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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                 811-01424

AIM Equity Funds (Invesco Equity 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:        10/31            

Date of reporting period:    10/31/16        

Item 1. Report to Stockholders.

 

 

    LOGO  

Annual Report to Shareholders

 

   

October 31, 2016

 

 

 

 

 

Invesco Charter Fund

 

Nasdaq:

A: CHTRX  ∎  B: BCHTX  ∎  C: CHTCX  ∎  R: CHRRX  ∎  S: CHRSX  ∎  Y: CHTYX

R5: CHTVX  ∎   R6: CHFTX

 

LOGO

 

 

Letters to Shareholders

 

 

LOGO

Philip Taylor

     

Dear Shareholders:

This annual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. Inside is a discussion of how your Fund was managed and the factors that affected its performance during the reporting period.

    In December 2015, the US Federal Reserve raised short-term interest rates for the first time since 2006, signaling its belief that the economy was likely to continue strengthening. Indeed, throughout the reporting period, US economic data were generally positive and the economy expanded at a moderate rate – but there were some bumps along the road. Job growth in May 2016 was very weak, but it was followed by strong increases in nonfarm payrolls in June and July. Increased concerns about global economic weakness caused US stock market indexes to sink at the start of calendar year 2016, but they eventually

recovered; they sank again following the UK’s decision to leave the European Union, but then quickly recovered and reached record highs later in the summer. Strong demand for income-producing investments, particularly those perceived to be lower risk, benefited bonds as well as dividend-paying stocks for much of the reporting period. While economic news in the US was generally positive, news overseas was less upbeat. The European Central Bank, and central banks in China and Japan – as well as other countries – maintained extraordinarily accommodative monetary policies in response to economic weakness. As the fiscal year drew to a close, uncertainty about the outcome of the US presidential election resulted in increased market volatility; the surprise outcome after the close of the reporting period suggested that market volatility may continue for some time to come.

    Short-term market volatility can prompt some investors to abandon their investment plans – and can cause others to settle for average results. The investment professionals at Invesco, in contrast, 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.

    You, too, can invest with high conviction by maintaining a long-term investment perspective and by working with your financial adviser on a regular basis. During periods of short-term market volatility or uncertainty, your financial adviser can keep you focused on your long-term investment goals – a new home, a child’s college education or a secure retirement. He or she also can share research about the economy, the markets and individual investment options.

Visit our website for more information on your investments

Our website, invesco.com/us, offers a wide range of market insights and investment perspectives. On the website, you’ll find detailed information about our funds, including performance, holdings and portfolio manager commentaries. You can access information about your account by completing a simple, secure online registration. Click on the “Need to register” link in the “Account Access” box on our homepage to get started.

    In addition to the resources accessible on our website and through our mobile app, you can obtain timely updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. 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.

Have questions?

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,

 

 

LOGO

Philip Taylor

Senior Managing Director, Invesco Ltd.

 

2                         Invesco Charter Fund

LOGO

Bruce Crockett

     

Dear Fellow Shareholders:

Among the many important lessons I’ve learned in more than 40 years in a variety of business endeavors is the value of a trusted advocate.

    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, including but 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.

∎ 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.

    I trust the measures outlined above provide assurance that you have a worthy advocate when it comes to choosing the Invesco Funds.

    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,

 

 

LOGO

Bruce L. Crockett

Independent Chair

Invesco Funds Board of Trustees

 

3                         Invesco Charter Fund

 

Management’s Discussion of Fund Performance

 

Performance summary

For the fiscal year ended October 31, 2016, Class A shares of Invesco Charter Fund (the Fund), at net asset value (NAV), underperformed the Russell 1000 Index, the Fund’s style-specific benchmark.

    Your Fund’s long-term performance appears later in this report.

 

  

    

  

Fund vs. Indexes

Total returns, 10/31/15 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

      3.54 % 

Class B Shares

      2.74   

Class C Shares

      2.73   

Class R Shares

      3.24   

Class S Shares

      3.63   

Class Y Shares

      3.76   

Class R5 Shares

      3.92   

Class R6 Shares

      3.99   

S&P 500 Indexq (Broad Market Index)

      4.51   

Russell 1000 Indexq (Style-Specific Index)

      4.26   

Lipper Large Cap Core Funds Index∎ (Peer Group Index)

      4.18   
Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc.   

 

 

 

Market conditions and your Fund

During the fiscal year, the US economy continued to expand. The initial estimate of US gross domestic product (GDP) showed the US economy grew by 2.9% in the third quarter, beating consensus estimates.1 However, annualized GDP is expected to be lower. Employment data were mixed, though the unemployment rate had a surprise uptick from 4.9% in August to 5.0% in September before ending the fiscal year at 4.9%.2 Oil prices traded in a range from the high $20s to the low $50s during the reporting period.3

    The US Federal Reserve (the Fed) raised interest rates in December 2015 – its first increase since 2006 – but that was its only increase during the reporting

period. Major US stock market indexes posted gains for the reporting period, but they were fairly volatile. Stocks began calendar year 2016 on a negative note, driven by investor concerns about economic weakness in China, falling oil prices and uncertainty over Fed policy, including rumors of possible negative interest rates in the US. Markets recovered in late February and posted gains until June when UK voters opted to leave the European Union, sending markets sharply lower once again. Markets again recovered, and major US equity indexes hit record highs during the summer.4 In this environment, investors generally favored the perceived safety of government bonds and more defensive, dividend-paying equities often found in the telecommunication services, utilities and consumer staples sectors.

 

 

    During the fiscal year, stock selection in the information technology (IT) sector was the largest contributor to the Fund’s performance relative to its style-specific benchmark. Other contributors to the Fund’s performance were stock selection in the industrials sector as well as stock selection and an overweight allocation to the financials sector. The largest detractors for the reporting period included stock selection in the health care, consumer discretionary and telecommunication services sectors.

    The largest contributor to Fund performance was Taiwan Semiconductor Manufacturing Company. During the fiscal year, the company, a parts supplier to the iPhone 7, benefited from a broader rally in technology companies and record profits as demand for new iPhones fueled orders for its processor chips. Applied Materials, a semiconductor equipment and materials manufacturer, also benefited from strong earnings and increased demand. We sold our position in Applied Materials during the reporting period. In addition, QUALCOMM, a semiconductor and telecommunications equipment company, advanced on better-than-expected handset prices, chip sales and improving royalty trends in China, as well as positive sentiment following its acquisition of NXP Semiconductors (not a Fund holding).

    The largest detractor from Fund performance for the fiscal year was Allergan, a specialty pharmaceutical company, which saw its stock price weaken following cancellation of its planned merger with Pfizer (not a Fund holding). Allergan reported earnings below consensus and greater uncertainty around its sustainable organic growth rates. Shire, a biotechnology company, reported lower sales and higher-than-expected general

 
Portfolio Composition

By sector

  

% of total net assets  

Information Technology

   22.2%

Financials

   16.9    

Health Care

   13.7    

Consumer Discretionary

   11.3    

Industrials

   10.2    

Consumer Staples

   6.3  

Energy

   3.1  

Utilities

   2.1  

Telecommunication Services

   0.9  
Money Market Funds Plus Other Assets Less Liabilities   13.3    
Top 10 Equity Holdings*         
  % of total net assets     
  1.   Taiwan Semiconductor Manufacturing Co. Ltd.      3.5%   
  2.   American Express Co.      3.2       
  3.   Analog Devices, Inc.      3.1       
  4.   QUALCOMM, Inc.      3.1       
  5.   Thermo Fisher Scientific, Inc.      2.7       
  6.   Comcast Corp.-Class A      2.4       
  7.   International Business Machines Corp.      2.4       
  8.   AIA Group Ltd.      2.3       
  9.   Progressive Corp. (The)      2.3       

10.

   Cognizant Technology Solutions Corp.-Class A      2.0       

Total Net Assets

      $3.9 billion   

Total Number of Holdings*

      53   

The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.

*Excluding money market fund holdings.

Data presented here are as of October 31, 2016.

 

 

4                         Invesco Charter Fund

and administrative costs. Also detracting for the reporting period was Cognizant Technology Solutions, an IT, consulting and business process outsourcing services provider, which suffered from a slowdown in discretionary spending in several key segments, including financial services, health care and insurance, as well as uncertainty surrounding an internal investigation concerning improper payments made in India.

    Finally, the Fund’s conservative positioning and allocation to cash hampered performance during the fiscal year. We have been quite active in deploying cash during periods of market volatility and remain focused on putting these assets back to work.

    During the reporting period, our largest overweight position relative to the Russell 1000 Index was in the financials sector. The Fund also had slight overweight positions in the health care and IT sectors. Our underweight positions were in the consumer discretionary, consumer staples, energy, industrials, utilities and telecommunication services sectors. The Fund did not have allocations to the materials or real estate sectors.

    Following our mandate as a conservative cornerstone for our clients’ portfolios, we continue to seek out attractive risk-return growth-value anomalies with a long-term perspective.

    We thank you for your continued investment in Invesco Charter Fund.

1 Source: Bureau of Economic Analysis

2 Source: Bureau of Labor Statistics

3 Source: Thompson-Reuters

4 Source: Reuters

The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

See important Fund and, if applicable, index disclosures later in this report.

 

LOGO    

Ronald Sloan

Chartered Financial Analyst, Portfolio Manager and Chief Investment Officer of Invesco’s global core equity team, is lead

manager of Invesco Charter Fund. He joined Invesco in 1998. Mr. Sloan earned a BS in business administration and an MBA from the University of Missouri.

 

LOGO    

Brian Nelson

Chartered Financial Analyst, Portfolio Manager, is manager of Invesco Charter Fund. He joined Invesco in 2004. Mr.

Nelson earned a BA from the University of California, Santa Barbara.
 

 

5                         Invesco Charter Fund

 

Your Fund’s Long-Term Performance

Results of a $10,000 Investment – Oldest Share Class(es)

Fund and index data from 10/31/06

 

 

LOGO

 

1 Source: FactSet Research Systems Inc.
2 Source: Lipper Inc.

 

Past performance cannot guarantee comparable future results.

    The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including

 

management fees. Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; perfor-

mance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.

 

 

 

continued from page 8

 

∎   Small- and mid-capitalization companies risks. Small- and mid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the over all securities market.

 

 

About indexes used in this report

∎   The S&P 500® Index is an unmanaged index considered representative of the US stock market.
∎   The Russell 1000® Index is an unmanaged index considered representative of large-cap stocks. The Russell1000 Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
∎   The Lipper Large Cap Core Funds Index is an unmanaged index considered representative of large-cap core 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.

 

 

Other information

∎   The returns shown in management’s discussion of Fund performance are based on net asset values (NAVs) calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets
  of the Fund at period end for financial reporting purposes, and as such, the NAVs for shareholder transactions and the returns based on those NAVs may differ from the NAVs and returns reported in the Financial Highlights.
∎   Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s.
 

 

 

6                         Invesco Charter Fund

 Average Annual Total Returns

  

 As of 10/31/16, including maximum applicable

 sales charges

  

  

 Class A Shares

         

 Inception (11/26/68)

      10.42 % 

 10 Years

      5.22   

   5 Years

      7.77   

   1 Year

      -2.14   

 Class B Shares

         

 Inception (6/26/95)

      6.83 % 

 10 Years

      5.19   

   5 Years

      7.88   

   1 Year

      -1.75   

 Class C Shares

         

 Inception (8/4/97)

      4.28 % 

 10 Years

      5.03   

   5 Years

      8.17   

   1 Year

      1.84   

 Class R Shares

         

 Inception (6/3/02)

      6.16 % 

 10 Years

      5.55   

   5 Years

      8.72   

   1 Year

      3.24   

 Class S Shares

         

 10 Years

      5.89 % 

   5 Years

      9.10   

   1 Year

      3.63   

 Class Y Shares

         

 10 Years

      6.03 % 

   5 Years

      9.26   

   1 Year

      3.76   

 Class R5 Shares

         

 Inception (7/30/91)

      8.03 % 

 10 Years

      6.24   

   5 Years

      9.38   

   1 Year

      3.92   

 Class R6 Shares

         

 10 Years

      6.00 % 

   5 Years

      9.37   

   1 Year

      3.99   

Class S shares incepted on September 25, 2009. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares.

    Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A 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.

 Average Annual Total Returns

  

 As of 9/30/16, the most recent calendar quarter

 end, including maximum applicable

 sales charges

  

  

  

 Class A Shares

         

 Inception (11/26/68)

      10.49 % 

 10 Years

      5.71   

   5 Years

      10.28   

   1 Year

      5.82   

 Class B Shares

         

 Inception (6/26/95)

      6.97 % 

 10 Years

      5.68   

   5 Years

      10.43   

   1 Year

      6.28   

 Class C Shares

         

 Inception (8/4/97)

      4.43 % 

 10 Years

      5.52   

   5 Years

      10.71   

   1 Year

      10.19   

 Class R Shares

         

 Inception (6/3/02)

      6.38 % 

 10 Years

      6.05   

   5 Years

      11.27   

   1 Year

      11.74   

 Class S Shares

         

 10 Years

      6.39 % 

   5 Years

      11.65   

   1 Year

      12.13   

 Class Y Shares

         

 10 Years

      6.53 % 

   5 Years

      11.83   

   1 Year

      12.29   

 Class R5 Shares

         

 Inception (7/30/91)

      8.15 % 

 10 Years

      6.73   

   5 Years

      11.93   

   1 Year

      12.35   

 Class R6 Shares

         

 10 Years

      6.50 % 

   5 Years

      11.92   

   1 Year

      12.43   

The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.

    The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class S, Class Y, Class R5 and Class R6 shares was 1.08%, 1.83%, 1.83%, 1.33%, 0.98%, 0.83%, 0.74% and 0.65%, 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 S, Class Y, Class R5 and Class R6 shares was 1.09%, 1.84%, 1.84%, 1.34%, 0.99%, 0.84%, 0.75% and 0.66%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

    Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, Class S, 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.
 

 

 

7                         Invesco Charter Fund

 

Invesco Charter Fund’s investment objective is long-term growth of capital.

∎   Unless otherwise stated, information presented in this report is as of October 31, 2016, and is based on total net assets.
∎   Unless otherwise noted, all data provided by Invesco.
∎   To access your Fund’s reports/prospectus, visit invesco.com/fundreports.

 

 

About share classes

∎   Class B shares may not be purchased for new or additional investments. Please see the prospectus for more information.
∎   Class R shares are generally available only to employee benefit plans. Please see the prospectus for more information.
∎   Class S shares and Class Y shares are available only to certain investors. Please see the prospectus for more information.
∎   Class R5 shares and Class R6 shares are primarily intended for retirement plans that meet certain standards and for institutional investors. Please see the prospectus for more information.

 

 

Principal risks of investing in the Fund

∎   Cash/cash equivalents risk. In rising markets, holding cash or cash equivalents will negatively affect the Fund’s performance relative to its benchmark.
∎   Debt securities risk. The prices of debt securities held by the Fund will be affected by changes in interest rates, the creditworthiness of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. Falling interest rates will cause the Fund to reinvest the proceeds of debt securities that have been repaid by the issuer at lower interest rates. Falling interest rates may also reduce the Fund’s distributable income because interest payments on floating rate debt instruments held by the Fund will decline. The Fund could lose money on investments in debt securities if the issuer or borrower fails to meet its obligations to make interest payments and/or to repay principal in a timely manner. Changes in an issuer’s financial strength, the market’s perception of such strength or in the credit rating of the issuer or the security may affect the
 

value of debt securities. The Adviser’s credit analysis may fail to anticipate such changes, which could result in buying a debt security at an inopportune time or failing to sell a debt security in advance of a price decline or other credit event.

∎   Derivatives risk. The value of a derivative instrument depends largely on (and is derived from) the value of an underlying security, currency, commodity, interest rate, index or other asset (each referred to as an underlying asset). In addition to risks relating to the underlying assets, the use of derivatives may include other, possibly greater, risks, including counterparty, leverage and liquidity risks. Counterparty risk is the risk that the counterparty to the derivative contract will default on its obligation to pay the Fund the amount owed or otherwise perform under the derivative contract. Derivatives create leverage risk because they do not require payment up front equal to the economic exposure created by owning the derivative. As a result, an adverse change in the value of the underlying asset could result in the Fund sustaining a loss that is substantially greater than the amount invested in the derivative, which may make the Fund’s returns more volatile and increase the risk of loss. Derivative instruments may also be less liquid than more traditional investments and the Fund may be unable to sell or close out its derivative positions at a desirable time or price. This risk may be more acute under adverse market conditions, during which the Fund may be most in need of liquidating its derivative positions. Derivatives may also be harder to value, less tax efficient and subject to changing government regulation that could impact the Fund’s ability to use certain derivatives or their cost. Also, derivatives used for hedging or to gain or limit exposure to a particular market segment may not provide the expected benefits, particularly during adverse market conditions.
∎   Foreign securities risk. The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
∎   Management risk. The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
∎   Market risk. The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
 

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       
           continued on page 6

 

8                         Invesco Charter Fund

Schedule of Investments(a)

October 31, 2016

 

     Shares      Value  

Common Stocks & Other Equity Interests–86.72%

  

Advertising–1.54%   

Publicis Groupe S.A. (France)

     871,895       $ 59,820,171   
Aerospace & Defense–2.33%   

General Dynamics Corp.

     281,346         42,410,096   

United Technologies Corp.

     471,752         48,213,054   
               90,623,150   
Air Freight & Logistics–1.52%   

United Parcel Service, Inc.–Class B

     549,306         59,193,215   
Apparel, Accessories & Luxury Goods–3.63%   

Hanesbrands, Inc.

     1,577,811         40,549,743   

LVMH Moet Hennessy Louis Vuitton S.E. (France)

     253,508         46,070,646   

PVH Corp.

     512,982         54,878,814   
               141,499,203   
Asset Management & Custody Banks–1.31%   

Northern Trust Corp.

     707,102         51,208,327   
Auto Parts & Equipment–0.13%   

Adient PLC(b)

     108,986         4,959,967   
Biotechnology–6.73%   

AbbVie Inc.

     1,034,082         57,681,094   

Biogen Inc.(b)

     231,829         64,953,849   

Celgene Corp.(b)

     755,377         77,184,422   

Shire PLC–ADR

     370,209         62,432,046   
               262,251,411   
Building Products–1.13%   

Johnson Controls International PLC

     1,089,863         43,943,276   
Cable & Satellite–2.40%   

Comcast Corp.–Class A

     1,510,743         93,394,132   
Communications Equipment–1.19%   

F5 Networks, Inc.(b)

     336,334         46,484,722   
Consumer Finance–3.18%   

American Express Co.

     1,866,450         123,969,609   
Distillers & Vintners–1.37%   

Diageo PLC (United Kingdom)

     2,002,419         53,303,143   
Diversified Banks–2.86%   

Svenska Handelsbanken AB–Class A (Sweden)

     4,468,230         60,868,438   

U.S. Bancorp

     1,126,268         50,411,755   
               111,280,193   
Drug Retail–1.87%   

Walgreens Boots Alliance, Inc.

     882,397         73,000,704   
     Shares      Value  
Electric Utilities–1.05%   

Duke Energy Corp.

     508,588       $ 40,697,212   
Electronic Manufacturing Services–1.66%   

TE Connectivity Ltd. (Switzerland)

     1,025,250         64,457,467   
Health Care Facilities–1.50%   

HCA Holdings, Inc.(b)

     762,761         58,374,099   
Home Improvement Retail–1.33%   

Home Depot, Inc. (The)

     423,729         51,699,175   
Household Appliances–0.89%   

Whirlpool Corp.

     230,475         34,529,764   
Household Products–1.86%   

Procter & Gamble Co. (The)

     835,707         72,539,368   
Housewares & Specialties–1.41%   

Newell Brands, Inc.

     1,142,628         54,868,997   
Hypermarkets & Super Centers–1.22%   

Wal-Mart Stores, Inc.

     676,686         47,381,554   
Industrial Conglomerates–1.98%   

General Electric Co.

     2,651,488         77,158,301   
Industrial Machinery–3.23%   

Illinois Tool Works Inc.

     520,377         59,099,216   

Stanley Black & Decker Inc.

     586,302         66,744,620   
               125,843,836   
Insurance Brokers–1.72%   

Marsh & McLennan Cos., Inc.

     1,056,599         66,977,811   
Internet Software & Services–1.86%   

Alphabet Inc.–Class C(b)

     92,348         72,450,700   
IT Consulting & Other Services–4.40%   

Cognizant Technology Solutions Corp.–Class A(b)

     1,533,104         78,724,890   

International Business Machines Corp.

     602,687         92,626,965   
               171,351,855   
Life & Health Insurance–2.33%   

AIA Group Ltd. (Hong Kong)

     14,373,200         90,719,190   
Life Sciences Tools & Services–2.69%   

Thermo Fisher Scientific, Inc.

     712,633         104,778,430   
Multi-Sector Holdings–1.83%   

Berkshire Hathaway Inc.–Class A(b)

     331         71,396,700   
Multi-Utilities–1.03%   

WEC Energy Group, Inc.

     669,787         39,999,680   
Oil & Gas Equipment & Services–0.71%   

Halliburton Co.

     599,582         27,580,772   
 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

9                         Invesco Charter Fund

     Shares      Value  
Oil & Gas Exploration & Production–2.33%   

Cabot Oil & Gas Corp.

     1,766,537       $ 36,885,293   

Concho Resources Inc.(b)

     424,341         53,865,846   
               90,751,139   
Pharmaceuticals–2.79%   

Allergan PLC(b)

     301,267         62,946,727   

Merck & Co., Inc.

     781,121         45,867,425   
               108,814,152   
Property & Casualty Insurance–2.27%   

Progressive Corp. (The)

     2,800,030         88,228,945   
Regional Banks–1.43%   

First Republic Bank

     748,297         55,695,746   
Semiconductors–9.70%   

Analog Devices, Inc.

     1,897,552         121,633,083   

QUALCOMM, Inc.

     1,732,447         119,053,758   

Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan)

     22,909,019         136,842,858   
               377,529,699   
Systems Software–3.42%   

Microsoft Corp.

     1,104,410         66,176,247   

Oracle Corp.

     1,746,398         67,096,611   
               133,272,858   
     Shares      Value  
Wireless Telecommunication Services–0.89%   

Vodafone Group PLC–ADR (United Kingdom)

     1,248,837       $ 34,767,622   

Total Common Stocks & Other Equity Interests
(Cost $2,706,944,674)

   

      3,376,796,295   

Money Market Funds–13.21%

  

Government & Agency Portfolio–
Institutional Class, 0.29%(c)

     308,557,443         308,557,443   

Treasury Portfolio–Institutional Class, 0.22%(c)

     205,704,962         205,704,962   

Total Money Market Funds
(Cost $514,262,405)

   

      514,262,405   

TOTAL INVESTMENTS–99.93%
(Cost $3,221,207,079)

   

      3,891,058,700   

OTHER ASSETS LESS LIABILITIES–0.07%

  

      2,887,739   

NET ASSETS–100.00%

  

    $ 3,893,946,439   
 

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.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

10                         Invesco Charter Fund

Statement of Assets and Liabilities

October 31, 2016

 

Assets:

  

Investments, at value (Cost $2,706,944,674)

   $ 3,376,796,295   

Investments in affiliated money market funds, at value and cost

     514,262,405   

Total investments, at value (Cost $3,221,207,079)

     3,891,058,700   

Foreign currencies, at value (Cost $8,032,246)

     8,033,465   

Receivable for:

  

Fund shares sold

     1,207,689   

Dividends

     3,742,764   

Investment for trustee deferred compensation and retirement plans

     1,558,718   

Other assets

     76,505   

Total assets

     3,905,677,841   

Liabilities:

  

Payable for:

  

Fund shares reacquired

     7,006,697   

Accrued fees to affiliates

     2,571,996   

Accrued trustees’ and officers’ fees and benefits

     5,905   

Accrued other operating expenses

     357,341   

Trustee deferred compensation and retirement plans

     1,789,463   

Total liabilities

     11,731,402   

Net assets applicable to shares outstanding

   $ 3,893,946,439   

Net assets consist of:

  

Shares of beneficial interest

   $ 2,844,254,328   

Undistributed net investment income

     30,952,356   

Undistributed net realized gain

     348,962,066   

Net unrealized appreciation

     669,777,689   
    $ 3,893,946,439   

Net Assets:

  

Class A

   $ 3,467,887,082   

Class B

   $ 27,730,788   

Class C

   $ 200,499,130   

Class R

   $ 35,654,315   

Class S

   $ 18,363,522   

Class Y

   $ 102,182,170   

Class R5

   $ 38,681,596   

Class R6

   $ 2,947,836   

Shares outstanding, $0.001 par value per share,
with an unlimited number of shares authorized:

   

Class A

     189,413,790   

Class B

     1,606,331   

Class C

     11,575,173   

Class R

     1,966,343   

Class S

     1,002,271   

Class Y

     5,555,334   

Class R5

     2,030,934   

Class R6

     154,756   

Class A:

  

Net asset value per share

   $ 18.31   

Maximum offering price per share

  

(Net asset value of $18.31 ¸ 94.50%)

   $ 19.38   

Class B:

  

Net asset value and offering price per share

   $ 17.26   

Class C:

  

Net asset value and offering price per share

   $ 17.32   

Class R:

  

Net asset value and offering price per share

   $ 18.13   

Class S:

  

Net asset value and offering price per share

   $ 18.32   

Class Y:

  

Net asset value and offering price per share

   $ 18.39   

Class R5:

  

Net asset value and offering price per share

   $ 19.05   

Class R6:

  

Net asset value and offering price per share

   $ 19.05   
 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

11                         Invesco Charter Fund

Statement of Operations

For the year ended October 31, 2016

 

Investment income:

  

Dividends (net of foreign withholding taxes of $2,270,116)

    $ 81,041,097   

Dividends from affiliated money market funds

      1,142,611   

Total investment income

      82,183,708   

Expenses:

   

Advisory fees

      25,691,498   

Administrative services fees

      609,349   

Custodian fees

      546,852   

Distribution fees:

   

Class A

      8,971,006   

Class B

      370,809   

Class C

      2,157,926   

Class R

      195,061   

Class S

      27,463   

Transfer agent fees — A, B, C, R, S and Y

      7,687,843   

Transfer agent fees — R5

      57,584   

Transfer agent fees — R6

      3,685   

Trustees’ and officers’ fees and benefits

      171,152   

Registration and filing fees

      169,936   

Reports to shareholders

      587,656   

Professional services fees

      110,553   

Other

      167,506   

Total expenses

      47,525,879   

Less: Fees waived and expense offset arrangement(s)

      (527,614 ) 

Net expenses

      46,998,265   

Net investment income

      35,185,443   

Realized and unrealized gain (loss) from:

   

Net realized gain (loss) from:

   

Investment securities

      380,773,326   

Foreign currencies

      (359,064 ) 
       380,414,262   

Change in net unrealized appreciation (depreciation) of:

   

Investment securities

      (293,140,181 ) 

Foreign currencies

      (12,658 ) 
       (293,152,839 ) 

Net realized and unrealized gain

      87,261,423   

Net increase in net assets resulting from operations

    $ 122,446,866   

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

12                         Invesco Charter Fund

Statement of Changes in Net Assets

For the years ended October 31, 2016 and 2015

 

     2016      2015  

Operations:

     

Net investment income

   $ 35,185,443       $ 47,828,255   

Net realized gain

     380,414,262         519,136,354   

Change in net unrealized appreciation (depreciation)

     (293,152,839 )       (670,928,336 ) 

Net increase (decrease) in net assets resulting from operations

     122,446,866         (103,963,727 ) 

Distributions to shareholders from net investment income:

     

Class A

     (40,042,458 )       (24,044,646 ) 

Class B

     (101,578 )       —   

Class C

     (516,916 )       —   

Class R

     (336,604 )       (168,320 ) 

Class S

     (222,679 )       (146,967 ) 

Class Y

     (2,354,903 )       (3,667,332 ) 

Class R5

     (1,147,498 )       (3,407,046 ) 

Class R6

     (1,886,883 )       (1,272,961 ) 

Total distributions from net investment income

     (46,609,519 )       (32,707,272 ) 

Distributions to shareholders from net realized gains:

     

Class A

     (428,206,831 )       (443,314,681 ) 

Class B

     (5,446,571 )       (7,784,121 ) 

Class C

     (27,716,876 )       (28,876,067 ) 

Class R

     (4,925,504 )       (6,514,427 ) 

Class S

     (2,152,527 )       (2,274,423 ) 

Class Y

     (19,900,365 )       (45,748,273 ) 

Class R5

     (8,997,994 )       (38,554,035 ) 

Class R6

     (13,770,029 )       (12,930,631 ) 

Total distributions from net realized gains

     (511,116,697 )       (585,996,658 ) 

Share transactions–net:

     

Class A

     (49,993,523 )       (85,338,679 ) 

Class B

     (15,153,462 )       (21,106,952 ) 

Class C

     (16,283,874 )       (5,347,090 ) 

Class R

     (4,284,253 )       (16,079,719 ) 

Class S

     822,416         (885,785 ) 

Class Y

     (63,518,983 )       (247,402,243 ) 

Class R5

     (64,238,142 )       (266,338,960 ) 

Class R6

     (98,538,831 )       6,980,979   

Net increase (decrease) in net assets resulting from share transactions

     (311,188,652 )       (635,518,449 ) 

Net increase (decrease) in net assets

     (746,468,002 )       (1,358,186,106 ) 

Net assets:

     

Beginning of year

     4,640,414,441         5,998,600,547   

End of year (includes undistributed net investment income of $30,952,356 and $44,677,294, respectively)

   $ 3,893,946,439       $ 4,640,414,441   

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

13                         Invesco Charter Fund

Notes to Financial Statements

October 31, 2016

NOTE 1—Significant Accounting Policies

Invesco Charter Fund (the “Fund”) is a series portfolio of AIM Equity Funds (Invesco Equity 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 three 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 eight different classes of shares: Class A, Class B, Class C, Class R, Class S, 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 S, 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.

 

14                         Invesco Charter Fund

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.

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

 

15                         Invesco Charter Fund

  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.

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 $4.05 billion

     0 .615%   

Next $3.9 billion

     0 .57%   

Next $1.8 billion

     0 .545%   

Over $10 billion

     0 .52%         

For the year ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.62%.

Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco 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 S, Class Y, Class R5 and Class R6 shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.90%, 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 year ended October 31, 2016, the Adviser waived advisory fees of $486,796.

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 year 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 year ended October 31, 2016, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.

 

16                         Invesco Charter 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 R, Class S, Class Y, 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, Class R and Class S shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.15% of the average daily net assets of Class S shares. Of the Plan payments, up to 0.25% of the average daily net assets of Class A, Class B, Class C and Class R shares and 0.15% of the average daily net assets of Class S 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 year 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 year ended October 31, 2016, IDI advised the Fund that IDI retained $239,914 in front-end sales commissions from the sale of Class A shares and $12,924, $4,844 and $6,443 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.

For the year ended October 31, 2016, the Fund incurred $3,871 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.

During the year ended October 31, 2016, there were transfers from level 2 to level 1 of $273,632,694 due to foreign fair value adjustments.

 

     Level 1        Level 2        Level 3        Total  

Common Stocks & Other Equity Interests

   $ 3,262,624,714         $ 114,171,581         $ —         $ 3,376,796,295   

Money Market Funds

     514,262,405           —           —           514,262,405   

Total Investments

   $ 3,776,887,119         $ 114,171,581         $ —         $ 3,891,058,700   

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 year ended October 31, 2016, the Fund engaged in securities purchases of $4,970,601.

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 $40,818.

 

17                         Invesco Charter 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—Distributions to Shareholders and Tax Components of Net Assets

Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended October 31, 2016 and 2015:

 

     2016        2015  

Ordinary income

   $ 46,609,519         $ 67,468,176   

Long-term capital gain

     511,116,697           551,235,754   

Total distributions

   $ 557,726,216         $ 618,703,930   

Tax Components of Net Assets at Period-End:

 

     2016  

Undistributed ordinary income

   $ 38,262,145   

Undistributed long-term gain

     365,194,959   

Net unrealized appreciation — investments

     666,749,483   

Net unrealized appreciation (depreciation) — other investments

     (73,932 ) 

Temporary book/tax differences

     (1,866,528 ) 

Capital loss carryforward

     (18,574,016 ) 

Shares of beneficial interest

     2,844,254,328   

Total net assets

   $ 3,893,946,439   

The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.

The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.

Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. 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 has a capital loss carryforward as of October 31, 2016, which expires as follows:

 

Capital Loss Carryforward*  
Expiration   Short-Term        Long-Term        Total  

October 31, 2017

   $ 9,308,567         $ —         $ 9,308,567   

October 31, 2018

     9,265,449           —           9,265,449   
    $ 18,574,016         $           $ 18,574,016   

 

* 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.

 

18                         Invesco Charter Fund

NOTE 9—Investment Securities

The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2016 was $1,081,058,846 and $2,044,646,721, 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

   $ 803,104,497   

Aggregate unrealized (depreciation) of investment securities

     (136,355,014 ) 

Net unrealized appreciation of investment securities

   $ 666,749,483   

Cost of investments for tax purposes is $3,224,309,217.

NOTE 10—Reclassification of Permanent Differences

Primarily as a result of differing book/tax treatment of partnerships and foreign currency transactions, on October 31, 2016, undistributed net investment income was decreased by $2,300,862 and undistributed net realized gain was increased by $2,300,862. This reclassification had no effect on the net assets of the Fund.

NOTE 11—Share Information

 

     Summary of Share Activity  
    Years ended October 31,  
    2016(a)      2015  
     Shares      Amount      Shares      Amount  

Sold:

           

Class A

     5,334,229       $ 94,685,694         7,967,867       $ 169,658,526   

Class B

     27,826         468,455         42,760         866,232   

Class C

     701,037         11,808,469         961,765         19,474,704   

Class R

     368,052         6,559,975         379,464         7,947,415   

Class S

     37,290         673,670         39,788         844,373   

Class Y

     3,193,027         58,366,827         3,694,862         79,378,983   

Class R5

     568,624         10,445,497         1,641,312         37,116,423   

Class R6

     231,849         4,451,467         425,650         8,981,442   

Issued as reinvestment of dividends:

           

Class A

     25,760,253         434,833,073         20,975,293         432,301,008   

Class B

     334,842         5,364,162         382,019         7,510,477   

Class C

     1,631,764         26,222,439         1,354,452         26,709,787   

Class R

     314,013         5,259,713         326,354         6,680,464   

Class S

     139,733         2,357,300         116,655         2,404,258   

Class Y

     1,057,284         17,889,253         1,865,898         38,549,443   

Class R5

     576,673         10,091,783         1,946,724         41,445,748   

Class R6

     895,192         15,656,912         667,462         14,203,592   

Automatic conversion of Class B shares to Class A shares:

           

Class A

     849,593         15,165,383         967,742         20,571,723   

Class B

     (897,893 )       (15,165,383 )       (1,017,096 )       (20,571,723 ) 

Reacquired:

           

Class A

     (33,114,867 )       (594,677,673 )       (33,421,073 )       (707,869,936 ) 

Class B

     (342,950 )       (5,820,696 )       (440,174 )       (8,911,938 ) 

Class C

     (3,181,030 )       (54,314,782 )       (2,558,579 )       (51,531,581 ) 

Class R

     (906,761 )       (16,103,941 )       (1,458,054 )       (30,707,598 ) 

Class S

     (125,808 )       (2,208,554 )       (198,336 )       (4,134,416 ) 

Class Y

     (7,665,882 )       (139,775,063 )       (17,090,633 )       (365,330,669 ) 

Class R5

     (4,388,890 )       (84,775,422 )       (15,568,006 )       (344,901,131 ) 

Class R6

     (6,959,527 )       (118,647,210 )       (732,416 )       (16,204,055 ) 

Net increase (decrease) in share activity

     (15,562,327 )     $ (311,188,652 )       (28,728,300 )     $ (635,518,449 ) 

 

(a)  There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 41% 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.

 

19                         Invesco Charter Fund

NOTE 12—Financial Highlights

The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.

 

     Net asset
value,
beginning
of period		     Net
investment
income
(loss)(a)		     Net gains
(losses)
on securities
(both
realized and
unrealized)		     Total from
investment
operations		     Dividends
from net
investment
income		     Distributions
from net
realized
gains		     Total
distributions		     Net asset
value, end
of period		     Total
return(b)		     Net assets,
end of period
(000’s omitted)		     Ratio of
expenses
to average
net assets
with fee waivers
and/or expenses
absorbed		     Ratio of
expenses
to average net
assets without
fee waivers
and/or expenses
absorbed		     Ratio of net
investment
income (loss)
to average
net assets		     Portfolio
turnover(c)		  

Class A

  

Year ended 10/31/16

   $ 20.30      $ 0.16      $ 0.34      $ 0.50      $ (0.21 )    $ (2.28 )    $ (2.49 )    $ 18.31        3.54 %    $ 3,467,887        1.11 %(d)      1.12 %(d)      0.88 %(d)      28 % 

Year ended 10/31/15

     23.28        0.19        (0.74 )      (0.55 )      (0.13 )      (2.30 )      (2.43 )      20.30        (2.53 )      3,869,488        1.07        1.08        0.89        47   

Year ended 10/31/14

     22.22        0.12        2.09        2.21        (0.20 )      (0.95 )      (1.15 )      23.28        10.48        4,517,960        1.05        1.07        0.53        23   

Year ended 10/31/13

     17.73        0.19        4.49        4.68        (0.19 )      —        (0.19 )      22.22        26.63        4,529,846        1.05        1.07        0.94        35   

Year ended 10/31/12

     16.38        0.14        1.31        1.45        (0.10 )      —        (0.10 )      17.73        8.93        4,025,451        1.10        1.12        0.79        42   

Class B

  

Year ended 10/31/16

     19.24        0.02        0.32        0.34        (0.04 )      (2.28 )      (2.32 )      17.26        2.74        27,731        1.86 (d)      1.87 (d)      0.13 (d)      28   

Year ended 10/31/15

     22.21        0.03        (0.70 )      (0.67 )      —        (2.30 )      (2.30 )      19.24        (3.22 )      47,808        1.82        1.83        0.14        47   

Year ended 10/31/14

     21.25        (0.05 )      2.00        1.95        (0.04 )      (0.95 )      (0.99 )      22.21        9.62        78,125        1.80        1.82        (0.22 )      23   

Year ended 10/31/13

     16.96        0.04        4.30        4.34        (0.05 )      —        (0.05 )      21.25        25.63        108,696        1.80        1.82        0.19        35   

Year ended 10/31/12

     15.67        0.01        1.28        1.29        —        —        —        16.96        8.23        125,315        1.85        1.87        0.04        42   

Class C

  

Year ended 10/31/16

     19.30        0.02        0.32        0.34        (0.04 )      (2.28 )      (2.32 )      17.32        2.73        200,499        1.86 (d)      1.87 (d)      0.13 (d)      28   

Year ended 10/31/15

     22.27        0.03        (0.70 )      (0.67 )      —        (2.30 )      (2.30 )      19.30        (3.22 )      239,765        1.82        1.83        0.14        47   

Year ended 10/31/14

     21.30        (0.05 )      2.01        1.96        (0.04 )      (0.95 )      (0.99 )      22.27        9.64        282,091        1.80        1.82        (0.22 )      23   

Year ended 10/31/13

     17.00        0.04        4.31        4.35        (0.05 )      —        (0.05 )      21.30        25.63        283,655        1.80        1.82        0.19        35   

Year ended 10/31/12

     15.71        0.01        1.28        1.29        —        —        —        17.00        8.21        247,719        1.85        1.87        0.04        42   

Class R

  

Year ended 10/31/16

     20.12        0.11        0.34        0.45        (0.16 )      (2.28 )      (2.44 )      18.13        3.24        35,654        1.36 (d)      1.37 (d)      0.63 (d)      28   

Year ended 10/31/15

     23.07        0.13        (0.72 )      (0.59 )      (0.06 )      (2.30 )      (2.36 )      20.12        (2.72 )      44,079        1.32        1.33        0.64        47   

Year ended 10/31/14

     22.03        0.06        2.07        2.13        (0.14 )      (0.95 )      (1.09 )      23.07        10.19        67,910        1.30        1.32        0.28        23   

Year ended 10/31/13

     17.59        0.14        4.44        4.58        (0.14 )      —        (0.14 )      22.03        26.23        77,769        1.30        1.32        0.69        35   

Year ended 10/31/12

     16.25        0.09        1.32        1.41        (0.07 )      —        (0.07 )      17.59        8.73        81,503        1.35        1.37        0.54        42   

Class S

  

Year ended 10/31/16

     20.32        0.18        0.34        0.52        (0.24 )      (2.28 )      (2.52 )      18.32        3.63        18,364        1.01 (d)      1.02 (d)      0.98 (d)      28   

Year ended 10/31/15

     23.30        0.21        (0.74 )      (0.53 )      (0.15 )      (2.30 )      (2.45 )      20.32        (2.42 )      19,329        0.97        0.98        0.99        47   

Year ended 10/31/14

     22.24        0.14        2.09        2.23        (0.22 )      (0.95 )      (1.17 )      23.30        10.57        23,137        0.95        0.97        0.63        23   

Year ended 10/31/13

     17.75        0.21        4.48        4.69        (0.20 )      —        (0.20 )      22.24        26.73        24,014        0.95        0.97        1.04        35   

Year ended 10/31/12

     16.39        0.15        1.33        1.48        (0.12 )      —        (0.12 )      17.75        9.08        21,072        1.00        1.02        0.89        42   

Class Y

  

Year ended 10/31/16

     20.40        0.20        0.34        0.54        (0.27 )      (2.28 )      (2.55 )      18.39        3.76        102,182        0.86 (d)      0.87 (d)      1.13 (d)      28   

Year ended 10/31/15

     23.38        0.25        (0.75 )      (0.50 )      (0.18 )      (2.30 )      (2.48 )      20.40        (2.24 )      183,005        0.82        0.83        1.14        47   

Year ended 10/31/14

     22.31        0.18        2.09        2.27        (0.25 )      (0.95 )      (1.20 )      23.38        10.75        479,371        0.80        0.82        0.78        23   

Year ended 10/31/13

     17.81        0.24        4.49        4.73        (0.23 )      —        (0.23 )      22.31        26.89        469,066        0.80        0.82        1.19        35   

Year ended 10/31/12

     16.44        0.18        1.33        1.51        (0.14 )      —        (0.14 )      17.81        9.26        362,231        0.85        0.87        1.04        42   

Class R5

  

Year ended 10/31/16

     21.03        0.23        0.36        0.59        (0.29 )      (2.28 )      (2.57 )      19.05        3.92        38,682        0.75 (d)      0.76 (d)      1.24 (d)      28   

Year ended 10/31/15

     24.04        0.27        (0.78 )      (0.51 )      (0.20 )      (2.30 )      (2.50 )      21.03        (2.22 )      110,943        0.73        0.74        1.23        47   

Year ended 10/31/14

     22.90        0.20        2.16        2.36        (0.27 )      (0.95 )      (1.22 )      24.04        10.87        414,713        0.72        0.74        0.86        23   

Year ended 10/31/13

     18.29        0.26        4.61        4.87        (0.26 )      —        (0.26 )      22.90        26.99        413,033        0.72        0.74        1.27        35   

Year ended 10/31/12

     16.87        0.22        1.36        1.58        (0.16 )      —        (0.16 )      18.29        9.43        378,446        0.68        0.70        1.21        42   

Class R6

  

Year ended 10/31/16

     21.04        0.24        0.36        0.60        (0.31 )      (2.28 )      (2.59 )      19.05        3.99        2,948        0.68 (d)      0.69 (d)      1.31 (d)      28   

Year ended 10/31/15

     24.05        0.29        (0.77 )      (0.48 )      (0.23 )      (2.30 )      (2.53 )      21.04        (2.12 )      125,997        0.64        0.65        1.32        47   

Year ended 10/31/14

     22.91        0.22        2.16        2.38        (0.29 )      (0.95 )      (1.24 )      24.05        10.96        135,294        0.63        0.65        0.95        23   

Year ended 10/31/13

     18.29        0.28        4.62        4.90        (0.28 )      —        (0.28 )      22.91        27.15        130,764        0.63        0.65        1.36        35   

Year ended 10/31/12(e)

     18.64        0.02        (0.37 )      (0.35 )      —        —        —        18.29        (1.88 )      96,034        0.60 (f)      0.63 (f)      1.29 (f)      42   

 

(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 based on average daily net assets (000’s omitted) of $3,588,402, $37,081, $215,793, $39,012, $18,308, $143,186, $65,382, and $37,795 for Class A, Class B, Class C, Class R, Class S Class Y, Class R5 and Class R6 shares, respectively.
(e) Commencement date of September 24, 2012.
(f) Annualized.

 

20                         Invesco Charter Fund

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees

and Shareholders of the Invesco Charter Fund:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Invesco Charter Fund (the “Fund”) as of October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2016 by correspondence with the custodian, provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas

December 21, 2016

 

21                         Invesco Charter 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      $ 1,032.70       $ 5.62      $ 1,019.61      $ 5.58         1.10 % 
B     1,000.00        1,028.00         9.43        1,015.84        9.37         1.85   
C     1,000.00        1,028.50         9.43        1,015.84        9.37         1.85   
R     1,000.00        1,030.70         6.89        1,018.35        6.85         1.35   
S     1,000.00        1,032.70         5.11        1,020.11        5.08         1.00   
Y     1,000.00        1,033.70         4.35        1,020.86        4.32         0.85   
R5     1,000.00        1,034.80         3.73        1,021.47        3.71         0.73   
R6     1,000.00        1,034.80         3.43        1,021.77        3.40         0.67   

 

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 184/366 to reflect the most recent fiscal half year.

 

22                         Invesco Charter Fund

Approval of Investment Advisory and Sub-Advisory Contracts

 

The Board of Trustees (the Board) of AIM Equity Funds (Invesco Equity Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco Charter 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 Core 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, 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 noted that a co-chief investment officer had been added to the Fund’s portfolio management team. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.

 

 

23                         Invesco Charter 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 above 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 the above the rate of one mutual fund advised by Invesco Advisers using a similar investment process.

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 more comparable, 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.

 

 

24                         Invesco Charter Fund

Tax Information

Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.

The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.

The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2016:

 

Federal and State Income Tax

  

Long-Term Capital Gain Distributions

    $ 511,116,697   

Qualified Dividend Income*

      100 % 

Corporate Dividends Received Deduction*

      100 % 

U.S. Treasury Obligations*

      0 % 

 

  * The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year.

 

25                         Invesco Charter Fund

Trustees and Officers

 

The address of each trustee and officer is AIM Equity Funds (Invesco Equity Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Interested Persons                
Martin L. Flanagan1 — 1960 Trustee   2007  

Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business

 

Formerly: Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US) Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization)

  

146

   None
Philip A. Taylor2 — 1954 Trustee and Senior Vice President   2006  

Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent) Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company) Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).

 

Formerly: Director, Chief Executive Officer and President, Van Kampen Exchange Corp.; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.

  

146

   None
1  Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser.

 

2  Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser.

 

T-1                         Invesco Charter Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Independent Trustees                

Bruce L. Crockett — 1944

Trustee and Chair

  

1993

  

Chairman, Crockett Technologies Associates (technology consulting company)

 

Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute

  

146

   ALPS (Attorneys Liability Protection Society) (insurance company) and Globe Specialty Metals, Inc. (metallurgical company); Member of the Audit Committee, Ferroglobe PLC and Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council

David C. Arch — 1945

Trustee

   2010   Chairman of Blistex Inc., a consumer health care products manufacturer  

146

   Board member of the Illinois Manufacturers’ Association; Member of the Board of Visitors, Institute for the Humanities, University of Michigan

James T. Bunch — 1942

Trustee

  

2003

  

Managing Member, Grumman Hill Group LLC (family office/private equity investments)

 

Formerly: Chairman of the Board, Denver Film Society, Chairman of the Board of Trustees, Evans Scholarship Foundation; Chairman, Board of Governors, Western Golf Association

  

146

   Trustee, Evans Scholarship Foundation

Albert R. Dowden — 1941

Trustee

  

2000

  

Director of a number of public and private business corporations, including Nature’s Sunshine Products, Inc.

 

Formerly: Director, The Boss Group, Ltd. and Reich & Tang Funds (5 portfolios) (registered investment company); Director, Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company); Director, Continental Energy Services, LLC (oil and gas pipeline service); Director, CompuDyne Corporation (provider of product and services to the public security market) and Director, Annuity and Life Re (Holdings), Ltd. (reinsurance company); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations; Chairman, DHJ Media, Inc.; Director, Magellan Insurance Company; and Director, The Hertz Corporation, Genmar Corporation (boat manufacturer), National Media Corporation; Advisory Board of Rotary Power International (designer, manufacturer, and seller of rotary power engines); and Chairman, Cortland Trust, Inc. (registered investment company)

  

146

   Director of Nature’s Sunshine Products, Inc.

Jack M. Fields — 1952

Trustee

  

1997

  

Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Discovery Learning Alliance (non-profit)

 

Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives

  

146

   None

Eli Jones — 1961

Trustee

   2016  

Professor and Dean, Mays Business School — Texas A&M University

 

Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University and Director, Arvest Bank

  

146

   Director of Insperity, Inc. (formerly known as Administaff)

Prema Mathai-Davis — 1950

Trustee

  

1998

  

Retired.

 

Formerly: Chief Executive Officer, YWCA of the U.S.A.

  

146

   None

Larry Soll — 1942

Trustee

  

2003

  

Retired.

 

Formerly: Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company)

  

146

   None

Raymond Stickel, Jr. — 1944

Trustee

   2005  

Retired.

 

Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche

  

146

   None

Robert C. Troccoli — 1949

Trustee

   2016  

Adjunct Professor, University of Denver — Daniels College of Business

 

Formerly: Senior Partner, KPMG LLP

  

146

   None

 

T-2                         Invesco Charter Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Independent Trustees—(continued)

Suzanne H. Woolsey — 1941

Trustee

   2014  

Retired.

 

Formerly: Chief Executive Officer of Woolsey Partners LLC

  

146

   Director, SunShare LLC; Trustee, Ocean Conservancy; Emeritus Chair of the Board of Trustees of the Institute for Defense Analyses and of Colorado College; Trustee, Chair, Business and Finance Committee of California Institute of Technology; Prior to 2014, Director of Fluor Corp.; Prior to 2010, Trustee of the German Marshall Fund of the United States; Prior to 2010, Trustee of the Rocky Mountain Institute
Other Officers                

Sheri Morris — 1964

President, Principal Executive Officer and Treasurer

  

1999

  

President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust

   N/A   N/A

Russell C. Burk — 1958

Senior Vice President and Senior Officer

   2005   Senior Vice President and Senior Officer, The Invesco Funds   N/A   N/A

John M. Zerr — 1962

Senior Vice President, Chief Legal Officer and Secretary

   2006  

Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company)

   N/A   N/A

 

T-3                         Invesco Charter Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Other Officers—(continued)                
Karen Dunn Kelley — 1960 Senior Vice President  

2004

  

Senior Managing Director, Investments, Invesco Ltd.; Director, Co-President, Co-Chief Executive Officer, and Co-Chairman, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Chairman and Director, Invesco Senior Secured Management, Inc.; Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Executive Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Invesco Mortgage Capital Inc. and Invesco Management Company Limited; Senior Vice President, The Invesco Funds

 

Formerly: Vice President, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Asset Management (Bermuda) Ltd., Director, INVESCO Global Asset Management DAC (formerly known as INVESCO Global Asset Management Limited) and INVESCO Management S.A.; Senior Vice President, Van Kampen Investments Inc. and Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and President, Fund Management Company; Chief Cash Management Officer, Director of Cash Management, Senior Vice President, and Managing Director, Invesco AIM Capital Management, Inc.; Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only)

   N/A   N/A

Kelli Gallegos — 1970

Vice President, Principal Financial Officer and Assistant Treasurer

   2008  

Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Assistant Vice President, The Invesco Funds

   N/A   N/A

Tracy Sullivan — 1962

Vice President, Chief Tax Officer and Assistant Treasurer

   2008  

Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Assistant Vice President, The Invesco Funds

   N/A   N/A

Crissie M. Wisdom — 1969

Anti-Money Laundering Compliance Officer

   2013  

Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.

 

Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp.

   N/A   N/A

Robert R. Leveille — 1969

Chief Compliance Officer

   2016  

Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds

 

Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds

   N/A   N/A

The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.

 

Office of the Fund

11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Investment Adviser

Invesco Advisers, Inc.

1555 Peachtree Street, N.E.

Atlanta, GA 30309

  

Distributor

Invesco Distributors, Inc.

11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Auditors

PricewaterhouseCoopers LLP

1000 Louisiana Street, Suite 5800

Houston, TX 77002-5678

     

Counsel to the Fund

Stradley Ronon Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, PA 19103-7018

  

Counsel to the Independent Trustees

Goodwin Procter LLP

901 New York Avenue, N.W.

Washington, D.C. 20001

  

Transfer Agent

Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Custodian

State Street Bank and Trust Company

225 Franklin Street

Boston, MA 02110-2801

 

T-4                         Invesco Charter Fund

 

Explore High-Conviction Investing with Invesco

 

 

LOGO

 

 

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.

    LOGO

SEC file numbers: 811-01424 and 002-25469                             CHT-AR-1                                          Invesco Distributors, Inc.

 

 

     LOGO  

Annual Report to Shareholders

 

   October 31, 2016
 

 

 

Invesco Diversified Dividend Fund

 

  Nasdaq:
 

A: LCEAX  ∎  B: LCEDX  ∎  C: LCEVX  ∎  R: DDFRX  ∎  Y: LCEYX  ∎  Investor: LCEIX

R5: DDFIX  ∎  R6: LCEFX

 

 

 

LOGO

 

Letters to Shareholders

 

LOGO

Philip Taylor

     

Dear Shareholders:

This annual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. Inside is a discussion of how your Fund was managed and the factors that affected its performance during the reporting period.

    In December 2015, the US Federal Reserve raised short-term interest rates for the first time since 2006, signaling its belief that the economy was likely to continue strengthening. Indeed, throughout the reporting period, US economic data were generally positive and the economy expanded at a moderate rate – but there were some bumps along the road. Job growth in May 2016 was very weak, but it was followed by strong increases in nonfarm payrolls in June and July. Increased concerns about global economic weakness caused US stock market

indexes to sink at the start of calendar year 2016, but they eventually recovered; they sank again following the UK’s decision to leave the European Union, but then quickly recovered and reached record highs later in the summer. Strong demand for income-producing investments, particularly those perceived to be lower risk, benefited bonds as well as dividend-paying stocks for much of the reporting period. While economic news in the US was generally positive, news overseas was less upbeat. The European Central Bank, and central banks in China and Japan – as well as other countries – maintained extraordinarily accommodative monetary policies in response to economic weakness. As the fiscal year drew to a close, uncertainty about the outcome of the US presidential election resulted in increased market volatility; the surprise outcome after the close of the reporting period suggested that market volatility may continue for some time to come.

Short-term market volatility can prompt some investors to abandon their investment plans – and can cause others to settle for average results. The investment professionals at Invesco, in contrast, 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.

You, too, can invest with high conviction by maintaining a long-term investment perspective and by working with your financial adviser on a regular basis. During periods of short-term market volatility or uncertainty, your financial adviser can keep you focused on your long-term investment goals – a new home, a child’s college education or a secure retirement. He or she also can share research about the economy, the markets and individual investment options.

Visit our website for more information on your investments

Our website, invesco.com/us, offers a wide range of market insights and investment perspectives. On the website, you’ll find detailed information about our funds, including performance, holdings and portfolio manager commentaries. You can access information about your account by completing a simple, secure online registration. Click on the “Need to register” link in the “Account Access” box on our homepage to get started.

In addition to the resources accessible on our website and through our mobile app, you can obtain timely updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. 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.

Have questions?

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,

 

LOGO

Philip Taylor

Senior Managing Director, Invesco Ltd.

 

2                         Invesco Diversified Dividend Fund

 

    

 

LOGO

     Bruce Crockett

    

Dear Fellow Shareholders:

Among the many important lessons I’ve learned in more than 40 years in a variety of business endeavors is the value of a trusted advocate.

    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, including but 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.
∎   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.

I trust the measures outlined above provide assurance that you have a worthy advocate when it comes to choosing the Invesco Funds.

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,

 

LOGO

Bruce L. Crockett

Independent Chair

Invesco Funds Board of Trustees

 

3                         Invesco Diversified Dividend Fund

 

Management’s Discussion of Fund Performance

 

Performance summary

For the fiscal year ended October 31, 2016, Class A shares of Invesco Diversified Dividend Fund (the Fund), at net asset value (NAV), underperformed the Russell 1000 Value Index, the Fund’s style-specific benchmark.

    Your Fund’s long-term performance appears later in this report.

 

  

    

  

Fund vs. Indexes

Total returns, 10/31/15 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

      6.27 % 

Class B Shares

      5.41   

Class C Shares

      5.41   

Class R Shares

      5.93   

Class Y Shares

      6.53   

Investor Class Shares

      6.29   

Class R5 Shares

      6.59   

Class R6 Shares

      6.63   

S&P 500 Indexq (Broad Market Index)

      4.51   

Russell 1000 Value Indexq (Style-Specific Index)

      6.37   

Lipper Large-Cap Value Funds Index∎ (Peer Group Index)

      4.94   

 

Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc.

 

         

 

 

Market conditions and your Fund

During the fiscal year ended October 31, 2016, the US economy continued to expand. The US Federal Reserve (the Fed) raised interest rates in December 2015 – its first increase since 2006 – but that was its only increase during the reporting period. Major US stock market indexes posted gains for the reporting period, but they were fairly volatile. Stocks began calendar year 2016 on a negative note, driven by investor concerns about economic weakness in China, falling oil prices and uncertainty over Fed policy. Markets recovered in late February and posted gains until June when UK voters opted to leave the European Union, sending markets sharply lower. Markets again recovered, and major US equity indexes hit record highs during the summer.1 It’s important to view the market’s ups and

downs during the fiscal year within the context of the long-term economic cycle, which began in June 2009. This cycle is one of the longest expansions on record with one of the largest bull markets, despite a historically low recovery in company revenue versus previous cycle troughs.2 In this environment, we remain focused on our assessment of each investment’s risk-reward profile.

    During the reporting period, our total return approach continued to emphasize long-term capital appreciation, current income and capital preservation. We believe the Fund may serve as an equity foundation within a well-diversified asset allocation strategy, complementing more aggressive and cyclical investments. As always, we look for dividend-paying companies with strong profitability, solid balance sheets and capital allocation policies that support sustained or increasing

 

dividends and share repurchases. We perform extensive fundamental research, incorporating both financial statement analysis and an assessment of the potential reward relative to the downside risk, to determine a fair valuation over our two- to three-year investment horizon for each stock. We believe this process may provide a valuable combination of dividend income, price appreciation and capital preservation. We also maintain a rigorous sell discipline and consider selling or reducing shares in stocks that no longer meet our investment criteria.

    Within the consumer staples sector, Campbell Soup and General Mills were among the largest contributors to the Fund’s absolute performance. Campbell Soup’s margins improved as it restructured divisions, cut costs, improved supply chain productivity and adopted new budgeting practices. The company continues to reshape its portfolio to rebalance mature, high-margin categories and faster growing but less profitable categories, such as organics and fresh-packaged goods. General Mills’ profitability also improved due to strong cost savings driven by plant closures, stock keeping unit rationalization and holistic margin-management practices, as well as product innovation and renovation of existing brands.

    Within the utilities sector, Exelon was among the largest contributors to absolute Fund performance. The company committed to closing uneconomic nuclear plants, as well as other actions to improve the profitability of its merchant generation assets. The company acquired Pepco Holdings (not a Fund holding) in March 2016 as part of an ongoing shift to a more regulated profile.

    Consumer discretionary was the worst-performing sector within the Russell 1000 Value Index during the fiscal year. The Fund’s holdings in UK retailer Marks

 

Portfolio Composition

    

By sector

   % of total net assets

Consumer Staples

      20.8 % 

Financials

      14.7   
Utilities      13.7   
Industrials      7.7   
Consumer Discretionary      7.5   
Energy      5.9   
Telecommunication Services      4.8   
Health Care      3.5   
Materials      2.4   
Information Technology      1.7   
Money Market Funds Plus Other Assets Less Liabilities      17.3   
Top 10 Equity Holdings*
   % of total net assets 

 

1.

   General Mills, Inc.      3.0 % 

2.

   AT&T Inc.      2.8   

3.

   PPL Corp.      2.7   

4.

   Coca-Cola Co. (The)      2.7   

5.

   Exelon Corp.      2.6   

6.

   Hartford Financial Services Group, Inc. (The)      2.6   

7.

   Suncor Energy, Inc.      2.4   

8.

   Procter & Gamble Co. (The)      2.3   

9.

   Kraft Heinz Co. (The)      1.9   

10.

   Campbell Soup Co.      1.8   

Total Net Assets

      $18.8 billion   
Total Number of Holdings*      72   

The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.

*Excluding money market fund holdings.

Data presented here are as of October 31, 2016.

 

 

4                         Invesco Diversified Dividend Fund

& Spencer and French lodging company Accor were among the largest detractors from Fund performance. Shares of Marks & Spencer fell as economic uncertainty mounted following the UK’s decision to leave the European Union. The company faced declining sales in the garment business due to increased competition, rising costs of goods sourced abroad and losses in international markets. Shares of Accor fell as terrorism-related headwinds led to a decline in occupancy levels and revenue per room in key markets such as France. Accor also faced skepticism regarding valuation and execution risk following the acquisition of FRHI Holdings (not a Fund holding).

Within the financials sector, asset manager Legg Mason was among the largest detractors from the Fund’s performance versus its style-specific benchmark. The company’s stock price was negatively affected by market participants’ view of acquisitions announced during the reporting period, outflows in several of its affiliates’ fund products and concern over pending regulatory proposals, which may negatively impact both operating margins and future organic growth for the asset management industry.

Within the Russell 1000 Value Index, the utilities and information technology (IT) sectors were the best-performing sectors while consumer discretionary was the only sector to post a loss for the fiscal year. The Fund’s underweight position in the IT sector detracted from its performance versus the style-specific index.

The Fund has successfully navigated multiple market cycles over its history with a consistent long-term mandate to emphasize capital appreciation, current income and capital preservation.

It has been our privilege to oversee Invesco Diversified Dividend Fund, and we thank you for your continued investment.

 

1 Source: Reuters
2 Source: National Bureau of Economic Research, Ned Davis Research and FactSet Research Systems Inc.

The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

See important Fund and, if applicable, index disclosures later in this report.

 

LOGO

Meggan Walsh

Chartered Financial Analyst, Portfolio Manager and Head of Invesco’s dividend value team, is lead manager of Invesco Diversified Dividend Fund. She joined Invesco in 1991. Ms. Walsh earned a BS in finance from the University of Maryland and an MBA from Loyola University Maryland.

 

LOGO

Robert Botard

Chartered Financial Analyst, Portfolio Manager, is manager of Invesco Diversified Dividend Fund. He joined Invesco in 1993. Mr. Botard earned a BBA in finance and a BBA in international business from The University of Texas at Austin. He also earned a Master of International Management degree from the Thunderbird School of Global Management.

 

LOGO

Kristina Bradshaw

Chartered Financial Analyst, Portfolio Manager, is manager of Invesco Diversified Dividend Fund. She joined Invesco in 2006. Ms. Bradshaw earned a BBA with honors from The University of Texas at Austin and an MBA from Stanford University’s Graduate School of Business.

 

LOGO

Chris McMeans

Chartered Financial Analyst, Portfolio Manager is manager of Invesco Diversified Dividend Fund. He joined Invesco in 2008. Mr. McMeans earned a BA in economics from The University of Texas at Austin and an MBA with honors from the University of Houston.

    

 

 

5                         Invesco Diversified Dividend Fund

 

Your Fund’s Long-Term Performance

Results of a $10,000 Investment – Oldest Share Class(es)

Fund and index data from 10/31/06

 

LOGO

 

1 Source: FactSet Research Systems Inc.
2 Source: Lipper Inc.

 

Past performance cannot guarantee comparable future results.

The data shown in the chart include reinvested distributions, applicable sales charges Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable.

Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.

    

 

 

 

6                         Invesco Diversified Dividend Fund

Average Annual Total Returns   
As of 10/31/16, including maximum applicable sales charges                                                                       

Class A Shares

         

Inception (12/31/01)

      7.26 % 

10 Years

      6.58   

  5 Years

      12.32   

  1 Year

      0.44   

Class B Shares

         

Inception (12/31/01)

      7.29 % 

10 Years

      6.55   

  5 Years

      12.49   

  1 Year

      0.41   

Class C Shares

         

Inception (12/31/01)

      6.91 % 

10 Years

      6.40   

  5 Years

      12.73   

  1 Year

      4.41   

Class R Shares

         

Inception (10/25/05)

      7.93 % 

10 Years

      6.94   

  5 Years

      13.29   

  1 Year

      5.93   

Class Y Shares

         

10 Years

      7.41 % 

  5 Years

      13.86   

  1 Year

      6.53   

Investor Class Shares

         

Inception (7/15/05)

      7.74 % 

10 Years

      7.24   

  5 Years

      13.61   

  1 Year

      6.29   

Class R5 Shares

         

Inception (10/25/05)

      8.54 % 

10 Years

      7.54   

  5 Years

      13.94   

  1 Year

      6.59   

Class R6 Shares

         

10 Years

      7.35 % 

  5 Years

      13.95   

  1 Year

      6.63   

Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A 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

Average Annual Total Returns   
As of 9/30/16, the most recent calendar quarter end, including maximum applicable sales charges     

Class A Shares

         

Inception (12/31/01)

      7.35 % 

10 Years

      7.00   

  5 Years

      14.37   

  1 Year

      5.54   

Class B Shares

         

Inception (12/31/01)

      7.37 % 

10 Years

      6.98   

  5 Years

      14.59   

  1 Year

      5.92   

Class C Shares

         

Inception (12/31/01)

      7.00 % 

10 Years

      6.82   

  5 Years

      14.82   

  1 Year

      9.87   

Class R Shares

         

Inception (10/25/05)

      8.06 % 

10 Years

      7.36   

  5 Years

      15.39   

  1 Year

      11.39   

Class Y Shares

         

10 Years

      7.83 % 

  5 Years

      15.96   

  1 Year

      11.97   

Investor Class Shares

         

Inception (7/15/05)

      7.85 % 

10 Years

      7.66   

  5 Years

      15.72   

  1 Year

      11.73   

Class R5 Shares

         

Inception (10/25/05)

      8.67 % 

10 Years

      7.97   

  5 Years

      16.05   

  1 Year

      12.04   

Class R6 Shares

         

10 Years

      7.77 % 

  5 Years

      16.03   

  1 Year

      12.15   

most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.

The net annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class R, Class Y, Investor Class, Class R5 and Class R6 shares was 0.83%, 1.58%, 1.58%, 1.08%, 0.58%, 0.81%, 0.54% and 0.44%, 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, Investor Class, Class R5 and Class R6 shares was 0.84%, 1.59%, 1.59%, 1.09%, 0.59%, 0.82%, 0.55% and 0.45%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R, 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.
 

 

7                         Invesco Diversified Dividend Fund

 

Invesco Diversified Dividend Fund’s investment objective is long-term growth of capital and secondarily, current income.

∎   Unless otherwise stated, information presented in this report is as of October 31, 2016, and is based on total net assets.
∎   Unless otherwise noted, all data provided by Invesco.
∎   To access your Fund’s reports/prospectus, visit invesco.com/fundreports.

 

 

About share classes

∎   Class B shares may not be purchased for new or additional investments. Please see the prospectus for more information.
∎   Class R shares are generally available only to employer sponsored retirement and benefit plans. Please see the prospectus for more information.
∎   Class Y shares and Investor Class shares are available only to certain investors. Please see the prospectus for more information.
∎   Class R5 shares and Class R6 shares are primarily intended for employer sponsored retirement and benefit plans that meet certain standards and for institutional investors. Please see the prospectus for more information.

 

 

Principal risks of investing in the Fund

∎   Foreign securities risk. The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
∎   Management risk. The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
∎   Market risk. The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
∎   Value investing style risk. A value investing style subjects the Fund to the risk that the valuations never improve or that the returns on value equity securities are less than returns on other styles of investing or the overall stock market.

 

 

About indexes used in this report

∎   The S&P 500® Index is an unmanaged index considered representative of the US stock market.
∎   The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
∎   The Lipper Large-Cap Value Funds Index is an unmanaged index considered representative of large-cap value funds tracked by Lipper.
∎   The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es).
∎   A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not.

 

 

Other information

∎   The returns shown in management’s discussion of Fund performance are based on net asset values (NAVs) calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the NAVs for shareholder transactions and the returns based on those NAVs may differ from the NAVs and returns reported in the Financial Highlights.
∎   Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s.
 

 

This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.

 

 

 

NOT FDIC INSURED  |  MAY LOSE VALUE  |  NO BANK GUARANTEE

 

8                         Invesco Diversified Dividend Fund

Schedule of Investments(a)

October 31, 2016

 

     Shares      Value  

Common Stocks & Other Equity Interests–82.71%

  

Aerospace & Defense–1.92%   

General Dynamics Corp.

     1,349,931       $ 203,488,599   

Raytheon Co.

     1,156,517         157,991,787   
               361,480,386   
Air Freight & Logistics–0.47%   

United Parcel Service, Inc.–Class B

     830,582         89,503,516   
Apparel Retail–0.44%   

TJX Cos., Inc. (The)

     1,135,581         83,749,099   
Apparel, Accessories & Luxury Goods–0.95%   

Coach, Inc.

     2,804,806         100,664,487   

Columbia Sportswear Co.

     1,388,853         78,664,634   
               179,329,121   
Asset Management & Custody Banks–0.94%   

Federated Investors, Inc.–Class B

     3,886,719         104,941,413   

Legg Mason, Inc.

     2,481,960         71,281,891   
               176,223,304   
Brewers–1.44%   

Heineken N.V. (Netherlands)

     3,305,260         272,102,013   
Construction Machinery & Heavy Trucks–0.85%   

Joy Global Inc.(b)

     5,788,808         161,102,527   
Consumer Finance–1.74%   

American Express Co.

     4,941,089         328,187,131   
Data Processing & Outsourced Services–0.67%   

Automatic Data Processing, Inc.

     1,450,555         126,285,318   
Department Stores–0.27%   

Marks & Spencer Group PLC (United Kingdom)

     12,118,064         50,389,999   
Drug Retail–1.26%   

Walgreens Boots Alliance, Inc.

     2,874,224         237,784,552   
Electric Utilities–9.62%   

American Electric Power Co., Inc.

     4,413,046         286,141,903   

Duke Energy Corp.

     3,578,465         286,348,769   

Entergy Corp.

     3,093,767         227,948,753   

Exelon Corp.

     14,596,473         497,301,835   

PPL Corp.

     14,953,025         513,486,878   
               1,811,228,138   
Electrical Components & Equipment–2.32%   

ABB Ltd. (Switzerland)

     10,144,880         208,753,120   

Emerson Electric Co.

     4,506,499         228,389,369   
               437,142,489   
Food Distributors–1.27%   

Sysco Corp.

     4,966,120         238,969,694   
     Shares      Value  
General Merchandise Stores–1.24%   

Target Corp.

     3,407,734       $ 234,213,558   
Health Care Equipment–0.82%   

Stryker Corp.

     1,344,331         155,068,581   
Hotels, Resorts & Cruise Lines–0.57%   

Accor S.A. (France)

     2,820,082         107,066,341   
Household Products–3.24%   

Kimberly-Clark Corp.

     1,579,096         180,664,373   

Procter & Gamble Co. (The)

     4,940,978         428,876,891   
               609,541,264   
Housewares & Specialties–0.87%   

Newell Brands, Inc.

     3,395,131         163,034,191   
Human Resource & Employment Services–0.39%   

Robert Half International, Inc.

     1,947,932         72,891,615   
Industrial Machinery–1.72%   

Flowserve Corp.

     5,745,575         243,325,101   

Pentair PLC (United Kingdom)

     1,478,917         81,532,694   
               324,857,795   
Integrated Oil & Gas–4.97%   

Royal Dutch Shell PLC–Class B (United Kingdom)

     6,237,574         160,987,206   

Suncor Energy, Inc. (Canada)

     15,149,962         454,640,053   

TOTAL S.A. (France)

     6,691,963         320,239,877   
               935,867,136   
Integrated Telecommunication Services–4.82%   

AT&T Inc.

     14,051,601         516,958,401   

BT Group PLC (United Kingdom)

     40,865,478         187,773,519   

Deutsche Telekom AG (Germany)

     12,413,156         202,286,016   
               907,017,936   
Investment Banking & Brokerage–0.66%   

Charles Schwab Corp. (The)

     3,913,136         124,046,411   
Life & Health Insurance–0.28%   

Lincoln National Corp.

     1,078,907         52,963,545   
Motorcycle Manufacturers–1.56%   

Harley-Davidson, Inc.

     5,153,488         293,851,886   
Movies & Entertainment–0.78%   

Time Warner Inc.

     1,646,778         146,546,774   
Multi-Line Insurance–2.57%   

Hartford Financial Services Group, Inc. (The)

     10,957,179         483,321,166   
Multi-Utilities–4.14%   

Consolidated Edison, Inc.

     3,782,014         285,731,158   

Dominion Resources, Inc.

     4,569,295         343,610,984   

Sempra Energy

     1,402,262         150,182,260   
               779,524,402   
 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

9                         Invesco Diversified Dividend Fund

     Shares      Value  
Oil & Gas Drilling–0.51%   

Nabors Industries Ltd.

     8,093,097       $ 96,307,854   
Oil & Gas Equipment & Services–0.40%   

Baker Hughes Inc.

     1,350,245         74,803,573   
Packaged Foods & Meats–8.31%   

Campbell Soup Co.

     6,324,540         343,675,504   

General Mills, Inc.

     9,076,589         562,566,986   

Kraft Heinz Co. (The)

     3,936,496         350,151,319   

Mead Johnson Nutrition Co.

     1,260,266         94,230,089   

Mondelez International, Inc.–Class A

     4,773,291         214,511,697   
               1,565,135,595   
Paper Packaging–2.44%   

Avery Dennison Corp.

     1,081,040         75,445,782   

International Paper Co.

     6,195,413         278,979,447   

Sonoco Products Co.

     2,099,609         105,589,337   
               460,014,566   
Personal Products–0.47%   

L’Oreal S.A. (France)

     493,960         88,412,980   
Pharmaceuticals–2.65%   

Bristol-Myers Squibb Co.

     2,071,829         105,476,814   

Eli Lilly and Co.

     3,169,959         234,069,772   

Johnson & Johnson

     1,372,253         159,167,625   
               498,714,211   
Property & Casualty Insurance–0.52%   

Travelers Cos., Inc. (The)

     906,631         98,079,342   
Regional Banks–7.11%   

Cullen/Frost Bankers, Inc.

     1,830,193         139,076,366   

Fifth Third Bancorp

     9,566,461         208,166,191   

KeyCorp

     15,493,528         218,768,616   
     Shares      Value  
Regional Banks–(continued)   

M&T Bank Corp.

     2,404,392       $ 295,091,030   

PNC Financial Services Group, Inc. (The)

     2,157,827         206,288,261   

Zions Bancorp.

     8,412,321         270,960,860   
               1,338,351,324   
Restaurants–0.80%   

Darden Restaurants, Inc.

     2,322,574         150,479,569   
Semiconductors–1.00%   

Linear Technology Corp.

     3,144,934         188,884,736   
Soft Drinks–2.72%   

Coca-Cola Co. (The)

     12,064,320         511,527,168   
Specialized REIT’s–0.87%   

Weyerhaeuser Co.

     5,478,292         163,965,280   
Tobacco–2.12%   

Altria Group, Inc.

     2,486,580         164,412,670   

Philip Morris International Inc.

     2,440,941         235,404,350   
               399,817,020   

Total Common Stocks & Other Equity Interests
(Cost $12,616,906,434)

   

      15,577,783,106   

Money Market Funds–18.06%

  

Government & Agency Portfolio–Institutional Class, 0.29%(c)

     2,040,616,709         2,040,616,709   

Treasury Portfolio–Institutional Class, 0.22%(c)

     1,360,411,140         1,360,411,140   

Total Money Market Funds
(Cost $3,401,027,849)

   

      3,401,027,849   

TOTAL INVESTMENTS–100.77%
(Cost $16,017,934,283)

   

      18,978,810,955   

OTHER ASSETS LESS LIABILITIES–(0.77)%

  

      (144,551,566 ) 

NET ASSETS–100.00%

            $ 18,834,259,389   
 

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)  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 value of this security as of October 31, 2016 represented less than 1% of the Fund’s Net Assets. See Note 5.
(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.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

10                         Invesco Diversified Dividend Fund

Statement of Assets and Liabilities

October 31, 2016

 

 

Assets:

  

Investments, at value (Cost $12,430,559,858)

   $ 15,416,680,580   

Investments in affiliates, at value (Cost $3,587,374,425)

     3,562,130,375   

Total investments, at value (Cost $16,017,934,283)

     18,978,810,955   

Foreign currencies, at value (Cost $31,821)

     31,808   

Receivable for:

  

Investments sold

     13,977,200   

Fund shares sold

     126,235,280   

Dividends

     25,307,825   

Investment for trustee deferred compensation and retirement plans

     688,795   

Unrealized appreciation on forward foreign currency contracts outstanding

     14,322,885   

Other assets

     345,257   

Total assets

     19,159,720,005   

Liabilities:

  

Payable for:

  

Investments purchased

     292,554,078   

Fund shares reacquired

     25,052,051   

Accrued fees to affiliates

     6,439,775   

Accrued trustees’ and officers’ fees and benefits

     18,021   

Accrued other operating expenses

     467,515   

Trustee deferred compensation and retirement plans

     901,086   

Unrealized depreciation on forward foreign currency contracts outstanding

     28,090   

Total liabilities

     325,460,616   

Net assets applicable to shares outstanding

   $ 18,834,259,389   

Net assets consist of:

  

Shares of beneficial interest

   $ 15,339,540,910   

Undistributed net investment income

     57,541,540   

Undistributed net realized gain

     462,110,907   

Net unrealized appreciation

     2,975,066,032   
    $ 18,834,259,389   

Net Assets:

  

Class A

   $ 5,985,547,968   

Class B

   $ 16,308,584   

Class C

   $ 778,829,341   

Class R

   $ 237,638,438   

Class Y

   $ 3,670,662,445   

Investor Class

   $ 2,114,403,547   

Class R5

   $ 3,410,570,582   

Class R6

   $ 2,620,298,484   

Shares outstanding, $0.001 par value per share,
with an unlimited number of shares authorized:

   

Class A

     317,931,281   

Class B

     876,189   

Class C

     41,891,022   

Class R

     12,583,608   

Class Y

     194,748,941   

Investor Class

     112,411,143   

Class R5

     181,140,856   

Class R6

     139,141,494   

Class A:

  

Net asset value per share

   $ 18.83   

Maximum offering price per share

  

(Net asset value of $18.83 ¸ 94.50%)

   $ 19.93   

Class B:

  

Net asset value and offering price per share

   $ 18.61   

Class C:

  

Net asset value and offering price per share

   $ 18.59   

Class R:

  

Net asset value and offering price per share

   $ 18.88   

Class Y:

  

Net asset value and offering price per share

   $ 18.85   

Investor Class:

  

Net asset value and offering price per share

   $ 18.81   

Class R5:

  

Net asset value and offering price per share

   $ 18.83   

Class R6:

  

Net asset value and offering price per share

   $ 18.83   
 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

11                         Invesco Diversified Dividend Fund

Statement of Operations

For the year ended October 31, 2016

 

Investment income:

  

Dividends (net of foreign withholding taxes of $4,453,274)

    $ 376,835,500   

Dividends from affiliates

      7,526,308   

Total investment income

      384,361,808   

Expenses:

   

Advisory fees

      58,866,761   

Administrative services fees

      929,358   

Custodian fees

      626,656   

Distribution fees:

   

Class A

      13,356,728   

Class B

      199,190   

Class C

      6,171,776   

Class R

      983,495   

Investor Class

      4,450,248   

Transfer agent fees — A, B, C, R, Y and Investor

      15,074,961   

Transfer agent fees — R5

      2,918,034   

Transfer agent fees — R6

      30,714   

Trustees’ and officers’ fees and benefits

      307,557   

Registration and filing fees

      490,150   

Reports to shareholders

      707,814   

Professional services fees

      128,131   

Other

      277,816   

Total expenses

      105,519,389   

Less: Fees waived and expense offset arrangement(s)

      (2,878,183 ) 

Net expenses

      102,641,206   

Net investment income

      281,720,602   

Realized and unrealized gain (loss) from:

   

Net realized gain (loss) from:

   

Investment securities

      481,230,446   

Foreign currencies

      (1,015,865 ) 

Forward foreign currency contracts

      8,855,780   
       489,070,361   

Change in net unrealized appreciation of:

   

Investment securities

      117,231,429   

Foreign currencies

      67,681   

Forward foreign currency contracts

      3,573,460   
       120,872,570   

Net realized and unrealized gain

      609,942,931   

Net increase in net assets resulting from operations

    $ 891,663,533   

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

12                         Invesco Diversified Dividend Fund

Statement of Changes in Net Assets

For the years ended October 31, 2016 and 2015

 

     2016      2015  

Operations:

     

Net investment income

   $ 281,720,602       $ 189,379,968   

Net realized gain

     489,070,361         477,957,577   

Change in net unrealized appreciation

     120,872,570         101,752,051   

Net increase in net assets resulting from operations

     891,663,533         769,089,596   

Distributions to shareholders from net investment income:

     

Class A

     (87,597,660 )       (67,378,784 ) 

Class B

     (186,213 )       (208,402 ) 

Class C

     (5,342,554 )       (2,939,363 ) 

Class R

     (2,826,974 )       (2,012,249 ) 

Class Y

     (38,800,678 )       (16,633,380 ) 

Investor Class

     (35,300,336 )       (31,388,104 ) 

Class R5

     (55,949,846 )       (39,951,307 ) 

Class R6

     (29,669,892 )       (17,210,512 ) 

Total distributions from net investment income

     (255,674,153 )       (177,722,101 ) 

Distributions to shareholders from net realized gains:

     

Class A

     (187,921,659 )       (84,111,861 ) 

Class B

     (884,906 )       (587,690 ) 

Class C

     (18,558,267 )       (7,110,573 ) 

Class R

     (8,075,563 )       (2,755,974 ) 

Class Y

     (46,717,282 )       (16,899,359 ) 

Investor Class

     (78,259,112 )       (39,162,635 ) 

Class R5

     (96,137,321 )       (40,314,134 ) 

Class R6

     (33,943,581 )       (20,768,832 ) 

Total distributions from net realized gains

     (470,497,691 )       (211,711,058 ) 

Share transactions-net:

     

Class A

     1,217,893,699         357,634,116   

Class B

     (6,485,243 )       (7,799,720 ) 

Class C

     328,459,436         78,983,740   

Class R

     33,543,725         59,455,008   

Class Y

     2,439,382,508         308,694,919   

Investor Class

     101,759,931         (36,776,138 ) 

Class R5

     990,438,812         361,308,305   

Class R6

     1,759,334,300         (118,855,797 ) 

Net increase in net assets resulting from share transactions

     6,864,327,168         1,002,644,433   

Net increase in net assets

     7,029,818,857         1,382,300,870   

Net assets:

     

Beginning of year

     11,804,440,532         10,422,139,662   

End of year (includes undistributed net investment income of $57,541,540 and $32,597,353, respectively)

   $ 18,834,259,389       $ 11,804,440,532   

Notes to Financial Statements

October 31, 2016

NOTE 1—Significant Accounting Policies

Invesco Diversified Dividend Fund (the “Fund”) is a series portfolio of AIM Equity Funds (Invesco Equity 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 three 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.

 

13                         Invesco Diversified Dividend Fund

The Fund’s investment objective is long-term growth of capital and, secondarily, current income.

The Fund currently consists of eight different classes of shares: Class A, Class B, Class C, Class R, 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 R, 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.

 

14                         Invesco Diversified Dividend 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 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

 

15                         Invesco Diversified Dividend 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 .60%   

Next $350 million

     0 .55%   

Next $1.3 billion

     0 .50%   

Next $2 billion

     0 .45%   

Next $2 billion

     0 .40%   

Next $2 billion

     0 .375%   

Over $8 billion

     0 .35%         

For the year ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.40%.

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, Investor Class, Class R5 and Class R6 shares to 2.00%, 2.75%, 2.75%, 2.25%, 1.75%, 2.00%, 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 year ended October 31, 2016, the Adviser waived advisory fees of $2,846,947.

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 year 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 year 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 R, 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, Class R and Investor Class shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R 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

 

16                         Invesco Diversified Dividend Fund

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 year 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 year ended October 31, 2016, IDI advised the Fund that IDI retained $2,062,253 in front-end sales commissions from the sale of Class A shares and $35,640, $3,270 and $63,142 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.

For the year ended October 31, 2016, the Fund incurred $1,154 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

   $ 14,377,537,373         $ 1,200,245,733         $ —         $ 15,577,783,106   

Money Market Funds

     3,401,027,849           —           —           3,401,027,849   
    $ 17,778,565,222         $ 1,200,245,733         $ —         $ 18,978,810,955   

Forward Foreign Currency Contracts*

     —           14,294,795           —           14,294,795   

Total Investments

   $ 17,778,565,222         $ 1,214,540,528         $ —         $ 18,993,105,750   

 

* 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  
     Currency Risk  

Derivative Assets

  

Unrealized appreciation on forward foreign currency contracts outstanding

   $ 14,322,885   

Derivatives not subject to master netting agreements

     —   

Total Derivative Assets subject to master netting agreements

   $ 14,322,885   

Derivative Liabilities

  

Unrealized depreciation on forward foreign currency contracts outstanding

   $ (28,090 ) 

Derivatives not subject to master netting agreements

     —   

Total Derivative Liabilities subject to master netting agreements

   $ (28,090 ) 

 

17                         Invesco Diversified Dividend 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 as of 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		  

Citigroup Global Markets Inc.

   $ 4,752,196         $ —         $ 4,752,196         $ —         $ —         $ 4,752,196   

Deutsche Bank Securities Inc.

     4,863,887           (28,090 )         4,835,797           —           —           4,835,797   

Goldman Sachs International

     4,706,802           —           4,706,802           —           —           4,706,802   

Total

   $ 14,322,885         $ (28,090 )       $ 14,294,795         $ —         $ —         $ 14,294,795   

Effect of Derivative Investments for the year ended October 31, 2016

The table below summarizes the gains (losses) 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

   $ 8,855,780   

Change in Net Unrealized Appreciation:

  

Forward foreign currency contracts

     3,573,460   

Total

   $ 12,429,240   

The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.

 

     Forward
Foreign Currency
Contracts		  

Average notional value

   $ 608,850,354   

 

Open Forward Foreign Currency Contracts  

Settlement
Date

 

     

Counterparty

      Contract to        Notional
Value 		       Unrealized
Appreciation
(Depreciation)		  
          Deliver        Receive            

11/18/16

      Citigroup Global Markets Inc.        CAD        86,515,861           USD        65,966,085         $ 64,511,465         $ 1,454,620   

11/18/16

      Citigroup Global Markets Inc.        EUR        148,516,721           USD        166,448,630           163,151,054           3,297,576   

11/18/16

      Deutsche Bank Securities Inc.        CAD        87,100,609           USD        66,394,964           64,947,489           1,447,475   

11/18/16

      Deutsche Bank Securities Inc.        EUR        148,517,712           USD        166,568,555           163,152,143           3,416,412   

11/18/16

      Deutsche Bank Securities Inc.        USD        1,070,737           EUR        949,123           1,042,647           (28,090 ) 

11/18/16

      Goldman Sachs International        CAD        86,341,998           USD        65,811,884           64,381,822           1,430,062   

11/18/16

      Goldman Sachs International        EUR        152,745,475           USD        171,073,235           167,796,495           3,276,740   

Total Forward Foreign Currency Contracts — Currency Risk

  

      $ 14,294,795   

Currency Abbreviations:

 

CAD  

– Canadian Dollar

EUR  

– Euro

USD  

– U.S. Dollar

NOTE 5—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 year ended October 31, 2016.

 

    

Value

10/31/15

        Purchases
at Cost		        Proceeds
from Sales		        Change in
Unrealized
Appreciation		        Realized
Gain (Loss)		       

Value

10/31/16

        Dividend
Income		  

Joy Global Inc.

   $ 92,620,713         $ 5,185,431         $ —         $ 63,296,383         $ —         $ 161,102,527         $ 230,459   

 

18                         Invesco Diversified Dividend Fund

NOTE 6—Expense Offset Arrangement(s)

The expense offset arrangement is comprised of transfer agency credits which result from balances in demand deposit accounts 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 $31,236.

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—Distributions to Shareholders and Tax Components of Net Assets

Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended October 31, 2016 and 2015:

 

     2016        2015  

Ordinary income

   $ 267,023,011         $ 181,384,333   

Long-term capital gain

     459,148,833           208,048,826   

Total distributions

   $ 726,171,844         $ 389,433,159   

Tax Components of Net Assets at Period-End:

 

     2016  

Undistributed ordinary income

   $ 58,462,134   

Undistributed long-term gain

     488,932,940   

Net unrealized appreciation — investments

     2,956,864,386   

Net unrealized appreciation (depreciation) — other investments

     (105,435 ) 

Temporary book/tax differences

     (920,594 ) 

Capital loss carryforward

     (8,514,952 ) 

Shares of beneficial interest

     15,339,540,910   

Total net assets

   $ 18,834,259,389   

The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.

The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.

Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. 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.

 

19                         Invesco Diversified Dividend Fund

The Fund has a capital loss carryforward as of October 31, 2016, which expires as follows:

 

Capital Loss Carryforward*  
Expiration   Short-Term        Long-Term        Total  

October 31, 2017

   $ 8,514,952         $ —         $ 8,514,952   

* 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 year ended October 31, 2016 was $4,880,975,874 and $1,319,903,885, 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

   $ 3,187,848,905   

Aggregate unrealized (depreciation) of investment securities

     (230,984,519 ) 

Net unrealized appreciation of investment securities

   $ 2,956,864,386   

Cost of investments for tax purposes is $16,021,946,569.

NOTE 11—Reclassification of Permanent Differences

Primarily as a result of differing book/tax treatment of foreign currency transactions, on October 31, 2016, undistributed net investment income was decreased by $1,102,252 and undistributed net realized gain was increased by $1,102,252. This reclassification had no effect on the net assets of the Fund.

 

20                         Invesco Diversified Dividend Fund

NOTE 12—Share Information

 

     Summary of Share Activity  
    Years ended October 31,  
    2016(a)      2015  
     Shares      Amount      Shares      Amount  

Sold:

           

Class A

     108,979,405       $ 2,005,788,792         49,071,513       $ 908,967,640   

Class B

     151,159         2,737,031         128,997         2,364,301   

Class C

     23,552,942         427,973,231         7,543,186         138,036,038   

Class R

     6,720,938         124,503,593         5,218,131         95,069,215   

Class Y

     167,451,174         3,100,807,223         31,767,783         589,650,231   

Investor Class

     13,026,207         240,459,190         6,156,226         114,175,060   

Class R5

     70,801,603         1,300,534,108         39,348,146         727,950,505   

Class R6

     106,486,741         1,989,408,864         21,894,533         408,991,767   

Issued as reinvestment of dividends:

           

Class A

     13,066,538         230,265,852         6,750,039         121,781,499   

Class B

     58,325         1,007,338         41,958         744,661   

Class C

     1,259,068         21,799,540         519,418         9,219,512   

Class R

     616,089         10,841,357         263,465         4,766,201   

Class Y

     4,198,659         74,674,258         1,638,950         29,651,060   

Investor Class

     6,012,378         105,660,767         3,648,821         65,788,807   

Class R5

     7,939,892         140,140,576         4,126,231         74,560,754   

Class R6

     3,528,232         62,800,636         1,454,383         26,276,678   

Automatic conversion of Class B shares to Class A shares:

           

Class A

     327,801         6,042,821         372,517         6,929,711   

Class B

     (331,527 )       (6,042,821 )       (376,599 )       (6,929,711 ) 

Reacquired:

           

Class A

     (55,515,159 )       (1,024,203,766 )       (36,679,017 )       (680,044,734 ) 

Class B

     (231,547 )       (4,186,791 )       (216,579 )       (3,978,971 ) 

Class C

     (6,658,102 )       (121,313,335 )       (3,727,814 )       (68,271,810 ) 

Class R

     (5,633,746 )       (101,801,225 )       (2,179,666 )       (40,380,408 ) 

Class Y

     (39,830,247 )       (736,098,973 )       (16,754,694 )       (310,606,372 ) 

Investor Class

     (13,325,518 )       (244,360,026 )       (11,696,608 )       (216,740,005 ) 

Class R5

     (24,574,635 )       (450,235,872 )       (23,678,672 )       (441,202,954 ) 

Class R6

     (16,074,584 )       (292,875,200 )       (29,733,962 )       (554,124,242 ) 

Net increase in share activity

     372,002,086       $ 6,864,327,168         54,900,686       $ 1,002,644,433   

 

(a)  There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 47% 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.

 

21                         Invesco Diversified Dividend Fund

NOTE 13—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

                            

Year ended 10/31/16

   $ 18.78      $ 0.33      $ 0.76      $ 1.09      $ (0.31 )    $ (0.73 )    $ (1.04 )    $ 18.83        6.27 %    $ 5,985,548        0.80 %(d)      0.82 %(d)      1.79 %(d)      11 % 

Year ended 10/31/15

     18.17        0.30        0.95        1.25        (0.28 )      (0.36 )      (0.64 )      18.78        7.09        4,715,635        0.82        0.83        1.63        11   

Year ended 10/31/14

     16.52        0.28        1.78        2.06        (0.25 )      (0.16 )      (0.41 )      18.17        12.68        4,206,935        0.83        0.84        1.59        6   

Year ended 10/31/13

     13.54        0.25        3.20        3.45        (0.26 )      (0.21 )      (0.47 )      16.52        26.07        3,700,473        0.86        0.87        1.65        9   

Year ended 10/31/12

     11.92        0.22        1.76        1.98        (0.22 )      (0.14 )      (0.36 )      13.54        17.00        2,520,209        0.91        0.92        1.78        12   

Class B

                            

Year ended 10/31/16

     18.58        0.19        0.74        0.93        (0.17 )      (0.73 )      (0.90 )      18.61        5.41        16,309        1.55 (d)      1.57 (d)      1.04 (d)      11   

Year ended 10/31/15

     17.97        0.16        0.95        1.11        (0.14 )      (0.36 )      (0.50 )      18.58        6.35        22,845        1.57        1.58        0.88        11   

Year ended 10/31/14

     16.35        0.14        1.76        1.90        (0.12 )      (0.16 )      (0.28 )      17.97        11.77        29,691        1.58        1.59        0.84        6   

Year ended 10/31/13

     13.40        0.13        3.17        3.30        (0.14 )      (0.21 )      (0.35 )      16.35        25.16        35,912        1.61        1.62        0.90        9   

Year ended 10/31/12

     11.80        0.13        1.74        1.87        (0.13 )      (0.14 )      (0.27 )      13.40        16.12        35,401        1.66        1.67        1.03        12   

Class C

                            

Year ended 10/31/16

     18.56        0.19        0.74        0.93        (0.17 )      (0.73 )      (0.90 )      18.59        5.41        778,829        1.55 (d)      1.57 (d)      1.04 (d)      11   

Year ended 10/31/15

     17.95        0.16        0.95        1.11        (0.14 )      (0.36 )      (0.50 )      18.56        6.36        440,482        1.57        1.58        0.88        11   

Year ended 10/31/14

     16.33        0.14        1.76        1.90        (0.12 )      (0.16 )      (0.28 )      17.95        11.79        348,340        1.58        1.59        0.84        6   

Year ended 10/31/13

     13.38        0.13        3.17        3.30        (0.14 )      (0.21 )      (0.35 )      16.33        25.19        276,653        1.61        1.62        0.90        9   

Year ended 10/31/12

     11.79        0.13        1.73        1.86        (0.13 )      (0.14 )      (0.27 )      13.38        16.04        153,467        1.66        1.67        1.03        12   

Class R

                            

Year ended 10/31/16

     18.84        0.28        0.75        1.03        (0.26 )      (0.73 )      (0.99 )      18.88        5.93        237,638        1.05 (d)      1.07 (d)      1.54 (d)      11   

Year ended 10/31/15

     18.22        0.26        0.96        1.22        (0.24 )      (0.36 )      (0.60 )      18.84        6.87        204,956        1.07        1.08        1.38        11   

Year ended 10/31/14

     16.57        0.23        1.79        2.02        (0.21 )      (0.16 )      (0.37 )      18.22        12.36        138,078        1.08        1.09        1.34        6   

Year ended 10/31/13

     13.58        0.22        3.20        3.42        (0.22 )      (0.21 )      (0.43 )      16.57        25.77        109,444        1.11        1.12        1.40        9   

Year ended 10/31/12

     11.96        0.19        1.76        1.95        (0.19 )      (0.14 )      (0.33 )      13.58        16.66        37,948        1.16        1.17        1.53        12   

Class Y

                            

Year ended 10/31/16

     18.80        0.38        0.75        1.13        (0.35 )      (0.73 )      (1.08 )      18.85        6.53        3,670,662        0.55 (d)      0.57 (d)      2.04 (d)      11   

Year ended 10/31/15

     18.19        0.35        0.95        1.30        (0.33 )      (0.36 )      (0.69 )      18.80        7.36        1,183,312        0.57        0.58        1.88        11   

Year ended 10/31/14

     16.54        0.32        1.79        2.11        (0.30 )      (0.16 )      (0.46 )      18.19        12.95        841,750        0.58        0.59        1.84        6   

Year ended 10/31/13

     13.56        0.29        3.19        3.48        (0.29 )      (0.21 )      (0.50 )      16.54        26.35        485,248        0.61        0.62        1.90        9   

Year ended 10/31/12

     11.94        0.26        1.76        2.02        (0.26 )      (0.14 )      (0.40 )      13.56        17.26        179,087        0.66        0.67        2.03        12   

Investor Class

                            

Year ended 10/31/16

     18.77        0.33        0.76        1.09        (0.32 )      (0.73 )      (1.05 )      18.81        6.29 (g)      2,114,404        0.76 (d)(g)      0.78 (d)(g)      1.83 (d)(g)      11   

Year ended 10/31/15

     18.16        0.31        0.96        1.27        (0.30 )      (0.36 )      (0.66 )      18.77        7.16 (g)      2,002,938        0.80 (g)      0.81 (g)      1.65 (g)      11   

Year ended 10/31/14

     16.51        0.29        1.78        2.07        (0.26 )      (0.16 )      (0.42 )      18.16        12.70 (g)      1,972,400        0.76 (g)      0.77 (g)      1.66 (g)      6   

Year ended 10/31/13

     13.53        0.25        3.20        3.45        (0.26 )      (0.21 )      (0.47 )      16.51        26.11        1,910,866        0.86        0.87        1.64        9   

Year ended 10/31/12

     11.92        0.23        1.75        1.98        (0.23 )      (0.14 )      (0.37 )      13.53        16.95        1,444,060        0.90        0.91        1.79        12   

Class R5

                            

Year ended 10/31/16

     18.78        0.39        0.76        1.15        (0.37 )      (0.73 )      (1.10 )      18.83        6.59        3,410,571        0.50 (d)      0.52 (d)      2.09 (d)      11   

Year ended 10/31/15

     18.17        0.36        0.95        1.31        (0.34 )      (0.36 )      (0.70 )      18.78        7.41        2,385,096        0.53        0.54        1.92        11   

Year ended 10/31/14

     16.52        0.33        1.78        2.11        (0.30 )      (0.16 )      (0.46 )      18.17        12.99        1,947,461        0.54        0.55        1.88        6   

Year ended 10/31/13

     13.54        0.29        3.20        3.49        (0.30 )      (0.21 )      (0.51 )      16.52        26.47        1,408,407        0.57        0.58        1.94        9   

Year ended 10/31/12

     11.92        0.27        1.76        2.03        (0.27 )      (0.14 )      (0.41 )      13.54        17.39        720,726        0.56        0.57        2.13        12   

Class R6

                            

Year ended 10/31/16

     18.79        0.41        0.74        1.15        (0.38 )      (0.73 )      (1.11 )      18.83        6.63        2,620,298        0.40 (d)      0.42 (d)      2.19 (d)      11   

Year ended 10/31/15

     18.17        0.37        0.97        1.34        (0.36 )      (0.36 )      (0.72 )      18.79        7.57        849,176        0.43        0.44        2.02        11   

Year ended 10/31/14

     16.52        0.35        1.78        2.13        (0.32 )      (0.16 )      (0.48 )      18.17        13.10        937,485        0.44        0.45        1.98        6   

Year ended 10/31/13

     13.54        0.31        3.19        3.50        (0.31 )      (0.21 )      (0.52 )      16.52        26.56        535,077        0.48        0.49        2.03        9   

Year ended 10/31/12(e)

     13.61        0.03        (0.10 )      (0.07 )      —        —        —        13.54        (0.51 )      166,418        0.49 (f)      0.50 (f)      2.20 (f)      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.
(d)  Ratios are based on average daily net assets (000’s omitted) of $5,342,691, $19,919, $617,178, $196,699, $2,131,912, $2,052,299, $2,917,267 and $1,533,968 for Class A, Class B, Class C, Class R, Class Y, Investor Class, Class R5 and Class R6 shares, respectively.
(e)  Commencement date of September 24, 2012.
(f)  Annualized.
(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 0.21%, 0.23% and 0.18% for the years ended October 31, 2016, 2015 and 2014, respectively.

 

22                         Invesco Diversified Dividend Fund

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees

and Shareholders of the Invesco Diversified Dividend Fund:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Invesco Diversified Dividend Fund (the “Fund”) as of October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2016 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where confirmations of security purchases have not been received, provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas

December 21, 2016

 

23                         Invesco Diversified Dividend 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      $ 1,016.60      $ 3.95      $ 1,021.22      $ 3.96        0.78 % 
B     1,000.00        1,012.30        7.74        1,017.44        7.76        1.53   
C     1,000.00        1,012.30        7.74        1,017.44        7.76        1.53   
R     1,000.00        1,014.70        5.22        1,019.96        5.23        1.03   
Y     1,000.00        1,017.90        2.69        1,022.47        2.69        0.53   
Investor     1,000.00        1,016.20        4.00        1,021.17        4.01        0.79   
R5     1,000.00        1,018.10        2.49        1,022.67        2.49        0.49   
R6     1,000.00        1,018.00        1.98        1,023.18        1.98        0.39   

 

1  The actual ending account value is based on the actual total return of the Fund for the period May 1, 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 184/366 to reflect the most recent fiscal half year.

 

24                         Invesco Diversified Dividend Fund

Approval of Investment Advisory and Sub-Advisory Contracts

 

The Board of Trustees (the Board) of AIM Equity Funds (Invesco Equity Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco Diversified Dividend 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 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 the Fund’s performance 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.

 

 

25                         Invesco Diversified Dividend 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 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 and below the rate of an offshore fund advised by Invesco Advisers using a similar investment process.

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 more comparable, 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.

 

 

26                         Invesco Diversified Dividend Fund

Tax Information

Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.

The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.

The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2016:

 

Federal and State Income Tax

  

Long-Term Capital Gain Distributions

    $ 459,148,833   

Qualified Dividend Income*

      100 % 

Corporate Dividends Received Deduction*

      100 % 

U.S. Treasury Obligations*

      0 % 

 

  * The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year.

 

Non-Resident Alien Shareholders

  

Qualified Short-Term Gains

    $ 11,258,912   

 

27                         Invesco Diversified Dividend Fund

Trustees and Officers

 

The address of each trustee and officer is AIM Equity Funds (Invesco Equity Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Interested Persons                
Martin L. Flanagan1 — 1960 Trustee   2007  

Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business

 

Formerly: Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US) Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization)

   146   None
Philip A. Taylor2 — 1954 Trustee and Senior Vice President   2006  

Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent) Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company) Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).

 

Formerly: Director, Chief Executive Officer and President, Van Kampen Exchange Corp.; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.

   146   None
1  Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser.

 

2  Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser.

 

T-1                         Invesco Diversified Dividend Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Independent Trustees                

Bruce L. Crockett — 1944

Trustee and Chair

  

1993

  

Chairman, Crockett Technologies Associates (technology consulting company)

 

Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute

  

146

   ALPS (Attorneys Liability Protection Society) (insurance company) and Globe Specialty Metals, Inc. (metallurgical company); Member of the Audit Committee, Ferroglobe PLC and Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council

David C. Arch — 1945

Trustee

   2010   Chairman of Blistex Inc., a consumer health care products manufacturer  

146

   Board member of the Illinois Manufacturers’ Association; Member of the Board of Visitors, Institute for the Humanities, University of Michigan

James T. Bunch — 1942

Trustee

  

2003

  

Managing Member, Grumman Hill Group LLC (family office/private equity investments)

 

Formerly: Chairman of the Board, Denver Film Society, Chairman of the Board of Trustees, Evans Scholarship Foundation; Chairman, Board of Governors, Western Golf Association

  

146

   Trustee, Evans Scholarship Foundation

Albert R. Dowden — 1941

Trustee

  

2000

  

Director of a number of public and private business corporations, including Nature’s Sunshine Products, Inc.

 

Formerly: Director, The Boss Group, Ltd. and Reich & Tang Funds (5 portfolios) (registered investment company); Director, Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company); Director, Continental Energy Services, LLC (oil and gas pipeline service); Director, CompuDyne Corporation (provider of product and services to the public security market) and Director, Annuity and Life Re (Holdings), Ltd. (reinsurance company); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations; Chairman, DHJ Media, Inc.; Director, Magellan Insurance Company; and Director, The Hertz Corporation, Genmar Corporation (boat manufacturer), National Media Corporation; Advisory Board of Rotary Power International (designer, manufacturer, and seller of rotary power engines); and Chairman, Cortland Trust, Inc. (registered investment company)

  

146

   Director of Nature’s Sunshine Products, Inc.

Jack M. Fields — 1952

Trustee

  

1997

  

Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Discovery Learning Alliance (non-profit)

 

Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives

  

146

   None

Eli Jones — 1961

Trustee

   2016  

Professor and Dean, Mays Business School — Texas A&M University

 

Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University and Director, Arvest Bank

  

146

   Director of Insperity, Inc. (formerly known as Administaff)

Prema Mathai-Davis — 1950

Trustee

  

1998

  

Retired.

 

Formerly: Chief Executive Officer, YWCA of the U.S.A.

  

146

   None

Larry Soll — 1942

Trustee

  

2003

  

Retired.

 

Formerly: Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company)

  

146

   None

Raymond Stickel, Jr. — 1944

Trustee

   2005  

Retired.

 

Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche

  

146

   None

Robert C. Troccoli — 1949

Trustee

   2016  

Adjunct Professor, University of Denver — Daniels College of Business

 

Formerly: Senior Partner, KPMG LLP

  

146

   None

 

T-2                         Invesco Diversified Dividend Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Independent Trustees—(continued)

Suzanne H. Woolsey — 1941

Trustee

   2014  

Retired.

 

Formerly: Chief Executive Officer of Woolsey Partners LLC

  

146

   Director, SunShare LLC; Trustee, Ocean Conservancy; Emeritus Chair of the Board of Trustees of the Institute for Defense Analyses and of Colorado College; Trustee, Chair, Business and Finance Committee of California Institute of Technology; Prior to 2014, Director of Fluor Corp.; Prior to 2010, Trustee of the German Marshall Fund of the United States; Prior to 2010, Trustee of the Rocky Mountain Institute
Other Officers                

Sheri Morris — 1964

President, Principal Executive Officer and Treasurer

  

1999

  

President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust

   N/A   N/A

Russell C. Burk — 1958

Senior Vice President and Senior Officer

   2005   Senior Vice President and Senior Officer, The Invesco Funds   N/A   N/A

John M. Zerr — 1962

Senior Vice President, Chief Legal Officer and Secretary

   2006  

Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company)

   N/A   N/A

 

T-3                         Invesco Diversified Dividend Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Other Officers—(continued)                
Karen Dunn Kelley — 1960 Senior Vice President  

2004

  

Senior Managing Director, Investments, Invesco Ltd.; Director, Co-President, Co-Chief Executive Officer, and Co-Chairman, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Chairman and Director, Invesco Senior Secured Management, Inc.; Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Executive Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Invesco Mortgage Capital Inc. and Invesco Management Company Limited; Senior Vice President, The Invesco Funds

 

Formerly: Vice President, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Asset Management (Bermuda) Ltd., Director, INVESCO Global Asset Management DAC (formerly known as INVESCO Global Asset Management Limited) and INVESCO Management S.A.; Senior Vice President, Van Kampen Investments Inc. and Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and President, Fund Management Company; Chief Cash Management Officer, Director of Cash Management, Senior Vice President, and Managing Director, Invesco AIM Capital Management, Inc.; Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only)

   N/A   N/A

Kelli Gallegos — 1970

Vice President, Principal Financial Officer and Assistant Treasurer

   2008  

Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Assistant Vice President, The Invesco Funds

   N/A   N/A

Tracy Sullivan — 1962

Vice President, Chief Tax Officer and Assistant Treasurer

   2008  

Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Assistant Vice President, The Invesco Funds

   N/A   N/A

Crissie M. Wisdom — 1969

Anti-Money Laundering Compliance Officer

   2013  

Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.

 

Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp.

   N/A   N/A

Robert R. Leveille — 1969

Chief Compliance Officer

   2016  

Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds

 

Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds

   N/A   N/A

The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.

 

Office of the Fund

11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Investment Adviser

Invesco Advisers, Inc.

1555 Peachtree Street, N.E.

Atlanta, GA 30309

  

Distributor

Invesco Distributors, Inc.

11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Auditors

PricewaterhouseCoopers LLP

1000 Louisiana Street, Suite 5800

Houston, TX 77002-5678

     

Counsel to the Fund

Stradley Ronon Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, PA 19103-7018

  

Counsel to the Independent Trustees

Goodwin Procter LLP

901 New York Avenue, N.W.

Washington, D.C. 20001

  

Transfer Agent

Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Custodian

State Street Bank and Trust Company

225 Franklin Street

Boston, MA 02110-2801

 

T-4                         Invesco Diversified Dividend Fund

 

 

 

 

 

Explore High-Conviction Investing with Invesco

 

LOGO

 

 

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.

   LOGO

 

SEC file numbers: 811-01424 and 002-25469    DDI-AR-1    Invesco Distributors, Inc.

   

 

    LOGO  

Annual Report to Shareholders

 

   

October 31, 2016

 

   

 

   

Invesco Summit Fund

 

Nasdaq:

A: ASMMX  ∎  B: BSMMX  ∎  C: CSMMX  ∎  P: SMMIX  ∎  S: SMMSX  ∎  Y: ASMYX  ∎  R5: SMITX

 

    

LOGO

 

Letters to Shareholders

 

 

LOGO

Philip Taylor

     

Dear Shareholders:

This annual report includes information about your Fund, including performance data and a complete list of its investments as of the close of the reporting period. Inside is a discussion of how your Fund was managed and the factors that affected its performance during the reporting period.

     In December 2015, the US Federal Reserve raised short-term interest rates for the first time since 2006, signaling its belief that the economy was likely to continue strengthening. Indeed, throughout the reporting period, US economic data were generally positive and the economy expanded at a moderate rate – but there were some bumps along the road. Job growth in May 2016 was very weak, but it was followed by strong increases in nonfarm payrolls in June and July. Increased concerns about global economic weakness caused US stock market indexes to sink at the start of calendar year 2016, but they eventually recovered;

they sank again following the UK’s decision to leave the European Union, but then quickly recovered and reached record highs later in the summer. Strong demand for income-producing investments, particularly those perceived to be lower risk, benefited bonds as well as dividend-paying stocks for much of the reporting period. While economic news in the US was generally positive, news overseas was less upbeat. The European Central Bank, and central banks in China and Japan – as well as other countries – maintained extraordinarily accommodative monetary policies in response to economic weakness. As the fiscal year drew to a close, uncertainty about the outcome of the US presidential election resulted in increased market volatility; the surprise outcome after the close of the reporting period suggested that market volatility may continue for some time to come.

    Short-term market volatility can prompt some investors to abandon their investment plans – and can cause others to settle for average results. The investment professionals at Invesco, in contrast, 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.

    You, too, can invest with high conviction by maintaining a long-term investment perspective and by working with your financial adviser on a regular basis. During periods of short-term market volatility or uncertainty, your financial adviser can keep you focused on your long-term investment goals – a new home, a child’s college education or a secure retirement. He or she also can share research about the economy, the markets and individual investment options.

Visit our website for more information on your investments

Our website, invesco.com/us, offers a wide range of market insights and investment perspectives. On the website, you’ll find detailed information about our funds, including performance, holdings and portfolio manager commentaries. You can access information about your account by completing a simple, secure online registration. Click on the “Need to register” link in the “Account Access” box on our homepage to get started.

    In addition to the resources accessible on our website and through our mobile app, you can obtain timely updates to help you stay informed about the markets, the economy and investing by connecting with Invesco on Twitter, LinkedIn or Facebook. 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.

Have questions?

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,

 

 

LOGO

Philip Taylor

Senior Managing Director, Invesco Ltd.

 

2                         Invesco Summit Fund

LOGO

Bruce Crockett

      

Dear Fellow Shareholders:

Among the many important lessons I’ve learned in more than 40 years in a variety of business endeavors is the value of a trusted advocate.

    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, including but 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.
  ∎   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.

    I trust the measures outlined above provide assurance that you have a worthy advocate when it comes to choosing the Invesco Funds.

    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,

 

 

LOGO

Bruce L. Crockett

Independent Chair

Invesco Funds Board of Trustees

 

3                         Invesco Summit Fund

 

Management’s Discussion of Fund Performance

 

Performance summary

For the fiscal year ended October 31, 2016, Class A shares of Invesco Summit Fund (the Fund), at net asset value (NAV), underperformed the Russell 1000 Growth Index, the Fund’s style-specific benchmark.

    Your Fund’s long-term performance appears later in this report.

 

 

Fund vs. Indexes

Total returns, 10/31/15 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

      0.81 % 

Class B Shares

      0.03   

Class C Shares

      0.09   

Class P Shares

      0.98   

Class S Shares

      0.92   

Class Y Shares

      1.05   

Class R5 Shares

      1.10   

S&P 500 Indexq (Broad Market Index)

      4.51   

Russell 1000 Growth Indexq (Style-Specific Index)

      2.28   

Lipper Multi-Cap Growth Funds Index∎ (Peer Group Index)

      -0.19   

Source(s): qFactSet Research Systems Inc.; ∎Lipper Inc.

   

 

 

Market conditions and your Fund

During the fiscal year ended October 31, 2016, the US economy continued to expand. The initial estimate of US gross domestic product (GDP) showed the US economy grew by 2.9% in the third quarter, beating consensus estimates.1 However, annualized GDP is expected to be lower. Employment data were mixed, though the unemployment rate had a surprise uptick from 4.9% in August to 5.0% in September before ending the fiscal year at 4.9%.2 Oil prices traded in a range from the high $20s to the low $50s during the reporting period.3

    The US Federal Reserve (the Fed) raised interest rates in December 2015 – its first increase since 2006 – but that was its only increase during the reporting period. Major US stock market indexes posted gains for the reporting period, but they were fairly volatile. Stocks began

calendar year 2016 on a negative note, driven by investor concerns about economic weakness in China, falling oil prices and uncertainty over Fed policy, including rumors of possible negative interest rates in the US. Markets recovered in late February and posted gains until June when UK voters opted to leave the European Union, sending markets sharply lower once again. Markets again recovered, and major US equity indexes hit record highs during the summer.4 In this environment, investors generally favored the perceived safety of government bonds and more defensive, dividend-paying equities often found in the telecommunication services, utilities and consumer staples sectors.

    In this market environment, the Fund had positive returns at NAV, but underperformed its style-specific index. The Fund outperformed its style-specific index in a number of sectors, most notably the information technology (IT),

 

consumer staples and energy sectors. However, this performance was offset by relative underperformance in other sectors, including the health care, telecommunication services and consumer discretionary sectors. The Fund’s modest cash position also proved to be a drag on relative performance.

    The Fund outperformed its style-specific index by the widest margin in the IT sector driven by positive stock selection and overweight exposure within the sector. Social media giant Facebook reported better-than-expected results throughout the reporting period and significantly contributed to the Fund’s relative performance. A migration to mobile, increased video usage, contributions from Instagram and better user metrics across the board also helped the company’s stock price. We added video game developer Nintendo to the portfolio during the reporting period and it contributed to the Fund’s relative performance. The company’s price rose as it prepared to introduce its proprietary games on mobile gaming platforms.

    Solid stock selection in the consumer staples sector also contributed to the Fund’s performance versus its style-specific index. Tyson Foods was a significant contributor to Fund performance. The company beat earning expectations throughout the reporting period and saw increased margins across all protein food segments. Another large contributor to Fund performance was packaged food and beverage company WhiteWave Foods, which was acquired by Danone (not a Fund holding) for a premium during the fiscal year. We sold our position after the acquisition.

    Stock selection in the volatile energy sector also benefited Fund performance versus the style-specific index. As the energy sector recovered during the fiscal

 

Portfolio Composition

  

By sector

      % of total net assets   

Information Technology

      38.3 % 
Consumer Discretionary      21.1   
Health Care      14.0   

Consumer Staples

      7.9   

Industrials

      5.5   

Financials

      4.0   
Telecommunication Services      2.6   

Energy

      2.2   

Materials

      2.2   
Money Market Funds Plus Other Assets Less Liabilities      2.2   

 

4                         Invesco Summit Fund

Top 10 Equity Holdings*         
  % of total net assets   
  1.   Alphabet Inc.-Class A      6.3 % 
  2.   Facebook Inc.-Class A      5.6   
  3.   Amazon.com, Inc.      5.4   
  4.   Apple Inc.      4.2   
  5.   Visa Inc.-Class A      4.2   
  6.   Celgene Corp.      2.6   
  7.   Activision Blizzard, Inc.      2.1   
  8.   Lowe’s Cos., Inc.      2.1   
  9.   Electronic Arts Inc.      1.9   
10.   Broadcom Ltd.      1.9   

Total Net Assets

    $ 1.8 billion   

Total Number of Holdings*

      90   

The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.

*Excluding money market fund holdings.

Data presented here are as of October 31, 2016.

 

year, investors began allocating more funds to energy companies with solid balance sheets and growth prospects. Fund holding Pioneer Natural Resources, an independent oil and gas exploration and production company based in Texas, contributed to Fund performance. The company was helped by its solid management team and balance sheet. Superior Energy Services also contributed to the Fund’s relative performance.

    Some of the Fund’s outperformance versus the style-specific index was offset by the impact of underperforming sectors. Stock selection in the health care sector – specifically, biotechnology and pharmaceutical stocks – detracted from both absolute and relative Fund performance for the reporting period. Biopharmaceutical company Alkermes was the largest detractor from Fund performance during the reporting period. The company’s stock price fell early in the fiscal year after a key developmental drug did not meet its goal in two advanced trials. The trial results were unexpected and the stock lost roughly half its value in one day, despite the company having several treatments already on the market. Gilead Sciences was another biopharmaceutical holding within the Fund that underperformed relative to the style-specific index. The company faced headwinds during the fiscal year due to new competition with its expensive hepatitis-C treatment. We sold the position toward the end of the reporting period.

    In the telecommunication services sector, stock selection was a drag on the Fund’s performance relative to the style-specific index. LinkedIn was a detractor as the company faced lower-than-expected growth in early 2016. We sold the position during the reporting period. First Data, an e-commerce company located in New York, saw weakness in North American merchant services and subsequently detracted from the Fund’s relative performance. Tech giant Apple was also a detractor from the Fund’s absolute performance.

    Another challenge for the Fund was stock selection in the consumer discretionary sector. GameStop was a significant detractor during the reporting period as consumers shifted to digital downloads and online purchases versus traditional video game distribution. We sold our position in early 2016. Royal Caribbean Cruises and Norwegian Cruise Line also detracted from the Fund’s absolute and relative results.

    As we’ve discussed, the Fund, at NAV, had positive returns during the reporting period. Though we are optimistic that the prospects for the US consumer appear solid, we prudently balance the Fund between dynamic growth opportunities and more durable growth opportunities. We would like to caution investors against making investment decisions based on short-term performance.

    Thank you for your commitment to Invesco Summit Fund and for sharing our long-term investment horizon.

 

1 Source: Bureau of Economic Analysis
2 Source: Bureau of Labor Statistics
3 Source: Thompson-Reuters
4 Source: Reuters

The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Advisers, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but Invesco Advisers, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

See important Fund and, if applicable, index disclosures later in this report.

 

LOGO

 

Erik Voss

Chartered Financial Analyst, Portfolio Manager, is lead manager of Invesco Summit Fund. He joined Invesco in

2010. Mr. Voss earned a BS in mathematics and an MS in finance from the University of Wisconsin.

 

LOGO

 

Ido Cohen

Portfolio Manager, is manager of Invesco Summit Fund. He joined Invesco in 2010. Mr. Cohen earned

a BS in economics from The Wharton School of the University of Pennsylvania.

 

 

5                         Invesco Summit Fund

 

Your Fund’s Long-Term Performance

Results of a $10,000 Investment – Oldest Share Class(es)

Fund and index data from 10/31/06

    

LOGO

 

1 Source: FactSet Research Systems Inc.
2 Source: Lipper Inc.
* The Fund’s oldest share class (Class P) does not have a sales charge; therefore, the second-oldest share classes with a sales charge (Class A, Class B and Class C) are also included in the chart

 

Past performance cannot guarantee comparable future results.

    The data shown in the chart include reinvested distributions, applicable sales charges and Fund expenses including management fees. Results for Class B shares are calculated as if a hypothetical shareholder had liquidated his entire investment in the Fund at the close of the reporting period and paid the contingent deferred sales charges, if applicable.

Index results include reinvested dividends, but they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart and table(s) does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.

    

 

 

6                         Invesco Summit Fund

 

 Average Annual Total Returns

 As of 10/31/16, including maximum

 applicable sales charges

         
     

  

  

  

   

 Class A Shares

         

 Inception (10/31/05)

      6.19 % 

 10 Years

      5.60   

   5 Years

      11.34   

   1 Year

      -4.72   

 Class B Shares

         

 Inception (10/31/05)

      6.17 % 

 10 Years

      5.58   

   5 Years

      11.53   

   1 Year

      -4.62   

 Class C Shares

         

 Inception (10/31/05)

      5.93 % 

 10 Years

      5.40   

   5 Years

      11.76   

   1 Year

      -0.84   

 Class P Shares

         

 Inception (11/1/82)

      9.03 % 

 10 Years

      6.36   

   5 Years

      12.78   

   1 Year

      0.98   

 Class S Shares

         

 10 Years

      6.28 % 

   5 Years

      12.72   

   1 Year

      0.92   

 Class Y Shares

         

 10 Years

      6.41 % 

   5 Years

      12.91   

   1 Year

      1.05   

 Class R5 Shares

         

 10 Years

      6.51 % 

   5 Years

      13.00   

   1 Year

      1.10   

    Class S shares incepted on September 25, 2009. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares.

    Class Y shares incepted on October 3, 2008. Performance shown prior to that date is that of Class A shares and includes the 12b-1 fees applicable to Class A shares.

    Class R5 shares incepted on October 3, 2008. 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

 

 Average Annual Total Returns

 As of 9/30/16, the most recent calendar

 quarter end, including maximum applicable

 sales charges

     

  

  

  

  

  

 Class A Shares

         

 Inception (10/31/05)

      6.44 % 

 10 Years

      6.24   

   5 Years

      14.29   

   1 Year

      6.83   

 Class B Shares

         

 Inception (10/31/05)

      6.42 % 

 10 Years

      6.23   

   5 Years

      14.52   

   1 Year

      7.21   

 Class C Shares

         

 Inception (10/31/05)

      6.19 % 

 10 Years

      6.05   

   5 Years

      14.72   

   1 Year

      11.17   

 Class P Shares

         

 Inception (11/1/82)

      9.12 % 

 10 Years

      7.02   

   5 Years

      15.76   

   1 Year

      13.16   

 Class S Shares

         

 10 Years

      6.93 % 

   5 Years

      15.69   

   1 Year

      13.12   

 Class Y Shares

         

 10 Years

      7.06 % 

   5 Years

      15.88   

   1 Year

      13.27   

 Class R5 Shares

         

 10 Years

      7.16 % 

   5 Years

      16.01   

   1 Year

      13.43   

most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares.

    The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C, Class P, Class S, Class Y and Class R5 shares was 1.04%, 1.79%, 1.79%, 0.89%, 0.94%, 0.79% and 0.68%, 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 P, Class S, Class Y and Class R5 shares do not have a front-end sales charge or contingent deferred sales charge (CDSC); therefore, returns shown are at net asset value.

    The performance numbers shown do not reflect the creation and sales charges and other fees assessed by the AIM Summit Investors Plans, which were dissolved effective December 8, 2006.

    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.

 

 

7                         Invesco Summit Fund

 

Invesco Summit Fund’s investment objective is long-term growth of capital.

∎   Unless otherwise stated, information presented in this report is as of October 31, 2016, and is based on total net assets.
∎   Unless otherwise noted, all data provided by Invesco.
∎   To access your Fund’s reports/prospectus, visit invesco.com/fundreports.

 

 

About share classes

∎   Class B shares may not be purchased for new or additional investments. Please see the prospectus for more information.
∎   Class P shares, Class S shares and Class Y shares are available only to certain investors. Please see the prospectus for more information.
∎   Class R5 shares are primarily intended for employer sponsored retirement and benefit plans that meet certain standards and for institutional investors. Please see the prospectus for more information.

 

 

Principal risks of investing in the Fund

∎   Foreign securities risk. The Fund’s foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Unless the Fund has hedged its foreign securities risk, foreign securities risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Currency hedging strategies, if used, are not always successful.
∎   Growth investing risk. Growth stocks tend to be more expensive relative to the issuing company’s earnings or assets compared with other types of stock. As a result, they tend to be more sensitive to changes in, or investors’
 

expectations of, the issuing company’s earnings and can be more volatile.

∎   Management risk. The Fund is actively managed and depends heavily on the Adviser’s judgment about markets, interest rates or the attractiveness, relative values, liquidity, or potential appreciation of particular investments made for the Fund’s portfolio. The Fund could experience losses if these judgments prove to be incorrect. Additionally, legislative, regulatory, or tax developments may adversely affect management of the Fund and, therefore, the ability of the Fund to achieve its investment objective.
∎   Market risk. The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well, there can be no assurance that specific investments held by the Fund will rise in value.
∎   Sector focus risk. The Fund may from time to time invest a significant amount of its assets (i.e. over 25%) in one market sector or group of related industries. In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of industries.
∎   Small- and mid-capitalization companies risks. Small- and mid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and may have more limited product lines and markets, less experienced management
 

and fewer financial resources than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies, and their returns may vary, sometimes significantly, from the overall securities market.

 

 

About indexes used in this report

∎   The S&P 500® Index is an unmanaged index considered representative of the US stock market.
∎   The Russell 1000® Growth Index is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
∎   The Lipper Multi-Cap Growth Funds Index is an unmanaged index considered representative of multicap 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.

 

 

Other information

∎   The returns shown in management’s discussion of Fund performance are based on net asset values (NAVs) calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the NAVs for shareholder transactions and the returns based on those NAVs may differ from the NAVs and returns reported in the Financial Highlights.
∎   Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s.
 

 

 

This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.

 

   

 

NOT FDIC INSURED   |   MAY LOSE VALUE   |   NO BANK  GUARANTEE       

 

8                         Invesco Summit Fund

Schedule of Investments(a)

October 31, 2016

 

     Shares      Value  

Common Stocks & Other Equity Interests–97.77%

  

Advertising–0.83%   

Interpublic Group of Cos., Inc. (The)

     654,139       $ 14,646,172   
Aerospace & Defense–2.03%   

Northrop Grumman Corp.

     59,123         13,539,167   

Raytheon Co.

     164,524         22,475,624   
               36,014,791   
Air Freight & Logistics–0.60%   

United Parcel Service, Inc.–Class B

     98,837         10,650,675   
Airlines–0.42%   

Delta Air Lines, Inc.

     177,997         7,434,935   
Apparel, Accessories & Luxury Goods–0.17%   

Michael Kors Holdings Ltd.(b)

     58,933         2,992,618   
Application Software–1.58%     

salesforce.com, inc.(b)

     372,571         28,002,436   
Biotechnology–5.96%   

Alexion Pharmaceuticals, Inc.(b)

     130,223         16,994,101   

Alkermes PLC(b)

     140,654         7,090,368   

Amgen Inc.

     141,112         19,919,370   

Biogen Inc.(b)

     55,637         15,588,375   

Celgene Corp.(b)

     450,178         45,999,188   
               105,591,402   
Cable & Satellite–3.43%   

Charter Communications, Inc.–Class A(b)

     64,755         16,181,627   

Comcast Corp.–Class A

     215,081         13,296,308   

DISH Network Corp.–Class A(b)

     534,238         31,284,977   
               60,762,912   
Consumer Electronics–2.07%   

Harman International Industries, Inc.

     102,142         8,141,739   

Sony Corp. (Japan)

     901,000         28,512,175   
               36,653,914   
Data Processing & Outsourced Services–5.65%   

First Data Corp.–Class A(b)

     231,721         3,241,777   

MasterCard, Inc.–Class A

     155,207         16,610,253   

Vantiv, Inc.–Class A(b)

     99,503         5,806,995   

Visa Inc.–Class A

     901,510         74,383,590   
               100,042,615   
Diversified Support Services–0.48%   

Mobile Mini, Inc.

     334,042         8,467,965   
Drug Retail–0.28%   

CVS Health Corp.

     58,815         4,946,342   
Electrical Components & Equipment–0.13%   

AMETEK, Inc.

     51,319         2,263,168   
Environmental & Facilities Services–0.91%   

Waste Connections, Inc. (Canada)

     214,337         16,120,286   
Fertilizers & Agricultural Chemicals–0.53%   

Monsanto Co.

     92,449         9,316,086   
     Shares      Value  
Financial Exchanges & Data–1.52%   

Intercontinental Exchange, Inc.

     61,860       $ 16,726,325   

S&P Global Inc.

     83,782         10,208,837   
               26,935,162   
Health Care Equipment–1.11%   

Boston Scientific Corp.(b)

     892,009         19,624,198   
Home Entertainment Software–5.95%   

Activision Blizzard, Inc.

     876,346         37,831,857   

Electronic Arts Inc.(b)

     421,500         33,096,180   

Nintendo Co., Ltd. (Japan)

     52,500         12,736,375   

Take-Two Interactive Software, Inc.(b)

     488,769         21,696,456   
               105,360,868   
Home Improvement Retail–2.96%   

Home Depot, Inc. (The)

     121,007         14,764,064   

Lowe’s Cos., Inc.

     565,953         37,720,768   
               52,484,832   
Hotels, Resorts & Cruise Lines–1.93%   

Carnival Corp.

     77,758         3,817,918   

Norwegian Cruise Line Holdings Ltd.(b)

     308,088         11,975,380   

Royal Caribbean Cruises Ltd.

     240,017         18,450,107   
               34,243,405   
Household Appliances–0.53%   

Whirlpool Corp.

     62,221         9,321,950   
Housewares & Specialties–0.60%   

Newell Brands, Inc.

     221,197         10,621,880   
Industrial Conglomerates–0.19%   

Honeywell International Inc.

     30,740         3,371,563   
Industrial Gases–0.44%   

Praxair, Inc.

     66,672         7,804,624   
Integrated Telecommunication Services–1.50%   

Koninklijke KPN N.V. (Netherlands)

     5,044,909         16,453,543   

SBA Communications Corp.–Class A(b)

     88,769         10,055,752   
               26,509,295   
Internet & Direct Marketing Retail–6.79%   

Amazon.com, Inc.(b)

     120,527         95,194,635   

Priceline Group Inc. (The)(b)

     17,010         25,076,652   
               120,271,287   
Internet Software & Services–14.51%   

Alibaba Group Holding Ltd.–ADR
(China)(b)

     272,675         27,728,321   

Alphabet Inc.–Class A(b)

     21,717         17,588,598   

Alphabet Inc.–Class C(b)

     141,466         110,985,736   

Baidu, Inc.–ADR (China)(b)

     10,418         1,842,528   

Facebook Inc.–Class A(b)

     754,761         98,866,143   
               257,011,326   
Investment Banking & Brokerage–1.53%   

Charles Schwab Corp. (The)

     629,471         19,954,230   
 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

9                         Invesco Summit Fund

     Shares      Value  
Investment Banking & Brokerage–(continued)   

Lazard Ltd.–Class A

     195,495       $ 7,127,748   
               27,081,978   
Leisure Products–0.09%   

Brunswick Corp.

     36,595         1,591,882   
Life Sciences Tools & Services–1.21%   

Thermo Fisher Scientific, Inc.

     146,000         21,466,380   
Managed Health Care–1.60%   

UnitedHealth Group Inc.

     200,234         28,299,071   
Movies & Entertainment–1.06%   

Time Warner Inc.

     211,771         18,845,501   
Oil & Gas Equipment & Services–0.79%   

Schlumberger Ltd.

     143,989         11,264,259   

Superior Energy Services, Inc.

     196,528         2,782,837   
               14,047,096   
Oil & Gas Exploration & Production–1.35%   

Cimarex Energy Co.

     36,025         4,651,908   

Newfield Exploration Co.(b)

     146,623         5,951,428   

Pioneer Natural Resources Co.

     30,793         5,512,563   

Synergy Resources Corp.(b)

     1,146,801         7,844,119   
               23,960,018   
Packaged Foods & Meats–5.62%   

Blue Buffalo Pet Products, Inc.(b)

     350,271         8,798,808   

JM Smucker Co. (The)

     146,562         19,245,056   

Marine Harvest ASA (Norway)

     915,052         16,570,414   

Mondelez International, Inc.–Class A

     557,466         25,052,522   

Tyson Foods, Inc.

     421,592         29,869,793   
               99,536,593   
Paper Packaging–0.74%   

Bemis Co., Inc.

     270,261         13,167,116   
Personal Products–0.45%   

Estee Lauder Cos. Inc. (The)–Class A

     91,543         7,976,142   
Pharmaceuticals–4.11%   

Allergan PLC(b)

     145,056         30,308,001   

Eli Lilly and Co.

     135,953         10,038,769   

Merck & Co., Inc.

     247,685         14,544,063   

Zoetis Inc.

     374,672         17,909,322   
               72,800,155   
Railroads–0.74%   

Canadian Pacific Railway Ltd. (Canada)

     92,248         13,187,774   
     Shares      Value  
Regional Banks–0.65%   

SVB Financial Group(b)

     94,025       $ 11,496,437   
Restaurants–0.21%   

Papa John’s International, Inc.

     48,086         3,628,089   
Semiconductors–4.15%   

Broadcom Ltd. (Singapore)

     192,900         32,847,012   

Integrated Device Technology, Inc.(b)

     479,751         9,935,643   

NXP Semiconductors N.V. (Netherlands)(b)

     126,928         12,692,800   

QUALCOMM, Inc.

     262,311         18,026,012   
               73,501,467   
Soft Drinks–1.56%   

Monster Beverage Corp.(b)

     128,475         18,544,081   

PepsiCo, Inc.

     84,719         9,081,877   
               27,625,958   
Specialized Consumer Services–0.46%   

Service Corp. International

     321,414         8,228,198   
Specialized REIT’s–0.30%   

Crown Castle International Corp.

     58,198         5,295,436   
Specialty Chemicals–0.48%   

Sherwin-Williams Co. (The)

     34,570         8,464,810   
Systems Software–2.25%   

Microsoft Corp.

     461,577         27,657,694   

ServiceNow, Inc.(b)

     138,000         12,131,580   
               39,789,274   
Technology Hardware, Storage & Peripherals–4.21%   

Apple Inc.

     656,656         74,556,722   
Wireless Telecommunication Services–1.11%   

Sprint Corp.(b)

     3,195,000         19,681,201   

Total Common Stocks & Other Equity Interests (Cost $1,201,785,313)

   

      1,731,694,005   

Money Market Funds–2.08%

  

Government & Agency Portfolio–Institutional Class, 0.29%(c)

     22,125,504         22,125,504   

Treasury Portfolio–Institutional Class, 0.22%(c)

     14,750,336         14,750,336   

Total Money Market Funds
(Cost $36,875,840)

   

      36,875,840   

TOTAL INVESTMENTS–99.85%
(Cost $1,238,661,153)

   

      1,768,569,845   

OTHER ASSETS LESS LIABILITIES–0.15%

  

      2,560,706   

NET ASSETS–100.00%

  

    $ 1,771,130,551   
 

Investment Abbreviations:

 

ADR  

– American Depositary Receipt

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.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

10                         Invesco Summit Fund

Statement of Assets and Liabilities

October 31, 2016

 

 

Assets:

  

Investments, at value (Cost $1,201,785,313)

   $ 1,731,694,005   

Investments in affiliated money market funds, at value and cost

     36,875,840   

Total investments, at value (Cost $1,238,661,153)

     1,768,569,845   

Foreign currencies, at value (Cost $1,573)

     1,550   

Receivable for:

  

Investments sold

     17,374,051   

Fund shares sold

     151,033   

Dividends

     588,006   

Investment for trustee deferred compensation and retirement plans

     366,512   

Other assets

     63,698   

Total assets

     1,787,114,695   

Liabilities:

  

Payable for:

  

Investments purchased

     14,104,424   

Fund shares reacquired

     898,085   

Amount due custodian

     9,859   

Accrued fees to affiliates

     495,749   

Accrued trustees’ and officers’ fees and benefits

     3,187   

Accrued other operating expenses

     51,717   

Trustee deferred compensation and retirement plans

     421,123   

Total liabilities

     15,984,144   

Net assets applicable to shares outstanding

   $ 1,771,130,551   

Net assets consist of:

  

Shares of beneficial interest

   $ 1,137,720,312   

Undistributed net investment income

     613,834   

Undistributed net realized gain

     102,892,542   

Net unrealized appreciation

     529,903,863   
    $ 1,771,130,551   

Net Assets:

  

Class A

   $ 50,217,369   

Class B

   $ 280,005   

Class C

   $ 5,007,754   

Class P

   $ 1,708,869,044   

Class S

   $ 3,163,807   

Class Y

   $ 3,575,915   

Class R5

   $ 16,657   

Shares outstanding, $0.001 par value per share,
with an unlimited number of shares authorized:

   

Class A

     3,032,107   

Class B

     18,201   

Class C

     326,516   

Class P

     102,041,467   

Class S

     190,208   

Class Y

     214,002   

Class R5

     993   

Class A:

  

Net asset value per share

   $ 16.56   

Maximum offering price per share

  

(Net asset value of $16.56 ¸ 94.50%)

   $ 17.52   

Class B:

  

Net asset value and offering price per share

   $ 15.38   

Class C:

  

Net asset value and offering price per share

   $ 15.34   

Class P:

  

Net asset value and offering price per share

   $ 16.75   

Class S:

  

Net asset value and offering price per share

   $ 16.63   

Class Y:

  

Net asset value and offering price per share

   $ 16.71   

Class R5:

  

Net asset value and offering price per share

   $ 16.77   
 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

11                         Invesco Summit Fund

Statement of Operations

For the year ended October 31, 2016

 

Investment income:

  

Dividends (net of foreign withholding taxes of $117,658)

    $ 17,377,389   

Dividends from affiliated money market funds (includes securities lending income of $150,045)

      227,003   

Other income

      26,081   

Total investment income

      17,630,473   

Expenses:

   

Advisory fees

      11,274,613   

Administrative services fees

      410,092   

Custodian fees

      30,744   

Distribution fees:

   

Class A

      131,333   

Class B

      4,320   

Class C

      51,939   

Class P

      1,705,426   

Class S

      4,801   

Transfer agent fees — A, B, C, P, S and Y

      2,128,023   

Transfer agent fees — R5

      9   

Trustees’ and officers’ fees and benefits

      66,362   

Registration and filing fees

      97,277   

Reports to shareholders

      58,410   

Professional services fees

      62,590   

Other

      54,352   

Total expenses

      16,080,291   

Less: Fees waived and expense offset arrangement(s)

      (55,048 ) 

Net expenses

      16,025,243   

Net investment income

      1,605,230   

Realized and unrealized gain (loss) from:

   

Net realized gain (loss) from:

   

Investment securities (includes net gains from securities sold to affiliates of $104,854)

      105,095,768   

Foreign currencies

      (119,036 ) 
       104,976,732   

Change in net unrealized appreciation (depreciation) of:

   

Investment securities

      (94,171,647 ) 

Foreign currencies

      (3,532 ) 
       (94,175,179 ) 

Net realized and unrealized gain

      10,801,553   

Net increase in net assets resulting from operations

    $ 12,406,783   

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

12                         Invesco Summit Fund

Statement of Changes in Net Assets

For the years ended October 31, 2016 and 2015

 

     2016      2015  

Operations:

  

   

Net investment income (loss)

   $ 1,605,230       $ (263,716 ) 

Net realized gain

     104,976,732         119,184,412   

Change in net unrealized appreciation (depreciation)

     (94,175,179 )       43,582,752   

Net increase in net assets resulting from operations

     12,406,783         162,503,448   

Distributions to shareholders from net realized gains:

     

Class A

     (3,614,176 )       (4,071,647 ) 

Class B

     (41,771 )       (84,373 ) 

Class C

     (383,143 )       (321,880 ) 

Class P

     (115,878,847 )       (235,797,666 ) 

Class S

     (227,949 )       (470,346 ) 

Class Y

     (155,911 )       (94,950 ) 

Class R5

     (1,127 )       (70,504 ) 

Total distributions from net realized gains

     (120,302,924 )       (240,911,366 ) 

Share transactions–net:

     

Class A

     3,485,315         21,041,427   

Class B

     (227,529 )       (74,538 ) 

Class C

     644,565         2,667,529   

Class P

     (9,421,646 )       69,026,441   

Class S

     (151,816 )       19,882   

Class Y

     1,461,091         1,452,748   

Class R5

     —         (469,005 ) 

Net increase (decrease) in net assets resulting from share transactions

     (4,210,020 )       93,664,484   

Net increase (decrease) in net assets

     (112,106,161 )       15,256,566   

Net assets:

     

Beginning of year

     1,883,236,712         1,867,980,146   

End of year (includes undistributed net investment income of $613,834 and $(873,002), respectively)

   $ 1,771,130,551       $ 1,883,236,712   

Notes to Financial Statements

October 31, 2016

NOTE 1—Significant Accounting Policies

Invesco Summit Fund (the “Fund”) is a series portfolio of AIM Equity Funds (Invesco Equity 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 three 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 seven different classes of shares: Class A, Class B, Class C, Class P, Class S, Class Y and Class R5. Class P shares are not sold to members of the general public. Only shareholders who had accounts in the AIM Summit Investors Plans I and AIM Summit Investors Plans II at the close of business on December 8, 2006, may continue to purchase Class P shares as described in the Fund’s prospectus. 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 waiver shares may be subject to contingent deferred sales charges (“CDSC”). Class C shares are sold with a CDSC. Class P, Class S, Class Y 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

 

13                         Invesco Summit 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,

 

14                         Invesco Summit 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.

 

15                         Invesco Summit 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.

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 $10 million

     1 .00%   

Next $140 million

     0 .75%   

Over $150 million

     0 .625%         

For the year ended October 31, 2016, the effective advisory fees incurred by the Fund was 0.64%.

Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco 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 P, Class S, Class Y and Class R5 shares to 2.00%, 2.75%, 2.75%, 1.85%, 1.90%, 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 year ended October 31, 2016, the Adviser waived advisory fees of $31,488.

The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco for certain administrative costs incurred in providing accounting services to the Fund. For the year 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 year ended October 31, 2016, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.

The Fund 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 P, Class S, Class Y and Class R5 shares. The Fund has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund’s Class A, Class B, Class C, Class P and Class S shares (collectively, the “Plans”). The Fund, pursuant to the Plans, pays IDI compensation at the annual rate of 0.25% of the Fund’s average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.10% of the average daily net assets of Class P shares and 0.15% of the average daily net assets of Class S shares. Of the Plan payments, up to 0.25% of the average daily net assets of Class A, Class B and Class C shares, 0.10% of the average daily net assets of Class P shares and 0.15% of the average daily net assets of Class S 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

 

16                         Invesco Summit Fund

shares of the Fund. For the year 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 year ended October 31, 2016, IDI advised the Fund that IDI retained $32,462 in front-end sales commissions from the sale of Class A shares and $1,721, $67 and $873 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.

For the year ended October 31, 2016, the Fund incurred $7,618 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

   $ 1,686,611,415         $ 45,082,590         $ —         $ 1,731,694,005   

Money Market Funds

     36,875,840           —           —           36,875,840   

Total Investments

   $ 1,723,487,255         $ 45,082,590         $ —         $ 1,768,569,845   

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 year ended October 31, 2016, the Fund engaged in securities purchases of $4,004,855 and securities sales of $3,808,616, which resulted in net realized gains of $104,854.

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 $23,560.

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.

 

17                         Invesco Summit 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—Distributions to Shareholders and Tax Components of Net Assets

Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended October 31, 2016 and 2015:

 

     2016        2015  

Ordinary income

   $ —         $ 3,385,313   

Long-term capital gain

     120,302,924           237,526,053   

Total distributions

   $ 120,302,924         $ 240,911,366   

Tax Components of Net Assets at Period-End:

 

     2016  

Undistributed ordinary income

   $ 1,049,879   

Undistributed long-term gain

     104,982,256   

Net unrealized appreciation — investments

     527,820,623   

Net unrealized appreciation (depreciation) — other investments

     (4,828 ) 

Temporary book/tax differences

     (437,691 ) 

Shares of beneficial interest

     1,137,720,312   

Total net assets

   $ 1,771,130,551   

The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund’s net unrealized appreciation difference is attributable primarily to wash sales.

The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund’s temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.

Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. 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 does not have a capital loss carryforward as of October 31, 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 year ended October 31, 2016 was $831,562,498 and $977,083,045, 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

   $ 558,376,245   

Aggregate unrealized (depreciation) of investment securities

     (30,555,622 ) 

Net unrealized appreciation of investment securities

   $ 527,820,623   

Cost of investments for tax purposes is $1,240,749,222.

NOTE 10—Reclassification of Permanent Differences

Primarily as a result of differing book/tax treatment of foreign currency transactions, on October 31, 2016, undistributed net investment income was decreased by $118,394 and undistributed net realized gain was increased by $118,394. This reclassification had no effect on the net assets of the Fund.

 

18                         Invesco Summit Fund

NOTE 11—Share Information

 

     Summary of Share Activity  
    Years ended October 31,  
    2016      2015  
     Shares      Amount      Shares      Amount  

Sold:

           

Class A

     1,586,776       $ 25,588,835         1,757,047       $ 30,361,838   

Class B

     8,187         126,342         13,638         224,162   

Class C

     209,372         3,205,647         214,287         3,501,385   

Class P

     2,250,146         36,399,297         2,251,712         39,207,435   

Class S

     9,453         154,193         6,272         108,443   

Class Y

     425,083         6,711,110         140,739         2,426,496   

Issued as reinvestment of dividends:

           

Class A

     205,393         3,292,454         241,711         3,869,800   

Class B

     2,679         40,164         5,488         83,204   

Class C

     24,777         370,418         20,722         313,105   

Class P

     7,072,427         114,502,599         14,467,961         233,512,895   

Class S

     14,167         227,949         29,305         470,346   

Class Y

     8,724         140,813         3,855         61,947   

Class R5

     —         —         4,225         68,080   

Automatic conversion of Class B shares to Class A shares:

           

Class A

     13,153         209,023         14,613         262,573   

Class B

     (14,108 )       (209,023 )       (15,436 )       (262,573 ) 

Reacquired:

           

Class A

     (1,635,699 )       (25,604,997 )       (782,405 )       (13,452,784 ) 

Class B

     (12,798 )       (185,012 )       (7,485 )       (119,331 ) 

Class C

     (202,095 )       (2,931,500 )       (72,365 )       (1,146,961 ) 

Class P

     (9,931,393 )       (160,323,542 )       (11,679,213 )       (203,693,889 ) 

Class S

     (34,384 )       (533,958 )       (32,103 )       (558,907 ) 

Class Y

     (342,458 )       (5,390,832 )       (59,387 )       (1,035,695 ) 

Class R5

     —         —         (32,132 )       (537,085 ) 

Net increase (decrease) in share activity

     (342,598 )     $ (4,210,020 )       6,491,049       $ 93,664,484   

 

19                         Invesco Summit Fund

NOTE 12—Financial Highlights

The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.

 

     Net asset
value,
beginning
of period		     Net
investment
income
(loss)(a)		     Net gains
on securities
(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

  

Year ended 10/31/16

   $ 17.59      $ (0.01 )    $ 0.11      $ 0.10      $ —      $ (1.13 )    $ (1.13 )    $ 16.56        0.81 %    $ 50,217        1.05 %(d)      1.05 %(d)      (0.05 )%(d)      47 % 

Year ended 10/31/15

     18.62        (0.03 )      1.44        1.41        —        (2.44 )      (2.44 )      17.59        8.86        50,349        1.04        1.04        (0.16 )      49   

Year ended 10/31/14

     16.40        (0.03 )      2.62        2.59        (0.03 )      (0.34 )      (0.37 )      18.62        16.06        30,382        1.05        1.05        (0.18 )      52   

Year ended 10/31/13

     12.67        0.03        3.72        3.75        (0.02 )      —        (0.02 )      16.40        29.68        23,025        1.06        1.06        0.20        49   

Year ended 10/31/12

     11.56        0.01        1.10        1.11        (0.00 )      —        (0.00 )      12.67        9.62        22,712        1.08        1.08        0.09        36   

Class B

  

Year ended 10/31/16

     16.53        (0.12 )      0.10        (0.02 )      —        (1.13 )      (1.13 )      15.38        0.09        280        1.80 (d)      1.80 (d)      (0.80 )(d)      47   

Year ended 10/31/15

     17.77        (0.15 )      1.35        1.20        —        (2.44 )      (2.44 )      16.53        7.20        566        1.79        1.79        (0.91 )      49   

Year ended 10/31/14

     15.76        (0.15 )      2.50        2.35        —        (0.34 )      (0.34 )      17.77        15.19        676        1.80        1.80        (0.93 )      52   

Year ended 10/31/13

     12.25        (0.08 )      3.59        3.51        —        —        —        15.76        28.65        831        1.81        1.81        (0.55 )      49   

Year ended 10/31/12

     11.24        (0.08 )      1.09        1.01        —        —        —        12.25        8.99        913        1.83        1.83        (0.66 )      36   

Class C

  

Year ended 10/31/16

     16.49        (0.12 )      0.10        (0.02 )      —        (1.13 )      (1.13 )      15.34        0.09        5,008        1.80 (d)      1.80 (d)      (0.80 )(d)      47   

Year ended 10/31/15

     17.73        (0.15 )      1.35        1.20        —        (2.44 )      (2.44 )      16.49        8.02        4,855        1.79        1.79        (0.91 )      49   

Year ended 10/31/14

     15.73        (0.16 )      2.50        2.34        —        (0.34 )      (0.34 )      17.73        15.15        2,337        1.80        1.80        (0.93 )      52   

Year ended 10/31/13

     12.22        (0.08 )      3.59        3.51        —        —        —        15.73        28.72        2,122        1.81        1.81        (0.55 )      49   

Year ended 10/31/12

     11.23        (0.08 )      1.07        0.99        —        —        —        12.22        8.82        1,577        1.83        1.83        (0.66 )      36   

Class P

  

Year ended 10/31/16

     17.75        0.02        0.11        0.13        —        (1.13 )      (1.13 )      16.75        0.98        1,708,869        0.90 (d)      0.90 (d)      0.10 (d)      47   

Year ended 10/31/15

     18.74        (0.00 )      1.45        1.45        —        (2.44 )      (2.44 )      17.75        9.03        1,821,733        0.89        0.89        (0.01 )      49   

Year ended 10/31/14

     16.50        (0.01 )      2.63        2.62        (0.04 )      (0.34 )      (0.38 )      18.74        16.22        1,829,660        0.90        0.90        (0.03 )      52   

Year ended 10/31/13

     12.75        0.05        3.74        3.79        (0.04 )      —        (0.04 )      16.50        29.84        1,746,339        0.91        0.91        0.35        49   

Year ended 10/31/12

     11.63        0.03        1.11        1.14        (0.02 )      —        (0.02 )      12.75        9.80        1,518,577        0.93        0.93        0.24        36   

Class S

  

Year ended 10/31/16

     17.64        0.01        0.11        0.12        —        (1.13 )      (1.13 )      16.63        0.92        3,164        0.95 (d)      0.95 (d)      0.05 (d)      47   

Year ended 10/31/15

     18.66        (0.01 )      1.43        1.42        —        (2.44 )      (2.44 )      17.64        8.90        3,546        0.94        0.94        (0.06 )      49   

Year ended 10/31/14

     16.43        (0.01 )      2.62        2.61        (0.04 )      (0.34 )      (0.38 )      18.66        16.18        3,685        0.95        0.95        (0.08 )      52   

Year ended 10/31/13

     12.70        0.04        3.73        3.77        (0.04 )      —        (0.04 )      16.43        29.74        4,490        0.96        0.96        0.30        49   

Year ended 10/31/12

     11.58        0.02        1.12        1.14        (0.02 )      —        (0.02 )      12.70        9.82        3,896        0.98        0.98        0.19        36   

Class Y

  

Year ended 10/31/16

     17.69        0.03        0.12        0.15        —        (1.13 )      (1.13 )      16.71        1.10        3,576        0.80 (d)      0.80 (d)      0.20 (d)      47   

Year ended 10/31/15

     18.67        0.02        1.44        1.46        —        (2.44 )      (2.44 )      17.69        9.13        2,170        0.79        0.79        0.09        49   

Year ended 10/31/14

     16.45        0.01        2.61        2.62        (0.06 )      (0.34 )      (0.40 )      18.67        16.23        699        0.80        0.80        0.07        52   

Year ended 10/31/13

     12.72        0.06        3.73        3.79        (0.06 )      —        (0.06 )      16.45        29.90        514        0.81        0.81        0.45        49   

Year ended 10/31/12

     11.58        0.04        1.13        1.17        (0.03 )      —        (0.03 )      12.72        10.14        479        0.83        0.83        0.34        36   

Class R5

  

Year ended 10/31/16

     17.75        0.04        0.11        0.15        —        (1.13 )      (1.13 )      16.77        1.10        17        0.74 (d)      0.74 (d)      0.26 (d)      47   

Year ended 10/31/15

     18.71        0.04        1.44        1.48        —        (2.44 )      (2.44 )      17.75        9.24        18        0.68        0.68        0.20        49   

Year ended 10/31/14

     16.46        0.03        2.63        2.66        (0.07 )      (0.34 )      (0.41 )      18.71        16.50        541        0.69        0.69        0.18        52   

Year ended 10/31/13

     12.73        0.08        3.72        3.80        (0.07 )      —        (0.07 )      16.46        30.05        114        0.71        0.71        0.55        49   

Year ended 10/31/12

     11.60        0.06        1.11        1.17        (0.04 )      —        (0.04 )      12.73        10.12        123        0.72        0.72        0.45        36   

 

(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 based on average daily net assets (000’s omitted) of $52,533, $432, $5,194, $1,705,426, $3,201, $3,136 and $16 for Class A, Class B, Class C, Class P, Class S, Class Y, and Class R5 shares, respectively.

 

20                         Invesco Summit Fund

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees and Shareholders of the Invesco Summit Fund:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Invesco Summit Fund (the “Fund”) as of October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2016 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where confirmations of security purchases have not been received, provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas

December 21, 2016

 

21                         Invesco Summit 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      $ 1,073.90       $ 5.47      $ 1,019.86       $ 5.33         1.05 % 

B

     1,000.00        1,069.50         9.36        1,016.09         9.12         1.80   

C

     1,000.00        1,069.70         9.36        1,016.09         9.12         1.80   

P

     1,000.00        1,075.10         4.69        1,020.61         4.57         0.90   

S

     1,000.00        1,074.30         4.95        1,020.36         4.82         0.95   

Y

     1,000.00        1,075.30         4.17        1,021.11         4.06         0.80   

R5

     1,000.00        1,075.00         3.86        1,021.42         3.76         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 184/366 to reflect the most recent fiscal half year.

 

22                         Invesco Summit Fund

Approval of Investment Advisory and Sub-Advisory Contracts

 

The Board of Trustees (the Board) of AIM Equity Funds (Invesco Equity Funds) is required under the Investment Company Act of 1940, as amended, to approve annually the renewal of Invesco Summit 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 Multi-Cap Growth Funds Index. The Board noted that performance of Class P shares of the Fund was in the second quintile of its performance universe for the one and three year periods 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 P shares of the Fund was above the performance of the Index for the one, three and five year periods. The Trustees also reviewed more recent Fund performance and this review did not change their conclusions.

C. Advisory and Sub-Advisory Fees

The Board compared the Fund’s contractual management fee rate to the contractual

 

 

23                         Invesco Summit 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 P 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 mutual funds or client accounts with investment strategies comparable to those of the Fund.

The Board also considered the services that may be provided by the Affiliated Sub-Advisers pursuant to the sub-advisory contracts, as well as the fees payable by Invesco Advisers to the Affiliated Sub-Advisers pursuant to the sub-advisory contracts. The Board also noted that the sub-advisory fees are not paid directly by the Fund, but rather, are payable 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.

 

 

24                         Invesco Summit Fund

Tax Information

Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.

The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.

The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2016:

 

Federal and State Income Tax

  

Long-Term Capital Gain Distributions

   $ 120,302,924   

Qualified Dividend Income*

     0 % 

Corporate Dividends Received Deduction*

     0 % 

U.S. Treasury Obligations*

     0 % 

 

  * The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year.

 

25                         Invesco Summit Fund

Trustees and Officers

 

The address of each trustee and officer is AIM Equity Funds (Invesco Equity Funds) (the “Trust”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust’s organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Interested Persons                
Martin L. Flanagan1 — 1960 Trustee   2007  

Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business

 

Formerly: Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US) Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization)

   146   None
Philip A. Taylor2 — 1954 Trustee and Senior Vice President   2006  

Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) (registered transfer agent) Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company) Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).

 

Formerly: Director, Chief Executive Officer and President, Van Kampen Exchange Corp.; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco AIM Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.

   146   None
1  Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser.

 

2  Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser.

 

T-1                         Invesco Summit Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Independent Trustees                

Bruce L. Crockett — 1944

Trustee and Chair

   1993  

Chairman, Crockett Technologies Associates (technology consulting company)

 

Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute

   146   ALPS (Attorneys Liability Protection Society) (insurance company) and Globe Specialty Metals, Inc. (metallurgical company); Member of the Audit Committee, Ferroglobe PLC and Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council

David C. Arch — 1945

Trustee

   2010   Chairman of Blistex Inc., a consumer health care products manufacturer   146   Board member of the Illinois Manufacturers’ Association; Member of the Board of Visitors, Institute for the Humanities, University of Michigan

James T. Bunch — 1942

Trustee

   2003  

Managing Member, Grumman Hill Group LLC (family office/private equity investments)

 

Formerly: Chairman of the Board, Denver Film Society, Chairman of the Board of Trustees, Evans Scholarship Foundation; Chairman, Board of Governors, Western Golf Association

   146   Trustee, Evans Scholarship Foundation

Albert R. Dowden — 1941

Trustee

   2000  

Director of a number of public and private business corporations, including Nature’s Sunshine Products, Inc.

 

Formerly: Director, The Boss Group, Ltd. and Reich & Tang Funds (5 portfolios) (registered investment company); Director, Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company); Director, Continental Energy Services, LLC (oil and gas pipeline service); Director, CompuDyne Corporation (provider of product and services to the public security market) and Director, Annuity and Life Re (Holdings), Ltd. (reinsurance company); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations; Chairman, DHJ Media, Inc.; Director, Magellan Insurance Company; and Director, The Hertz Corporation, Genmar Corporation (boat manufacturer), National Media Corporation; Advisory Board of Rotary Power International (designer, manufacturer, and seller of rotary power engines); and Chairman, Cortland Trust, Inc. (registered investment company)

   146   Director of Nature’s Sunshine Products, Inc.

Jack M. Fields — 1952

Trustee

   1997  

Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Discovery Learning Alliance (non-profit)

 

Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives

   146   None

Eli Jones — 1961

Trustee

   2016  

Professor and Dean, Mays Business School — Texas A&M University

 

Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University and Director, Arvest Bank

   146   Director of Insperity, Inc. (formerly known as Administaff)

Prema Mathai-Davis — 1950

Trustee

   1998  

Retired.

 

Formerly: Chief Executive Officer, YWCA of the U.S.A.

   146   None

Larry Soll — 1942

Trustee

   2003  

Retired.

 

Formerly: Chairman, Chief Executive Officer and President, Synergen Corp. (a biotechnology company)

   146   None

Raymond Stickel, Jr. — 1944

Trustee

   2005  

Retired.

 

Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios) and Partner, Deloitte & Touche

   146   None

Robert C. Troccoli — 1949

Trustee

   2016  

Adjunct Professor, University of Denver — Daniels College of Business

 

Formerly: Senior Partner, KPMG LLP

   146   None

 

T-2                         Invesco Summit Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Independent Trustees—(continued)

Suzanne H. Woolsey — 1941

Trustee

   2014  

Retired.

 

Formerly: Chief Executive Officer of Woolsey Partners LLC

   146   Director, SunShare LLC; Trustee, Ocean Conservancy; Emeritus Chair of the Board of Trustees of the Institute for Defense Analyses and of Colorado College; Trustee, Chair, Business and Finance Committee of California Institute of Technology; Prior to 2014, Director of Fluor Corp.; Prior to 2010, Trustee of the German Marshall Fund of the United States; Prior to 2010, Trustee of the Rocky Mountain Institute
Other Officers                

Sheri Morris — 1964

President, Principal Executive Officer and Treasurer

   1999  

President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco AIM Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco AIM Capital Management, Inc. and Invesco AIM Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust

   N/A   N/A

Russell C. Burk — 1958

Senior Vice President and Senior Officer

   2005   Senior Vice President and Senior Officer, The Invesco Funds   N/A   N/A

John M. Zerr — 1962

Senior Vice President, Chief Legal Officer and Secretary

   2006  

Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.; Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company)

   N/A   N/A

 

T-3                         Invesco Summit Fund

Trustees and Officers—(continued)

 

Name, Year of Birth and
Position(s) Held with the Trust		   Trustee and/
or Officer Since		   Principal Occupation(s)
During Past 5 Years		   Number of
Funds in Fund
Complex
Overseen by
Trustee		  

Other Directorship(s)
Held by Trustee During

Past 5 Years

Other Officers—(continued)                
Karen Dunn Kelley — 1960 Senior Vice President   2004  

Senior Managing Director, Investments, Invesco Ltd.; Director, Co-President, Co-Chief Executive Officer, and Co-Chairman, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Chairman and Director, Invesco Senior Secured Management, Inc.; Senior Vice President, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Executive Vice President, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Invesco Mortgage Capital Inc. and Invesco Management Company Limited; Senior Vice President, The Invesco Funds

 

Formerly: Vice President, The Invesco Funds (other than AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust); and President and Principal Executive Officer, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Asset Management (Bermuda) Ltd., Director, INVESCO Global Asset Management DAC (formerly known as INVESCO Global Asset Management Limited) and INVESCO Management S.A.; Senior Vice President, Van Kampen Investments Inc. and Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director and President, Fund Management Company; Chief Cash Management Officer, Director of Cash Management, Senior Vice President, and Managing Director, Invesco AIM Capital Management, Inc.; Director of Cash Management, Senior Vice President, and Vice President, Invesco Advisers, Inc. and Vice President, The Invesco Funds (AIM Treasurer’s Series Trust (Invesco Treasurer’s Series Trust), and Short-Term Investments Trust only)

   N/A   N/A

Kelli Gallegos — 1970

Vice President, Principal Financial Officer and Assistant Treasurer

   2008  

Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Assistant Vice President, The Invesco Funds

   N/A   N/A

Tracy Sullivan — 1962

Vice President, Chief Tax Officer and Assistant Treasurer

   2008  

Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust

 

Formerly: Assistant Vice President, The Invesco Funds

   N/A   N/A

Crissie M. Wisdom — 1969

Anti-Money Laundering Compliance Officer

   2013  

Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.

 

Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp.

   N/A   N/A

Robert R. Leveille — 1969

Chief Compliance Officer

   2016  

Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds

 

Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds

   N/A   N/A

The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund’s Statement of Additional Information for information on the Fund’s sub-advisers.

 

Office of the Fund

11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Investment Adviser

Invesco Advisers, Inc.

1555 Peachtree Street, N.E.

Atlanta, GA 30309

  

Distributor

Invesco Distributors, Inc.

11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Auditors

PricewaterhouseCoopers LLP

1000 Louisiana Street, Suite 5800

Houston, TX 77002-5678

     

Counsel to the Fund

Stradley Ronon Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, PA 19103-7018

  

Counsel to the Independent Trustees

Goodwin Procter LLP

901 New York Avenue, N.W.

Washington, D.C. 20001

  

Transfer Agent

Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000

Houston, TX 77046-1173

  

Custodian

State Street Bank and Trust Company

225 Franklin Street

Boston, MA 02110-2801

 

T-4                         Invesco Summit Fund

 

 

Explore High-Conviction Investing with Invesco

 

LOGO

 

 

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.

    LOGO

SEC file numbers: 811-01424 and 002-25469                            SUM-AR-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.

The Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Raymond Stickel, Jr. Mr. Stickel is “independent” within the meaning of that term as used in Form N-CSR.

 

ITEM 4.     PRINCIPAL ACCOUNTANT FEES AND SERVICES.

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.

(a) to (d)

Item 4. Principal Accountant Fees and Services

Fees Billed by PWC Related to the Registrant

PWC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:

 

     Fees Billed for
Services
Rendered to the
Registrant for
fiscal year end
2016		         Fees Billed for
Services Rendered
to the Registrant
for fiscal year end
2015

Audit Fees

      $ 84,875           $ 84,875  

Audit-Related Fees

      $ 0           $ 0  

Tax Fees(1)

      $ 25,225           $ 29,975  

All Other Fees

      $ 0           $ 0  
    

 

 

          

 

 

  

Total Fees

      $     110,100           $     114,850  

(g) PWC billed the Registrant aggregate non-audit fees of $25,225for the fiscal year ended 2016, and $29,975 for the fiscal year ended 2015, for non-audit services rendered to the Registrant.

 

 

 

  (1) Tax fees for the fiscal year end October 31, 2016 includes fees billed for reviewing tax returns and/or services related to tax compliance. Tax fees for fiscal year end October 31, 2015 includes fees billed for reviewing tax returns and/or services related to tax compliance.

Fees Billed by PWC Related to Invesco and Invesco Affiliates

PWC billed Invesco Advisers, Inc. (“Invesco”), the Registrant’s adviser, and any entity controlling, controlled by or under common control with Invesco that provides ongoing services to the Registrant (“Invesco Affiliates”) aggregate fees for pre-approved non-audit services rendered to Invesco and Invesco Affiliates for the last two fiscal years as follows:

 

    

Fees Billed for
Non-Audit
Services Rendered
to Invesco and
Invesco Affiliates
for fiscal year end
2016 That Were
Required

to be Pre-

Approved

by the Registrant’s

Audit Committee

        

Fees Billed for
Non-Audit
Services Rendered
to Invesco and
Invesco Affiliates
for fiscal year end
2015 That Were
Required

to be Pre-

Approved

by the Registrant’s

Audit Committee

Audit-Related Fees

      $     635,000           $     574,000  

Tax Fees

      $               0           $               0  

All Other Fees

      $ 2,193,000           $ 3,750,000  
    

 

 

          

 

 

  

Total Fees(1)

      $ 2,828,000           $ 4,324,000  

 

 

 

(1)

Audit-Related fees for the year end 2016 include fees billed related to reviewing controls at a service organization. Audit-Related fees for the year end 2015 include fees billed related to reviewing controls at a service organization.

All other fees for the year end 2016 include fees billed related to the identification of structural and organizational alternatives, informed by industry practices, for certain of the company’s administrative activities and functions. All other fees for the year end 2015 include fees billed related to reviewing the operating effectiveness of strategic projects.

(e)(2) There were no amounts that were pre-approved by the Audit Committee pursuant to the de minimus exception under Rule 2-01 of Regulation S-X.

(g) Including the fees for services not required to be pre-approved by the registrant’s audit committee, PWC billed Invesco and Invesco Affiliates aggregate non-audit fees of $5,032,000 for the fiscal year ended October 31, 2016, and $9,083,000 for the fiscal year ended October 31, 2015, for non-audit services rendered to Invesco and Invesco Affiliates.

PWC provided audit services to the Investment Company complex of approximately $22 million.

(h) The Audit Committee also has considered whether the provision of non-audit services that were rendered to Invesco and Invesco Affiliates that were not required to be pre-approved pursuant to SEC regulations, if any, is compatible with maintaining PWC’s independence.

(f) Not applicable.

(e)(1)

PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES

POLICIES AND PROCEDURES

As adopted by the Audit Committees

of the Invesco Funds (the “Funds”)

Last Amended May 4, 2016

 

  I. Statement of Principles

The Audit Committees (the “Audit Committee”) of the Boards of Trustees of the Funds (the “Board”) have adopted these policies and procedures (the “Procedures”) with respect to the pre-approval of audit and non-audit services to be provided by the Funds’ independent auditor (the “Auditor”) to the Funds, and to the Funds’ investment adviser(s) and any entity controlling, controlled by, or under common control with the investment adviser(s) that provides ongoing services to the Funds (collectively, “Service Affiliates”).

Under Section 202 of the Sarbanes-Oxley Act of 2002, all audit and non-audit services provided to the Funds by the Auditor must be preapproved by the Audit Committee. Rule 2-01 of Regulation S-X requires that the Audit Committee also pre-approve a Service Affiliate’s engagement of the Auditor for non-audit services if the engagement relates directly to the operations and financial reporting of the Funds (a “Service Affiliate’s Covered Engagement”).

These Procedures set forth the procedures and the conditions pursuant to which the Audit Committee may pre-approve audit and non-audit services for the Funds and a Service Affiliate’s Covered Engagement pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and other organizations and regulatory bodies applicable to the Funds (“Applicable Rules”).1 They address both general pre-approvals without consideration of specific case-by-case services (“general pre-approvals”) and pre-approvals on a case-by-case basis (“specific pre-approvals”). Any services requiring pre-approval that are not within the scope of general pre-approvals hereunder are subject to specific pre-approval. These Procedures also address the delegation by the Audit Committee of pre-approval authority to the Audit Committee Chair or Vice Chair.

 

  II.

Pre-Approval of Fund Audit Services

The annual Fund audit services engagement, including terms and fees, is subject to specific pre-approval by the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by an independent auditor to be able to form an opinion on the Funds’ financial statements. The Audit Committee will receive, review and consider sufficient information concerning a proposed Fund audit engagement to make a reasonable evaluation of the Auditor’s qualifications and independence. The Audit Committee will oversee the Fund audit services engagement as necessary, including approving any changes in terms, audit scope, conditions and fees.

In addition to approving the Fund audit services engagement at least annually and specifically approving any changes, the Audit Committee may generally or specifically pre-approve engagements for other audit services, which are those services that only an independent auditor reasonably can provide. Other audit services may include services associated with SEC registration statements, periodic reports and other documents filed with the SEC.

 

 

1 Applicable Rules include, for example, New York Stock Exchange (“NYSE”) rules applicable to closed-end funds managed by Invesco and listed on NYSE.

  III. General and Specific Pre-Approval of Non-Audit Fund Services

The Audit Committee will consider, at least annually, the list of General Pre-Approved Non-Audit Services which list may be terminated or modified at any time by the Audit Committee. To inform the Audit Committee’s review and approval of General Pre-Approved Non-Audit Services, the Funds’ Treasurer (or his or her designee) and Auditor shall provide such information regarding independence or other matters as the Audit Committee may request.

Any services or fee ranges that are not within the scope of General Pre-Approved Non-Audit Services have not received general pre-approval and require specific pre-approval. Each request for specific pre-approval by the Audit Committee for services to be provided by the Auditor to the Funds must be submitted to the Audit Committee by the Funds’ Treasurer (or his or her designee) and must include detailed information about the services to be provided, the fees or fee ranges to be charged, and other relevant information sufficient to allow the Audit Committee to consider whether to pre-approve such engagement, including evaluating whether the provision of such services will impair the independence of the Auditor and is otherwise consistent with Applicable Rules.

 

  IV.

Non-Audit Service Types

The Audit Committee may provide either general or specific pre-approval of audit-related, tax or other services, each as described in more detail below.

 

  a.

Audit-Related Services

“Audit-related services” are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements or that are traditionally performed by an independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; services related to mergers, acquisitions or dispositions; compliance with ratings agency requirements and interfund lending activities; and assistance with internal control reporting requirements.

 

  b.

Tax Services

“Tax services” include, but are not limited to, the review and signing of the Funds’ federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will not approve proposed services of the Auditor which the Audit Committee believes are to be provided in connection with a service or transaction initially recommended by the Auditor, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds’ Treasurer (or his or her designee) and may consult with outside counsel or advisers as necessary to ensure the consistency of tax services rendered by the Auditor with the foregoing policy. The Auditor shall not represent any Fund or any Service Affiliate before a tax court, district court or federal court of claims.

Each request to provide tax services under either the general or specific pre-approval of the Audit Committee will include a description from the Auditor in writing of (i) the scope of the service, the fee structure for the engagement, and any side letter or other amendment to the engagement letter, or any other agreement (whether oral, written, or otherwise) between the Auditor and the Funds, relating to the service; and (ii) any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between the Auditor (or an affiliate of the Auditor) and any

person (other than the Funds or Service Affiliates receiving the services) with respect to the promoting, marketing, or recommending of a transaction covered by the service. The Auditor will also discuss with the Audit Committee the potential effects of the services on the independence of the Auditor, and document the substance of its discussion with the Audit Committee.

 

  c.

Other Services

The Audit Committee may pre-approve other non-audit services so long as the Audit Committee believes that the service will not impair the independence of the Auditor. Appendix I includes a list of services that the Auditor is prohibited from performing by the SEC rules. Appendix I also includes a list of services that would impair the Auditor’s independence unless the Audit Committee reasonably concludes that the results of the services will not be subject to audit procedures during an audit of the Funds’ financial statements.

 

  V.

Pre-Approval of Service Affiliate’s Covered Engagements

Rule 2-01 of Regulation S-X requires that the Audit Committee pre-approve a Service Affiliate’s engagement of the Auditor for non-audit services if the engagement relates directly to the operations and financial reporting of the Funds, defined above as a “Service Affiliate’s Covered Engagement”.

The Audit Committee may provide either general or specific pre-approval of any Service Affiliate’s Covered Engagement, including for audit-related, tax or other services, as described above, if the Audit Committee believes that the provision of the services to a Service Affiliate will not impair the independence of the Auditor with respect to the Funds. Any Service Affiliate’s Covered Engagements that are not within the scope of General Pre-Approved Non-Audit Services have not received general pre-approval and require specific pre-approval.

Each request for specific pre-approval by the Audit Committee of a Service Affiliate’s Covered Engagement must be submitted to the Audit Committee by the Funds’ Treasurer (or his or her designee) and must include detailed information about the services to be provided, the fees or fee ranges to be charged, a description of the current status of the pre-approval process involving other audit committees in the Invesco investment company complex (as defined in Rule 2-201 of Regulation S-X) with respect to the proposed engagement, and other relevant information sufficient to allow the Audit Committee to consider whether the provision of such services will impair the independence of the Auditor from the Funds. Additionally, the Funds’ Treasurer (or his or her designee) and the Auditor will provide the Audit Committee with a statement that the proposed engagement requires pre-approval by the Audit Committee, the proposed engagement, in their view, will not impair the independence of the Auditor and is consistent with Applicable Rules, and the description of the proposed engagement provided to the Audit Committee is consistent with that presented to or approved by the Invesco audit committee.

Information about all Service Affiliate engagements of the Auditor for non-audit services, whether or not subject to pre-approval by the Audit Committee, shall be provided to the Audit Committee at least quarterly, to allow the Audit Committee to consider whether the provision of such services is compatible with maintaining the Auditor’s independence from the Funds. The Funds’ Treasurer and Auditor shall provide the Audit Committee with sufficiently detailed information about the scope of services provided and the fees for such services, to ensure that the Audit Committee can adequately consider whether the provision of such services is compatible with maintaining the Auditor’s independence from the Funds.

  VI. Pre-Approved Fee Levels or Established Amounts

Pre-approved fee levels or ranges for audit and non-audit services to be provided by the Auditor to the Funds, and for a Service Affiliate’s Covered Engagement, under general pre-approval or specific pre-approval will be set periodically by the Audit Committee. Any proposed fees exceeding 110% of the maximum pre-approved fee levels or ranges for such services or engagements will be promptly presented to the Audit Committee and will require specific pre-approval by the Audit Committee before payment of any additional fees is made.

 

  VII. Delegation

The Audit Committee may from time to time delegate specific pre-approval authority to its Chair and/or Vice Chair, so that the Chair or, in his or her absence, Vice Chair may grant specific pre-approval for audit and non-audit services by the Auditor to the Funds and/or a Service Affiliate’s Covered Engagement between Audit Committee meetings. Any such delegation shall be reflected in resolutions adopted by the Audit Committee and may include such limitations as to dollar amount(s) and/or scope of service(s) as the Audit Committee may choose to impose. Any such delegation shall not preclude the Chair or Vice Chair from declining, on a case by case basis, to exercise his or her delegated authority and instead convening the Audit Committee to consider and pre-approve any proposed services or engagements.

Notwithstanding the foregoing, any non-audit services to be provided to the Funds for which the fees are estimated to exceed $500,000 and any Service Affiliate’s Covered Engagement for which the fees are estimated to exceed $500,000 must be pre-approved by the Audit Committee and may not be delegated to the Chair or Vice Chair.

 

  VIII. Compliance with Procedures

Notwithstanding anything herein to the contrary, failure to pre-approve any services or engagements that are not required to be pre-approved pursuant to the de minimis exception provided for in Rule 2-01(c)(7)(i)(C) of Regulation S-X shall not constitute a violation of these Procedures. The Audit Committee has designated the Funds’ Treasurer to ensure services and engagements are pre-approved in compliance with these Procedures. The Funds’ Treasurer will immediately report to the Chair of the Audit Committee, or the Vice Chair in his or her absence, any breach of these Procedures that comes to the attention of the Funds’ Treasurer or any services or engagements that are not required to be pre-approved pursuant to the de minimis exception provided for in Rule 2-01(c)(7)(i)(C) of Regulation S-X.

On at least an annual basis, the Auditor will provide the Audit Committee with a summary of all non-audit services provided to any entity in the investment company complex (as defined in section 2-01(f)(14) of Regulation S-X, including the Funds and Service Affiliates) that were not pre-approved, including the nature of services provided and the associated fees.

 

  IX. Amendments to Procedures

All material amendments to these Procedures must be approved in advance by the Audit Committee. Non-material amendments to these Procedures may be made by the Legal and Compliance Departments and will be reported to the Audit Committee at the next regularly scheduled meeting of the Audit Committee.

Appendix I

Non-Audit Services That May Impair the Auditor’s Independence

The Auditor is not independent if, at any point during the audit and professional engagement, the Auditor provides the following non-audit services:

 

  •   Management functions;
  •   Human resources;
  •   Broker-dealer, investment adviser, or investment banking services ;
  •   Legal services;
  •   Expert services unrelated to the audit;
  •   Any service or product provided for a contingent fee or a commission;
  •   Services related to marketing, planning, or opining in favor of the tax treatment of confidential transactions or aggressive tax position transactions, a significant purpose of which is tax avoidance;
  •   Tax services for persons in financial reporting oversight roles at the Fund; and
  •   Any other service that the Public Company Oversight Board determines by regulation is impermissible.

An Auditor is not independent if, at any point during the audit and professional engagement, the Auditor provides the following non-audit services unless it is reasonable to conclude that the results of the services will not be subject to audit procedures during an audit of the Funds’ financial statements:

 

  •   Bookkeeping or other services related to the accounting records or financial statements of the audit client;
  •   Financial information systems design and implementation;
  •   Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
  •   Actuarial services; and
  •   Internal audit outsourcing services.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

 

ITEM 6. SCHEDULE OF INVESTMENTS.

Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES.

Not applicable.

ITEM 9.

   PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
 

Not applicable.

ITEM 10.

   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 

None

ITEM 11.

   CONTROLS AND PROCEDURES.

(a)

  

As of November 21, 2016, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrant’s disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”), as amended. Based on that evaluation, the Registrant’s officers, including the PEO and PFO, concluded that, as of 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 this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12.

   EXHIBITS.

12(a) (1)

  

Code of Ethics.

12(a) (2)

  

Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.

12(a) (3)

  

Not applicable.

12(b)

  

Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:    AIM Equity Funds (Invesco Equity 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)    Code of Ethics.
12(a) (2)    Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
12(a) (3)    Not applicable.
12(b)    Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.