Item No. 3: Annual Presentation by Invesco Active Commodities Manager (August 13, 2014, Regular Retirement Board Meeting) INVESTMENT MANAGER SUMMARY

Transcription

1 Item No. 3: Annual Presentation by Invesco Active Commodities Manager (August 13, 2014, Regular Retirement Board Meeting) INVESTMENT MANAGER SUMMARY Firm Name Manager Tenure with Fund Investment StrategyNehicle Contract Expiration MANAGEMENT Invesco 11 Months Commodities Open Ended ASSETS' Total Firm AUM Total Firm Assets in Strategy Total Assets Managed for WPERP ' As of 6/30/2014 $802.4 Billion $1.5 Billion RP - $102.4 Million HP - $ 17.9 Million PERFORMANCE* as of 6/30/2014 QTD YTD Inception2 Invesco Balanced Risk Commodity Strategy (gross) 1.75% 3.13% -3.17% Invesco Balanced Risk Commodity Strategy (est. net) 1.57% 2.77% -3.62% DJ-UBS Commodities Index3 0.08% 7.08% 3.25% Difference (net of fees) 1.49% -4.31% -6.87% `Source: BNY Mellon 2 Inception date of 9/1/ As of 6/30/2014, DJ-UBS Commodities changed its name to Bloomberg Commodities Index Current Fee FEES 0.70% First $100 Million 0.55% Over $100 Million WATCH STATUS N/A PREVIOUSLY DISCLOSED LITIGATION N/A 3

2 Invesco Balanced-Risk Commodity Strategy Update for Second Quarter 2014 Water and Power Employees Retirement Plan August 13, 2014 The Invesco Collective Trust Funds are bank collective trust funds for which Invesco National Trust Company serves as trustee and investment manager. They are available exclusively to qualified retirement plans. The funds are not FDIC insured or registered with the Securities and Exchange Commission. Fund investors and potential investors are strongly encouraged to review the funds' Declaration of Trust for additional information regarding the operation and investment objectives of the funds. Invesco Distributors, Inc., is the US distributor for the Invesco Collective Trust Funds. Both Invesco National Trust Company and Invesco Distributors, Inc. are indirect, wholly owned subsidiaries of Invesco Ltd. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This does not constitute an offer or solicitation of any security or product, nor constitute a recommendation of the suitability of any investment strategy for a particular investor. When evaluating whether a fund is appropriate for your investment goals, fund performance, fees and expenses are only a few of the criteria you should consider. You may also consider the investment objective, strategy and risks. Investment products offered are Not FDIC Insured, May Lose Value, and are Not Bank Guaranteed /14

3 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Schedule Additional Information and Disclosures Glossary of Investment Terms 2

4 Introduction David Gluch, CFA Client Portfolio Manager, Invesco Global Asset Allocation Joined Invesco in 1995 Served as head of U.S. Product Management from 2005 to 2012, overseeing product positioning, strategy and servicing for the retail and institutional channels Received his B.B.A. in finance from University of Texas and is a CFA charter holder Delia M. Roges Managing Director, Public Funds Sales & Service Team Joined Invesco in 2011 Over 20 years of institutional investment management experience Board of Regents Loyola Marymount University, Board of Advisors to the Dean of the School of Education, Loyola Marymount University MBA, University of Southern California; B.B.A.-Finance, Loyola Marymount University 3

5 Explore Intentional Investing with Invesco At Invesco, all of our people and all of our resources are dedicated to helping investors worldwide achieve their financial objectives. It s a philosophy of investment excellence we call Intentional Investing. As an independent firm, our global organization is solely focused on investment management: More than 750 investment professionals Global assets under management of US$802.4 billion More than 6,000 employees worldwide Invesco Asia-Pacific Asia ex-japan Greater China Japan Australia Locations: Beijing, Hong Kong, Melbourne, New Delhi, Shenzhen, Sydney, Taipei, Tokyo Invesco Canada Trimark Investments Canadian, regional, sector and global equity Canadian and global fixed income Balanced portfolios Location: Toronto Invesco Fixed Income Global liquidity Stable value Global and US broad fixed income Global alternatives and bank loans Locations: Atlanta, Chicago, Hong Kong, Houston, London, Louisville, Melbourne, New York, Palm Harbor, FL, San Diego, Tokyo Invesco Fundamental Equity US growth equity US value equity International and global growth equity Sector equity Balanced portfolios Locations: Austin, Houston, San Francisco Invesco Global Asset Allocation Global macro Risk parity Commodities Active balanced solutions Locations: Atlanta, Frankfurt Invesco Global Core Equity Emerging markets International and global equity US equity Locations: Atlanta, Hong Kong, San Francisco Invesco Perpetual Global and regional equity, including UK, European, Asian, Japanese and emerging markets Global macro Fixed income Location: Henley, UK Invesco PowerShares Index-based exchange traded funds (ETFs) and notes (ETNs) and actively managed ETFs Domestic and international equity Taxable and tax-free fixed income Commodities and currencies Location: Chicago Invesco Private Capital Private equity funds of funds Customized portfolios Locations: London, New York, San Francisco Invesco Quantitative Strategies Quantitative equity Enhanced Long/short strategies Locations: Boston, Frankfurt, New York, Tokyo Invesco Real Estate Global direct real estate investing Global public real estate investing Locations: Atlanta, Beijing, Dallas, Hong Kong, London, Luxembourg, Madrid, Milan, Munich, New York, Newport Beach, Paris, Prague, San Francisco, Seoul, Shanghai, Singapore, Sydney, Tokyo, Warsaw Source: Invesco. Invesco Ltd. client-related data, investment professional, employee data and AUM are as of June 30, 2014, and include all assets under advisement, distributed and overseen by Invesco, including those of its affiliates Invesco Distributors, Inc. and Invesco PowerShares Capital Management LLC, which have an agreement with Deutsche Bank to provide certain marketing services for the PowerShares DB products. Invesco PowerShares Capital Management LLC is the sponsor for the PowerShares QQQ and BLDRS products. ALPS Distributors, Inc. is the distributor of PowerShares QQQ, BLDRS Funds and the PowerShares DB Funds. Invesco PowerShares Capital Management LLC and Invesco Distributors, Inc. are wholly owned, indirect subsidiaries of Invesco Ltd. Invesco Distributors, Inc. is the US distributor for Invesco Ltd. s retail products. Invesco Ltd. is not affiliated with ALPS Distributors, Inc. or Deutsche Bank. The listed centers do not all provide products or services that are available in all jurisdictions, nor are their products and services available on all platforms. The entities listed are each wholly owned, indirect subsidiaries of Invesco Ltd., except ALPS Distributors Inc., Deutsche Bank and Invesco Great Wall in Shenzhen, which is a joint venture between Invesco and Great Wall Securities, and the Huaneng Invesco WLR Investment Consulting Company Ltd. in Beijing, which is a joint venture between Huaneng Capital Services and Invesco WLR Limited. Please consult your Invesco representative for more information. Invesco Unit Investment Trusts Equity trusts Closed-end trusts Tax-free fixed-income trusts Taxable fixed-income trusts Location: Chicago WL Ross & Co. Distressed and restructuring private equity Energy private equity Locations: Beijing, Mumbai, New York, Tokyo 4

6 Invesco Global Asset Allocation Investment strategies Research Focus: Risk Allocation and Management balance risk exposures and create well-defined risk budgets Smart Beta improve the expected Sharpe Ratio within asset classes Tactical Allocation improve the risk-return profile by shifting away from the strategic portfolio weights Global Asset Allocation: $29.6 B Multi-Asset Classes Long-Only Invesco Balanced-Risk Allocation Strategy (IBRA): $21.1 B Long-Short Invesco Global Markets Strategy (GMS): $539mm Individual Asset Classes Invesco Balanced-Risk Commodity Strategy (BRCS) 1 : $1.5 B Invesco Macro International Equity Strategy: $8.3mm Invesco Macro Long/Short Strategy: $14.1mm Source: Invesco as of 06/30/14. 1 Strategy will occasionally have small short positions in individual commodities. Short sales may cause the strategy to repurchase a security at a higher price, causing a loss. As there is no limit on how much the price of the security can increase, the strategy s exposure is unlimited. Total GAA assets include $6.0 billion managed in multi-asset portfolios. 5

7 Invesco Global Asset Allocation Investment team Team Member In the Industry Since With the Firm Since Education Scott Wolle, CFA Chief Investment Officer Mark Ahnrud, CFA Portfolio Manager Chris Devine, CFA Portfolio Manager Scott Hixon, CFA Portfolio Manager, Head of Investment Research Christian Ulrich, CFA Portfolio Manager John Centner Investment Systems Analyst Raymond Fu Quantitative Analyst Duke University, M.B.A. Virginia Tech, B.Sc Duke University, M.B.A. Babson College, B.Sc University of Georgia, M.B.A. Wake Forest University, B.A Georgia State University, M.B.A. Georgia Southern University, B.B.A KV Zurich Business School, Switzerland University of Tennessee, B.A Georgia State University, M.S. Georgia Institute of Technology, B.Sc. David Gluch, CFA University of Texas, B.B.A. Client Portfolio Manager Mike McHugh, CFA Bellevue University, B.S. Client Portfolio Manager Dr. Bernhard Pfaff Portfolio Manager University of Freiburg i. Br., Doctorate Degree University of Freiburg i. Br. Max Andres Widmer, CFA Client Portfolio Manager Graduate School of Business Administration, (GSBA Zurich, Switzerland), B.B.A. Team founded in team members with 20 years average experience As of 06/30/14. In addition to the members above, the team is supported by one Business Analyst and two Portfolio Analysts. Client portfolio managers (CPMs) are integrated with Invesco s investment teams and involved in the ongoing research matters of their respective team s portfolios. The primary responsibilities of the CPM are to represent the portfolios in the marketplace and to manage the business responsibilities of the investment team. The CPM does not manage fund assets. 6

8 Invesco Global Asset Allocation Key Invesco contacts Delia Roges Managing Director, Invesco Public Funds 101 California Street, Suite 1800 San Francisco, CA Dave Gluch, CFA Client Portfolio Manager, Invesco Global Asset Allocation 11 Greenway Plaza, Suite 1000 Houston, TX George Avery Senior Product Manager, Invesco Global Asset Allocation 1555 Peachtree Street, NE Atlanta, GA Scott Wolle, CFA Chief Investment Officer, Invesco Global Asset Allocation 1555 Peachtree Street, NE Atlanta, GA Source: Invesco. As of 06/30/14. 7

9 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Schedule Additional Information and Disclosures Glossary of Investment Terms 8

10 Invesco Balanced-Risk Commodity Strategy Investment objective Strategy objectives The investment objective is to provide total return. Outperform the Bloomberg Commodity Index by 5% per year over a full market cycle Better diversification than the index Additional benefits No lock-up Daily liquidity Transparency Please see the derivatives and leverage risk disclosures on page 31 of this document. The Dow Jones-UBS Commodity Index changed it s name to the Bloomberg Commodity Index on 06/30/14. 9

11 Invesco Balanced-Risk Commodity Strategy Drivers of return: four key sources Structural Sources Tactical Sources Storage Difficulty Rebalancing Optimal Roll Tactical Allocation Long-term returns driven by average term structure which is determined by difficulty of storage and scarcity Potential rebalancing return is higher than that available for most other asset classes; most indices ignore this Term structure of commodity futures creates opportunity to achieve higher returns than available through front-month investments Alter exposure to commodities based on three considerations: Supply and demand balance Economic environment Price trends Source: Invesco. As of 06/30/14. For illustrative purposes only. 10

12 Invesco Balanced-Risk Commodity Strategy Step one: Investment universe Agriculture/ Livestock Energy Industrial Metals Precious Metals Soy Meal WTI Crude Copper Gold Soybeans Brent Crude Aluminum Silver Soybean Oil Gasoline Assets Sugar Corn Wheat Heating Oil Gas Oil Natural Gas Cotton Coffee Live Cattle Universe covers each of the four major complexes Minimum liquidity of $1 billion trading volume standardized for 10% volatility Source: Invesco. As of 06/30/14. 11

13 Invesco Balanced-Risk Commodity Strategy Step one: Strategic asset selection and exposure design Focus on Storage Difficulty Strategic Commodity Selection Average Annualized Excess Return (%) Contango Wheat Natural Gas Brent Soy Meal Gasoil Copper Heating Oil WTI Crude Oil Silver Sugar Gold Soybeans Live Cattle Soybean Oil Aluminum Cotton Corn Coffee Gasoline Average Annualized Term Structure (%) Backwardation Universe Backwardation Contango 100% 0% Term Structure Adjustment Define universe of commodities: Liquid commodities Top 30% get a weight multiplier of 1.0 and the bottom 30% are excluded Commodities between the 30 th and 70 th percentile are ranked according to their term structure Strategic allocation based on term structure to emphasize commodities that are scarce or difficult to store Sources: Invesco analysis and Bloomberg. Time period represented: 10/90 12/13. Backwardation refers to a status where prices of futures contracts with a longer maturity are lower than the spot price of the commodity. Contango refers to a status where prices of futures contracts with a longer maturity are higher than the spot price of the commodity. For illustrative purposes only. Past performance cannot guarantee future results. 12

14 Invesco Balanced-Risk Commodity Strategy Step one: Tactical sources of return - optimal roll yield Term Structure 60 Optimal Roll vs. Front Month: Excess Return and Risk Contract Price on 12/31/08 (%) Annualized Excess Return (%) Optimal Roll 11.7 / 26.1 Front Month 4.2 / /09 04/09 06/09 08/09 10/09 12/09 Contract Expiration Standard Deviation (Risk) Sources: Invesco analysis and DataStream. Data from 12/31/91 to 12/31/13. For illustrative purposes only. Front Month return is the GSCI Crude Oil excess return. Optimal Roll return is the Deutsche Bank Optimum Yield Light Crude Oil excess return. Term Structure of futures contracts refers to the price curve formed by the prices of futures contracts over various expiration months. Past performance is not a guarantee of future results. 13

15 Invesco Balanced-Risk Commodity Strategy Step two: Structural sources of return - portfolio construction Bloomberg Commodity Index 1 Asset Weight Risk Contribution (%) Weight (%) Precious Metals 15 Industrial Metals 17 Agriculture/ Livestock 36 Energy 32 Asset weights drive risk allocation Industrial Metals 15 Precious Metals 9 Energy 49 Agriculture/ Livestock 27 Balanced-Risk Commodity Strategy Portfolio Representative Strategic Risk Contribution (%) Agriculture/ Livestock 25 Precious Metals 25 Energy 25 Industrial Metals 25 Risk allocation drives asset weights Representative Strategic Asset Weight Weight (%) Precious Metals 28 Industrial Metals 23 Agriculture/ Livestock 28 Energy 21 Sources: Invesco analysis and DataStream. As of 06/30/14. 1 The Dow Jones-UBS Commodity Index changed it s name to the Bloomberg Commodity Index on 06/30/14. 14

16 Invesco Balanced-Risk Commodity Strategy Step three: Tactical asset allocation 3% risk target Strategic Allocation is calculated through volatility and correlation estimates and re-set monthly Active positioning 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 predetermined risk ranges Composition of Risk (%) Strategic Agriculture Energy Industrial Metals Composition of Risk (%) Tactical Range Agriculture Energy Industrial Metals Precious Metals 25% strategic allocation Precious Metals Net Investment (%) Strategic Net Notional Exposure (%) Notional Exposure (%) Strategic Net Investment (%) Tactical Range Tactical 75% 125% Asset classes are subject to change and are not buy/sell recommendations. Source: Invesco analysis. Above figures do not represent specific time periods or actual portfolio results. For illustrative purposes only. 15

17 Invesco Balanced-Risk Commodity Strategy Step three: Historical targeted risk contribution Risk Contribution (%) 100 Agriculture 75 Energy 75% 50 Industrial Metals 50% 25 Precious Metals 25% 0 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Minimum (%) Average (%) Maximum (%) Agriculture Energy Industrial Metals Precious Metals Source: Invesco analysis. The risk contributions represent each asset class as a percentage of the total portfolio standard deviation in the month in which it was implemented. Data as of 06/30/14. 16

18 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Schedule Additional Information and Disclosures Glossary of Investment Terms 17

19 Commodity performance tends to reverse The experience since 2008 has been as bad as any in modern history Commodity excess return index 1 Major losses and recoveries 2008 vs. best and worst experiences 1,000 11/ / % -51% 5/ % 6/2008 Jan-14-42% -55% Index Value (100=Peak) Index Value (100=Peak) had the fastest recovery at 5 years took 10 years but bottomed after Best & Worst of 1974, 1980, 1997 After 72 months, the index is still 42% below prior peaks nearly the worst experience in modern history /70 12/75 12/80 12/85 12/90 12/95 12/00 12/05 12/ Months from Peak Months from Peak Sources: DataStream and Invesco analysis. Data from 01/31/70 to 06/30/14. 1 GSCI Commodity Index used for this analysis. Please note that a logarithmic scale is being used in the left chart. Past performance is not a guarantee of future results. The four periods of loss are named for the year in which the index reached a major local peak. The recovery is considered complete when the index exceeds the prior local peak. Excess return above treasury bills. 18

20 Invesco Balanced-Risk Commodity Strategy Representative asset class performance returns Agriculture Energy Industrial Metals Precious Metals 2Q 2014 (%) Year-to-Date 2014 (%) Sources: Bloomberg L.P., GSCI and Invesco analysis. Data as of 06/30/14 based on continuous future return indices. commodities represented by the S&P GSCI sub-indices. *Not included in the Invesco Balanced-Risk Commodity Strategy strategic allocation. **Non-index assets included in the Invesco Balanced-Risk Commodity Strategy. The Dow Jones-UBS Commodity Index changed it s name to the Bloomberg Commodity Index on 06/30/14. Past performance is not a guarantee of future results. 19

21 Invesco Balanced-Risk Commodity Strategy Term structure - based asset selection for strategic allocation Strategic Commodity Selection and YTD Return 100% 70% 30% 0% Soy Meal (13.15%) WTI Crude (10.79%) Soybean Oil (-1.80%) Copper (-3.07%) Silver (8.09%) Live Cattle (16.79%) Soybeans (8.43%) *Gold (9.85%) Corn (-2.43%) Unleaded Gasoline (6.45%) Gas Oil (-1.74%) Coffee (51.56%) Sugar (4.04%) Aluminum (0.10%) Wheat (-7.50%) Brent Crude (4.63%) Cotton (-5.98%) Natural Gas (13.09%) Heating Oil (1.65%) Source: Invesco analysis. As of 06/30/14. *Gold receives a full weight in the strategic allocation due to the requirement that each complex have at least one fully weighted asset. For illustrative purposes only. Term Structure of futures contracts refers to the price curve formed by the prices of futures contracts over various expiration months. 20

22 Economic environment: Growth cycle Commodities and global GDP historical year over year change Commodity excess returns tend to move along with the global GDP 100% GSCI Light Energy World GDP Growth 10% GSCI Light Energy Excess Return 1 (Y/Y) 75% 50% 25% 0% -25% -50% 8% 6% 4% 2% 0% -2% World Real GDP year over year change 2-75% -4% Year Sources: DataStream, World Bank, Goldman Sachs and Invesco analysis. Data from 01/31/70 to 12/31/13. Past performance is not a guarantee of future results. 1 Excess return above treasury bills estimate and 2014 forecast from Goldman Sachs Economic Research. 21

23 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Schedule Additional Information and Disclosures Glossary of Investment Terms 22

24 Invesco Balanced-Risk Commodity Trust Water & Power Employees Retirement Plan account portfolio summary Total Account Summary Since Inception Month/ Year Market Value ($) Portfolio (gross %) Gross Excess Return Portfolio (net %) Net Excess Return Benchmark 1 (%) 06/ ,406, / ,651, / ,651, / ,645, / ,574, Client Performance Chart (%) Return (%) Portfolio (gross) Portfolio (net) Benchmark Q 2014 YTD 2014 Since Inception (09/01/13) 01/ ,961, / ,303, / ,890, / ,238, / ,574, Performance Table (%) Period Portfolio (gross %) Portfolio (net %) Benchmark 1 Gross Excess Return Net Excess Return 2Q YTD Since Inception All data as of 06/30/14. Source: Invesco analysis. Water & Power s combined account fee schedule is 70 bp on the first $100mm and 55 bp thereafter. 1 Bloomberg Commodity Index. The Dow Jones-UBS Commodity Index changed it s name to the Bloomberg Commodity Index on 06/30/14. 23

25 Invesco Institutional Trust Balanced-Risk Commodity Fund Water & Power Retiree Health Benefits Fund portfolio summary Total Account Summary Since Inception Month/ Year Market Value ($) Portfolio (gross %) Gross Excess Return Portfolio (net %) Net Excess Return Benchmark 1 (%) 06/ ,892, / ,792, / ,808, / ,619, / ,971, Client Performance Chart (%) Return (%) Portfolio (gross) Portfolio (net) Benchmark Q 2014 YTD 2014 Since Inception (09/01/13) 01/ ,162, / ,401, / ,516, / ,920, / ,966, Performance Table (%) Period Portfolio (gross %) Portfolio (net %) Benchmark 1 Gross Excess Return Net Excess Return 2Q YTD Since Inception All data as of 06/30/14. Source: Invesco analysis. Water & Power s combined account fee schedule is 70 bp on the first $100mm and 55 bp thereafter. 1 Bloomberg Commodity Index. The Dow Jones-UBS Commodity Index changed it s name to the Bloomberg Commodity Index on 06/30/14. 24

26 Water & Power Employees Retirement Plan Performance history as of June 30, 2014 Since Inception Water & Power Employees Retirement Plan Return Attribution (%) 1 Since Inception Water & Power Retiree Health Benefits Plan Return Attribution (%) Attribution Returns Since Inception Precious Metals (%) Agriculture/ Livestock (%) Energy (%) Industrial Metals (%) Active Positioning (%) Cash (%) Total (%) Retirement Plan Health Benefit Source: Invesco analysis and gross of fees. Data as of 06/30/14. *Portfolio performance inception: 09/01/13. Note: Returns are gross of fees; net returns will be lower. Past performance is not a guarantee of future results. 25

27 Invesco Balanced-Risk Commodity Fund Asset Growth Portfolio Changes (Retirement Plan) Amount Initial Value Invested as of 9/1/13 $105,761,290 Net Additions/(Withdrawals) $0 Income Received $0 Market Appreciation $(3,354,840) Market Value as of 6/30/14 $102,406,452 Portfolio Changes (Retiree Health Benefits Fund) Amount Initial Value Invested as of 9/1/13 $18,499,898 Net Additions/(Withdrawals) $0 Income Received $0 Market Appreciation $(607,490) Market Value as of 6/30/14 $17,892,408 26

28 Invesco Balanced-Risk Commodity Strategy Asset allocation versus the Bloomberg Commodity Index Invesco Bloomberg Agriculture/Livestock % Soybeans 11.26% 6.21% Soymeal 11.25% 3.01% Soybean Oil -1.64% 2.68% Sugar 7.61% 4.00% Corn -1.10% 7.35% Wheat -1.10% 3.25% Kansas Wheat 0.00% 1.27% Lean Hogs 0.00% 2.46% Cotton 1.33% 1.50% Coffee -0.73% 3.28% Live Cattle 0.55% 3.10% Energy % WTI Crude Oil 22.57% 8.68% Brent Crude Oil 5.07% 6.14% Gasoline 8.14% 3.74% Heating Oil % 3.41% Gas Oil 0.78% 0.00% Natural Gas 1.98% 9.39% Precious Metals 21.87% 14.57% Silver 5.57% 3.65% Gold 16.30% 10.92% Industrial Metals 28.21% 15.96% Copper 30.70% 6.52% Aluminum -2.49% 4.54% Nickel 0.00% 2.73% Zinc 0.00% 2.17% Grand Total % % Sources: Invesco analysis and Bloomberg. Past allocations are not a guarantee of future allocations. Data as of 06/30/14. The Dow Jones-UBS Commodity Index changed its name to the Bloomberg Commodity Index on 06/30/14. 27

29 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Schedule Additional Information and Disclosures Glossary of Investment Terms 28

30 Water and Power Employees Retirement Plan Fee Schedule Management Fee: o 70 basis points on the first $100 million o 55 basis points thereafter 29

31 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Schedule Additional Information and Disclosures Glossary of Investment Terms 30

32 Invesco disclaimer Derivatives Risk The Invesco Balanced-Risk Commodity Strategy invests (directly or indirectly) a substantial portion of its assets in "derivatives" so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index the value of which may rise or fall more rapidly than other investments. The strategy invests principally in exchange-traded futures across a diverse mix of assets including equities, bonds and commodities. The Invesco Balanced-Risk Commodity Strategy is a long-only strategy, so the portfolio will hold no net short positions at any time. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the portfolio uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the Fund. Leverage Risk The Invesco Balanced-Risk Commodity Strategy employs leverage as a fundamental element within the investment strategy. The implementation of a risk parity strategy requires the use of leverage in order to increase the risk of the government bond allocation in the strategy so that it can be balanced against the portfolio s exposure to stocks and commodities. The use of derivatives facilitates the ability to create the desired level of leverage in the portfolio. Leverage may cause the portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the portfolio. 31

33 Table of contents Company Overview Investment Process and Discipline Market Overview Water & Power Employees Retirement Plan Performance Review Fee Disclosure Additional Information and Disclosures Glossary of Investment Terms 32

34 Glossary of Investment Terms Backwardation. A status where prices of futures contracts with a longer maturity are lower than the spot price of the commodity. Contango. A status where prices of futures contracts with a longer maturity are higher than the spot price of the commodity. Front Month. Used in futures trading to refer to the contract month with an expiration date closest to the current date, which is often in the same month. Futures Contract. A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Roll Yield. The amount of return generated in a backwardated futures market that is achieved by rolling a short-term contract into a longer-term contract and profiting from the convergence toward a higher spot price. Spot Price. The current price at which a particular security can be bought or sold at a specified time and place. A security's spot price is regarded as the explicit value of the security at any given time in the marketplace. Standard Deviation. Standard deviation measures a fund s range of total returns and identifies the spread of a fund s short-term fluctuations. Term Structure. Term Structure of futures contracts refers to the price curve formed by the prices of futures contracts over various expiration months. Optimal Roll. Optimizing the roll yield by choosing the most attractive futures contract. 33

35 Thank you /14