | 10.49 | |||
Class Y Shares | ||||
10 Years | 6.81 | % | ||
5 Years | 12.27 | |||
1 Year | 12.60 | |||
Investor Class Shares | ||||
Inception (1/19/84) | 9.64 | % | ||
10 Years | 6.65 | |||
5 Years | 12.07 | |||
1 Year | 12.41 | |||
Class R5 Shares | ||||
Inception (12/21/98) | 3.69 | % | ||
10 Years | 7.27 | |||
5 Years | 12.63 | |||
1 Year | 12.90 | |||
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower. |
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.
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 1.39%, 2.14%, 2.14%, 1.14%, 1.30% and 0.87%, 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
3 Invesco Technology Fund
Letters to Shareholders
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Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the |
fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive.
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term |
decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Technology Fund
Schedule of Investments(a)
October 31, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.16% |
| |||||||
Aerospace & Defense–3.75% | ||||||||
Raytheon Co. | 186,716 | $ | 25,507,273 | |||||
Application Software–2.68% | ||||||||
salesforce.com, inc.(b) | 242,593 | 18,233,290 | ||||||
Biotechnology–9.37% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 82,922 | 10,821,321 | ||||||
Alkermes PLC(b) | 79,348 | 3,999,933 | ||||||
Amgen Inc. | 100,920 | 14,245,867 | ||||||
Biogen Inc.(b) | 28,313 | 7,932,736 | ||||||
BioMarin Pharmaceutical Inc.(b) | 74,713 | 6,015,891 | ||||||
Celgene Corp.(b) | 202,588 | 20,700,442 | ||||||
63,716,190 | ||||||||
Cable & Satellite–3.52% | ||||||||
DISH Network Corp.–Class A(b) | 408,823 | 23,940,675 | ||||||
Communications Equipment–0.38% | ||||||||
Palo Alto Networks, Inc.(b) | 17,022 | 2,618,494 | ||||||
Consumer Electronics–4.28% | ||||||||
Harman International Industries, Inc. | 65,665 | 5,234,157 | ||||||
Sony Corp. (Japan) | 754,100 | 23,863,520 | ||||||
29,097,677 | ||||||||
Data Processing & Outsourced Services–7.79% | ||||||||
First Data Corp.–Class A(b) | 899,359 | 12,582,032 | ||||||
MasterCard, Inc.–Class A | 135,052 | 14,453,265 | ||||||
Visa Inc.–Class A | 315,088 | 25,997,911 | ||||||
53,033,208 | ||||||||
Health Care Equipment–1.59% | ||||||||
Medtronic PLC | 132,124 | 10,836,810 | ||||||
Home Entertainment Software–7.63% | ||||||||
Activision Blizzard, Inc. | 526,394 | 22,724,429 | ||||||
Electronic Arts Inc.(b) | 154,008 | 12,092,708 | ||||||
Nintendo Co., Ltd. (Japan) | 40,500 | 9,825,204 | ||||||
Take-Two Interactive Software, Inc.(b)(c) | 163,466 | 7,256,256 | ||||||
51,898,597 | ||||||||
Internet & Direct Marketing Retail–7.73% | ||||||||
Amazon.com, Inc.(b) | 57,345 | 45,292,228 | ||||||
Priceline Group Inc. (The)(b) | 4,939 | 7,281,222 | ||||||
52,573,450 | ||||||||
Internet Software & Services–16.26% | ||||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 158,462 | 16,114,001 | ||||||
Alphabet Inc.–Class A(b) | 55,009 | 44,551,789 | ||||||
Alphabet Inc.–Class C(b) | 20,219 | 15,862,614 | ||||||
Facebook Inc.–Class A(b) | 260,544 | 34,128,659 | ||||||
110,657,063 |
Shares | Value | |||||||
Life Sciences Tools & Services–1.48% | ||||||||
Thermo Fisher Scientific, Inc. | 68,528 | $ | 10,075,672 | |||||
Movies & Entertainment–1.02% | ||||||||
Time Warner Inc. | 77,802 | 6,923,600 | ||||||
Pharmaceuticals–2.73% | ||||||||
Allergan PLC(b) | 60,436 | 12,627,498 | ||||||
Eli Lilly and Co. | 80,139 | 5,917,464 | ||||||
18,544,962 | ||||||||
Semiconductor Equipment–0.97% | ||||||||
Applied Materials, Inc. | 226,167 | 6,576,936 | ||||||
Semiconductors–8.77% | ||||||||
Broadcom Ltd. (Singapore) | 130,748 | 22,263,769 | ||||||
Integrated Device Technology, Inc.(b) | 658,324 | 13,633,890 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 29,380 | 2,938,000 | ||||||
QUALCOMM, Inc. | 303,590 | 20,862,705 | ||||||
59,698,364 | ||||||||
Systems Software–5.83% | ||||||||
Microsoft Corp. | 572,297 | 34,292,036 | ||||||
ServiceNow, Inc.(b) | 60,973 | 5,360,137 | ||||||
39,652,173 | ||||||||
Technology Hardware, Storage & Peripherals–7.76% | ||||||||
Apple Inc. | 464,795 | 52,772,824 | ||||||
Tobacco–1.17% | ||||||||
Philip Morris International Inc. | 82,385 | 7,945,209 | ||||||
Wireless Telecommunication Services–2.45% | ||||||||
Sprint Corp.(b) | 2,710,536 | 16,696,902 | ||||||
Total Common Stocks & Other Equity Interests |
| 660,999,369 | ||||||
Money Market Funds–2.76% |
| |||||||
Government & Agency Portfolio– Institutional Class, 0.29%(d) | 11,287,967 | 11,287,967 | ||||||
Treasury Portfolio–Institutional Class, 0.22%(d) | 7,525,311 | 7,525,311 | ||||||
Total Money Market Funds |
| 18,813,278 | ||||||
TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)–99.92% (Cost $467,292,367) |
| 679,812,647 | ||||||
Investments Purchased with Cash Collateral from Securities on Loan |
| |||||||
Money Market Funds–0.51% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29% (Cost $3,435,825)(d)(e) | 3,435,825 | 3,435,825 | ||||||
TOTAL INVESTMENTS–100.43% |
| 683,248,472 | ||||||
OTHER ASSETS LESS LIABILITIES–(0.43)% |
| (2,895,721 | ) | |||||
NET ASSETS–100.00% |
| $ | 680,352,751 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Technology Fund
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at October 31, 2016. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
(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, 2016
Information Technology | 58.1 | % | ||
Consumer Discretionary | 16.5 | |||
Health Care | 15.2 | |||
Industrials | 3.7 | |||
Telecommunication Services | 2.5 | |||
Consumer Staples | 1.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.8 |
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, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $448,479,089)* | $ | 660,999,369 | ||
Investments in affiliated money market funds, at value and cost | 22,249,103 | |||
Total investments, at value (Cost $470,728,192) | 683,248,472 | |||
Foreign currencies, at value (Cost $19,070) | 18,940 | |||
Receivable for: | ||||
Investments sold | 16,111,038 | |||
Fund shares sold | 224,366 | |||
Dividends | 239,688 | |||
Investment for trustee deferred compensation and retirement plans | 200,665 | |||
Other assets | 37,923 | |||
Total assets | 700,081,092 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 14,667,803 | |||
Fund shares reacquired | 626,875 | |||
Collateral upon return of securities loaned | 3,435,825 | |||
Accrued fees to affiliates | 668,528 | |||
Accrued trustees’ and officers’ fees and benefits | 2,165 | |||
Accrued other operating expenses | 95,372 | |||
Trustee deferred compensation and retirement plans | 231,773 | |||
Total liabilities | 19,728,341 | |||
Net assets applicable to shares outstanding | $ | 680,352,751 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 429,673,823 | ||
Undistributed net investment income (loss) | (3,978,071 | ) | ||
Undistributed net realized gain | 42,140,272 | |||
Net unrealized appreciation | 212,516,727 | |||
$ | 680,352,751 |
Net Assets: |
| |||
Class A | $ | 284,578,105 | ||
Class B | $ | 4,668,514 | ||
Class C | $ | 27,688,467 | ||
Class Y | $ | 10,297,317 | ||
Investor Class | $ | 352,997,374 | ||
Class R5 | $ | 122,974 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 7,738,032 | |||
Class B | 145,397 | |||
Class C | 896,728 | |||
Class Y | 277,543 | |||
Investor Class | 9,658,036 | |||
Class R5 | 2,915 | |||
Class A: | ||||
Net asset value per share | $ | 36.78 | ||
Maximum offering price per share | ||||
(Net asset value of $36.78 ¸ 94.50%) | $ | 38.92 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 32.11 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 30.88 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 37.10 | ||
Investor Class: | ||||
Net asset value and offering price per share | $ | 36.55 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 42.19 |
* | At October 31, 2016, securities with an aggregate value of $3,333,689 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, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $8,822) | $ | 2,233,172 | ||
Dividends from affiliated money market funds (includes securities lending income of $595) | 21,902 | |||
Other income | 76,069 | |||
Total investment income | 2,331,143 | |||
Expenses: | ||||
Advisory fees | 2,390,787 | |||
Administrative services fees | 90,957 | |||
Distribution fees: | ||||
Class A | 357,797 | |||
Class B | 27,512 | |||
Class C | 142,452 | |||
Investor Class | 308,072 | |||
Transfer agent fees — A, B, C, Y and Investor | 1,325,315 | |||
Transfer agent fees — R5 | 130 | |||
Trustees’ and officers’ fees and benefits | 17,330 | |||
Registration and filing fees | 47,762 | |||
Reports to shareholders | 78,571 | |||
Professional services fees | 35,045 | |||
Other | 15,311 | |||
Total expenses | 4,837,041 | |||
Less: Fees waived and expense offset arrangement(s) | (22,668 | ) | ||
Net expenses | 4,814,373 | |||
Net investment income (loss) | (2,483,230 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities | 48,099,051 | |||
Foreign currencies | 46,209 | |||
48,145,260 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 26,983,984 | |||
Foreign currencies | 6,952 | |||
26,990,936 | ||||
Net realized and unrealized gain | 75,136,196 | |||
Net increase in net assets resulting from operations | $ | 72,652,966 |
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, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (2,483,230 | ) | $ | (4,961,403 | ) | ||
Net realized gain (loss) | 48,145,260 | (4,591,346 | ) | |||||
Change in net unrealized appreciation (depreciation) | 26,990,936 | (41,284,425 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 72,652,966 | (50,837,174 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (21,588,723 | ) | |||||
Class B | — | (565,799 | ) | |||||
Class C | — | (2,439,662 | ) | |||||
Class Y | — | (632,960 | ) | |||||
Investor Class | — | (24,548,720 | ) | |||||
Class R5 | — | (26,205 | ) | |||||
Total distributions from net realized gains | — | (49,802,069 | ) | |||||
Share transactions–net: | ||||||||
Class A | (25,221,937 | ) | 12,277,080 | |||||
Class B | (1,582,143 | ) | (2,785,580 | ) | ||||
Class C | (3,162,907 | ) | 2,094,880 | |||||
Class Y | (12,550 | ) | 1,543,377 | |||||
Investor Class | (14,769,772 | ) | (4,667,465 | ) | ||||
Class R5 | (364,564 | ) | (516,716 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (45,113,873 | ) | 7,945,576 | |||||
Net increase (decrease) in net assets | 27,539,093 | (92,693,667 | ) | |||||
Net assets: | ||||||||
Beginning of period | 652,813,658 | 745,507,325 | ||||||
End of period (includes undistributed net investment income (loss) of $(3,978,071) and $(1,494,841), respectively) | $ | 680,352,751 | $ | 652,813,658 |
Notes to Financial Statements
October 31, 2016
(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. Class Y and Investor Class shares are available only to certain 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 securities) 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
9 Invesco Technology Fund
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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
11 Invesco Technology Fund
K. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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 forward 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 $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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.70%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $9,399.
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, 2016, 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, 2016, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
12 Invesco Technology Fund
The Trust has entered into master distribution agreements with Invesco Distributors, Inc. (“IDI”) to serve as the distributor for the Class A, Class B, Class C, Class Y, Investor Class and 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, 2016, 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, 2016, IDI advised the Fund that IDI retained $18,261 in front-end sales commissions from the sale of Class A shares and $2,464, $138 and $1,840 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $1,842 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, 2016. 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 | |||||||||||||
Common Stocks and Other Equity Interests | $ | 637,135,849 | $ | 23,863,520 | $ | — | $ | 660,999,369 | ||||||||
Money Market Funds | 22,249,103 | — | — | 22,249,103 | ||||||||||||
Total Investments | $ | 659,384,952 | $ | 23,863,520 | $ | — | $ | 683,248,472 |
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, 2016, the Fund engaged in securities purchases of $35,938.
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $13,269.
13 Invesco Technology 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 were eligible to participate in a retirement plan that provided 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 eight 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 carryforwards 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, 2016.
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, 2016 was $196,902,613 and $240,433,418, 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 | $ | 221,209,144 | ||
Aggregate unrealized (depreciation) of investment securities | (9,603,955 | ) | ||
Net unrealized appreciation of investment securities | $ | 211,605,189 |
Cost of investments for tax purposes is $471,643,283.
14 Invesco Technology Fund
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 286,639 | $ | 10,287,455 | 1,926,254 | $ | 71,790,658 | ||||||||||
Class B | 1,025 | 31,871 | 3,377 | 109,483 | ||||||||||||
Class C | 47,877 | 1,446,732 | 208,493 | 6,550,960 | ||||||||||||
Class Y | 37,588 | 1,370,591 | 98,908 | 3,634,390 | ||||||||||||
Investor Class | 133,388 | 4,752,827 | 389,157 | 14,076,824 | ||||||||||||
Class R5 | 1,127 | 45,540 | 32,371 | 1,385,677 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 555,305 | 20,218,651 | ||||||||||||
Class B | — | — | 17,341 | 554,904 | ||||||||||||
Class C | — | — | 72,954 | 2,244,796 | ||||||||||||
Class Y | — | — | 13,633 | 499,641 | ||||||||||||
Investor Class | — | — | 651,719 | 23,559,648 | ||||||||||||
Class R5 | — | — | 611 | 25,396 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 33,702 | 1,209,786 | 67,911 | 2,461,415 | ||||||||||||
Class B | (38,547 | ) | (1,209,786 | ) | (76,874 | ) | (2,461,415 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (1,046,118 | ) | (36,719,178 | ) | (2,317,080 | ) | (82,193,644 | ) | ||||||||
Class B | (12,930 | ) | (404,228 | ) | (30,258 | ) | (988,552 | ) | ||||||||
Class C | (154,530 | ) | (4,609,639 | ) | (220,054 | ) | (6,700,876 | ) | ||||||||
Class Y | (38,484 | ) | (1,383,141 | ) | (71,023 | ) | (2,590,654 | ) | ||||||||
Investor Class | (552,912 | ) | (19,522,599 | ) | (1,167,108 | ) | (42,303,937 | ) | ||||||||
Class R5 | (10,527 | ) | (410,104 | ) | (43,236 | ) | (1,927,789 | ) | ||||||||
Net increase (decrease) in share activity | (1,312,702 | ) | $ | (45,113,873 | ) | 112,401 | $ | 7,945,576 |
(a) | There is an entity that is record owner of more than 5% of the outstanding shares of the Fund and owns 9% 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. |
15 Invesco Technology Fund
NOTE 11—Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
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 10/31/16 | $ | 32.99 | $ | (0.13 | ) | $ | 3.92 | $ | 3.79 | $ | — | $ | — | $ | — | $ | 36.78 | 11.49 | % | $ | 284,578 | 1.42 | %(d) | 1.42 | %(d) | (0.74 | )%(d) | 30 | % | |||||||||||||||||||||||||||
Year ended 04/30/16 | 37.86 | (0.26 | ) | (2.09 | ) | (2.35 | ) | — | (2.52 | ) | (2.52 | ) | 32.99 | (6.83 | ) | 279,234 | 1.39 | 1.39 | (0.70 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 37.61 | (0.35 | ) | 5.88 | 5.53 | — | (5.28 | ) | (5.28 | ) | 37.86 | 15.27 | 311,682 | 1.40 | 1.40 | (0.89 | ) | 67 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 34.19 | (0.30 | ) | 7.07 | 6.77 | — | (3.35 | ) | (3.35 | ) | 37.61 | 20.22 | 287,236 | 1.45 | 1.45 | (0.80 | ) | 69 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class B |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 28.91 | (0.23 | ) | 3.43 | 3.20 | — | — | — | 32.11 | 11.07 | 4,669 | 2.17 | (d) | 2.17 | (d) | (1.49 | )(d) | 30 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 33.73 | (0.47 | ) | (1.83 | ) | (2.30 | ) | — | (2.52 | ) | (2.52 | ) | 28.91 | (7.53 | ) | 5,663 | 2.14 | 2.14 | (1.45 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 34.27 | (0.58 | ) | 5.32 | 4.74 | — | (5.28 | ) | (5.28 | ) | 33.73 | 14.41 | 9,521 | 2.15 | 2.15 | (1.64 | ) | 67 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 31.64 | (0.54 | ) | 6.52 | 5.98 | — | (3.35 | ) | (3.35 | ) | 34.27 | 19.32 | 12,567 | 2.20 | 2.20 | (1.55 | ) | 69 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 27.80 | (0.22 | ) | 3.30 | 3.08 | — | — | — | 30.88 | 11.08 | 27,688 | 2.17 | (d) | 2.17 | (d) | (1.49 | )(d) | 30 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 32.53 | (0.45 | ) | (1.76 | ) | (2.21 | ) | — | (2.52 | ) | (2.52 | ) | 27.80 | (7.53 | ) | 27,898 | 2.14 | 2.14 | (1.45 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 33.22 | (0.56 | ) | 5.15 | 4.59 | — | (5.28 | ) | (5.28 | ) | 32.53 | 14.40 | 30,645 | 2.15 | 2.15 | (1.64 | ) | 67 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 30.76 | (0.53 | ) | 6.34 | 5.81 | — | (3.35 | ) | (3.35 | ) | 33.22 | 19.32 | 27,846 | 2.20 | 2.20 | (1.55 | ) | 69 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class Y |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 33.24 | (0.09 | ) | 3.95 | 3.86 | — | — | — | 37.10 | 11.61 | 10,297 | 1.17 | (d) | 1.17 | (d) | (0.49 | )(d) | 30 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 38.04 | (0.17 | ) | (2.11 | ) | (2.28 | ) | — | (2.52 | ) | (2.52 | ) | 33.24 | (6.61 | ) | 9,256 | 1.14 | 1.14 | (0.45 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 37.67 | (0.25 | ) | 5.90 | 5.65 | — | (5.28 | ) | (5.28 | ) | 38.04 | 15.58 | 9,013 | 1.15 | 1.15 | (0.64 | ) | 67 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 34.16 | (0.21 | ) | 7.07 | 6.86 | — | (3.35 | ) | (3.35 | ) | 37.67 | 20.51 | 5,850 | 1.20 | 1.20 | (0.55 | ) | 69 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Investor Class |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 32.78 | (0.12 | ) | 3.89 | 3.77 | — | — | — | 36.55 | 11.50 | (g) | 352,997 | 1.35 | (d)(g) | 1.35 | (d)(g) | (0.67 | )(d)(g) | 30 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 37.60 | (0.22 | ) | (2.08 | ) | (2.30 | ) | — | (2.52 | ) | (2.52 | ) | 32.78 | (6.73 | )(g) | 330,298 | 1.30 | (g) | 1.30 | (g) | (0.61 | )(g) | 46 | |||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 37.34 | (0.31 | ) | 5.85 | 5.54 | — | (5.28 | ) | (5.28 | ) | 37.60 | 15.41 | (g) | 383,681 | 1.30 | (g) | 1.30 | (g) | (0.79 | )(g) | 67 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 33.94 | (0.27 | ) | 7.02 | 6.75 | — | (3.35 | ) | (3.35 | ) | 37.34 | 20.31 | (g) | 366,054 | 1.36 | (g) | 1.36 | (g) | (0.71 | )(g) | 69 | |||||||||||||||||||||||||||||||||||
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)(g) | 342,287 | 1.48 | (g) | 1.48 | (g) | (0.66 | )(e)(g) | 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 | ||||||||||||||||||||||||||||||||||||||||
Class R5 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 37.74 | (0.04 | ) | 4.49 | 4.45 | — | — | — | 42.19 | 11.79 | 123 | 0.89 | (d) | 0.89 | (d) | (0.21 | )(d) | 30 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 42.75 | (0.08 | ) | (2.41 | ) | (2.49 | ) | — | (2.52 | ) | (2.52 | ) | 37.74 | (6.36 | ) | 465 | 0.87 | 0.87 | (0.18 | ) | 46 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 41.63 | (0.16 | ) | 6.56 | 6.40 | — | (5.28 | ) | (5.28 | ) | 42.75 | 15.91 | 965 | 0.87 | 0.87 | (0.36 | ) | 67 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 37.33 | (0.10 | ) | 7.75 | 7.65 | — | (3.35 | ) | (3.35 | ) | 41.63 | 20.89 | 1,457 | 0.89 | 0.89 | (0.24 | ) | 69 | ||||||||||||||||||||||||||||||||||||||
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 |
(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 $283,904, $5,458, $28,258, $9,800, $348,106 and $258 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. |
(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 0.18%, 0.16%, 0.15%, 0.16% and 0.20% for the six months ended October 31, 2016 and the years ended April 30, 2016, April 30, 2015, April 30, 2014 and April 30, 2013, respectively. |
16 Invesco Technology Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,114.90 | $ | 7.57 | $ | 1,018.05 | $ | 7.22 | 1.42 | % | ||||||||||||
B | 1,000.00 | 1,110.70 | 11.54 | 1,014.27 | 11.02 | 2.17 | ||||||||||||||||||
C | 1,000.00 | 1,110.40 | 11.54 | 1,014.27 | 11.02 | 2.17 | ||||||||||||||||||
Y | 1,000.00 | 1,116.10 | 6.24 | 1,019.31 | 5.96 | 1.17 | ||||||||||||||||||
Investor | 1,000.00 | 1,115.00 | 7.20 | 1,018.40 | 6.87 | 1.35 | ||||||||||||||||||
R5 | 1,000.00 | 1,117.90 | 4.75 | 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, 2016 through October 31, 2016, 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 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge performance universe and against the Lipper Science & Technology Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of its performance universe for the one year period, the fifth quintile for the three year period and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was above the performance of the Index for the one year period and below the performance of the Index for the three and five year periods. Invesco Advisers advised the Board that the portfolio management team had changed in 2014 and the benchmark had changed in 2015 to better
18 Invesco Technology Fund
align with the investment process of the team. 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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rate of one such mutual fund and above the rate of one such mutual fund. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of another fund sub-advised by Invesco Advisers.
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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
19 Invesco Technology Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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, 2016 | ||
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Invesco Technology Sector Fund
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Nasdaq: | ||||
A: IFOAX ∎ B: IFOBX ∎ C: IFOCX ∎ Y: IFODX | ||||
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2 Fund Performance | ||||
4 Letters to Shareholders | ||||
5 Schedule of Investments | ||||
7 Financial Statements | ||||
9 Notes to Financial Statements | ||||
15 Financial Highlights | ||||
16 Fund Expenses | ||||
17 Approval of Investment Advisory and Sub-Advisory 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.
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Fund Performance
Performance summary
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Fund vs. Indexes | ||||
Cumulative total returns, 4/30/16 to 10/31/16, 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.
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Class A Shares | 11.36 | % | ||
Class B Shares | 10.95 | |||
Class C Shares | 10.95 | |||
Class Y Shares | 11.46 | |||
Nasdaq Composite Indexq (Broad Market/Style-Specific Index) | 9.33 | |||
Lipper Science & Technology Funds Index∎ (Peer Group Index) | 13.62 | |||
Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc. | ||||
The Nasdaq Composite Index is a broad-based market index of the common stocks and similar securities listed on the Nasdaq stock market. 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.
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For more information about your Fund |
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends.
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2 Invesco Technology Sector Fund
Average Annual Total Returns | ||||
As of 10/31/16, including maximum applicable sales charges
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Class A Shares | ||||
Inception (7/28/97) | 4.26 | % | ||
10 Years | 4.82 | |||
5 Years | 8.00 | |||
1 Year | -6.32 | |||
Class B Shares | ||||
Inception (11/28/95) | 4.63 | % | ||
10 Years | 4.78 | |||
5 Years | 8.13 | |||
1 Year | -6.44 | |||
Class C Shares | ||||
Inception (7/28/97) | 3.78 | % | ||
10 Years | 4.63 | |||
5 Years | 8.42 | |||
1 Year | -2.57 | |||
Class Y Shares | ||||
Inception (7/28/97) | 4.81 | % | ||
10 Years | 5.68 | |||
5 Years | 9.49 | |||
1 Year | -0.60 | |||
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower.
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Average Annual Total Returns | ||||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (7/28/97) | 4.38 | % | ||
10 Years | 5.28 | |||
5 Years | 11.17 | |||
1 Year | 6.06 | |||
Class B Shares | ||||
Inception (11/28/95) | 4.74 | % | ||
10 Years | 5.25 | |||
5 Years | 11.36 | |||
1 Year | 6.45 | |||
Class C Shares | ||||
Inception (7/28/97) | 3.90 | % | ||
10 Years | 5.09 | |||
5 Years | 11.62 | |||
1 Year | 10.45 | |||
Class Y Shares | ||||
Inception (7/28/97) | 4.93 | % | ||
10 Years | 6.15 | |||
5 Years | 12.74 | |||
1 Year | 12.57 | |||
Performance includes litigation proceeds. Had these proceeds not been received, total returns would have been lower.
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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, prior to June 1, 2010, 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 1.58%, 2.33%, 2.33% and 1.33%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class Y shares do not have a front-end sales charge or a CDSC; therefore, performance is at net asset value.
The performance of the Fund’s share classes will differ primarily due to different sales charge structures and class expenses.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
3 Invesco Technology Sector Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the |
fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive.
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short-term |
decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. Thank you for investing with us.
Sincerely,
Philip Taylor
Senior Managing Director, Invesco Ltd.
4 Invesco Technology Sector Fund
Schedule of Investments(a)
October 31, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks & Other Equity Interests–97.57% |
| |||||||
Aerospace & Defense–3.74% | ||||||||
Raytheon Co. | 22,530 | $ | 3,077,823 | |||||
Application Software–2.68% | ||||||||
salesforce.com, inc.(b) | 29,409 | 2,210,380 | ||||||
Biotechnology–9.37% | ||||||||
Alexion Pharmaceuticals, Inc.(b) | 10,050 | 1,311,525 | ||||||
Alkermes PLC(b) | 9,644 | 486,154 | ||||||
Amgen Inc. | 12,170 | 1,717,917 | ||||||
Biogen Inc.(b) | 3,428 | 960,457 | ||||||
BioMarin Pharmaceutical Inc.(b) | 9,055 | 729,109 | ||||||
Celgene Corp.(b) | 24,532 | 2,506,680 | ||||||
7,711,842 | ||||||||
Cable & Satellite–3.51% | ||||||||
DISH Network Corp.–Class A(b) | 49,370 | 2,891,107 | ||||||
Communications Equipment–0.38% | ||||||||
Palo Alto Networks, Inc.(b) | 2,052 | 315,659 | ||||||
Consumer Electronics–4.28% | ||||||||
Harman International Industries, Inc. | 7,960 | 634,492 | ||||||
Sony Corp. (Japan) | 91,300 | 2,889,191 | ||||||
3,523,683 | ||||||||
Data Processing & Outsourced Services–7.80% | ||||||||
First Data Corp.–Class A(b) | 109,518 | 1,532,157 | ||||||
MasterCard, Inc.–Class A | 16,419 | 1,757,161 | ||||||
Visa Inc.–Class A | 38,000 | 3,135,380 | ||||||
6,424,698 | ||||||||
Health Care Equipment–1.59% | ||||||||
Medtronic PLC | 15,931 | 1,306,661 | ||||||
Home Entertainment Software–7.66% | ||||||||
Activision Blizzard, Inc. | 63,675 | 2,748,850 | ||||||
Electronic Arts Inc.(b) | 18,677 | 1,466,518 | ||||||
Nintendo Co., Ltd. (Japan) | 5,000 | 1,212,988 | ||||||
Take-Two Interactive Software, Inc.(b) | 19,743 | 876,392 | ||||||
6,304,748 | ||||||||
Internet & Direct Marketing Retail–7.74% | ||||||||
Amazon.com, Inc.(b) | 6,944 | 5,484,510 | ||||||
Priceline Group Inc. (The)(b) | 600 | 884,538 | ||||||
6,369,048 | ||||||||
Internet Software & Services–16.55% | ||||||||
Alibaba Group Holding Ltd.–ADR (China)(b) | 21,149 | 2,150,642 | ||||||
Alphabet Inc.–Class A(b) | 6,665 | 5,397,983 | ||||||
Alphabet Inc.–Class C(b) | 2,453 | 1,924,477 | ||||||
Facebook Inc.–Class A(b) | 31,677 | 4,149,370 | ||||||
13,622,472 |
Shares | Value | |||||||
Life Sciences Tools & Services–1.48% | ||||||||
Thermo Fisher Scientific, Inc. | 8,313 | $ | 1,222,260 | |||||
Movies & Entertainment–1.02% | ||||||||
Time Warner Inc. | 9,431 | 839,265 | ||||||
Pharmaceuticals–2.73% | ||||||||
Allergan PLC(b) | 7,318 | 1,529,023 | ||||||
Eli Lilly and Co. | 9,704 | 716,543 | ||||||
2,245,566 | ||||||||
Semiconductor Equipment–0.97% | ||||||||
Applied Materials, Inc. | 27,394 | 796,618 | ||||||
Semiconductors–8.81% | ||||||||
Broadcom Ltd. (Singapore) | 15,896 | 2,706,771 | ||||||
Integrated Device Technology, Inc.(b) | 80,300 | 1,663,013 | ||||||
NXP Semiconductors N.V. (Netherlands)(b) | 3,561 | 356,100 | ||||||
QUALCOMM, Inc. | 36,801 | 2,528,965 | ||||||
7,254,849 | ||||||||
Systems Software–5.83% | ||||||||
Microsoft Corp. | 69,322 | 4,153,774 | ||||||
ServiceNow, Inc.(b) | 7,392 | 649,831 | ||||||
4,803,605 | ||||||||
Technology Hardware, Storage & Peripherals–7.79% | ||||||||
Apple Inc. | 56,511 | 6,416,259 | ||||||
Tobacco–1.17% | ||||||||
Philip Morris International Inc. | 9,963 | 960,832 | ||||||
Wireless Telecommunication Services–2.47% | ||||||||
Sprint Corp.(b) | 329,557 | 2,030,071 | ||||||
Total Common Stocks & Other Equity Interests (Cost $68,041,712) |
| 80,327,446 | ||||||
Money Market Funds–2.49% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(c) | 1,226,852 | 1,226,852 | ||||||
Treasury Portfolio–Institutional | 817,902 | 817,902 | ||||||
Total Money Market Funds | 2,044,754 | |||||||
TOTAL INVESTMENTS–100.06% | 82,372,200 | |||||||
OTHER ASSETS LESS | (46,477 | ) | ||||||
NET ASSETS–100.00% | $ | 82,325,723 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
5 Invesco Technology Sector Fund
Investment Abbreviations:
ADR | – American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2016
Information Technology | 58.5 | % | ||
Consumer Discretionary | 16.5 | |||
Health Care | 15.2 | |||
Industrials | 3.7 | |||
Telecommunication Services | 2.5 | |||
Consumer Staples | 1.2 | |||
Money Market Funds Plus Other Assets Less Liabilities | 2.4 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
6 Invesco Technology Sector Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: | ||||
Investments, at value (Cost $68,041,712) | $ | 80,327,446 | ||
Investments in affiliated money market funds, at value and cost | 2,044,754 | |||
Total investments, at value (Cost $70,086,466) | 82,372,200 | |||
Foreign currencies, at value (Cost $8,566) | 8,492 | |||
Receivable for: | ||||
Investments sold | 1,960,714 | |||
Fund shares sold | 10,636 | |||
Dividends | 29,129 | |||
Investment for trustee deferred compensation and retirement plans | 28,691 | |||
Other assets | 30,690 | |||
Total assets | 84,440,552 | |||
Liabilities: | ||||
Payable for: | ||||
Investments purchased | 1,776,895 | |||
Fund shares reacquired | 134,415 | |||
Accrued fees to affiliates | 124,887 | |||
Accrued trustees’ and officers’ fees and benefits | 1,846 | |||
Accrued other operating expenses | 45,661 | |||
Trustee deferred compensation and retirement plans | 31,125 | |||
Total liabilities | 2,114,829 | |||
Net assets applicable to shares outstanding | $ | 82,325,723 | ||
Net assets consist of: | ||||
Shares of beneficial interest | $ | 68,810,981 | ||
Undistributed net investment income (loss) | (708,606 | ) | ||
Undistributed net realized gain | 1,938,106 | |||
Net unrealized appreciation | 12,285,242 | |||
$ | 82,325,723 |
Net Assets: | ||||
Class A | $ | 73,249,475 | ||
Class B | $ | 451,789 | ||
Class C | $ | 7,049,328 | ||
Class Y | $ | 1,575,131 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 4,221,421 | |||
Class B | 30,347 | |||
Class C | 473,326 | |||
Class Y | 86,563 | |||
Class A: | ||||
Net asset value per share | $ | 17.35 | ||
Maximum offering price per share | ||||
(Net asset value of $17.35 ¸ 94.50%) | $ | 18.36 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 14.89 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 14.89 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 18.20 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
7 Invesco Technology Sector Fund
Statement of Operations
For the six months ended October 31, 2016
(Unaudited)
Investment income: |
| |||
Dividends (net of foreign withholding taxes of $1,077) | $ | 265,511 | ||
Dividends from affiliated money market funds (includes securities lending income of $119) | 2,659 | |||
Total investment income | 268,170 | |||
Expenses: | ||||
Advisory fees | 278,527 | |||
Administrative services fees | 25,205 | |||
Custodian fees | 1,791 | |||
Distribution fees: | ||||
Class A | 92,475 | |||
Class B | 2,885 | |||
Class C | 34,492 | |||
Transfer agent fees | 179,503 | |||
Trustees’ and officers’ fees and benefits | 10,406 | |||
Registration and filing fees | 26,502 | |||
Reports to shareholders | 22,206 | |||
Professional services fees | 23,261 | |||
Other | 6,850 | |||
Total expenses | 704,103 | |||
Less: Fees waived and expense offset arrangement(s) | (1,390 | ) | ||
Net expenses | 702,713 | |||
Net investment income (loss) | (434,543 | ) | ||
Realized and unrealized gain from: | ||||
Net realized gain from: | ||||
Investment securities | 3,719,300 | |||
Foreign currencies | 6,021 | |||
3,725,321 | ||||
Change in net unrealized appreciation of: | ||||
Investment securities | 5,500,596 | |||
Foreign currencies | 512 | |||
5,501,108 | ||||
Net realized and unrealized gain | 9,226,429 | |||
Net increase in net assets resulting from operations | $ | 8,791,886 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
8 Invesco Technology Sector Fund
Statement of Changes in Net Assets
For the six months ended October 31, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (434,543 | ) | $ | (849,700 | ) | ||
Net realized gain | 3,725,321 | 6,302,009 | ||||||
Change in net unrealized appreciation (depreciation) | 5,501,108 | (11,368,674 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 8,791,886 | (5,916,365 | ) | |||||
Share transactions–net: | ||||||||
Class A | (4,852,897 | ) | (10,956,691 | ) | ||||
Class B | (254,740 | ) | (581,865 | ) | ||||
Class C | (440,741 | ) | (774,023 | ) | ||||
Class Y | 124,827 | 452,285 | ||||||
Net increase (decrease) in net assets resulting from share transactions | (5,423,551 | ) | (11,860,294 | ) | ||||
Net increase (decrease) in net assets | 3,368,335 | (17,776,659 | ) | |||||
Net assets: | ||||||||
Beginning of period | 78,957,388 | 96,734,047 | ||||||
End of period (includes undistributed net investment income (loss) of $(708,606) and $(274,063), respectively) | $ | 82,325,723 | $ | 78,957,388 |
Notes to Financial Statements
October 31, 2016
(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 Y shares are available only to certain 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 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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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
9 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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 the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
10 Invesco Technology Sector 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. |
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. The Fund bears the risk of loss with respect to the investment of collateral. 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. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. 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. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. 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 and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. 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, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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 forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
11 Invesco Technology Sector Fund
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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.67%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $1,106.
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, 2016, 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, 2016, 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, 2016, 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, 2016, IDI advised the Fund that IDI retained $12,554 in front-end sales commissions from the sale of Class A shares and $30 from Class B shares for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $226 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.
12 Invesco Technology Sector 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, 2016. 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 | |||||||||||||
Common Stocks & Other Equity Interests | $ | 77,438,255 | $ | 2,889,191 | $ | — | $ | 80,327,446 | ||||||||
Money Market Funds | 2,044,754 | — | — | 2,044,754 | ||||||||||||
Total Investments | $ | 79,483,009 | $ | 2,889,191 | $ | — | $ | 82,372,200 |
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, 2016, the Fund engaged in securities purchases of $4,415.
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $284.
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 were eligible to participate in a retirement plan that provided 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.
13 Invesco Technology Sector Fund
NOTE 8—Tax Information
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from 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 eight 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 carryforwards 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 capital loss carryforward as of April 30, 2016.
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, 2016 was $24,389,616 and $29,566,583, 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 | $ | 15,352,429 | ||
Aggregate unrealized (depreciation) of investment securities | (3,151,105 | ) | ||
Net unrealized appreciation of investment securities | $ | 12,201,324 |
Cost of investments for tax purposes is $70,170,876.
NOTE 10—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 21,005 | $ | 347,909 | 110,280 | $ | 1,836,154 | ||||||||||
Class C | 1,307 | 18,886 | 16,864 | 234,225 | ||||||||||||
Class Y | 24,527 | 428,668 | 46,583 | 775,751 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 10,217 | 173,051 | 25,960 | 427,834 | ||||||||||||
Class B | (11,890 | ) | (173,051 | ) | (30,033 | ) | (427,834 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (318,958 | ) | (5,373,857 | ) | (794,117 | ) | (13,220,679 | ) | ||||||||
Class B | (5,748 | ) | (81,689 | ) | (10,672 | ) | (154,031 | ) | ||||||||
Class C | (31,558 | ) | (459,627 | ) | (70,174 | ) | (1,008,248 | ) | ||||||||
Class Y | (17,573 | ) | (303,841 | ) | (18,943 | ) | (323,466 | ) | ||||||||
Net increase (decrease) in share activity | (328,671 | ) | $ | (5,423,551 | ) | (724,252 | ) | $ | (11,860,294 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 71% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The 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 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 10/31/16 | $ | 15.58 | $ | (0.08 | ) | $ | 1.85 | $ | 1.77 | $ | 17.35 | 11.36 | % | $ | 73,249 | 1.63 | %(d) | 1.63 | %(d) | (0.98 | )%(d) | 30 | % | |||||||||||||||||||||
Year ended 04/30/16 | 16.73 | (0.15 | ) | (1.00 | ) | (1.15 | ) | 15.58 | (6.87 | ) | 70,256 | 1.58 | 1.58 | (0.89 | ) | 44 | ||||||||||||||||||||||||||||
Year ended 04/30/15 | 14.49 | (0.17 | ) | 2.41 | 2.24 | 16.73 | 15.46 | 86,451 | 1.58 | 1.58 | (1.07 | ) | 66 | |||||||||||||||||||||||||||||||
Year ended 04/30/14 | 12.01 | (0.14 | ) | 2.62 | 2.48 | 14.49 | 20.65 | 83,926 | 1.68 | 1.68 | (1.02 | ) | 69 | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 13.42 | (0.13 | ) | 1.60 | 1.47 | 14.89 | 10.95 | 452 | 2.38 | (d) | 2.38 | (d) | (1.73 | )(d) | 30 | |||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.52 | (0.24 | ) | (0.86 | ) | (1.10 | ) | 13.42 | (7.58 | ) | 644 | 2.33 | 2.33 | (1.64 | ) | 44 | ||||||||||||||||||||||||||||
Year ended 04/30/15 | 12.66 | (0.25 | ) | 2.11 | 1.86 | 14.52 | 14.69 | 1,287 | 2.33 | 2.33 | (1.82 | ) | 66 | |||||||||||||||||||||||||||||||
Year ended 04/30/14 | 10.58 | (0.21 | ) | 2.29 | 2.08 | 12.66 | 19.66 | 1,692 | 2.43 | 2.43 | (1.77 | ) | 69 | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 13.42 | (0.12 | ) | 1.59 | 1.47 | 14.89 | 10.95 | (h) | 7,049 | 2.35 | (d)(h) | 2.35 | (d)(h) | (1.70 | )(d)(h) | 30 | ||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.52 | (0.24 | ) | (0.86 | ) | (1.10 | ) | 13.42 | (7.58 | ) | 6,759 | 2.33 | 2.33 | (1.64 | ) | 44 | ||||||||||||||||||||||||||||
Year ended 04/30/15 | 12.67 | (0.25 | ) | 2.10 | 1.85 | 14.52 | 14.60 | (h) | 8,087 | 2.32 | (h) | 2.32 | (h) | (1.81 | )(h) | 66 | ||||||||||||||||||||||||||||
Year ended 04/30/14 | 10.58 | (0.21 | ) | 2.30 | 2.09 | 12.67 | 19.75 | (h) | 7,976 | 2.41 | (h) | 2.41 | (h) | (1.75 | )(h) | 69 | ||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 16.32 | (0.07 | ) | 1.95 | 1.88 | 18.20 | 11.52 | 1,575 | 1.38 | (d) | 1.38 | (d) | (0.73 | )(d) | 30 | |||||||||||||||||||||||||||||
Year ended 04/30/16 | 17.49 | (0.11 | ) | (1.06 | ) | (1.17 | ) | 16.32 | (6.69 | ) | 1,299 | 1.33 | 1.33 | (0.64 | ) | 44 | ||||||||||||||||||||||||||||
Year ended 04/30/15 | 15.10 | (0.14 | ) | 2.53 | 2.39 | 17.49 | 15.83 | 909 | 1.33 | 1.33 | (0.82 | ) | 66 | |||||||||||||||||||||||||||||||
Year ended 04/30/14 | 12.49 | (0.11 | ) | 2.72 | 2.61 | 15.10 | 20.90 | 647 | 1.43 | 1.43 | (0.77 | ) | 69 | |||||||||||||||||||||||||||||||
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 |
(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 $73,377, $572, $7,079 and $1,436 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 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 $(0.15) 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 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 total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.97% for the six months ended October 31, 2016 and 0.99% and 0.98% for the years ended April 30, 2015 and 2014, respectively. |
15 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, 2016 through October 31, 2016.
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 (05/01/16) | ACTUAL | HYPOTHETICAL (5% annual return before | Annualized Expense Ratio | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,113.60 | $ | 8.68 | $ | 1,016.99 | $ | 8.29 | 1.63 | % | ||||||||||||
B | 1,000.00 | 1,109.50 | 12.65 | 1,013.21 | 12.08 | 2.38 | ||||||||||||||||||
C | 1,000.00 | 1,109.50 | 12.50 | 1,013.36 | 11.93 | 2.35 | ||||||||||||||||||
Y | 1,000.00 | 1,114.60 | 7.36 | 1,018.25 | 7.02 | 1.38 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, 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 Sector Fund
Approval of Investment Advisory and Sub-Advisor 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. The Trustees’ deliberations and conclusions in a particular year may be based in part on their deliberations and conclusions regarding these 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge performance universe and against the Lipper Science & Technology Funds Index. The Board noted that performance of Class A shares of the Fund was in the third quintile of its performance universe for the one year period, the fifth quintile for the three year period and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of 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.
17 Invesco Technology Sector Fund
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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rates of two such mutual funds. The Board also noted how the Fund’s rate compared to the effective sub-adviser fee rate of one fund sub-advised by Invesco Advisers.
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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco Funds and the profitability of Invesco Advisers
and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and were advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
18 Invesco Technology Sector Fund
Explore High-Conviction Investing with Invesco
Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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, 2016 | |||
Invesco Value Opportunities Fund | ||||
Nasdaq: A: VVOAX ∎ B: VVOBX ∎ C: VVOCX ∎ R: VVORX ∎ Y: VVOIX ∎ R5: VVONX |
| ||
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, 4/30/16 to 10/31/16, 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 | 0.34 | % | ||
Class B Shares | 0.35 | |||
Class C Shares | 0.00 | |||
Class R Shares | 0.17 | |||
Class Y Shares | 0.52 | |||
Class R5 Shares | 0.52 | |||
S&P 500 Indexq (Broad Market Index) | 4.06 | |||
S&P 1500 Value Indexq (Style-Specific Index) | 3.34 | |||
Lipper Multi-Cap Value Funds Index∎ (Peer Group Index) | 3.21 |
Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The S&P 1500® Value Index combines the value stocks of the S&P 500, S&P MidCap 400 and the S&P SmallCap 600 indexes.
The Lipper Multi-Cap Value Funds Index is an unmanaged index considered representative of multicap value funds tracked by Lipper.
The S&P MidCap 400® Index is an unmanaged index considered representative of mid-sized US companies.
The S&P SmallCap 600® Index is a market-value weighted index considered representative of small-cap US stocks.
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.
For more information about your Fund
Read the most recent quarterly commentary from your Fund’s portfolio managers by visiting invesco.com/us. Use the “Product Finder” on the homepage to locate your Fund; then click on its name to access its product detail page. There, you can learn more about your Fund’s investment strategies, holdings and performance. Also, visit blog.invesco.us.com, where many of Invesco’s investment professionals share their insights about market and economic news and trends. |
2 Invesco Value Opportunities Fund
Average Annual Total Returns |
| |||
As of 10/31/16, including maximum applicable sales charges
|
| |||
Class A Shares | ||||
Inception (6/25/01) | 4.02 | % | ||
10 Years | 2.00 | |||
5 Years | 7.91 | |||
1 Year | -7.57 | |||
Class B Shares | ||||
Inception (6/25/01) | 3.99 | % | ||
10 Years | 2.25 | |||
5 Years | 8.86 | |||
1 Year | -6.45 | |||
Class C Shares | ||||
Inception (6/25/01) | 3.65 | % | ||
10 Years | 1.85 | |||
5 Years | 8.36 | |||
1 Year | -3.79 | |||
Class R Shares | ||||
10 Years | 2.32 | % | ||
5 Years | 8.87 | |||
1 Year | -2.50 | |||
Class Y Shares | ||||
Inception (3/23/05) | 4.07 | % | ||
10 Years | 2.82 | |||
5 Years | 9.42 | |||
1 Year | -2.00 | |||
Class R5 Shares | ||||
10 Years | 2.84 | % | ||
5 Years | 9.64 | |||
1 Year | -1.86 |
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, prior to June 1, 2010, 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 R5 shares incepted on May 23, 2011. Performance shown prior to that date is that of the Fund’s and the
Average Annual Total Returns |
| |||
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges | ||||
Class A Shares | ||||
Inception (6/25/01) | 4.21 | % | ||
10 Years | 2.44 | |||
5 Years | 11.01 | |||
1 Year | 1.40 | |||
Class B Shares | ||||
Inception (6/25/01) | 4.18 | % | ||
10 Years | 2.69 | |||
5 Years | 12.05 | |||
1 Year | 2.72 | |||
Class C Shares | ||||
Inception (6/25/01) | 3.84 | % | ||
10 Years | 2.30 | |||
5 Years | 11.47 | |||
1 Year | 5.64 | |||
Class R Shares | ||||
10 Years | 2.77 | % | ||
5 Years | 12.02 | |||
1 Year | 7.12 | |||
Class Y Shares | ||||
Inception (3/23/05) | 4.33 | % | ||
10 Years | 3.27 | |||
5 Years | 12.57 | |||
1 Year | 7.63 | |||
Class R5 Shares | ||||
10 Years | 3.29 | % | ||
5 Years | 12.82 | |||
1 Year | 7.77 |
predecessor fund’s Class A shares and includes the 12b-1 fees applicable to Class A shares.
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 1.26%, 1.26%, 1.98%, 1.51%, 1.01% and 0.85%, 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.
Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.
3 Invesco Value Opportunities Fund
Letters to Shareholders
Bruce Crockett | Dear Fellow Shareholders: As independent chair of the Invesco Funds Board, I can assure you that the members of the Board are strong advocates for the interests of investors in Invesco’s mutual funds. We work hard to represent your interests through oversight of the quality of the investment management services your funds receive and other matters important to your investment. This includes but is not limited to: ensuring that Invesco offers a diverse lineup of mutual funds that your financial adviser can use to strive to meet your financial needs as your investment goals change over time; monitoring how the portfolio management teams of the Invesco funds are performing in light of changing economic and market conditions; assessing each portfolio management team’s investment performance within the context of the investment strategy described in the |
fund’s prospectus; and monitoring for potential conflicts of interests that may impact the nature of the services that your funds receive.
We believe one of the most important services we provide our fund shareholders is the annual review of the funds’ advisory and sub-advisory contracts with Invesco Advisers and its affiliates. This review is required by the Investment Company Act of 1940 and focuses on the nature and quality of the services Invesco provides as the adviser to the Invesco funds and the reasonableness of the fees that it charges for those services. Each year, we spend months carefully reviewing information received from Invesco and a variety of independent sources, such as performance and fee data prepared by Lipper Inc., an independent, third-party firm widely recognized as a leader in its field. We also meet with our independent legal counsel and other independent advisers to review and help us assess the information that we have received. Our goal is to assure that you receive quality investment management services for a reasonable fee.
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: This semiannual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. The investment professionals at Invesco invest with high conviction, take a long-term perspective and have a passion to exceed. Invesco’s pure focus on investment management eliminates possible distractions and means that there are no competing lines of business for us to support. Just as important, we embrace a variety of investment strategies, asset classes and geographies – because we know that no single investment approach meets the diverse needs of all of our clients. We manage all our investment approaches with a passion to exceed. All our investment teams have a highly disciplined, long-term investing style that eliminates short- |
term decision-making. Of course, investing with high conviction can’t guarantee a profit or ensure success; no investment strategy can. To learn more about how we invest with high conviction, visit invesco.com/HighConviction.
Our website, invesco.com/us, offers timely information about your Fund and allows you to access your account. Also, you can obtain updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. Additionally, you can access our blog at blog.invesco.us.com. Our goal is to provide you the information you want, when and where you want it.
Finally, I’m pleased to share with you Invesco’s commitment to both the Principles for Responsible Investment and to considering environmental, social and governance issues in our robust investment process. I invite you to learn more at invesco.com/esg.
For questions about your account, 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. 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, 2016
(Unaudited)
Shares | Value | |||||||
Common Stocks–96.16% |
| |||||||
Advertising–1.75% | ||||||||
Omnicom Group Inc. | 153,955 | $ | 12,288,688 | |||||
Agricultural & Farm Machinery–0.46% | ||||||||
AGCO Corp. | 63,304 | 3,233,568 | ||||||
Asset Management & Custody Banks–4.45% | ||||||||
Affiliated Managers Group, Inc.(b) | 235,900 | 31,294,494 | ||||||
Auto Parts & Equipment–4.34% | ||||||||
Dana Inc. | 1,518,958 | 23,513,470 | ||||||
Gentex Corp. | 415,400 | 7,024,414 | ||||||
30,537,884 | ||||||||
Building Products–0.23% | ||||||||
Owens Corning | 32,559 | 1,588,228 | ||||||
Construction & Engineering–3.93% | ||||||||
AECOM(b) | 993,790 | 27,677,051 | ||||||
Consumer Electronics–2.49% | ||||||||
Harman International Industries, Inc. | 219,700 | 17,512,287 | ||||||
Consumer Finance–3.97% | ||||||||
Synchrony Financial | 976,900 | 27,929,571 | ||||||
Diversified Banks–12.51% | ||||||||
Bank of America Corp. | 1,565,566 | 25,831,839 | ||||||
Citigroup Inc. | 533,121 | 26,202,897 | ||||||
JPMorgan Chase & Co. | 498,864 | 34,551,321 | ||||||
Wells Fargo & Co. | 31,625 | 1,455,066 | ||||||
88,041,123 | ||||||||
Electronic Components–4.93% | ||||||||
Belden Inc. | 535,492 | 34,705,236 | ||||||
Electronic Equipment & Instruments–2.42% | ||||||||
FLIR Systems, Inc. | 516,900 | 17,016,348 | ||||||
Electronic Manufacturing Services–1.44% | ||||||||
Flex Ltd.(b) | 714,500 | 10,138,755 | ||||||
Health Care Distributors–2.75% | ||||||||
Cardinal Health, Inc. | 282,200 | 19,384,318 | ||||||
Health Care Facilities–2.28% | ||||||||
Brookdale Senior Living Inc.(b) | 1,110,467 | 16,024,039 | ||||||
Health Care Supplies–3.99% | ||||||||
Alere, Inc.(b) | 629,023 | 28,104,748 | ||||||
Hotels, Resorts & Cruise Lines–3.80% | ||||||||
Carnival Corp. | 239,400 | 11,754,540 | ||||||
Norwegian Cruise Line Holdings Ltd.(b) | 385,900 | 14,999,933 | ||||||
26,754,473 |
Shares | Value | |||||||
Human Resource & Employment Services–2.06% | ||||||||
ManpowerGroup Inc. | 189,200 | $ | 14,530,560 | |||||
Industrial Machinery–1.99% | ||||||||
ITT Inc. | 396,900 | 13,978,818 | ||||||
Investment Banking & Brokerage–7.44% | ||||||||
E*TRADE Financial Corp.(b) | 486,300 | 13,694,208 | ||||||
LPL Financial Holdings, Inc. | 632,009 | 19,566,999 | ||||||
TD Ameritrade Holding Corp. | 557,600 | 19,075,496 | ||||||
52,336,703 | ||||||||
Life & Health Insurance–5.15% | ||||||||
Aflac, Inc. | 102,700 | 7,072,949 | ||||||
MetLife, Inc. | 426,800 | 20,042,528 | ||||||
Unum Group | 258,274 | 9,142,900 | ||||||
36,258,377 | ||||||||
Managed Health Care–1.34% | ||||||||
Anthem, Inc. | 77,100 | 9,395,406 | ||||||
Oil & Gas Equipment & Services–1.97% | ||||||||
Weatherford International PLC(b) | 2,870,073 | 13,833,752 | ||||||
Oil & Gas Exploration & Production–1.88% | ||||||||
Apache Corp. | 221,900 | 13,198,612 | ||||||
Pharmaceuticals–1.70% | ||||||||
Novartis AG (Switzerland) | 131,100 | 9,311,069 | ||||||
Pfizer Inc. | 84,700 | 2,685,837 | ||||||
11,996,906 | ||||||||
Property & Casualty Insurance–4.20% | ||||||||
AmTrust Financial Services, Inc. | 1,119,952 | 29,555,533 | ||||||
Real Estate Services–1.83% | ||||||||
Realogy Holdings Corp. | 561,666 | 12,856,535 | ||||||
Regional Banks–2.34% | ||||||||
First Horizon National Corp. | 471,800 | 7,270,438 | ||||||
SVB Financial Group(b) | 75,300 | 9,206,931 | ||||||
16,477,369 | ||||||||
Semiconductor Equipment–0.53% | ||||||||
Lam Research Corp. | 38,200 | 3,700,052 | ||||||
Semiconductors–3.37% | ||||||||
ON Semiconductor Corp.(b) | 2,029,200 | 23,680,764 | ||||||
Steel–1.96% | ||||||||
Allegheny Technologies, Inc. | 1,009,300 | 13,766,852 | ||||||
Systems Software–2.66% | ||||||||
Oracle Corp. | 487,900 | 18,745,118 | ||||||
Total Common Stocks |
| 676,542,168 |
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–3.81% |
| |||||||
Government & Agency Portfolio–Institutional Class, 0.29%(c) | 16,092,212 | $ | 16,092,212 | |||||
Treasury Portfolio–Institutional Class, 0.22%(c) | 10,728,142 | 10,728,142 | ||||||
Total Money Market Funds |
| 26,820,354 | ||||||
TOTAL INVESTMENTS–99.97% |
| 703,362,522 | ||||||
OTHER ASSETS LESS LIABILITIES–0.03% |
| 195,393 | ||||||
NET ASSETS–100.00% | $ | 703,557,915 |
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. The rate shown is the 7-day SEC standardized yield as of October 31, 2016. |
Portfolio Composition
By sector, based on Net Assets
as of October 31, 2016
Financials | 41.9 | % | ||
Information Technology | 15.3 | |||
Consumer Discretionary | 12.4 | |||
Health Care | 12.1 | |||
Industrials | 8.7 | |||
Energy | 3.8 | |||
Materials | 2.0 | |||
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 Value Opportunities Fund
Statement of Assets and Liabilities
October 31, 2016
(Unaudited)
Assets: |
| |||
Investments, at value (Cost $710,376,411) | $ | 676,542,168 | ||
Investments in affiliated money market funds, at value and cost | 26,820,354 | |||
Total investments, at value (Cost $737,196,765) | 703,362,522 | |||
Foreign currencies, at value (Cost $1,266) | 1,360 | |||
Receivable for: | ||||
Investments sold | 3,625,042 | |||
Fund shares sold | 476,990 | |||
Dividends | 418,651 | |||
Investment for trustee deferred compensation and retirement plans | 446,940 | |||
Other assets | 35,657 | |||
Total assets | 708,367,162 | |||
Liabilities: |
| |||
Payable for: | ||||
Investments purchased | 2,816,793 | |||
Fund shares reacquired | 822,589 | |||
Accrued fees to affiliates | 570,403 | |||
Accrued trustees’ and officers’ fees and benefits | 2,374 | |||
Accrued other operating expenses | 82,639 | |||
Trustee deferred compensation and retirement plans | 514,449 | |||
Total liabilities | 4,809,247 | |||
Net assets applicable to shares outstanding | $ | 703,557,915 | ||
Net assets consist of: |
| |||
Shares of beneficial interest | $ | 736,614,960 | ||
Undistributed net investment income (loss) | 525,791 | |||
Undistributed net realized gain | 266,969 | |||
Net unrealized appreciation (depreciation) | (33,849,805 | ) | ||
$ | 703,557,915 |
Net Assets: |
| |||
Class A | $ | 578,646,514 | ||
Class B | $ | 13,166,346 | ||
Class C | $ | 71,689,844 | ||
Class R | $ | 15,298,006 | ||
Class Y | $ | 22,859,015 | ||
Class R5 | $ | 1,898,190 | ||
Shares outstanding, $0.01 par value per share, |
| |||
Class A | 49,725,136 | |||
Class B | 1,150,843 | |||
Class C | 6,402,147 | |||
Class R | 1,321,782 | |||
Class Y | 1,967,588 | |||
Class R5 | 162,761 | |||
Class A: | ||||
Net asset value per share | $ | 11.64 | ||
Maximum offering price per share | ||||
(Net asset value of $11.64 ¸ 94.50%) | $ | 12.32 | ||
Class B: | ||||
Net asset value and offering price per share | $ | 11.44 | ||
Class C: | ||||
Net asset value and offering price per share | $ | 11.20 | ||
Class R: | ||||
Net asset value and offering price per share | $ | 11.57 | ||
Class Y: | ||||
Net asset value and offering price per share | $ | 11.62 | ||
Class R5: | ||||
Net asset value and offering price per share | $ | 11.66 |
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, 2016
(Unaudited)
Investment income: |
| |||
Dividends | $ | 4,669,454 | ||
Dividends from affiliated money market funds | 62,265 | |||
Other income | 52,703 | |||
Total investment income | 4,784,422 | |||
Expenses: | ||||
Advisory fees | 2,439,043 | |||
Administrative services fees | 96,206 | |||
Distribution fees: | ||||
Class A | 746,200 | |||
Class B | 19,090 | |||
Class C | 365,552 | |||
Class R | 38,636 | |||
Transfer agent fees — A, B, C, R and Y | 962,033 | |||
Transfer agent fees — R5 | 1,198 | |||
Trustees’ and officers’ fees and benefits | 17,924 | |||
Registration and filing fees | 46,661 | |||
Reports to shareholders | 60,625 | |||
Professional services fees | 27,382 | |||
Other | 17,578 | |||
Total expenses | 4,838,128 | |||
Less: Fees waived and expense offset arrangement(s) | (33,480 | ) | ||
Net expenses | 4,804,648 | |||
Net investment income (loss) | (20,226 | ) | ||
Realized and unrealized gain (loss) from: | ||||
Net realized gain from investment securities | 7,338,646 | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investment securities | (5,849,907 | ) | ||
Foreign currencies | (8,959 | ) | ||
(5,858,866 | ) | |||
Net realized and unrealized gain | 1,479,780 | |||
Net increase in net assets resulting from operations | $ | 1,459,554 |
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, 2016 and the year ended April 30, 2016
(Unaudited)
October 31, 2016 | April 30, 2016 | |||||||
Operations: |
| |||||||
Net investment income (loss) | $ | (20,226 | ) | $ | 857,483 | |||
Net realized gain | 7,338,646 | 63,907,754 | ||||||
Change in net unrealized appreciation (depreciation) | (5,858,866 | ) | (130,123,587 | ) | ||||
Net increase (decrease) in net assets resulting from operations | 1,459,554 | (65,358,350 | ) | |||||
Distributions to shareholders from net investment income: | ||||||||
Class A | — | (6,374,595 | ) | |||||
Class B | — | (214,433 | ) | |||||
Class C | — | (604,296 | ) | |||||
Class R | — | (149,900 | ) | |||||
Class Y | — | (221,282 | ) | |||||
Class R5 | — | (28,190 | ) | |||||
Total distributions from net investment income | — | (7,592,696 | ) | |||||
Distributions to shareholders from net realized gains: | ||||||||
Class A | — | (81,588,078 | ) | |||||
Class B | — | (2,744,475 | ) | |||||
Class C | — | (10,999,237 | ) | |||||
Class R | — | (2,137,815 | ) | |||||
Class Y | — | (2,566,931 | ) | |||||
Class R5 | — | (309,704 | ) | |||||
Total distributions from net realized gains | — | (100,346,240 | ) | |||||
Share transactions–net: | ||||||||
Class A | (44,844,613 | ) | 8,474,743 | |||||
Class B | (3,931,736 | ) | (6,773,271 | ) | ||||
Class C | (7,767,992 | ) | (1,170,332 | ) | ||||
Class R | (836,669 | ) | (806,697 | ) | ||||
Class Y | 1,775,454 | 2,873,928 | ||||||
Class R5 | (949,081 | ) | 418,686 | |||||
Net increase (decrease) in net assets resulting from share transactions | (56,554,637 | ) | 3,017,057 | |||||
Net increase (decrease) in net assets | (55,095,083 | ) | (170,280,229 | ) | ||||
Net assets: | ||||||||
Beginning of period | 758,652,998 | 928,933,227 | ||||||
End of period (includes undistributed net investment income (loss) of $525,791 and $546,017, respectively) | $ | 703,557,915 | $ | 758,652,998 |
Notes to Financial Statements
October 31, 2016
(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 Y shares are available only to certain investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waived shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class R, Class Y and Class R5
9 Invesco Value Opportunities Fund
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 securities) 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 asked 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 asked prices. For purposes of determining net asset value (“NAV”) 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 securities) 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/asked 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.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
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 (net of withholding tax, if any) 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
10 Invesco Value Opportunities Fund
are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the 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 net investment 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 recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
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. | 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. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts — The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward 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, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward 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
11 Invesco Value Opportunities Fund
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 forward 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% |
For the six months ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.67%.
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 Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”) the Adviser, not the Fund, will 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 Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2017, 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 (the “expense limits”). 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, 2017. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2018, 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, 2016, the Adviser waived advisory fees of $24,791.
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, 2016, 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, 2016, 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, 2016, expenses incurred under these agreements are shown in the Statement of Operations as Distribution fees.
12 Invesco Value Opportunities Fund
Front-end sales commissions and CDSC (collectively, the “sales charges”) are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended October 31, 2016, IDI advised the Fund that IDI retained $22,558 in front-end sales commissions from the sale of Class A shares and $1,454, $709 and $137 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.
For the six months ended October 31, 2016, the Fund incurred $3,731 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. |
During the six months ended October 31, 2016, there was a transfer from Level 1 to Level 2 of $9,311,069, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 667,231,099 | $ | 9,311,069 | $ | — | $ | 676,542,168 | ||||||||
Money Market Funds | 26,820,354 | — | — | 26,820,354 | ||||||||||||
Total Investments | $ | 694,051,453 | $ | 9,311,069 | $ | — | $ | 703,362,522 |
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, 2016, the Fund received credits from this arrangement, which resulted in the reduction of the Fund’s total expenses of $8,689.
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 were eligible to participate in a retirement plan that provided 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.
13 Invesco Value Opportunities 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 eight 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 carryforwards 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, 2016, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
April 30, 2017 | $ | 2,864,143 | $ | — | $ | 2,864,143 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any 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, 2016 was $119,103,045 and $178,238,327, 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 | $ | 57,042,875 | ||
Aggregate unrealized (depreciation) of investment securities | (97,071,147 | ) | ||
Net unrealized appreciation (depreciation) of investment securities | $ | (40,028,272 | ) |
Cost of investments for tax purposes is $743,390,794.
14 Invesco Value Opportunities Fund
NOTE 9—Share Information
Summary of Share Activity | ||||||||||||||||
Six months ended October 31, 2016(a) | Year ended April 30, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: | ||||||||||||||||
Class A | 970,894 | $ | 11,084,951 | 2,354,104 | $ | 29,329,291 | ||||||||||
Class B | 15,933 | 180,115 | 38,022 | 469,743 | ||||||||||||
Class C | 115,102 | 1,272,476 | 337,380 | 4,092,825 | ||||||||||||
Class R | 99,226 | 1,131,270 | 143,054 | 1,807,758 | ||||||||||||
Class Y | 606,987 | 6,981,181 | 471,386 | 5,672,449 | ||||||||||||
Class R5 | 2,915 | 33,274 | 46,312 | 533,045 | ||||||||||||
Issued as reinvestment of dividends: | ||||||||||||||||
Class A | — | — | 7,433,854 | 83,482,158 | ||||||||||||
Class B | — | — | 262,715 | 2,900,373 | ||||||||||||
Class C | — | — | 984,865 | 10,705,485 | ||||||||||||
Class R | — | — | 204,428 | 2,287,553 | ||||||||||||
Class Y | — | — | 226,316 | 2,530,214 | ||||||||||||
Class R5 | — | — | 30,075 | 337,140 | ||||||||||||
Automatic conversion of Class B shares to Class A shares: | ||||||||||||||||
Class A | 242,834 | 2,773,396 | 538,406 | 6,646,266 | ||||||||||||
Class B | (246,946 | ) | (2,773,396 | ) | (547,070 | ) | (6,646,266 | ) | ||||||||
Reacquired: | ||||||||||||||||
Class A | (5,123,566 | ) | (58,702,960 | ) | (8,893,592 | ) | (110,982,972 | ) | ||||||||
Class B | (118,301 | ) | (1,338,455 | ) | (284,478 | ) | (3,497,121 | ) | ||||||||
Class C | (814,400 | ) | (9,040,468 | ) | (1,326,216 | ) | (15,968,642 | ) | ||||||||
Class R | (173,101 | ) | (1,967,939 | ) | (387,712 | ) | (4,902,008 | ) | ||||||||
Class Y | (456,789 | ) | (5,205,727 | ) | (429,510 | ) | (5,328,735 | ) | ||||||||
Class R5 | (85,815 | ) | (982,355 | ) | (35,493 | ) | (451,499 | ) | ||||||||
Net increase (decrease) in share activity | (4,965,027 | ) | $ | (56,554,637 | ) | 1,166,846 | $ | 3,017,057 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 28% of the outstanding shares of the Fund. IDI has an agreement with these entities to sell Fund shares. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
15 Invesco 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(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 to average (loss) net assets | Portfolio turnover(c) | |||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | $ | 11.60 | $ | 0.00 | $ | 0.04 | $ | 0.04 | $ | — | $ | — | $ | — | $ | 11.64 | 0.34 | % | $ | 578,647 | 1.25 | %(d) | 1.26 | %(d) | 0.07 | %(d) | 17 | % | ||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.45 | 0.02 | (1.08 | ) | (1.06 | ) | (0.13 | ) | (1.66 | ) | (1.79 | ) | 11.60 | (6.93 | ) | 622,026 | 1.25 | 1.25 | 0.17 | 38 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 14.24 | 0.13 | 0.33 | 0.46 | (0.25 | ) | — | (0.25 | ) | 14.45 | 3.29 | 754,084 | 1.22 | 1.23 | 0.88 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 11.97 | 0.23 | (e) | 2.18 | 2.41 | (0.14 | ) | — | (0.14 | ) | 14.24 | 20.21 | 809,243 | 1.23 | 1.24 | 1.71 | (e) | 16 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.24 | 0.12 | 1.72 | 1.84 | (0.10 | ) | (0.01 | ) | (0.11 | ) | 11.97 | 18.15 | 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 | 740,384 | 1.40 | 1.40 | 0.92 | 46 | |||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 11.40 | 0.00 | 0.04 | 0.04 | — | — | — | 11.44 | 0.35 | (f) | 13,166 | 1.25 | (d)(f) | 1.26 | (d)(f) | 0.07 | (d)(f) | 17 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.24 | 0.02 | (1.07 | ) | (1.05 | ) | (0.13 | ) | (1.66 | ) | (1.79 | ) | 11.40 | (6.97 | )(f) | 17,105 | 1.25 | (f) | 1.25 | (f) | 0.17 | (f) | 38 | |||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 14.03 | 0.13 | 0.33 | 0.46 | (0.25 | ) | — | (0.25 | ) | 14.24 | 3.34 | (f) | 28,912 | 1.22 | (f) | 1.23 | (f) | 0.88 | (f) | 64 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 11.80 | 0.22 | (e) | 2.15 | 2.37 | (0.14 | ) | — | (0.14 | ) | 14.03 | 20.16 | (f) | 41,084 | 1.23 | (f) | 1.24 | (f) | 1.71 | (e)(f) | 16 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.09 | 0.12 | 1.70 | 1.82 | (0.10 | ) | (0.01 | ) | (0.11 | ) | 11.80 | 18.25 | (f) | 50,968 | 1.26 | (f) | 1.27 | (f) | 1.14 | (f) | 15 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/12 | 10.04 | 0.09 | (0.04 | ) | 0.05 | — | — | — | 10.09 | 0.50 | (f) | 67,547 | 1.38 | (f) | 1.38 | (f) | 0.94 | (f) | 46 | |||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 11.20 | (0.04 | ) | 0.04 | 0.00 | — | — | — | 11.20 | 0.00 | (g) | 71,690 | 1.97 | (d)(g) | 1.98 | (d)(g) | (0.65 | )(d)(g) | 17 | |||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.07 | (0.07 | ) | (1.05 | ) | (1.12 | ) | (0.09 | ) | (1.66 | ) | (1.75 | ) | 11.20 | (7.57 | )(g) | 79,538 | 1.97 | (g) | 1.97 | (g) | (0.55 | )(g) | 38 | ||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 13.87 | 0.02 | 0.33 | 0.35 | (0.15 | ) | — | (0.15 | ) | 14.07 | 2.53 | (g) | 99,994 | 1.95 | (g) | 1.96 | (g) | 0.15 | (g) | 64 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 11.67 | 0.13 | (e) | 2.13 | 2.26 | (0.06 | ) | — | (0.06 | ) | 13.87 | 19.38 | (g) | 107,754 | 1.94 | (g) | 1.95 | (g) | 1.00 | (e)(g) | 16 | |||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 9.99 | 0.05 | 1.67 | 1.72 | (0.03 | ) | (0.01 | ) | (0.04 | ) | 11.67 | 17.26 | (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 | )(g) | 101,785 | 2.11 | (g) | 2.11 | (g) | 0.21 | (g) | 46 | ||||||||||||||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 11.55 | (0.01 | ) | 0.03 | 0.02 | — | — | — | 11.57 | 0.17 | 15,298 | 1.50 | (d) | 1.51 | (d) | (0.18 | )(d) | 17 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.41 | (0.01 | ) | (1.07 | ) | (1.08 | ) | (0.12 | ) | (1.66 | ) | (1.78 | ) | 11.55 | (7.12 | ) | 16,119 | 1.50 | 1.50 | (0.08 | ) | 38 | ||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 14.20 | 0.09 | 0.33 | 0.42 | (0.21 | ) | — | (0.21 | ) | 14.41 | 3.03 | 20,696 | 1.47 | 1.48 | 0.63 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 11.94 | 0.19 | (e) | 2.18 | 2.37 | (0.11 | ) | — | (0.11 | ) | 14.20 | 19.91 | 23,247 | 1.48 | 1.49 | 1.46 | (e) | 16 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.22 | 0.09 | 1.72 | 1.81 | (0.08 | ) | (0.01 | ) | (0.09 | ) | 11.94 | 17.80 | 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 | 19,599 | 1.65 | (i) | 1.65 | (i) | 0.67 | (i) | 46 | |||||||||||||||||||||||||||||||||||||
Class Y | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 11.56 | 0.02 | 0.04 | 0.06 | — | — | — | 11.62 | 0.52 | 22,859 | 1.00 | (d) | 1.01 | (d) | 0.32 | (d) | 17 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.39 | 0.05 | (1.08 | ) | (1.03 | ) | (0.14 | ) | (1.66 | ) | (1.80 | ) | 11.56 | (6.71 | ) | 21,016 | 1.00 | 1.00 | 0.42 | 38 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 14.21 | 0.16 | 0.33 | 0.49 | (0.31 | ) | — | (0.31 | ) | 14.39 | 3.55 | 22,295 | 0.97 | 0.98 | 1.13 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 11.94 | 0.26 | (e) | 2.18 | 2.44 | (0.17 | ) | — | (0.17 | ) | 14.21 | 20.53 | 16,266 | 0.98 | 0.99 | 1.96 | (e) | 16 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.22 | 0.15 | 1.71 | 1.86 | (0.13 | ) | (0.01 | ) | (0.14 | ) | 11.94 | 18.39 | 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 | 11,424 | 1.15 | 1.15 | 1.17 | 46 | |||||||||||||||||||||||||||||||||||||||
Class R5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended 10/31/16 | 11.60 | 0.03 | 0.03 | 0.06 | — | — | — | 11.66 | 0.52 | 1,898 | 0.83 | (d) | 0.84 | (d) | 0.49 | (d) | 17 | |||||||||||||||||||||||||||||||||||||||
Year ended 04/30/16 | 14.42 | 0.08 | (1.09 | ) | (1.01 | ) | (0.15 | ) | (1.66 | ) | (1.81 | ) | 11.60 | (6.56 | ) | 2,850 | 0.84 | 0.84 | 0.58 | 38 | ||||||||||||||||||||||||||||||||||||
Year ended 04/30/15 | 14.25 | 0.19 | 0.33 | 0.52 | (0.35 | ) | — | (0.35 | ) | 14.42 | 3.76 | 2,952 | 0.82 | 0.83 | 1.28 | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 04/30/14 | 11.99 | 0.28 | (e) | 2.18 | 2.46 | (0.20 | ) | — | (0.20 | ) | 14.25 | 20.67 | 2,225 | 0.81 | 0.82 | 2.13 | (e) | 16 | ||||||||||||||||||||||||||||||||||||||
Year ended 04/30/13 | 10.26 | 0.18 | 1.73 | 1.91 | (0.17 | ) | (0.01 | ) | (0.18 | ) | 11.99 | 18.82 | 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 | 4,040 | 0.81 | (i) | 0.81 | (i) | 1.51 | (i) | 46 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended 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. |
(d) | Ratios are annualized and based on average daily net assets (000’s omitted) of $592,094, $15,148, $74,910, $15,328, $21,200 and $2,377 for Class A, Class B, Class C, Class R, Class Y 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 $0.15 and 1.07%, $0.14 and 1.07%, $0.05 and 0.36%, $0.11 and 0.82%, $0.18 and 1.32% and $0.20 and 1.49% for Class A, Class B, Class C, Class R, Class Y and Class R5 shares, respectively. |
(f) | The total return, ratio of expenses to average net assets and ratio of net investment income (loss) to average net assets reflect actual 12b-1 fees of 0.25%, 0.25%, 0.25%, 0.25%, 0.25% and 0.23% for the six months ended October 31, 2016 and the years ended April 30, 2016, 2015, 2014, 2013 and 2012, respectively. |
(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 0.97%, 0.97%, 0.98%, 0.96%, 0.95% and 0.96% for the six months ended October 31, 2016 and the years ended April 30, 2016, 2015, 2014, 2013 and 2012, respectively. |
(h) | Commencement date of May 23, 2011. |
(i) | Annualized. |
16 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, 2016 through October 31, 2016.
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 | ACTUAL | HYPOTHETICAL (5% annual return before expenses) | Annualized | ||||||||||||||||||||
Ending Account Value (10/31/16)1 | Expenses Paid During Period2 | Ending Account Value (10/31/16) | Expenses Paid During Period2 | |||||||||||||||||||||
A | $ | 1,000.00 | $ | 1,003.40 | $ | 6.31 | $ | 1,018.90 | $ | 6.36 | 1.25 | % | ||||||||||||
B | 1,000.00 | 1,003.50 | 6.31 | 1,018.90 | 6.36 | 1.25 | ||||||||||||||||||
C | 1,000.00 | 1,000.00 | 9.93 | 1,015.27 | 10.01 | 1.97 | ||||||||||||||||||
R | 1,000.00 | 1,001.70 | 7.57 | 1,017.64 | 7.63 | 1.50 | ||||||||||||||||||
Y | 1,000.00 | 1,005.20 | 5.05 | 1,020.16 | 5.09 | 1.00 | ||||||||||||||||||
R5 | 1,000.00 | 1,005.20 | 4.19 | 1,021.02 | 4.23 | 0.83 |
1 | The actual ending account value is based on the actual total return of the Fund for the period May 1, 2016 through October 31, 2016, 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 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 agreements. During contract renewal meetings held on June 7-8, 2016, the Board as a whole, and the disinterested or “independent” Trustees, who comprise over 75% of the Board, voting separately, approved the continuance for the Fund of the Master Investment Advisory Agreement with Invesco Advisers, Inc. (Invesco Advisers and the investment advisory agreement) and the Master Intergroup Sub-Advisory Contract for Mutual Funds with Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers and the sub-advisory contracts) for another year, effective July 1, 2016.
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 Board determined that continuation of the Fund’s investment advisory agreement and the sub-advisory contracts is in the best interest of the Fund and its shareholders and that 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, which meet throughout the year to review the performance of funds advised by Invesco Advisers (the Invesco Funds). 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 Board had the benefit of reports from the Sub-Committees and Investments Committee throughout the year in considering approval of the continuance of each Invesco Fund’s investment advisory agreement and sub-advisory contracts for another year.
During the contract renewal process, the Board receives comparative performance and fee data regarding the Invesco Funds prepared by Invesco Advisers and Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board also receives an independent written evaluation from the Senior Officer, an officer of the Invesco Funds who reports directly to the independent Trustees. 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. 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.
The Trustees recognized that the advisory fee rates for the Invesco Funds are, in many cases, the result of years of review and negotiation. 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 is a summary of 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 8, 2016, and does not reflect consideration of factors that became known to the Board after that date.
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. 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. 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, trading operations, internal audit, valuation and legal and compliance.
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 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 Board noted that 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 may 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 Broadridge performance universe and against the Lipper Multi-Cap Value Funds Index. The Board noted that performance of Class A shares of the Fund was in the fifth quintile of its performance universe for the one and three year periods and the fourth quintile for the five year period (the first quintile being the best performing funds and the fifth quintile being the worst performing funds). The Board noted that performance of Class A shares of the Fund was below the performance of the Index for the one, three and five year periods. Invesco Advisers noted portfolio management changes that had been made to the Fund over the last year. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.
18 Invesco Value Opportunities Fund
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 Broadridge 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 its expense group. The Board noted that the term “contractual management fee” for funds in the expense group may include both advisory and certain administrative services fees, but that Broadridge does not provide information on a fund by fund basis as to what is included. The Board noted that Invesco Advisers does not separately charge the Invesco Funds for the administrative services included in the term as defined by Broadridge. The Board also reviewed the methodology used by Broadridge 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 funds advised by Invesco Advisers and its affiliates with investment strategies comparable to those of the Fund, based on asset balances as of December 31, 2015. The Board noted that the Fund’s rate was below the rate of one mutual fund advised by Invesco Advisers using a similar investment process. The Board noted that Invesco Advisers and the Affiliated Sub-Advisers do not manage 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.
D. | Economies of Scale and Breakpoints |
The Board considered the extent to which there are economies of scale in the provision of advisory services to the Fund. The Board also considered whether the Fund benefits from economies of scale through contractual breakpoints in the Fund’s advisory fee schedule. The Board also noted that the Fund shares directly in economies of scale through lower fees charged by third party service providers based on the combined size of the Invesco Funds and other clients advised by Invesco Advisers.
E. | Profitability and Financial Resources |
The Board reviewed information from Invesco Advisers concerning the costs of the advisory and other services that Invesco Advisers and its affiliates provide to the Fund and the Invesco
Funds and the profitability of Invesco Advisers and its affiliates in providing these services. The Board received information from Invesco Advisers and a report from an independent consultant engaged by the Senior Officer about the methodology used to prepare the profitability information. The Board noted that Invesco Advisers continues to operate at a net profit from services Invesco Advisers and its affiliates 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. 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 providing transfer agency and distribution services to the Fund. The Board considered comparative information regarding fees charged for these services, including information provided by Broadridge 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; and that the services are required for the operation of the Fund.
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 that it receives 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 with respect to certain investments in the affiliated money market 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 amount of advisory fees received by Invesco Advisors from the Fund’s investment of cash collateral from any securities lending arrangements in the affiliated money market funds is fair and reasonable.
The Board also considered that the Fund may use an affiliated broker to execute certain trades for the Fund to, among other things, control information leakage, and was advised that such trades would be executed in compliance with rules under the Investment Company Act of 1940, as amended, and consistent with best execution obligations.
19 Invesco Value Opportunities Fund
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Invesco mailing information
Send general correspondence to Invesco Investment Services, Inc., P.O. Box 219078, Kansas City, MO 64121-9078.
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. |
PricewaterhouseCoopers LLP informed the Trust that it has identified an issue related to its independence under Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the Loan Rule). The Loan Rule prohibits accounting firms, such as PricewaterhouseCoopers LLP, from being deemed independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust is required under various securities laws to have its financial statements audited by an independent accounting firm.
The Loan Rule specifically provides that an accounting firm would not be independent if it receives a loan from a lender that is a record or beneficial owner of more than ten percent of an audit client’s equity securities. For purposes of the Loan Rule, audit clients include the Funds as well as all registered investment companies advised by the Adviser and its affiliates, including other subsidiaries of the Adviser’s parent company, Invesco Ltd. (collectively, the Invesco Fund Complex). PricewaterhouseCoopers LLP informed the Trust it has relationships with lenders who hold, as record owner, more than ten percent of the shares of certain funds within the Invesco Fund Complex. These relationships call into question PricewaterhouseCoopers LLP’s independence under the Loan Rule with respect to those funds, as well as all other funds in the Invesco Fund Complex.
On June 20, 2016, the SEC Staff issued a “no-action” letter to another mutual fund complex (see Fidelity Management & Research Company et al., No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services performed by an audit firm that was not in compliance with the Loan Rule in certain specified circumstances. In October 2016, in connection with its annual communication, PricewaterhouseCoopers LLP communicated, as contemplated by the no-action letter, that it believes that it remains objective and impartial and that a reasonable investor possessing all the facts would conclude that PricewaterhouseCoopers LLP is able to exhibit the requisite objectivity and impartiality to report on the Funds’ financial statements as the independent registered public accounting firm. PricewaterhouseCoopers LLP also represented that it has complied with PCAOB Rule 3526(b)(1) and (2), which are conditions to the Funds relying on the no action letter, and affirmed that it is an independent accountant within the meaning of PCAOB Rule 3520. Therefore, the Adviser, the Funds and PricewaterhouseCoopers LLP concluded that PricewaterhouseCoopers LLP could continue to serve as the Funds’ independent registered public accounting firm. The Invesco Fund Complex relied upon the no-action letter in reaching this conclusion.
If in the future the independence of PricewaterhouseCoopers LLP is called into question under the Loan Rule by circumstances that are not addressed in the SEC’s no-action letter, the Fund will need to take other action in order for the Fund’s filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions could result in additional costs, impair the ability of the Funds to issue new shares or have other material adverse effects on the Funds. In addition, the SEC has indicated that the no-action relief will expire 18 months from its issuance after which the Invesco Funds will no longer be able rely on the letter unless its term is extended or made permanent by the SEC Staff.
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 21, 2016 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 21, 2016, 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/ Sheri Morris | |
Sheri Morris | ||
Principal Executive Officer | ||
Date: | January 6, 2017 |
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/ Sheri Morris | |
Sheri Morris | ||
Principal Executive Officer | ||
Date: | January 6, 2017 | |
By: | /s/ Kelli Gallegos | |
Kelli Gallegos | ||
Principal Financial Officer | ||
Date: | January 6, 2017 |
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. |