Collective Trusts 101

Operating Expenses

Fund operating expenses such as audit, custody, fund accounting, and transfer agency fees are accrued and deducted daily from the total fund assets prior to striking the daily net asset value (NAV) for the fund and prior to calculating performance. Fund operating expenses are expressed as a ratio of total assets. The most recent audited expense ratios for the Invesco Collective Trust Funds can be found in the annual report. Quarterly unaudited expense ratios can be found on the quarterly Fund Overviews / Fact Sheets. The expenses on the funds are generally lower than those for mutual funds and decrease as fund assets grow.

Management Fees

One of the more well-known features of collective trust funds is their ability to charge negotiable fees to their clients. The Invesco Collective Trust Funds offer this type of pricing flexibility to clients for most funds in the Class C shares of a given fund.

The Invesco Collective Trust Funds Class C share class investments charge according to an asset-based fee structure allowing clients with greater assets invested to pay a lower fee through consecutive breakpoints. Management fees are specific to each account. They accrue daily based on the account's market value and are redeemed from the account monthly. Management Fees cover the administrative services provided by the Trust Company, the sub-advisor to the fund and the marketing costs assumed by the distribution channels selling the funds. They may also include revenue sharing fees for plan administration expenses.

All other share classes offered have a fixed management fee charged to all investing plans that may or may not include fixed revenue share fees. These share classes function identically to mutual funds in that all fees and expenses are deducted from the fund prior to striking the daily net asset value.

Collective trust funds are exempt from taxation under IRS Revenue Ruling 2011-1 since they can only be purchased by certain qualified retirement plans such as 401(K) and defined benefit plans.

Because collective trust funds are only available as retirement plan investments, they do not pay out dividends or capital gains. All income and earnings from the sale of securities are reinvested back into the fund with a resulting increase/decrease in share price. In other words, any profit or loss to the fund is reflected in the daily share price. The exception to this are stable value trusts. In order to maintain a daily share price of $1 per share, all dividends for these funds accrue daily and are reinvested back into investor accounts on the last business day of each month as dividends.

The Invesco Collective Trust Funds Class C share class investments represent our flexible pricing product offerings where each investing plan can have its own custom fee schedule. For this reason, net asset values (NAV) and performance for Class C shares of any Invesco Collective Trust Fund is calculated differently from that of mutual funds.

Since the management fees are different for each plan, those fees must be charged outside of the daily NAV. Therefore, the NAV of a Class C collective trust fund does not reflect the deduction of investment management fees, although it does include fund expenses.

Returns for Class C shares are calculated both gross of fees or standard net of fees. Gross of fees fund performance is calculated before the deduction of management fees but after the deduction of fund operating expenses. Standard net of fees fund performance is calculated after the deduction of fund operating expenses and after the deduction of the standard investment management fee applicable to the fund. Individual Plan performance will vary depending upon the timing of contributions and withdrawals and upon the individual Plan's fee schedule. The monthly-adjusted returns are compounded and then annualized to compute the long-term returns.

Net of fees returns, as provided by the Trust Company for a fund's Class C shares, are net of our standard management fee, which does not include any client service fees and may not be the actual fee paid by the Plan. The actual investment management fee varies for each Plan based on the fee negotiated with the Plan. This negotiated fee can fluctuate daily based on the various asset level breakpoints reached at the time the daily fee accrual is calculated for each Plan.

Note, however, that any share class other than Class C within the Invesco Collective Trust Funds has a fixed management fee and therefore the daily NAVs and net performance do reflect the deduction of the management fees for that class of shares for all investors.