Municipal securities
generally are classified as general or revenue obligations. General obligations are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue obligations are bonds whose
interest is payable only from the revenues derived from a particular facility or class of facilities, or a specific excise tax or other revenue source. The securities in which the Fund invests as part of its 80% policy related
to New York municipal securities may also include securities issued by U.S. territories, commonwealths and possessions or by their agencies, instrumentalities and authorities, if the interest on such securities is not
subject to New York state and New York City personal income taxes and federal income tax. These securities are “New York municipal securities” for purposes of this prospectus.
The Fund will not invest in municipal securities the interest from which
(and thus proportionate share of the exempt-interest dividends paid by the Fund) would be subject
to the federal alternative minimum tax (AMT). Additionally, under normal market conditions, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in New York municipal securities, and in
derivatives and other instruments that have economic characteristics similar to such securities. These securities are generally issued by the state and its political subdivisions (such as cities, towns, counties, agencies and
authorities) and primarily include municipal bonds (long-term (generally more than one year) obligations), municipal notes (short-term obligations), interests in municipal leases, and tax-exempt commercial paper.
Most of the securities the Fund buys are “investment-grade,” although it can invest as much as 25% of its total assets in below-investment-grade securities (commonly called
“junk bonds”). This restriction is applied at the time of purchase and the Fund may continue to hold a security whose credit rating has been downgraded or, in the case of an unrated security, after the Fund’s Adviser, Invesco
Advisers, Inc. (Invesco or the Adviser), has changed its assessment of the security’s credit quality. As a result, credit rating downgrades or other market fluctuations may cause the Fund’s holdings of below-investment grade
securities to exceed, at times significantly, this restriction for an extended period of time. If the Fund has more than 25% of its total assets invested in below-investment-grade securities, the Adviser will not purchase additional
below-investment-grade securities until the level of holdings in those securities no longer exceeds the restriction. Investment-grade securities are: (i) securities rated BBB- or higher by S&P Global Ratings (S&P) or
Baa3 or higher by Moody's Investors Service, Inc. (Moody's) or an equivalent rating by another nationally recognized statistical rating organization (NRSRO), (ii) securities with comparable short-term NRSRO ratings, or (iii) unrated
securities determined by the Adviser to be of comparable quality, each at the time of purchase. While securities rated BBB+, BBB or BBB- by S&P or Baa1, Baa2 or Baa3 by Moody's are considered investment-grade, they have some
speculative characteristics. If two or more nationally recognized statistical rating organizations have assigned different ratings to a security, the Adviser uses the highest rating assigned. The Fund also invests
in unrated securities, in which case the Adviser internally assigns ratings to those securities, after assessing their credit quality and other factors, in investment-grade or below-investment-grade categories similar to those of
nationally recognized statistical rating organizations.
To the extent the Fund invests in pre-refunded municipal securities collateralized by U.S. government securities, the Fund may treat those securities as investment-grade (AAA)
securities even if the issuer itself has a below-investment-grade rating.
The Fund does not limit its investments to securities of a particular
maturity range, but it generally focuses on longer-term securities to seek higher yields. The
Fund may invest in inverse floating rate interests (Inverse Floaters) issued in connection with municipal tender option bond (TOB) financing transactions to generate leverage for the Fund. The Fund can expose up to 20% of its total assets to
the effects of leverage from its investments in Inverse Floaters. The Fund's investments in Inverse Floaters
are included for purposes of the 80%
policies described above. The Fund can also engage in reverse repurchase agreements, which also create leverage.
The Fund can invest in
derivative instruments, including futures contracts and swap contracts.
The Fund can use futures contracts, including interest rate futures, to
reduce exposure to interest rate changes and to manage duration.
The Fund can invest in swaps, including interest rate swaps, to hedge its
exposure to interest rates. The Fund may not enter into interest rate swaps with respect to more than 25% of its total assets.
The Fund can borrow money to purchase additional securities, another form of leverage. Although the amount of borrowing will vary from time to time, the amount of leveraging from
borrowings will not exceed one-third of the Fund’s total assets. The Fund may also borrow to meet redemption obligations or for temporary and emergency purposes.
The Fund can invest up to 20% of its net assets (plus borrowings for
investment purposes) in investments that generate income subject to income taxes. Taxable
investments include many of the types of securities the Fund would buy for temporary defensive purposes. The Fund does not anticipate investing substantial amounts of its assets in taxable investments under normal market conditions
or as part of its normal trading strategies and policies.
The Fund can invest up to 25% of its total assets in tobacco settlement
revenue bonds, which make payments only from a state's interest in the Master Settlement
Agreement (MSA), and up to 25% of its total assets in tobacco bonds subject to a state's appropriation pledge, which make payments from both MSA revenue and a state's appropriation pledge.
Decisions to purchase or sell securities are determined by the relative
value considerations of the portfolio managers that factor in economic and credit-related
fundamentals, market supply and demand, market dislocations and situation-specific opportunities. The purchase or sale of securities may be related to a decision to alter the Fund's macro risk exposure (such as duration, yield curve
positioning and sector exposure), a need to limit or reduce the Fund's exposure to a particular security or issuer, degradation of an issuer's credit quality, or general liquidity needs of the Fund. The potential for
realization of capital gains or losses resulting from possible changes in interest rates will not be a major consideration and frequency of portfolio turnover generally will not be a limiting factor if the Adviser considers it
advantageous to purchase or sell securities.
Principal Risks
of Investing in the Fund
As with any mutual fund investment, loss of money is a risk of investing. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. The risks associated with an investment
in the Fund can increase during times of significant market volatility. The principal risks of
investing in the Fund are:
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. The value of the Fund’s investments may go up or down due to general market conditions that are not specifically
related to the particular issuer, such as real or perceived adverse economic conditions, changes in the general outlook for revenues or corporate earnings, changes in interest or currency rates, regional or global
instability, natural or environmental disasters, widespread disease or other public health issues, war, military conflict, acts of terrorism, economic crisis or adverse investor sentiment generally. 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.
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