Invesco Unit Trusts Fixed income

Transcription

1 Invesco Unit Trusts Fixed income

2 Before investing, investors should carefully read the prospectus and consider the investment objectives, risks, charges and expenses. For this and more complete information about the trust(s), investors should ask their advisors for a prospectus or download one at invesco.com/uit. About risk There is no assurance a unit trust will achieve its investment objective. An investment in a unit trust is subject to market risk, which is the possibility that the market values of securities owned by a unit trust will decline and that the value of trust units may therefore be less than what you paid for them. The trusts are unmanaged and their portfolios are not intended to change during the trusts lives except in limited circumstances. Accordingly, you can lose money investing in a unit trust. The trust should be considered as part of a long-term investment strategy and you should consider your ability to pursue it by investing in successive trusts, if available. You will realize tax consequences associated with investing from one series to the next. An investment in these trusts should be made with an understanding of the risks associated therewith, such as the inability of the issuer or an insurer to pay the principal of or interest on a bond when due, volatile interest rates, early call provisions and changes to the tax status of the bonds. In particular, Qualified Bonds may be redeemed approximately three years after issuance to the extent an issue has unexpected bond sale proceeds. As interest rates rise, bond prices fall. Investments in a trust may be subject to interest rate risk. If interest rates rise, the value of the bonds in a trust may decline and if interest rates decline the value of the bonds may increase. Also, the longer the period to maturity, the greater the sensitivity to interest rate changes tends to be. Should the issuer of any Build America Bonds (BABs) or Qualified Bonds (including Qualified School Construction Bonds, Qualified Energy Conservation Bonds and Clean Renewable Energy Bonds) fail to continue to meet the applicable requirements imposed on the bonds as provided by the American Recovery & Reinvestment Act of 2009, it is possible that such issuer may not receive federal cash subsidy payments, impairing the issuer s ability to make scheduled interest payments. BABs and Qualified Bonds are not guaranteed by the federal government. If the issuer can not pay the debt service on the municipal obligation, the BABs or Qualified Bonds status would not help the issuer. A particular series of a trust may be concentrated in certain sectors or geographic regions, and to the extent that it is, your investment in units of a trust series would be subject to the risks associated with such concentrations. Please refer to the prospectus associated with the applicable trust. Not all municipals can be sold as Build America Bonds or Qualified Bonds. For BABs on which the issuer receives a direct federal subsidy payment for a portion of their costs, only new money governmental issues for capital expenditures capital qualify. An investment in the Ginnie Mae ( GNMA ) securities, mortgage-backed securities, should be made with an understanding of the risks associated with an investment in mortgage-backed securities, such as volatile interest rates and the early return of principal. As interest rates rise, bond prices fall. The principal amount of GNMA securities per unit will decline, as principal payments and prepayments are made on the underlying GNMA securities. Certain trusts invest in bonds rated below investment grade and are considered to be junk bonds. Bonds rated below BBB- by Standard & Poor s and Fitch, or below Baa3 by Moody s, are considered to be below investment grade. These bonds are considered to be speculative and are subject to greater market and credit risks. Accordingly, the risk of default is higher than with investment grade bonds. In addition, these bonds may be more sensitive to interest rate changes and may be more likely to make early returns of principal. The trust s price per unit, yield and return may fluctuate more than in a trust consisting of investment grade bonds. Certain of the bonds in a trust s portfolio may be restricted securities that may be subject to enhanced liquidity risk. This is the risk that the value of a security will fall if trading in the security is limited or absent. Any bonds in the trust designated as Rule 144A securities are subject to resale restrictions. The value of trust units may decrease if there is a lack of a liquid market for these securities. Securities of foreign issuers in a Trust present risks beyond those of U.S. issuers. These risks may include market and political factors related to an issuer s foreign market, international trade conditions, less regulation, smaller or less liquid markets, increased volatility, differing accounting practices and changes in the value of foreign currencies. With respect to the GNMA trusts the US Government guarantee applies only to the timely payment of the interest and principal on the Ginnie Mae securities and does not guarantee against market value fluctuations, nor does it apply to the units of the trust. Discount fixed income unit trusts may realize gains when a municipal bond is sold, is called or matures and unit holders may incur a tax liability from time to time. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under US federal tax laws. Federal and state tax laws are complex and constantly changing. You should always consult your own legal or tax advisor for information concerning your individual situation.

3 Innovative investment solutions for your investment portfolio When it comes to fixed income investing, investors can be overwhelmed by the dynamics of the over-the-counter fixed income trading market. Selecting individual bonds can be difficult in regards to obtaining liquidity, diversification and determining fair market value. We can help. Tax-exempt unit trusts Invesco offers both national and state specific municipal portfolios. Municipal bonds are unique securities that offer investors the potential for tax benefits in return for investing in debt securities that states, cities, counties, universities, hospitals and other governmental entities issue to help build America s infrastructure. Taxable unit trusts These portfolios are generally diversified among a variety of fixed income securities, such as taxable municipal, corporate and agency bonds. They typically seek to provide high current income, consistent with preservation of capital. $45 billion in initial unit trust deposits as of June 30, 2015 Generations of experience In our history, we have had very few defaults. Experience and prudence has kept our municipal investments 99.96% default-free 1 and our corporate investments 99.74% default-free. 1 Past performance is no guarantee of future results. Bond type Invesco Unit Trust default rate 1 S&P Universe default rate 2, % of our initial municipal bond investments default free 1 (%) % of our initial corporate bond investments default free Internal Invesco Database; Municipals 1/1/86 12/31/14, Corporates 1/1/01 12/31/14 2 S&P Investment Grade Municipal default rate; cumulative average default rate, ; from U.S. Public Finance Defaults and Rating Transition Data: 2014 Update published 5/5/15 3 S&P Corporate Default Rate, Cumulative Rate, from Default, Transition, and Recovery: 2014 Annual Global Corporate Default Study and Rating Transitions published 4/30/15 invesco.com/uit 1

4 Invest with a leader Invesco is a global leader in fixed income unit trusts. Fixed income unit trusts have long been valued for the potential steady stream of monthly income they may generate. Bonds often perform differently than stocks in similar market conditions, and they may provide critical stability to an overall portfolio. A disciplined long-term strategy of including fixed income within a portfolio has historically been utilized as a way to reduce overall volatility or risk. Invesco offers a number of disciplined unit trusts that generate either tax-exempt or taxable income making them potentially important components of many investors portfolios. Unit trust investment team The Unit Trust Investment team is a well-rounded group of investment professionals, distinguished by their breadth of experience and depth of industry knowledge. The team is responsible for portfolio construction, individual securities transactions, market risk and credit risk. This allows them to deliver quality research driven unit trust products, as they have for more than three decades. Investment overview The securities in Invesco s tax-exempt and taxable fixed income unit trust portfolios are selected by experienced analysts. They conduct extensive research on each potential holding, including an extensive review of its credit quality, terms and maturity. Once securities are selected, they are monitored on an ongoing basis in an effort to insure continued investment quality. A security may be sold under limited circumstances if a significantly adverse situation occurs. Invesco Unit Trusts focuses on quality and value. Many portfolios are made up of high-quality bonds and strive to protect income with call protection of at least five years. Invesco has developed fixed income unit trusts that have stood the test of time and offers portfolios for various investment objectives. 2

5 Potential benefits to investing in fixed income unit trusts Professional selection. The Unit Trust Investment team, an experienced group of investment professionals, selects and obtains the securities held in Invesco s fixed income portfolios. Diversification. Certain Invesco fixed income unit trusts are diversified across various geographical regions, maturities, credit ratings and subcategories within the fixed income markets. Of course, diversification does not guarantee a profit or eliminate the risk of loss. Current income/preservation of capital. The income generated by Invesco s fixedincome unit trusts may remain fairly consistent. A buy and hold strategy is often utilized by investors to preserve capital. Also, Invesco s portfolios offer various return and yield components for different investment objectives. Monthly income. Unit trusts typically pay monthly income unlike individual bonds, which usually pay income semiannually. Tax savings. Our tax-exempt unit trusts are not subject to federal and, in some cases, state and local taxes. Convenience and transparency. The structure of Invesco s fixed income unit trusts allows investors access to a diversified portfolio of fixed income securities within one investment. Also, transparency is readily available with a defined portfolio, daily pricing and liquidity. AMT-free portfolios. Invesco s national and state municipal portfolios do not buy alternative minimum tax (AMT) paper. AMT has become problematic for many middle-income taxpayers because it does not take into account inflation. Lower fees. Investing in fixed income unit trusts generally corresponds to lower ongoing fees than investing in mutual funds or potentially other similar fixed income investment packages. invesco.com/uit 3

6 Finding the right mix Investing in fixed income unit trusts Asset allocation should be the foundation of an investment plan, whether planning for retirement, education, current income or other capital requirements. It is one of the most important and most frequently misunderstood concepts in the investment industry. The basic confusion is often that asset allocation and diversification are one in the same, they are not. Yet, they both can play a vital role in your overall portfolio. Asset allocation Asset allocation in its simplest form would divide a portfolio into two basic classes of investment securities: stocks and bonds. The concept being when one asset class trends down in value the other asset class may trend up, thus, offsetting some of the volatility. Changes to personal situations, goals and objectives should be generally applied to asset allocation, not necessarily current market conditions. What are bonds? A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and US and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. Diversification Diversification is a risk reduction technique that applies to individual holdings within a particular asset class as a percent of total assets. Attempting to achieve higher rates of return and hedge against equity downturns, many investors diversify their equity holdings among various sectors, asset classes, geographical regions, market styles and indexes. The same applies to fixed income. Bonds in different sectors may have unique behaviors, often resulting in different reactions to the same market conditions. Diversification does not guarantee a profit or eliminate the risk of loss. Diversification does not ensure a profit or eliminate the risk of loss. 4

7 Potential to improve the risk-return profile in an overall portfolio Correlation is a foundational principal of portfolio theory. Investments that are not well correlated to one another may help to limit total portfolio volatility. Bonds generally have low correlations to most major asset classes, especially equities. Historically, the low correlation indicates that adding bonds to a portfolio has the potential to both diversify equity exposure and lower portfolio risk. Of course, past performance does not guarantee future results. Why consider fixed income in a portfolio allocation? The monthly income is usually constant throughout the life of a particular bond Hedge for possible changes in interest rates Moderate price risk Complement a portfolio to meet your current and future financial objective and goals (retirement, education or life event) Bonds generally have low correlation to equity markets the income from bonds can potentially enhance an overall portfolio in an up market and help cushion losses when markets decline Potentially higher reinvestment opportunities in down market From speculative to conservative investing, fixed income should be considered as one of the core foundations in an overall portfolio. Invesco s fixed income unit trusts are professionally selected portfolios that offer investors the structure of a longterm disciplined investment. Correlation measures how two securities move in relation to each other. Correlations are used in advanced portfolio management. invesco.com/uit 5

8 Tax exempt Fixed income unit trusts Invesco Unit Trusts offers many national and state municipal bond portfolios that may suit various investment objectives. Municipal bonds may provide significant tax savings, with monthly interest payments in all trusts and high credit quality in certain trusts. In recent years, municipal bonds have provided favorable after-tax returns compared to taxable bonds, particularly for investors in high-income tax brackets. Of course, past performance is no guarantee of future results. Invesco Unit Trusts has deposited more than 5,248 fixed income unit trusts with over $45 billion in initial deposits as of June 30, Taxable equivalent yields 1 Taxable-equivalent yields represent the amount of pretax return an investor would need to earn in a taxable investment in order to equal that of a tax-exempt investment. The following chart shows the approximate taxable yields that are equivalent to tax-exempt yields under federal taxes for individuals using the highest federal tax bracket. Taxable equivalent yields Tax-exempt rate Taxable-equivalent rate 2 Bond A Bond B Bond C Bond D % The taxable equivalent yields and taxable equivalent estimated current returns are for illustrative purposes only, apply only to individuals and show the approximate taxable yield/estimated current returns for individuals that is equivalent to the related tax-exempt yield/estimated current returns under federal taxes using the published federal tax rates scheduled to be in effect in This information is based on present law as of the date of publication and does not account for any proposed changes in tax rates. This information illustrates approximately what you would have to earn on taxable investments to equal the tax-exempt estimated current return if you are in the 28% federal tax bracket. This information does not account for limitations on deductions, the alternative minimum tax or taxes other than federal personal income tax. 2 Federal tax rates and state tax rates may vary. Please consult your financial advisor for further information. A portion of your interest income may be subject to state and local taxes. 6

9 Municipal bonds Some characteristics of municipals include: Issued by states, cities or other local governments to finance schools, highways, hospitals, bridges and other public works. Income is exempt from federal tax, and from the state and local taxes for the state of residence Have low price volatility relative to stocks Enhanced diversification of municipal bonds Lower price volatility compared to many types of taxable bonds Lower default rates versus taxable bonds Invesco unit trusts tax-exempt fixed income portfolios Invesco s national and state-specific municipal portfolios are quality investments that have potential for monthly income, maturity flexibility, low initial investment of one unit and are AMT-free. Benefits particular to either our national or state-specific municipal portfolios may be: National municipal portfolios Tax-exempt income from federal and investor s state of residence. Residents of states with low or no state income tax can find viable investments with out of state bonds that may have higher yields. Ideal for residents of states with low bond issuance, thus helping to diversify a portfolio or provide a possible yield advantage. Geographical diversification with the potential to seize opportunities across many states. Various options for portfolio durations to meet an investment objective: limited maturity, long-term and intermediate. State specific municipal portfolios Tax-exempt income on the federal, state and local levels. State-specific municipal bonds may be an attractive investment for resident in a state with a high-income tax, such as New York and California. Diversification among various sectors within the state. invesco.com/uit 7

10 Taxable Fixed income unit trusts Invesco Unit Trusts offers many taxable fixed income unit trusts that seek to generate high income and protect principal with fixed monthly payments. Invesco offers a variety of taxable fixed income portfolios, such as taxable municipals, corporate bonds or agency bonds. These portfolios could be ideal investments for an IRA portfolio. Quality investments may offer stability to an overall portfolio, especially in volatile markets. Our taxable fixed income unit trusts are quality investments that select individual securities in the portfolios using investment grade and above credit ratings, with the exception of the HYCT trust. Also, our taxable portfolios historically have had higher yields than US treasuries. Of course, past performance does not guarantee future results. Ratings guide 1 Bond quality investment grade Moody s rating S&P rating Fitch rating Highest quality Aaa AAA AAA High quality Aa AA AA Upper medium grade A A A Medium grade Baa BBB BBB Bond quality noninvestment grade Moody s rating S&P rating Fitch rating Noninvestment grade (HYCT) Below Baa3 Below BBB- Below BBB- 1 A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA/Aaa (highest) to D/C (lowest); ratings are subject to change without notice. For more information on Standard and Poor s rating methodology, please visit standardandpoors.com and select Understanding Ratings under Rating Resources on the homepage or Moody s at moodys.com and select Rating Methodologies under Research and Ratings on the homepage. For more information on Fitch Ratings rating methodology, please visit fitchratings.com and select Ratings Definitions on the homepage. 8

11 Taxable fixed income Invesco Unit Trusts can help you simulate a bond ladder type investment with Investment Grade Bonds in three different maturities (portfolios below are a mix of corporates and taxable municipals): Investment Grade Income Trust, 7+ Year Series (IGST) Investment Grade Income Trust, Year Series (IGLM) Investment Grade Income Trust, 20+ Year Series (IGLT) Invesco provides investors with convenient access to diversified portfolios of taxable municipal, corporate and agency bonds with a low minimum investment, potential for consistent monthly income, daily liquidity and transparency. Taxable municipal portfolios Potential for monthly income Defined portfolios with similar benefits of the tax-exempt municipals such as diversification of maturities, credit ratings, geographic locations and yields High credit ratings, quality investments with yields comparable to corporate bonds Suitable investment in an IRA account Intermediate and long-term portfolio durations are available to help meet an investor s investment objectives Corporate (credit) portfolios Potential for monthly income Defined portfolios of corporate securities with diversification among various sectors, industries, maturities, credit qualities and geographic locations Quality investment, portfolios are investment grade or better corporate bonds 1 We offer portfolios with long-term and intermediate durations Agency portfolio High monthly income pays out both principal and interest monthly Defined and diversified portfolio of GNMA 2 securities Enhance overall yield with potentially little or no additional credit risk. Potential for higher yields than US treasuries with comparable maturities. High-quality investment GNMAs 1 are the only mortgage-backed security that enjoys the full faith and credit of the United States Government as to the timely payment of principal and interest 1 HYCT trusts invest primarily in bonds below investment grade. 2 Mortgage loans underlying GNMA securities may be prepaid anytime resulting in return of principal invesco.com/uit 9

12 Long-term disciplined investing Fixed income taxable and tax-exempt Invesco s fixed income unit trusts can satisfy a variety of your individual investment goals. They are professionally selected, disciplined long-term fixed income strategies that can be a core component of your fixed income portfolio. Our fixed income unit trusts may provide diversification opportunities via varied structures in credit ratings, durations, geographic locations, subcategories and sectors. Tax-exempt fixed income unit trusts National municipal portfolios Trust IMIT Insured Municipals Income Trust (Long-Term) QUAL Quality Municipal Income Trust, 20+ Year (Long-Term) QMLM Quality Municipals Income Trust, Limited Maturity IGMT Investment Grade Municipal Trust (Long-Term) IGIN Investment Grade Municipal Trust, Intermediate Maturity IGTT Investment Grade Municipal Trust, Year (Limited Maturity) Snapshot Seeks current monthly income and principal protection Seeks diversification across various geographies, maturities, credit ratings, and municipalities within the US Long-term. Historically, municipal bonds held to term tend to outperform taxable bonds 1 Intermediate and Limited Maturity. Shorter duration, lower interest rate risk Tax Bond ratings 2 (selection criteria) Exempt federal and state of residence IMIT A-/A3 or higher QUAL A /A3 or higher QMLM A /A3 or higher IGMT Investment Grade (BBB /Baa3 or higher) IGTT Investment Grade (BBB-/Baa3 or higher) IGIN Investment Grade (BBB /Baa3 or higher) Call protection Duration Short-term Approximately 5 years Intermediate IGIN 7 13 years Limited maturity IGTT years QMLM years Long-term IMIT years IGMT years QUAL years Please see each trust prospectus for complete details about the risks associated with each trust. 1 Past performance is no guarantee of future results. 2 A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA/Aaa (highest) to D/C (lowest); ratings are subject to change without notice. For more information on Standard and Poor s rating methodology, please visit standardandpoors.com and select Understanding Ratings under Rating Resources on the homepage or Moody s at moodys.com and select Rating Methodologies under Research and Ratings on the homepage. Diversification does not ensure a profit or eliminate the risk of loss. 10

13 Taxable municipal/corporate portfolios IGSC Investment Grade Corporate Trust, 3-7 Year Series IGST Investment Grade Income Trust, 7+ Year Series IGLM Investment Grade Income Trust, Year Series IGLT Investment Grade Income Trust, 20+ Year Series FLTG Variable & Fixed Rate Corporate Trust HIGT High Income Investment Grade Trust HYCT High Yield Corporate Trust, 4-7 Year Seeks to generate high level of current income and preserve capital Seeks diversified portfolios of investment grade taxable municipals and corporate bonds (except HYCT) Income level IGSC Investment Grade (BBB /Baa3 or higher) IGST Investment Grade (BBB-/Baa3 or higher) IGLM Investment Grade (BBB /Baa3 or higher) IGLT Investment Grade (BBB /Baa3 or higher) FLTG Investment Grade (BBB-/Baa3 or higher) HIGT Investment Grade (BBB /Baa3 or higher) HYCT Below investment grade (Caa3/CCC- or higher) Approximately 5 years or more IGSC FLTG IGST HYCT HIGT 3-7 years 4 7 years 7 13 years 4-7 years 5 8 years Agency portfolio VGMB GNMA Income Portfolio High monthly income potential pays out both principal and interest monthly Defined portfolio of GNMA securities. Seeks high quality mortgage-backed securities with yields potentially higher than US Treasuries GNMA securities are fully backed by the faith and credit of US government as to the timely payment of principal and interest. Income level AAA or Aaa Approximately 5 years or more Approximately 4 years IGLM years IGLT years invesco.com/uit 11

14 Consider fixed income unit trusts Invest with a leader Invesco s fixed income unit trusts offer a range of innovative investment solutions to meet your needs. Invesco s tax-exempt and taxable portfolios can help you access a wide range of fixed income opportunities overseen by experienced managers to meet your objectives. Invesco fixed income unit trusts Invesco has been a leader in the fixed income unit trust market for over three decades and was one of the pioneers of the tax-exempt fixed income unit trust. Today, Invesco s fixed income product platform includes portfolios that span the fixed income markets, giving you the opportunity to build a well-diversified fixed income allocation in an overall portfolio. Your financial advisor can help you determine how Invesco s fixed income unit trusts might work best in your portfolio, based on your unique investment goals, time horizon and risk preferences. Together, you can select the appropriate mix of fixed income unit trust investments that will help you meet your objectives. For more information about how Invesco Unit Trusts can enhance your portfolio, contact your financial advisor or visit us on the web at invesco.com/uit. 12

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16 Invesco Unit Trusts: Specialized insights, global resources An experienced growth business; Invesco Unit Trusts has been developing and delivering enduring investments for nearly 40 years. Our strategies are designed to deliver core, innovative and tactical investments for client s most important investment dollars. In doing so, we draw on our firm s expert resources as a leading global investment firm with more than $803 billion in assets under management. 1 The specialized insight of our investment teams combined with the extensive reach of our global firm results in a powerful combination in strategy development that is unique to Invesco in the industry. Invesco Unit Trusts are built with global collaboration, Intentional Investing, and unprecedented experience. Collaboration with global experts. At Invesco, great ideas transcend borders and our investment teams have the ability to access expert perspectives from our 750-plus investment professionals across the globe. Broad and expansive unit trust lineup. Every investment strategy we offer is carefully constructed and closely monitored by our experts. Unparalleled experience. Over the past four decades, our unit trust team has managed investors money through many market cycles and industry changes. 1 As of June 30, 2015 Before investing, investors should carefully read the prospectus and consider the investment objectives, risks, charges and expenses. For this and more complete information about the trust(s), investors should ask their advisors for a prospectus or download one at invesco.com/uit. Information contained herein and in the preliminary prospectus is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission, but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or a solicitation of an offer to buy; nor shall there be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Invesco unit investment trusts are distributed by the sponsor, Invesco Capital Markets, Inc. and broker dealers including Invesco Distributors, Inc. Both firms are wholly owned, indirect subsidiaries of Invesco Ltd. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under US federal tax laws. Federal and state tax laws are complex and constantly changing. You should always consult your own legal or tax advisor for information concerning your individual situation. Invesco 11 Greenway Plaza, Suite 1000 Houston, TX invesco.com/uit U-FIXINC-BRO-1 08/15 Invesco Distributors, Inc. US9762