Invesco Premium Income Fund Balanced Income A multi-asset strategy designed using risk-balancing principles that seeks income and an increase in value during periods of economic strength and seeks protection during periods of economic stress. Share class: Symbol A: PIAFX C: PICFX Y: PIYFX Pursuing yield in a low rate environment The search for attractive yields has intensified over the past few years as the yields of many assets have fallen in the wake of near-zero short-term interest rates. The few remaining assets with attractive yields often carry relatively high volatility. With low yield and high volatility investors may have to sacrifice at least some safety in an attempt to boost their portfolios income. The Global Asset Allocation team (GAA) starts portfolio construction by balancing risk. By combining high yielding assets, long-duration US Treasury bonds and investments in other asset classes that have the potential for income and growth of capital, Invesco Premium Income Fund may provide current income and capital protection during times of economic stress. This balanced-risk approach seeks to mitigate portfolio volatility while providing a competitive yield. The Invesco approach to Balanced Income 1. Design portfolio of high income assets The GAA team determines the allocation of the High Income Portfolio s assets among different asset classes by evaluating income-producing assets based on yield, liquidity, and tax and regulatory issues. The High Income Portfolio currently includes allocations to three core segments: A noninvestment grade (high yield) debt segment A US dollar-denominated emerging market debt segment A preferred equity segment Step one: Strategic weighting example Yield premium of selected assets 1 Sample high income segment weights High yield Preferred shares Emerging debt 3.00% 4.00% 2.00% 5 4 3 Yields drive weights 2 For illustrative purposes only and does not represent actual allocation of the strategy. Sources: DataStream, Bloomberg L.P. and Invesco analysis. Data as of Sept. 30, 2015. High yield 33.3% Preferred shares 44.5% Emerging debt 22.2% 1 Yield relative to the Ryan Labs 30-Year STRIPS Index. High yield represented by Merrill Lynch High Yield Master II Index. Preferred Shares represented by Bank of America Merrill Lynch Preferred Shares Index. Emerging Debt represented by JP Morgan EMBI Global Composite.
2. Balance high credit risk with interest rate risk The fund s Government Bond Portfolio includes investments in debt securities issued, guaranteed or otherwise backed by the US Government or its agencies and instrumentalities. The team expects these assets to rise during periods of economic stress. Step two: Balance risk contribution Risk allocation Asset mix High income Tsy STRIPS Seek to balance the amount of risk contributed by each asset Tsy STRIPS 25.0% Preferred shares 33.3% High yield 25.0% Emerging debt 16.7% This leads to the strategic asset mix For illustrative purposes only and does not represent actual allocation of the strategy. As of Sept. 30, 2015. Sources: Invesco analysis and DataStream. High Income includes High Yield, Emerging Debt and Preferred Stock. 3. Make tactical adjustments Increase or decrease allocations based on yield and cyclical appeal. In addition, the GAA team can make opportunistic investments in other asset classes such as global equities which they believe have favorable prospects for high current income and the possibility of growth of capital.
Tactical allocation Strategic allocation is calculated through yield, volatility, and correlation estimates and reset monthly. Tactical allocation allows the asset weights to deviate from the long-term strategic allocation and is adjusted monthly. Depending on the tactical indicators, the portfolio can be positioned within the pre-determined risk ranges. Strategic vs. tactical asset allocation Strategic Tactical range 50 40 30 Composition of risk (%) Net investment (%) Composition of risk (%) Net investment (%) High income assets 1 Treasuries 100 80 60 Strategic 80 60 40 20 Highincome assets 1 Treasuries 50% strategic allocation 140 120 100 80 Tactical Source: Invesco analysis. Above figures do not represent specific time periods or actual portfolio results. For illustrative purposes only. Asset classes are subject to change and are not buy/sell recommendations. Putting it all together Opportunistic assets High yield debt Invesco Global Asset Allocation Team Strategic and tactical weights for each asset. Emerging market debt High yield debt Obligations of companies with lower credit ratings. Emerging market debt Obligations of countries considered developing such as Brazil and Turkey. Preferred stock Securities that have properties of both equity and debt. These typically offer higher yields than traditional equities. Treasury securities Preferred stock Treasury securities Bonds backed by the full faith and credit of the government as well as related securities. Zero coupon treasuries (STRIPS) are a strategic investment. Opportunistic assets Assets that occasionally trade at a premium yield to treasury STRIPS or appear timely from a total return perspective. For illustrative purposes only. Does not represent actual portfolio allocations. 1 High Income Assets are all except Treasuries.
Summary Investors currently face a low yield environment. Many assets that offer a higher yield have also had larger downside exposure. We believe that the prudent approach to handling this dilemma is to balance yield with assets that have historically tended to perform well during periods of economic uncertainty. Diversification may smooth returns even in volatile periods >10% 0 to 10% -10 to 0% <-10% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 High yield Preferred shares Emerging debt 30 year STRIPS 10.87 2.74 11.77 2.19-26.39 57.51 15.19 4.38 15.59 7.42 2.50 5.11 0.96 8.10-11.31-25.24 20.07 13.66 4.11 13.60-3.65 15.44 11.73 10.73 9.88 6.28-10.91 28.18 12.04 8.46 18.54-6.58 5.53 17.52 62.03 40.37 19.58 79.00-46.84 7.24 60.65 1.92-23.92 57.66 Average 11.31 19.12 17.53 4.18 4.11 14.73 12.03 19.40 12.41-6.68 20.28 Sources: DataStream, Bloomberg L.P. and Invesco analysis. Past performance cannot guarantee future results. An investment cannot be made in an index. Index returns are not indicative of fund returns. High yield represented by Merrill Lynch High Yield Master II Index. Preferred Shares represented by Bank of America Merrill Lynch Preferred Shares Index. Emerging Debt represented by JP Morgan EMBI Global Composite. 30-Year STRIPS represented by Ryan Labs 30-Year STRIPS Index. Experienced leadership The Global Asset Allocation team manages approximately $25.9 billion for clients around the world as of September 30, 2015. The senior professionals on the team have extensive experience in asset allocation strategies. The team consists of Chief Investment Officer (CIO) Scott Wolle and Portfolio Managers Mark Ahnrud, Chris Devine, Scott Hixon, Dr. Bernhard Pfaff 1 and Christian Ulrich, each of whom has more than 16 years of investment experience. The team s CIO, Scott Wolle, has been with Invesco since 1999 and has more than two decades of investment industry experience. Please contact your Invesco sales representative to learn more about our approach to diversified income sources. 1 Not listed in the prospectus.
Invesco Premium Income Fund Investment objective Seeks to provide current income. Performance summary Average annual total returns (%) as of Sept. 30, 2015 class A shares (inception 12/14/11) NAV Max load 5.50% Quarter 2.09 7.46 1 year 0.48 5.07 3 years 2.46 0.54 Inception 4.99 3.44 30-day SEC yield (%) 1 4.58 Had fees not been waived and/or expenses reimbursed, the SEC yields would have been 4.10% for Class A shares. Performance quoted is past performance and cannot guarantee comparable future results; current performance may be lower or higher. Visit invesco.com/performance for the most recent month-end performance. Performance figures reflect reinvested distributions and changes in net asset value (NAV). Investment return and principal value will vary, and you may have a gain or a loss when you sell shares. Performance shown at NAV does not include applicable front-end sales charges, which would have reduced the performance. Performance for other share classes will differ due to differing sales charge structures and class expenses. The gross expense ratio is 1.29% and the net expense ratio is 1.05% for Class A shares. Net = Total annual operating expenses less any contractual fee waivers by the adviser in effect through at least Feb. 29, 2016 and expense reimbursements through at least June 30, 2016. See current prospectus for more information. Expenses are as of the fund s fiscal year end as outlined in the fund s current prospectus. 1 SEC yield: A calculation for determining the amount of portfolio income, excluding non-income items as prescribed by the SEC. Yields are subject to change. About risk There is a risk that the Federal Reserve Board (FRB) and central banks may raise the federal funds and equivalent foreign rates. This risk is heightened due to the potential tapering of the FRB s quantitative easing program and other similar foreign central bank actions, which may expose fixed income investments to heightened volatility and reduced liquidity, particularly those with longer maturities. As a result, the value of the Fund s investments and share price may decline. Changes in central bank policies could also increase shareholder redemptions, which may increase portfolio turnover and fund transaction costs. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer s credit rating. The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues. Most senior loans are made to corporations with below investment-grade credit ratings and are subject to significant credit, valuation and liquidity risk. The value of the collateral securing a loan may not be sufficient to cover the amount owed, may be found invalid or may be used to pay other outstanding obligations of the borrower under applicable law. There is also the risk that the collateral may be difficult to liquidate, or that a majority of the collateral may be illiquid. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Investments in real estate related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid. Mortgage- and asset-backed securities are subject to prepayment or call risk, which is the risk that the borrower s payments may be received earlier or later than expected due to changes in prepayment rates on underlying loans. Securities may be prepaid at a price less than the original purchase value. Issuers of sovereign debt or the governmental authorities that control repayment may be unable or unwilling to repay principal or interest when due, and the Fund may have limited recourse in the event of default. Without debt holder approval, some governmental debtors may be able to reschedule or restructure their debt payments or declare moratoria on payments. Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. An investment in a derivative could lose more than the cash amount invested. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risks associated with an investment in the Fund.
Explore Intentional Investing with Invesco At Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It s a philosophy of investment excellence we call Intentional Investing, and it guides the way we: Manage investments Provide choices Connect with our clients Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. We manage investment strategies across all major asset classes and deliver them through a variety of vehicles. Our wide range of choices allows you to create a portfolio that s purpose-built for your needs. We re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisors. Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their advisors for a prospectus/summary prospectus or visit invesco.com/fundprospectus. Note: Not all products, materials or services available at all firms. Advisors, please contact your home office. All data provided by Invesco unless otherwise noted. invesco.com/us PIN-BRO-1 10/15 Invesco Distributors, Inc. US12206