Prospectus
Invesco
Actively Managed Exchange-Traded Fund Trust
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Invesco
AAA CLO Floating Rate Note ETF |
CBOE
BZX Exchange, Inc. |
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The Invesco AAA CLO
Floating Rate Note ETF (the “Fund”) seeks current income and capital
preservation.
This table
describes the fees and expenses that you may pay if you buy, hold, and sell
shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example
below.
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Management
Fees1 |
% |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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1
The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then sell
all of your Shares at the end of those periods. The example also assumes that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. This example does not include brokerage commissions that
investors may pay to buy and sell Shares. Although your actual costs may be
higher or lower, your costs, based on these assumptions, would
be:
|
1
Year |
3
Years |
5
Years |
10
Years |
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$ |
$ |
$ |
$ |
The Fund is an
actively managed exchange-traded fund (“ETF”) that seeks to achieve its
investment objective by investing, under normal market conditions, at least 80%
of its net assets (plus the amount of any borrowings for investment purposes) in
floating rate note securities issued by collateralized loan obligations (CLOs)
that are rated AAA (or equivalent by a nationally recognized statistical rating
organization (“NRSRO”)) at the time of purchase. The Fund may invest in CLO
securities of any maturity. A CLO is a trust that issues fixed- or floating-rate
debt securities that are collateralized by a pool of loans, which may include
domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below investment
grade or equivalent unrated loans. The underlying loans in a CLO are selected by
the CLO’s manager. The Fund may purchase CLO securities both in the primary
markets (e.g. purchased directly from the issuer) and secondary
markets.
The
Fund may invest in CLO securities that are unrated, in which case the Fund’s
sub-adviser, Invesco Senior Secured Management, Inc. (the “Sub-Adviser”), may
internally assign ratings to certain of those securities,
after assessing
their credit quality, in categories similar to those of NRSROs. In such
instances, unrated CLO securities will be counted toward the 80% investment
strategy if determined to be equivalent to an AAA rating by the
Sub-Adviser.
The
Fund may invest up to 15% of its net assets in below AAA-rated CLO securities with
a minimum rating of AA at the time of purchase, or if unrated, determined to be
of comparable credit quality by the Sub-Adviser. The Fund will not invest in CLO
securities that have a rating that is below AA (or equivalent by an NRSRO) at
the time of purchase.
The
Fund may invest up to 20% of its net assets in CLO securities that are denominated in
foreign currencies.
The
Fund will primarily invest in CLOs whose underlying loan collateral is almost entirely
comprised of broadly syndicated loans (i.e., loans with offering sizes that are
typically greater than $250 million). The Fund may, however, invest up to 15% of
its net assets in “middle-market CLOs,” which are CLOs whose underlying loan
collateral is substantially comprised of middle market loans (i.e., loans with
offering sizes generally below $250 million).
The
Fund will limit its investment in fixed-rate CLO securities to a maximum of 15% of
its net assets at the time of purchase.
In
selecting securities for the Fund’s portfolio, the Sub-Adviser utilizes a
combination of
“top-down”, macroeconomic-driven investment approach and a fundamental
“bottom-up” approach, which leverages the Sub-Adviser’s experience as a frequent
CLO issuer and manager as well as experience in the loan market in managing
various retail and institutional loan funds.
The
Fund may also invest a portion of its assets in cash or other short-term
instruments, such as money market instruments or money market funds, or other
ETFs (including affiliated ETFs) while deploying new capital, or for liquidity
management purposes and managing redemptions.
The
Fund may invest in currency forward contracts or futures contracts for purpose of
hedging any foreign currency exposure from non-U.S. denominated CLO securities.
The Fund will not use derivatives for any other purposes.
The
Fund is “non-diversified” and therefore is not required to meet certain
diversification requirements under the Investment Company Act of 1940, as
amended (the “1940 Act”).
The following
summarizes the principal risks of investing in the Fund.
1
2
The bar chart below
shows how the
Fund
has performed.
The
table below the bar chart shows the Fund’s average
annual
total
returns
(before and after
taxes).
The bar chart and
table provide an indication of the risks of investing in the Fund by showing how
the Fund’s average annual total returns compared with a broad measure of market
performance
and an
additional index with characteristics relevant to the Fund.
The Fund's performance
reflects fee
waivers,
if
any,
absent
which performance would
have
been lower.
Although the
information shown in the bar chart and the table gives you some idea of the risks
involved
in
investing in the Fund, the Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future.
Updated
performance information is available online at www.invesco.com/ETFs .
3
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Period
Ended |
Returns |
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Average Annual Total Returns (for the period ended December 31, 2023)
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Inception
Date |
1
Year |
Since
Inception |
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Return
Before Taxes |
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% |
% |
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Return
After Taxes on Distributions |
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Return
After Taxes on Distributions and Sale of Fund Shares |
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Bloomberg
U.S. Aggregate Bond Index |
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JP
Morgan CLOIE AAA Index (reflects no deduction for fees,
expenses
or taxes)1 |
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1
Management
of the Fund
Investment
Adviser. Invesco Capital
Management LLC (the “Adviser”).
Investment
Sub-Adviser: Invesco Senior
Secured Management, Inc. (the “Sub-Adviser”).
Portfolio
Managers
The following
individuals are responsible jointly and primarily for the day-to-day management
of the Fund’s portfolio:
|
Name |
Title
with
Sub-Adviser/Adviser/Trust |
Date
Began
Managing
the
Fund |
|
Ian
Gilbertson |
CLO
Portfolio Manager and Portfolio
Manager of
the Sub-Adviser |
November
2022 |
|
| ||
|
Scott
Baskind |
Head of
Global Senior Loans and
Chief
Investment Officer of the
Sub-Adviser |
November
2022 |
|
| ||
Purchase
and Sale of Shares
The Fund issues and
redeems Shares at NAV only with APs and only in large blocks of 50,000 Shares
(each block of Shares is called a “Creation Unit”) or multiples thereof
(“Creation Unit Aggregations”), generally in exchange for the deposit or
delivery of cash. However, the Fund also reserves the right to permit or require
Creation Units to be issued in exchange for a basket of securities. Except when
aggregated in Creation Units, the Shares are not redeemable securities of the
Fund.
Individual
Shares may only be bought and sold in the secondary market (i.e., on a
national securities exchange) through a broker or dealer at a market price.
Because the Shares trade at market prices rather than NAV, Shares may trade at a
price greater than NAV (at a premium), at NAV, or less
than NAV (at a
discount). An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase Shares (bid) and the
lowest price a seller is willing to accept for Shares (ask) when buying or
selling shares in the secondary market (the “bid-ask spread”).
Recent
information, including information on the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads, is available online at
www.invesco.com/ETFs.
Tax
Information
The Fund’s
distributions generally are taxed as ordinary income, capital gains or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case your distributions may be taxed as ordinary income when withdrawn from such
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase
Shares
of the
Fund through a broker-dealer or other financial intermediary (such as a bank),
the Fund’s distributor or its related companies may pay the intermediary for
certain Fund-related activities, including those that are designed to make the
intermediary more knowledgeable about exchange-traded products, such as the
Fund, as well as for marketing, education or other initiatives related to the
sale or promotion of Shares. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson or
financial adviser to recommend the Fund over another investment. Ask your
salesperson or financial adviser or visit your financial intermediary’s website
for more information.
Additional Information About the Fund’s Strategies and Risks
Principal
Investment Strategies
The Fund is an
actively managed ETF that seeks to achieve its investment objective by
investing, under normal market conditions, at least 80% of its net assets (plus
the amount of any borrowings for investment purposes) in floating rate note
securities issued by CLOs that are rated AAA (or equivalent by a NRSRO at the
time of purchase. The Fund may invest in CLO securities of any maturity. A CLO
is a trust that issues fixed- or floating-rate debt securities that are
collateralized by a pool of loans, which may include domestic and foreign senior
secured loans, senior unsecured loans, and subordinate corporate loans,
including loans that may be rated below investment grade or equivalent unrated
loans. The Fund may purchase CLO securities both in the primary markets (e.g.
purchased directly from the issuer) and secondary markets.
The
Fund may invest in CLO securities that are unrated, in which case the Sub-Adviser may
internally assign ratings to certain of those securities, after assessing their
credit quality, in categories similar to those of NRSROs. In such instances,
unrated CLO securities will be counted toward the 80% investment strategy if
determined to be equivalent to an AAA rating by the Sub-Adviser.
The
Fund may invest up to 15% of its net assets in below AAA-rated CLO securities with
a minimum rating of AA at the time of purchase, or if unrated, determined to be
of comparable credit quality by the Sub-Adviser. The Fund will not invest in CLO
securities that have a rating that is below AA (or equivalent by an NRSRO) at
the time of purchase. The Fund may, but is not required to, sell a CLO in the
event the CLO's rating is downgraded after purchase. Rather, the Sub-Adviser
will evaluate the security as part of its ongoing assessment of the Fund's
portfolio, as described below.
The
Fund may invest up to 20% of its net assets in CLO securities that are denominated in
foreign currencies.
4
The
Fund will primarily invest in CLOs whose underlying loan collateral is almost entirely
comprised of broadly syndicated loans (i.e., loans with offering sizes that are
typically greater than $250 million). The Fund may, however, invest up to 15% of
its net assets in “middle-market CLOs,” which are CLOs whose underlying loan
collateral is substantially comprised of middle market loans (i.e., loans with
offering sizes generally below $250 million).
The
Fund will limit its investment in fixed-rate CLO securities to a maximum of 15% of
its net assets at the time of purchase.
In
selecting securities for the Fund’s portfolio, the Sub-Adviser utilizes a
combination of
“top-down”, macroeconomic-driven investment approach and a fundamental
“bottom-up” approach, which leverages the Sub-Adviser’s experience as a frequent
CLO issuer and manager as well as experience in the loan market in managing
various retail and institutional loan funds.
The
Fund may also invest a portion of its assets in cash or other short-term
instruments, such as money market instruments or money market funds, or other
ETFs (including affiliated ETFs) while deploying new capital, or for liquidity
management purposes and managing redemptions.
The
Fund may invest in currency forward contracts or futures contracts for purpose of
hedging any foreign currency exposure from non-U.S. denominated CLO securities.
The Fund will not use derivatives for any other purposes.
The
Fund is “non-diversified” and therefore is not required to meet certain
diversification requirements under the 1940 Act.
Temporary
Defensive Strategies
The Fund may take a
temporary defensive position and hold a portion of its assets in cash or cash
equivalents and money market funds (including affiliated money market funds) if
there are inadequate investment opportunities available due to adverse market,
economic, political or other conditions, or atypical circumstances such as
unusually large cash inflows or redemptions. Doing so could help the Fund avoid
losses in the event of falling market prices and provide liquidity to make
additional investments, but may mean lost investment opportunities in a period
of rising market prices. During these periods, the Fund may not achieve its
investment objective.
Principal
Risks of Investing in the Fund
The following
provides additional information regarding certain of the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund's
“Summary Information” section. Any of the following risks may impact the Fund’s
NAV which could result in the Fund trading at a premium or discount to
NAV.
Market
Risk.
The Fund’s holdings are subject to market fluctuations, and the Fund could lose
money due to short-term market movements and over longer periods during market
downturns. You should anticipate that the value of Shares will decline, more or
less, in correlation with any decline in value of the holdings in the Fund’s
portfolio. The value of a security may decline due to general market conditions,
economic trends or events that are not specifically related to the issuer of the
security or due to factors that affect a particular industry or group of
industries. During a general downturn in the securities markets, multiple asset
classes may be negatively affected. Additionally, natural or environmental
disasters, widespread disease or other public health issues, war, military
conflicts, acts of
terrorism,
economic crises
or
other events could result in increased premiums or discounts to the Fund’s
NAV.
Market
Disruption Risks Related to Armed
Conflict.
As a
result of increasingly interconnected global economies
and
financial markets, armed conflict
between countries or in a geographic region, for example the
current conflicts
between
Russia
and
Ukraine in Europe
and
Hamas
and
Israel in the
Middle
East,
has
the
potential to adversely impact the Fund’s investments. Such
conflicts, and other
corresponding events, have had, and could continue to have, severe negative
effects on regional and global economic and financial markets, including
increased
volatility, reduced
liquidity, and overall uncertainty. The negative impacts may be particularly
acute in certain sectors.
The
timing
and duration of such conflicts, resulting
sanctions, related events and
other implications cannot be
predicted. The foregoing may result in a negative impact on Fund performance and
the value of an investment in the Fund, even beyond any direct investment
exposure the Fund may have to issuers located in or with
significant exposure to an impacted country or geographic region.
Management
Risk.
The Fund is subject to management risk because it is an actively managed
portfolio. In managing the Fund’s portfolio holdings, the Sub-Adviser applies
investment techniques and risk analyses in making investment decisions for the
Fund, but there can be no guarantee that these actions will produce the desired
results.
Collateralized
Loan Obligations Risk. In addition to
normal interest rate, default, credit, liquidity and other risks associated with
investments in loans and fixed income securities generally, CLO securities carry
additional risks associated with the CLO structure. For example, certain classes
or “tranches” of CLO securities may be subordinate to other classes, collateral
values may be volatile, and disputes with the issuer may produce unexpected
investment results. CLOs issue classes or “tranches” of securities that vary in
risk and yield. Losses caused by defaults on underlying assets are borne first
by the holders of subordinate tranches. Accordingly, the degree of risk
associated with CLO securities will generally correspond to the specific tranche
in which the Fund is invested. Though the Fund will invest primarily in
AAA-rated tranches of CLO securities, such securities may be downgraded, and in
stressed market environments it is possible that even highly rated tranches of
CLO securities could experience defaults or other losses due to defaults in the
underlying loan collateral, the disappearance of the subordinated/equity
tranches, market anticipation of defaults, as well as negative market sentiment
with respect to CLO securities as an asset class. Such risks are generally
heightened in the case of middle market CLOs, whose underlying loan collateral
is generally comprised of loans to smaller issuers for which less information is
available.
CLOs
are managed by entities independent of the Sub-Adviser, which are responsible for
selecting, managing and replacing the loan collateral within a CLO. CLO managers
may have limited operating histories, may be subject to conflicts of interests,
including managing the assets of other clients or other investment vehicles, or
receiving fees that incentivize maximizing the yield, and indirectly the risk,
of a CLO. Adverse developments with respect to a CLO manager, such as personnel
and resource constraints, regulatory issues or other developments that may
impact the ability and/or performance of the CLO manager, may adversely impact
the performance of the CLO securities in which the Fund invests.
Variable-
and Floating-Rate Instruments Risk. Securities with
floating or variable interest rates can be less sensitive to interest rate
changes than securities with fixed interest rates, but may decline in value if
their interest rates do not rise as much, or as quickly, as interest rates in
general. Conversely, floating rate securities will not generally increase in
value if interest rates decline. A decline in interest rates may result in a
reduction of income received from floating rate securities held by the Fund and
may adversely affect the value of the Fund’s shares. Generally, floating rate
securities carry lower yields than fixed notes of the same
maturity.
Fixed-Income
Securities Risk. The Fund invests
in fixed-income securities, which are subject to interest rate risk and credit
risk. Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. Fixed-income securities with
longer maturities typically are more sensitive to changes in interest rates,
making them more volatile than securities with shorter maturities. Credit risk
refers to the possibility that the issuer of a security will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt. Debt instruments are subject to varying degrees of credit risk, which may
be
5
reflected in credit
ratings. There is a possibility that the credit rating of a fixed-income
security may be downgraded after purchase, which may occur quickly and without
advance warning following sudden market downturns or unexpected developments
involving an issuer, and which may adversely affect the liquidity and value of
the security. Securities issued by the U.S. government
historically have been subject to limited
credit risk; however, the actual or
threatened failure of the U.S. government to pay its obligations will increase
credit risks and securities issued
by U.S. government agencies are not
necessarily backed by the full faith and credit of the U.S. government. Due to recent
events in the fixed-income markets, including the FRB
ending
its
quantitative easing program, the Fund is subject to
heightened interest rate risk as a result of a rise in interest rates. In
addition, the Fund is subject to the risk that interest rates may exhibit
increased volatility, which could cause the Fund’s NAV to fluctuate more. A
decrease in fixed-income market maker capacity may act to decrease liquidity in
the fixed-income markets and act to further increase volatility, affecting the
Fund’s returns.
Foreign
Fixed-Income Investment Risk. Investments in
fixed-income securities of non-U.S. issuers are subject to the same risks as
other debt securities, notably credit risk, market risk, interest rate risk and
liquidity risk, while also facing risks beyond those associated with investments
in U.S. securities including, among others, greater market volatility, the
availability of less reliable financial information, higher transactional costs,
taxation by foreign governments, decreased market liquidity and political
instability. Foreign issuers are often subject to less stringent requirements
regarding accounting, auditing, financial reporting and record keeping than are
U.S. issuers, and therefore,
not all material information regarding these issuers will be available.
Securities exchanges or foreign governments may adopt rules or regulations that
may negatively impact the Fund’s ability to invest in foreign securities or may
prevent the Fund from repatriating its investments.
Changing
Fixed-Income
Market Conditions Risk.
Increases in
the
federal funds and equivalent foreign interest
rates
or
other changes to monetary policy or regulatory actions
may expose fixed-income
markets to heightened volatility and reduced liquidity for
certain
fixed-income
investments, particularly those with longer maturities. It is difficult to
predict the impact of interest rate changes on various markets. In addition,
decreases in fixed-income dealer market-making capacity may also potentially
lead to heightened volatility and reduced liquidity in the fixed-income markets.
As a result, the value of the Fund's investments and
share price may decline. Changes in central bank policies could also result in
higher than normal redemptions by APs (as defined
herein), which could
potentially increase the Fund's portfolio
turnover rate and transaction costs and potentially
lower the Fund’s performance returns.
Interest
Rate Risk. Interest rate risk
refers to the risk that bond prices generally fall as interest rates rise;
conversely, bond prices generally rise as interest rates fall. Specific bonds
differ in their sensitivity to changes in interest rates depending on their
individual characteristics. One measure of this sensitivity is called duration.
The longer the duration of a particular bond, the greater its price sensitivity
is to interest rates. Similarly, a longer duration portfolio of securities has
greater price sensitivity. To illustrate, if a portfolio is composed of fixed
income securities with an average duration of five years, the portfolio’s value
can be expected to fall approximately 5% if interest rates rise by 1%.
Conversely, the portfolio’s value can be expected to rise approximately 5% if
interest rates fall by 1%. A similar portfolio with an average duration of three
years is characterized as being less sensitive to duration, since its value can
be expected to fall only 3% in the event interest rates rise by 1%. In addition,
a period of falling or low interest rates may also prompt some issuers to
refinance their existing debt, which could affect the returns from certain
securities and, consequently, the Fund’s performance.
Credit
Risk.
The issuer of instruments in which the Fund invests may be unable to meet
interest and/or principal payments. An issuer’s securities may decrease in value
if its financial strength weakens, which may reduce its credit rating and
possibly its ability to meet its contractual obligations. Even in the case of
collateralized debt obligations, there is no assurance that
the sale of
collateral would raise enough cash to satisfy an issuer’s payment obligations or
that the collateral can or will be liquidated.
Income
Risk.
The Fund’s income may decline when interest rates fall because the Fund may hold
a significant portion of short duration securities and/or securities that have
floating or variable interest rates. To the extent that the Fund invests in
lower yielding bonds, and as the bonds in its portfolio mature, the Fund needs
to purchase additional bonds, thereby reducing the Fund’s income.
Call
Risk.
Call risk (also termed prepayment risk) is the risk that a borrower repays its
debts earlier than expected (especially if interest rates decline), resulting in
premature repayment of a debt instrument. If interest rates fall, issuers of
callable securities with high interest coupons may “call” (or repay) their bonds
before their maturity date in accordance with the terms of the security. If such
a repayment were to occur, the Fund would receive the principal (par) amount of
the security and would no longer own that security. Any reinvestment of the
amount of principal received would be subject to reinvestment risk, and the Fund
could be forced to reinvest in a lower yielding security, which could reduce the
Fund’s net investment income. If the Fund purchases a debt security at a premium
to its par value, and that security is called at par, the Fund could lose
money.
Reinvestment
Risk.
Reinvestment risk is the risk that the Fund will not be able to reinvest income
or principal at the same return it is currently earning. Reinvestment risk is
greater during periods of declining interest rates, as prepayments often occur
faster. This may require the Fund to reinvest the proceeds at an earlier date,
and it may be able to do so only at lower yields, thereby reducing its
return.
Liquidity
Risk.
Liquidity risk exists when a particular investment is difficult to purchase or
sell. If the Fund invests in illiquid securities or current portfolio securities
become illiquid, it may reduce the returns of the Fund because the Fund may be
unable to sell the illiquid securities at an advantageous time or price. In the
event that the Fund voluntarily or involuntarily liquidates portfolio assets
during periods of infrequent trading, it may not receive full value for those
assets.
Rule
144A Securities and Other Exempt Securities Risk. The Fund may
invest in Rule 144A securities and other types of exempt securities, which are
not registered for sale pursuant to an exemption from registration under the
Securities Act of 1933, as amended. These securities are also known as privately
issued securities, and typically may be resold only to qualified institutional
buyers, or in a privately negotiated transaction, or to a limited number of
purchasers, or in limited quantities after they have been held for a specified
period of time and other conditions are met for an exemption from registration.
Although such securities may be determined to be liquid in accordance with the
requirements of Rule 22e-4 under the 1940 Act, if there are an insufficient
number of qualified institutional buyers interested in purchasing such
securities at a particular time, the Fund may have difficulty selling such
securities at a desirable time or price. As a result, the Fund’s investment in
such securities may be subject to increased liquidity risk. In addition, the
issuers of Rule 144A securities may require their qualified institutional buyers
(such as the Fund) to keep certain offering information confidential, which
could adversely affect the ability of the Fund to sell such
securities.
Currency
Risk.
Because the Fund’s NAV is determined in U.S. dollars, the Fund’s NAV could
decline if the currency of the non-U.S. market in which the Fund invests
depreciates against the U.S. dollar, even if the value of the Fund’s holdings,
measured in the foreign currency, increases. Generally, an increase in the value
of the U.S. dollar against a foreign currency will reduce the value of a
security denominated in that foreign currency, thereby decreasing the Fund’s
overall NAV. In addition, fluctuations in the exchange values of currencies
could affect the economy or particular business operations of companies in a
geographic region in which the Fund invests, causing an adverse impact on the
Fund. As a result, investors have the potential for losses regardless of the
length of time they intend to hold Shares.
6
When
the Fund receives income in foreign currencies, the Fund will compute and
distribute its income in U.S. dollars, and the computation of income will be
made on the date that the Fund earns the income at the foreign exchange rates in
effect on that date. Therefore, if the values of the relevant foreign currencies
fall relative to the U.S. dollar between the earning of the income and the time
at which the Fund converts the foreign currencies to U.S. dollars, the Fund may
be required to liquidate securities in order to make distributions if it has
insufficient cash in U.S. dollars to meet distribution requirements.
Furthermore,
the Fund may incur costs in connection with conversions between U.S.
dollars and foreign currencies. Foreign exchange dealers realize a profit based
on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forwards, futures or options contracts to
purchase or sell foreign currencies.
Issuer-Specific
Changes Risk. The performance of
the Fund depends on the performance of individual securities to which the Fund
has exposure. The value of an individual security or particular type of security
may be more volatile than the market as a whole and may perform worse than the
market as a whole, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, expiration of patent protection, disruptions in supply,
labor problems or shortages, corporate restructurings, fraudulent disclosures or
other factors. Issuers may, in times of distress or at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Valuation
Risk.
Financial information related to securities of non-U.S. issuers may be less
reliable than information related to securities of U.S. issuers, which may make
it difficult to obtain a current price for a non-U.S. security held by the Fund.
In certain circumstances, market quotations may not be readily available for
some securities, and those securities may be fair valued. The value established
for a security through fair valuation may be different from what would be
produced if the security had been valued using market quotations. Fund
securities that are valued using techniques other than market quotations,
including “fair valued” securities, may be subject to greater fluctuations in
their value from one day to the next than would be the case if market quotations
were used. In addition, there is no assurance that the Fund could sell a
portfolio security for the value established for it at any time, and it is
possible that the Fund would incur a loss because a security is sold at a
discount to its established value.
Valuation
Time Risk. Because foreign
exchanges may be open on days when the Fund does not price its Shares, the value
of the non-U.S. securities in the Fund’s portfolio may change on days when you
will not be able to purchase or sell your Shares. As a result, trading spreads
and the resulting premium or discount on the Shares may widen, and, therefore,
increase the difference between the market price of the Shares and the NAV of
such Shares.
Non-Diversified
Fund Risk. Because the Fund
is considered non-diversified and can invest a greater portion of its assets in
securities of individual issuers than a diversified fund, changes in the market
value of a single investment could cause greater fluctuations in Share price
than would occur in a diversified fund. This may increase the Fund’s volatility
and cause the performance of a relatively small number of issuers to have a
greater impact on the Fund’s performance.
Authorized
Participant Concentration Risk. Only APs may
engage in creation or redemption transactions directly with the Fund. The Fund
has a limited number of institutions that may act as APs, and such APs have no
obligation to submit creation or redemption orders. Consequently, there is no
assurance that APs will establish or maintain an active trading market for the
Shares. The risk may be heightened to the extent that securities held by
the Fund are traded
outside a collateralized settlement system. In that case, APs may be required to
post collateral on certain trades on an agency basis (i.e., on behalf of other
market participants), which only a limited number of APs may be able to do. In
addition, to the extent that APs exit the business or are unable to proceed with
creation and/or redemption orders with respect to the Fund and no other AP is
able to step forward to create or redeem Creation Units, this may result in a
significantly diminished trading market for Shares, and Shares may be more
likely to trade at a premium or discount to NAV and to face trading halts and/or
delisting. Investments in non-U.S. securities, which may have lower trading
volumes or could experience extended market closures or trading halts, may
increase the risk that APs may not be able to effectively create or redeem
Creation Units or the risk that the Shares may be halted and/or
delisted.
Cash
Transaction Risk. Unlike most ETFs,
the Fund effects creations and redemptions principally for cash, rather than
principally in-kind because of the nature of the Fund’s investments. ETFs
generally are able to make in-kind redemptions and avoid being taxed on gain on
the distributed portfolio securities at the Fund level. Because the Fund
currently intends to effect redemptions principally for cash, rather than
principally for in-kind securities, it may be required to sell portfolio
securities in order to obtain the cash needed to distribute redemption proceeds.
The Fund may recognize a capital gain on these sales that might not have been
incurred if the Fund had made a redemption in-kind, and this may decrease the
tax efficiency of the Fund compared to ETFs that utilize an in-kind redemption
process, and there may be a substantial difference in the after-tax rate of
return between the Fund and conventional ETFs.
Market
Trading Risk. The Fund faces
numerous market trading risks, including losses from trading in secondary
markets, periods of high volatility and disruption in the creation/redemption
process of the Fund. Although Shares are listed for trading on a securities
exchange, there can be no assurance that an active trading market for Shares
will develop or be maintained by market makers or APs, that Shares will continue
to trade on any such exchange or that Shares will continue to meet the
requirements for listing on an exchange. Any of these factors, among others, may
lead to the Shares trading at a premium or discount to the Fund’s NAV. As a
result, an investor could lose money over short or long periods. Further, the
Fund may experience low trading volume and wide bid/ask spreads. Bid/ask spreads
vary over time based on trading volume and market liquidity (including for the
underlying securities held by the Fund), and are generally lower if Shares have
more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity.
In
stressed market conditions, the market for Shares may become less liquid in response
to deteriorating liquidity in the markets for the Fund’s portfolio holdings,
which may cause a variance in the market price of Shares and their underlying
NAV. In addition, an exchange or market may issue trading halts on specific
securities or financial instruments. As a result, the ability to trade certain
securities or financial instruments may be restricted, which may disrupt the
Fund’s creation/redemption process, potentially affect the price at which Shares
trade in the secondary market, and/or result in the Fund being unable to trade
certain securities or financial instruments at all. In these circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses.
Operational
Risk.
The Fund is exposed to operational risks arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund and
the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate to address these risks.
Shares
May Trade at Prices Different than NAV. Shares trade on a
stock exchange at prices at, above or below the Fund’s most recent NAV. The
Fund’s NAV is calculated at the end of each business day and fluctuates
7
with changes in the
market value of the Fund’s holdings. The trading price of the Shares fluctuates
continuously throughout trading hours on the exchange, based on both the
relative market supply of, and demand for, the Shares and the underlying value
of the Fund’s portfolio holdings. As a result, the trading prices of the Shares
may deviate from the Fund’s NAV. ANY OF THESE FACTORS, AMONG OTHERS, MAY LEAD TO
THE SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV. The Adviser cannot predict
whether the Shares will trade below, at or above the Fund’s NAV. Exchange prices
are not expected to correlate exactly with the Fund’s NAV due to timing reasons,
supply and demand imbalances and other factors. In addition, disruptions to
creations and redemptions, including disruptions at market makers, APs, or other
market participants, or periods of significant market volatility or stress, may
result in trading prices for the Shares that differ significantly from the value
of the Fund’s underlying holdings, with the result that investors may pay
significantly more or receive significantly less than the underlying value of
the Shares bought or sold. This can be reflected as a spread between the bid and
ask prices for the Fund quoted during the day or a premium or discount in the
closing price from the Fund’s NAV. Additionally, APs may be less willing to
create or redeem the Shares if there is a lack of an active market for such
Shares or the Fund’s underlying investments, which may contribute to the Shares
trading at a premium or discount.
Unlike
conventional ETFs, the Fund is not an index fund. The Fund is actively managed
and does not seek to replicate the performance of a specified index. Index-based
ETFs generally have traded at prices that closely correspond to NAV per share.
Given the high level of transparency of the Fund’s holdings, the Adviser
believes that the trading experience of the Fund should be similar to that of
index-based ETFs. However, there can be no assurance as to whether and/or the
extent to which the Shares will trade at premiums or discounts to
NAV.
Non-Principal
Investment Strategies
In accordance with
the
“1940
Act and the rules thereunder, the Fund has adopted a
policy to invest, under normal market conditions, at least 80% of the value of
its net assets (plus the amount of any borrowings for investment purposes) in
the types of securities (e.g., floating rate notes issued by CLOs with a rating
of AAA) suggested by the Fund’s name (the “80% investment policy”). The Fund’s
80% investment policy and investment objective are non-fundamental policies that
the Board of Trustees (the “Board”) of Invesco Actively Managed Exchange-Traded
Fund Trust (the “Trust”) may change without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Fund does not intend to use leverage for investment purposes. The Fund may, however,
borrow money for temporary or emergency purposes or to allow for an orderly
liquidation of securities to meet redemption requests.
In
this regard, the Fund has entered into a committed, unsecured line of credit
with a syndicate of lending banks that allows the Fund to borrow up to specified
limits for temporary or emergency purposes or to allow for an orderly
liquidation of securities to meet redemption requests. The Fund bears any
interest expenses associated with the line of credit. The Adviser pays the
set-up fees and the commitment fee based on the amount of the commitment that
has not been utilized.
The
fundamental and non-fundamental policies of the Fund is set forth in the Fund’s
Statement of Additional Information (“SAI”) under the section “Investment
Restrictions.”
Borrowing
Money
The Fund
may
borrow
money up to the limits set forth in the Fund’s SAI under the section “Investment
Restrictions.”
Securities
Lending
The Fund may lend
its portfolio securities to brokers, dealers, and other financial institutions.
In connection with such loans, the Fund receives liquid collateral equal to at
least 102% (105% for international securities) of the
value of the loaned
portfolio securities. This collateral is marked-to-market on a daily
basis.
Additional
Risks of Investing in the Fund
The Fund may also
be subject to certain other non-principal risks associated with its investments
and investment strategies. The following provides additional non-principal risk
information regarding investing in the Fund.
Cybersecurity
Risk.
With the increased use of technologies such as the Internet to conduct business,
the Fund, like all companies, may be susceptible to operational, information
security and related risks. Cybersecurity incidents involving the Fund and its
service providers (including, without limitation, the Adviser, the Sub-Adviser,
fund accountant, custodian, transfer agent and financial intermediaries) have
the ability to cause disruptions and impact business operations, potentially
resulting in financial losses, impediments to trading, the inability of Fund
shareholders to transact business, violations of applicable privacy and other
laws, regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs, and/or additional compliance costs. Similar adverse
consequences could result from cybersecurity incidents affecting issuers of
securities in which the Fund invests, counterparties with which the Fund
engages, governmental and other regulatory authorities, exchanges and other
financial market operators, banks, brokers, dealers, insurance companies, other
financial institutions and other parties. The Fund and its shareholders could be
negatively impacted as a result.
Large
Shareholder Risk. Certain
shareholders, including a third party investor, the Adviser or an affiliate of
the Adviser, an AP, a lead market maker, or another entity, may from time to
time own a substantial amount of Shares or may invest in the Fund and hold its
investment for a limited period of time solely to facilitate the commencement of
the Fund or to facilitate the Fund achieving a specified size or scale. There
can be no assurance that any large shareholder would not redeem its investment.
Dispositions of a large number of Shares by these shareholders may adversely
affect the Fund’s liquidity and net assets to the extent such transactions are
executed directly with the Fund in the form of redemptions through an AP, rather
than executed in the secondary market. These redemptions may also force the Fund
to sell portfolio securities when it might not otherwise do so, which may
negatively impact the Fund’s NAV and increase the Fund’s brokerage costs.
Further, such sales may accelerate the realization of taxable income and/or
gains to shareholders, or the Fund may be required to sell its more liquid Fund
investments to meet a large redemption, in which case the Fund’s remaining
assets may be less liquid, more volatile, and more difficult to price. To the
extent the Fund permits cash purchases, large purchases of Shares may adversely
affect the Fund’s performance to the extent that the Fund is delayed in
investing new cash and is required to maintain a larger cash position than it
ordinarily would. To the extent these large shareholders transact in shares on
the secondary market, such transactions may account for a large percentage of
the trading volume on the Fund’s exchange and may, therefore, have a material
upward or downward effect on the market price of the Shares. To the extent the
Fund permits redemptions in cash, the Fund may hold a relatively large
proportion of its assets in cash in anticipation of large redemptions, diluting
its investment returns.
Leverage
Risk.
To the
extent that the Fund borrows
money,
it may
be leveraged. Leveraging
generally exaggerates the effect on NAV of any increase or
decrease
in the
market value of the Fund’s
portfolio
securities.
Borrowing creates
interest expenses and other expenses
(e.g., commitment fees)
for the Fund that affect the Fund’s
performance. Interest
expenses
are
excluded from the
Fund
expenses borne by the Adviser under the unitary management fee.
Natural
Disaster/Epidemic Risk. Natural or
environmental disasters, such as earthquakes, fires, floods, hurricanes,
tsunamis and other severe weather-related phenomena generally, and widespread
disease, including pandemics and epidemics, have been and may be highly
disruptive to economies and markets, adversely impacting individual companies,
sectors, industries, markets, currencies, interest and inflation rates, credit
ratings,
8
investor sentiment,
and other factors affecting the value of the Fund’s investments. Additionally,
if a sector or sectors in which the Fund is concentrated is negatively impacted
to a greater extent by such events, the Fund may experience heightened
volatility. Given the increasing interdependence among global economies and
markets, conditions in one country, market, or region are increasingly likely to
adversely affect markets, issuers, and/or foreign exchange rates in other
countries, including the U.S. Any such events could have a significant adverse
impact on the value of the Fund’s investments.
Securities
Lending Risk. Securities lending
involves a risk of loss because the borrower may fail to return the securities
in a timely manner or at all. If the Fund lends its securities and is unable to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Any cash received as
collateral for loaned securities will be invested in an affiliated money market
fund. This investment is subject to market appreciation or depreciation and the
Fund will bear any loss on the investment of its cash collateral.
Trading
Issues Risk. Investors buying or
selling Shares in the secondary market may pay brokerage commissions or other
charges, which may be a significant proportional cost for investors seeking to
buy or sell relatively small amounts of Shares. Moreover, trading in Shares on
the Cboe BZX Exchange, Inc. (the “Exchange”) may be halted due to market
conditions or for reasons that, in the view of the Exchange, make trading in
Shares inadvisable. In addition, trading in Shares on the Exchange is subject to
trading halts caused by extraordinary market volatility pursuant to the
Exchange’s “circuit breaker” rules. There can be no assurance that the
requirements of the Exchange necessary to maintain the listing of the Fund will
continue to be met or will remain unchanged. Foreign exchanges may be open on
days when Shares are not priced, and therefore, if the Fund holds securities
that are primarily listed on such exchanges, the value of such securities in the
Fund’s portfolio may change on days when shareholders will not be able to
purchase or sell Shares.
Tax Structure of ETFs
Unlike interests in
conventional mutual funds, which typically are bought and sold only at closing
NAVs, the Shares are traded throughout the day in the secondary market on a
national securities exchange and are issued and redeemed principally for cash in
Creation Units at each day’s next calculated NAV. Because the Fund will redeem
Shares principally in cash, investments in the Shares will not typically gain
the tax-advantaged benefits associated with exchange-traded funds that redeem
shares principally in-kind. Such in-kind arrangements are designed to protect
shareholders from the adverse effects on the Fund’s portfolio that could arise
from frequent cash creation and redemption transactions. In a conventional
mutual fund, redemptions can have an adverse tax impact on taxable shareholders
because the mutual fund may need to sell portfolio securities to obtain cash to
meet such redemptions. These sales may generate taxable gains that must be
distributed to the shareholders of the Fund, whereas an in-kind redemption
mechanism will not lead to a taxable event for the Fund (to the extent that it
uses in-kind redemptions) or its shareholders. However, the tax advantages of
investing in Shares may be less pronounced than passive ETFs because the Fund is
actively managed and, therefore, may have greater turnover in its portfolio
securities, which could result in less tax efficiency than an investment in a
fund that is not actively managed.
The
Fund may recognize gains as a result of selling its securities. The Fund also may be
required to distribute any such gains to its shareholders to avoid adverse
federal income tax consequences. For information concerning the tax consequences
of distributions, see the section entitled “Dividends, Other Distributions and
Taxes” in this Prospectus.
Portfolio Holdings
A description of
the Trust's policies and procedures with respect to the disclosure of the Fund’s
portfolio holdings is available in the Fund’s SAI, which is available at
www.invesco.com/ETFs.
Management of the Fund
Invesco Capital
Management LLC is a registered investment adviser with its offices at 3500 Lacey
Road, Suite 700, Downers Grove, IL 60515. Invesco Capital Management LLC
serves as the investment adviser to the Invesco Actively Managed Exchange-Traded
Commodity Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust,
Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II,
Invesco Exchange-Traded Self-Indexed Fund Trust and Invesco India
Exchange-Traded Fund Trust, a family of ETFs, with combined assets under
management of $223 billion as of
December 31, 2023.
As
the Fund’s investment adviser, the Adviser has overall responsibility
for
selecting and continuously monitoring the Fund’s investments, managing the
Fund’s business affairs, and providing certain clerical, bookkeeping and other
administrative services for the Trust.
Invesco
Senior Secured Management, Inc. serves as the investment sub-adviser for the
Fund. The Sub-Adviser is a registered investment adviser and is a subsidiary of
Invesco Ltd., the parent company of the Adviser.
Subject
to the supervision of the Adviser and the Board, the Sub-Adviser is responsible for
the investment management of the Fund. The Sub-Adviser's principal business
address is located at 225 Liberty Street, New York, New York 10281, and has
acted as an investment adviser since 1992. In addition, the Sub-Adviser serves
as an investment adviser to the Invesco mutual funds with combined assets under
management of approximately $10.6 billion as of
December 31, 2023.
Portfolio
Managers
The Adviser and
Sub-Adviser each use teams of portfolio managers, investment strategists and
other investment specialists in managing the Fund. This team approach brings
together many disciplines and leverages the Sub-Adviser’s extensive resources.
In this regard, Ian Gilbertson and Scott Baskind (the “Portfolio Managers”) are
jointly and primarily responsible for the day-to-day management of the
Fund.
Investment
decisions for the Fund are made by investment management teams at
the Sub-Adviser. Each Portfolio Manager is responsible for various functions
related to portfolio management, including investing cash flows, coordinating
with other team members to focus on certain asset classes, implementing
investment strategy and researching and reviewing investment strategy. Each
Portfolio Manager has limitations on his or her authority for risk management
and compliance purposes that the Sub-Adviser believes to be
appropriate.
■
Ian Gilbertson, CLO
Portfolio Manager and Portfolio Manager of the Sub-Adviser, has been responsible
for the management of the Fund since November 2022 and has been associated with
the Sub-Adviser and/or its affiliates since 2008.
■
Scott Baskind, Head
of Global Senior Loans and Chief Investment Officer for the Senior Secured Bank
Loan Group of the Sub-Adviser, has been responsible for the management of the
Fund since November 2022 and has been associated with the Sub-Adviser and/or its
affiliates since 1999.
The
Fund's SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts that the Portfolio Managers manage and
the Portfolio Managers' ownership of Shares.
9
Advisory
Fees
Pursuant to an
investment advisory agreement between the Adviser and the Trust (the “Investment
Advisory Agreement”), the Fund pays the Adviser an annual unitary management fee
equal to 0.26% of the Fund’s average daily net assets (the “Advisory
Fee”).
The Adviser has agreed to waive 100% of its management fee for the Fund through
April 30, 2024.
The
Advisory Fee paid by the Fund to the Adviser is an annual unitary management fee. Out
of the unitary management fee, the Adviser pays for substantially all
expenses of the Fund, including payments to
the
Sub-Adviser, the
cost
of transfer agency, custody, fund administration, legal, audit and other
services, except for distribution fees, if any, brokerage expenses, taxes,
interest (including interest
expenses associated with the line of credit), Acquired Fund
Fees and Expenses, if any, litigation expenses, and other extraordinary
expenses, including proxy expenses (except for such proxies related to: (i)
changes to the Investment Advisory Agreement, (ii) the election of any Board
member who is an “interested person” of the Trust, or (iii) any other matters
that directly benefit the Adviser). The Adviser also
pays out of the unitary management fee the set-up fees and commitment fees
associated with the line of credit.
The
Fund may invest in money market funds that are managed by affiliates of the
Adviser and other funds (including ETFs) managed by the Adviser or affiliates of
the Adviser (collectively, “Underlying Affiliated Investments”). The indirect
portion of the advisory fees that the Fund incurs through such Underlying
Affiliated Investments is in addition to the Advisory Fee payable to the Adviser
by the Fund. Therefore, the Adviser has agreed to waive a portion of its
Advisory Fee and/or reimburse Fund expenses in an amount equal to 100% of the
net advisory fees earned by the Adviser or an affiliate of the Adviser that are
attributable to the Fund’s Underlying Affiliated Investments. This waiver does
not apply to the Fund’s investment of cash collateral received for securities
lending. These waivers are in place through at least August 31, 2025, and there is no
guarantee that the Adviser will extend them past that date.
The
Adviser has entered into an Investment Sub-Advisory Agreement with the
Sub-Adviser. The sub-advisory fee is paid by the Adviser to the Sub-Adviser at
40% of the Adviser’s compensation of the sub-advised assets of the
Fund.
A
discussion regarding the basis for the Board’s approval of the Investment Advisory
Agreement and Investment Sub-Advisory Agreement with respect to the Fund
is available in the
Fund’s Semi-Annual Report to shareholders for the fiscal period ended April 30,
2023.
How to Buy and Sell Shares
The Fund issues or
redeems its Shares at NAV per Share only in Creation Units or Creation Unit
Aggregations.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Shares are listed for trading on the secondary market on the Exchange. Shares
can be bought and sold throughout the trading day like other publicly traded
shares. There is no minimum investment. Although Shares generally are purchased
and sold in “round lots” of 100 Shares, brokerage firms typically permit
investors to purchase or sell Shares in smaller “odd lots,” at no per share
price differential. When buying or selling Shares through a broker, you will
incur customary brokerage commissions and charges, and you may pay some or all
of the spread between the bid and the offered price in the secondary market on
each leg of a round trip (purchase and sale) transaction.
The
Shares trade on the Exchange under the symbol “ICLO.”
Share
prices are reported in dollars and cents per Share.
APs
may acquire Shares directly from the Fund, and APs may tender their Shares for
redemption directly to the Fund, at NAV per Share, only in Creation Units or
Creation Unit Aggregations, and in accordance with the procedures described in
the SAI.
Under
normal circumstances, the Fund will pay out redemption proceeds to a
redeeming AP within two days after the AP’s redemption request is received, in
accordance with the process set forth in the Fund’s SAI and in the agreement
between the AP and the Fund’s distributor. However, the Fund reserves the right,
including under stressed market conditions, to take up to seven days after the
receipt of a redemption request to pay an AP, all as permitted by the 1940 Act.
If the Fund has foreign investments in a country where local market holiday(s)
prevent the Fund from delivering such foreign investments to an AP in response
to a redemption request, the Fund may take up to 15 days after the receipt of
the redemption request to deliver such investments to the AP.
The
Fund anticipates meeting redemption requests by paying
redemption proceeds to an AP primarily in cash, but it
reserves the right to also do so through in-kind
redemptions. Cash used for redemptions will be raised from the sale of portfolio
assets or may come from existing holdings of cash or cash equivalents. If the
Fund holds Rule 144A securities, an AP that is not a “qualified institutional
buyer,” as such term is defined under Rule 144A of the Securities Act, will not
be able to receive those Rule 144A securities.
The
Fund may liquidate and terminate at any time without shareholder approval.
Book
Entry
Shares are held in
book-entry form, which means that no stock certificates are issued. The
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares and is recognized as the record owner of all Shares
for all purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you hold in
book entry or “street name” form.
Share
Trading Prices
The trading prices
of Shares on the Exchange may differ from the Fund’s daily NAV. Market forces of
supply and demand, economic conditions and other factors may affect the trading
prices of Shares.
Frequent Purchases and Redemptions of Shares
Shares may be
purchased and redeemed directly from the Fund only in Creation Units by APs. The
vast majority of trading in Shares occurs on the secondary market and does not
involve the Fund directly. In-kind purchases and redemptions of Creation Units
by APs and cash trades on the secondary market are unlikely to cause many of the
harmful effects of frequent purchases or redemptions of the Shares. Cash
purchases and/or redemptions of Creation Units, however, can result in increased
disruption of portfolio management, dilution to the Fund and increased
transaction costs, which could negatively impact the Fund's ability to achieve
its investment objective, and may lead to the realization of capital gains.
These consequences may increase as the frequency of cash purchases and
redemptions of Creation Units by APs increases. However, direct trading by APs
is critical to ensuring that Shares trade at or close to NAV.
To
minimize these potential consequences of frequent purchases and redemptions of
Shares, the Fund imposes transaction fees on purchases and redemptions of
Creation Units to cover the custodial and other costs the Fund incurs in
effecting trades. In addition, the Adviser monitors trades by
10
APs for patterns of
abusive trading and the Fund reserves the right to not accept orders from APs
that the Adviser has determined may be disruptive to the management of the Fund
or otherwise are not in the best interests of the Fund. In recognition of the
nature of the Fund’s investments and that Shares are purchased and redeemed
in Creation Units principally in cash, the Board has adopted policies and
procedures with respect to frequent purchases and redemptions of Shares, which
incorporate the practices described above, as well as additional trade
monitoring for market timing activities.
Dividends, Other Distributions and Taxes
Dividends
and Other Distributions
Generally,
dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund also intends to distribute its net realized capital gains, if
any, to shareholders annually. Dividends and other distributions may be declared
and paid more frequently to comply with the distribution requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and
to avoid a federal excise tax imposed on regulated investment
companies.
Distributions
in cash may be reinvested automatically in additional whole Shares only
if the broker through whom you purchased Shares makes such option
available.
Taxes
The Fund intends to
qualify each year as a regulated investment company (“RIC”) and, as such, is not
subject to entity-level tax on the income and gain it distributes. If you are a
taxable investor, dividends and distributions you receive generally are taxable
to you whether you reinvest distributions in additional Shares or take them in
cash. Every year, you will be sent information showing the amount of dividends
and distributions you received during the prior calendar year. In addition,
investors in taxable accounts should be aware of the basic tax points
listed
below:
Fund
Tax Basics
■
The Fund earns
income generally in the form of dividends or interest on its investments. This
income, less expenses incurred in the operation of the Fund, constitutes the
Fund’s net investment income from which dividends may be paid to shareholders.
If you are a taxable investor, distributions of net investment income generally
are taxable to you as ordinary income.
■
Distributions of
net short-term capital gains are taxable to you as ordinary income. A fund with
a high portfolio turnover rate (a measure of how frequently assets within the
fund are bought and sold) is more likely to generate short-term capital gains
than a fund with a low portfolio turnover rate.
■
Distributions of
net long-term capital gains are taxable to you as long-term capital gains no
matter how long you have owned your Shares.
■
A portion of income
dividends paid by the Fund may be reported as qualified dividend income eligible
for taxation by individual shareholders at long-term capital gain rates,
provided certain holding period requirements are met. These reduced rates
generally are available for dividends derived from the Fund’s investment in
stocks of domestic corporations and qualified foreign corporations. If the Fund
invests primarily in debt
securities, either none or only a nominal portion of the dividends paid by the
Fund will be eligible for taxation at these reduced rates.
■
The use of
derivatives by the Fund may cause the Fund to realize higher amounts of ordinary
income or short-term capital gain, distributions from which are taxable to
individual shareholders at ordinary income tax rates rather than at the more
favorable tax rates for long-term capital gain.
■
Distributions
declared to shareholders with a record date in October, November or December—if
paid to you by the end of January—are taxable for federal income tax purposes as
if received in December.
■
Any long-term or
short-term capital gains realized on the sale of your Shares will be subject to
federal income tax.
■
If the Fund is
terminated, a shareholder will receive a liquidating distribution(s) which
should be treated as payment in exchange for the Shares held by the shareholder.
As a result, each shareholder should recognize gain or loss in an amount equal
to the difference between the shareholder’s adjusted tax basis in his or her
shares and the liquidating distribution(s) he or she receives, except to the
extent the Shares are held in a tax-advantaged arrangement. A liquidating
distribution may be subject to backup withholding as described
below.
■
A shareholder’s
cost basis information will be provided on the sale of any of the shareholder’s
Shares, subject to certain exceptions for exempt recipients. Please contact the
broker (or other nominee) that holds your Shares with respect to reporting of
your cost basis and available elections for your account.
■
At the time you
purchase your Shares, the Fund’s NAV may reflect undistributed income or
undistributed capital gains. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be taxable. Buying
Shares just before the Fund declares an income dividend or capital gains
distribution is sometimes known as “buying a dividend.” In addition, the Fund’s
NAV may, at any time, reflect net unrealized appreciation, which may result in
future taxable distributions to you.
■
By law, if you do
not provide the Fund with your proper taxpayer identification number and certain
required certifications, you may be subject to backup withholding on any
distributions of income, capital gains, or proceeds from the sale of your
Shares. The Fund also must withhold if the IRS instructs it to do so. When
withholding is required, the amount will be 24% of any distributions or proceeds
paid.
■
An additional 3.8%
Medicare tax is imposed on certain net investment income (including ordinary
dividends and capital gain distributions received from the Fund and net gains
from taxable dispositions of Shares) of U.S. individuals, estates and trusts to
the extent that such person’s “modified adjusted gross income” (in the case of
an individual) or “adjusted gross income” (in the case of an estate or trust)
exceeds a threshold amount. This Medicare tax, if applicable, is reported by you
on, and paid with, your federal income tax return.
■
You will not be
required to include the portion of dividends paid by the Fund derived from
interest on U.S. government obligations in your gross income for purposes of
personal and, in some cases, corporate income taxes in many state and local tax
jurisdictions. The percentage of dividends that constitutes dividends derived
from interest on federal obligations will be determined annually. This
percentage may differ from the actual percentage of interest received by the
Fund on federal obligations for the particular days on which you hold
shares.
■
Fund distributions
and gains from the sale of Shares generally are subject to state and local
income taxes.
■
If the Fund
qualifies to pass through the tax benefits from foreign taxes it pays on its
investments, and elects to do so, then any foreign taxes it pays on these
investments may be passed through to you. You will then be required to include
your pro rata share of these taxes in gross income, even though not
actually received by you, and will be entitled either to
11
deduct your share
of these taxes in computing your taxable income, or to claim a foreign tax
credit for these taxes against your U.S. federal income tax.
■
Foreign investors
should be aware that U.S. withholding, special certification requirements to
avoid U.S. backup withholding and claim any treaty benefits, and estate taxes
may apply to an investment in the Fund.
■
Under the Foreign
Account Tax Compliance Act (“FATCA”), a 30% withholding tax is imposed on income
dividends made by the Fund to certain foreign entities, referred to as foreign
financial institutions or non-financial foreign entities, that fail to comply
(or be deemed compliant) with extensive reporting and withholding requirements
designed to inform the U.S. Department of the Treasury of U.S.-owned foreign
investment accounts. After December 31, 2018, FATCA withholding also would have
applied to certain capital gain distributions, return of capital distributions
and the proceeds arising from the sale of Shares; however, based on proposed
regulations issued by the IRS, which can be relied upon currently, such
withholding is no longer required unless final regulations provide otherwise
(which is not expected). The Fund may disclose the information that it receives
from its shareholders to the IRS, non-U.S. taxing authorities or other parties
as necessary to comply with FATCA or similar laws. Withholding also may be
required if a foreign entity that is a shareholder of the Fund fails to provide
the Fund with appropriate certifications or other documentation concerning its
status under FATCA.
■
To the extent
the
Fund invests in an underlying fund that is
taxed
as a RIC, please see the section
titled
“Taxes
–
Taxation of the
Funds” in the Fund’s SAI for more
information regarding the tax consequences of such investment.
■
The above
discussion concerning the taxability of Fund dividends and distributions and of
sales of Shares is inapplicable to investors that generally are exempt from
federal income tax, such as retirement plans that are qualified under Section
401 and 403 of the Code and individual retirement accounts (“IRAs”) and Roth
IRAs.
Taxes
on Purchase and Redemption of Creation Units
To the extent that
the Fund permits in-kind transactions, an AP that exchanges equity securities
for a Creation Unit generally will recognize a capital gain or loss equal to the
difference between the market value of the Creation Units at the time of
exchange (plus any cash received by the AP as part of the issue) and the sum of
the AP's aggregate basis in the securities surrendered plus any cash component
paid. Similarly, an AP that redeems a Creation Unit in exchange for securities
generally will recognize a capital gain or loss equal to the difference between
the AP's basis in the Creation Units (plus any cash paid by the AP as part of
the redemption) and the aggregate market value of the securities received (plus
any cash received by the AP as part of the redemption). The IRS, however, may
assert that a loss realized upon an exchange of securities for a Creation Unit,
or of a Creation Unit for securities, cannot be deducted currently under the
rules governing “wash sales” or on the ground that there has been no significant
change in the AP's economic position. An AP exchanging securities should consult
its own tax advisor(s) with respect to whether wash sale rules apply and when a
loss otherwise might not be deductible.
Any
capital gain or loss realized on a redemption of a Creation Unit generally is
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as short-term capital gain or loss if the Shares have been
held for one year or less, assuming that such Creation Units are held as a
capital asset. If you purchase or redeem one or more Creation Units, you will be
sent a confirmation statement showing how many Shares you purchased or sold and
at what price.
The
foregoing discussion summarizes some of the more important
possible consequences under current federal, state and local tax law of an
investment in the Fund. It is not a substitute for personal tax advice. You also
may be subject to state, local
and/or
foreign tax on the Fund's distributions and sales and/or redemptions of Shares.
Consult your personal tax advisor(s) about the potential tax consequences of an
investment in the Shares under all applicable tax laws.
Distributor
Invesco
Distributors, Inc. (the “Distributor”) serves as the distributor of Creation
Units for the Fund on an agency basis. The Distributor does not maintain a
secondary market in Shares. The Distributor is an affiliate of the
Adviser.
Net Asset Value
The NAV for the
Fund will be calculated and disseminated daily on each day that the NYSE is open
for trading. The Bank of New York Mellon (“BNYM”) normally calculates the Fund’s
NAV as of the regularly scheduled close of business of the NYSE (normally 4:00
p.m., Eastern time). The Fund’s NAV is based on prices at the time of closing,
and U.S. fixed-income assets may be valued as of the announced closing time for
trading in fixed-income instruments in a particular market or exchange. NAV is
calculated by deducting all of the Fund’s liabilities from the total value of
its assets and then dividing the result by the number of Shares outstanding,
rounding to the nearest cent. Generally, the portfolio securities are recorded
in the NAV no later than the trade date plus one day. In determining NAV,
expenses are accrued and applied daily and securities and other assets for which
market quotations are readily available and reliable are valued at market value.
The Trust’s Board has designated the Adviser to fair value the Fund’s portfolio
securities and other assets for which market quotations are not readily
available and reliable in accordance with Board-approved policies and related
Adviser procedures (the “Valuation Procedures”), subject to the Board’s
oversight.
Securities
listed or traded on an exchange (except convertible securities)
generally are valued at the last trade price or official closing price that day
as of the close of the exchange where the security primarily trades. Securities
of investment companies that are not exchange-traded (e.g., open-end mutual
funds) are valued using such company’s end-of-business day NAV per share,
whereas securities of investment companies that are exchange-traded are valued
at the last trade price or official closing price on the exchange on which they
primarily trade. Deposits, other obligations of U.S. and non-U.S. banks and
financial institutions, and cash equivalents are valued at their daily account
value. Fixed-income securities (including convertible securities) normally are
valued on the basis of prices provided by independent pricing services. Pricing
services generally value fixed-income securities assuming orderly transactions
of institutional round lot size, but the Fund may hold or transact in the same
securities in smaller, odd lot sizes. Odd lots often trade at lower prices than
institutional round lots, and their value may be adjusted accordingly. Futures
contracts are valued at the daily settlement price set by an exchange on which
they are principally traded. U.S. exchange-traded options are valued at the mean
between the last bid and asked prices from the exchange on which they
principally trade. Non-U.S. exchange-traded options are valued at the final
settlement price set by the exchange on which they trade. Options not listed on
an exchange and swaps generally are valued using pricing provided from
independent pricing services. Unlisted securities will be valued using prices
provided by independent pricing services or by another method that the Adviser,
in its judgment, believes better reflects the security’s fair value in
accordance with the Valuation Procedures. Foreign exchange-traded equity
securities are valued at their market value if market quotations are available
and reliable. The Adviser may use various pricing services to obtain market
quotations as well as fair value prices. The Adviser may discontinue the use of
any pricing service at any time.
12
At
times, a listed security’s market price may not be readily available.
Moreover, even when
market quotations are available for a security, they may be stale or unreliable.
A security’s last market quotation may become stale because, among other
reasons, (i) the security is not traded frequently, (ii) the security ceased
trading before its exchange closed; (iii) market or issuer-specific events
occurred after the security ceased trading; or (iv) the passage of time between
when the security’s trading market closes and when the Fund calculates its NAV
caused the quotation to become stale. A security’s last market quotation may
become unreliable because of (i) certain issuer- or security-specific events,
including a merger or insolvency, (ii) events which affect a geographical area
or an industry segment, such as political events or natural disasters, or (iii)
market events, such as a significant movement in the U.S. market. When a
security’s market price is not readily available, or the Adviser determines, in
its judgment, that such price is stale or unreliable, the Adviser will value the
security at fair value in good faith using the Valuation Procedures.
Fair
value pricing involves subjective judgments,
and
fair value pricing methods may change from time to
time.
Consequently,
while
such determinations may be made in good faith,
it may
nevertheless be more difficult
for
the Adviser to accurately assign a daily value,
and
Fund
securities that are
fair valued may be subject to greater fluctuation in their value from one day to
the next than would be the case if market quotations were used. Because of the
inherent uncertainties of valuation, and the degree of subjectivity in such
decisions, it is possible that a
fair value determination for a security is materially different than the value
that could be realized upon the sale of the security. There is no
assurance that the Fund could sell a portfolio security for the value
established for it at any time, and it is possible that the Fund would incur a
loss if a security is sold at a discount to its established value. Because the Fund
seeks to track the Underlying Index, the use of fair value pricing could result
in a difference between the prices used to calculate the Fund’s NAV and the
prices used by the Underlying Index, which may increase the Fund’s tracking
error.
Fund Service Providers
BNYM, 240 Greenwich
Street, New York, New York 10286, is the administrator, custodian, transfer
agent and fund accounting and dividend disbursing agent for the
Fund.
Stradley Ronon
Stevens & Young, LLP, 191 North Wacker Drive, Suite 1601, Chicago, Illinois
60606, and 2000 K Street, NW, Suite 700, Washington, D.C. 20006, serves as legal
counsel to the Trust.
PricewaterhouseCoopers
LLP (“PwC”), One North Wacker Drive, Chicago, Illinois 60606, serves as the
Fund’s independent registered public accounting firm. PwC is responsible for
auditing the annual financial statements of the Fund and assists in the
preparation and/or review of the Fund’s federal and state income tax
returns.
13
Financial Highlights
The financial
highlights table below is intended to help you understand the Fund's financial
performance for the period since the Fund’s inception. Certain information
reflects financial results for a single Share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all
dividends and other
distributions). This information
has been derived from the Fund’s financial statements, which have been audited
by PwC, whose report, along with the Fund’s financial statements, is included in
the Fund’s Annual Report for the fiscal period ended October 31, 2023, which is
available upon request.
|
|
For
the Period
December
7, 2022(a)
Through
October
31,
2023 |
|
Per
Share Operating Performance: |
|
|
Net
asset value at beginning of period |
$25.00 |
|
Net
investment income(b) |
1.48 |
|
Net
realized and unrealized gain on investments |
0.38 |
|
Total
from investment operations |
1.86 |
|
Distributions
to shareholders from: |
|
|
Net
investment income |
(1.37) |
|
Net
asset value at end of period |
$25.49 |
|
Market
price at end of period(c) |
$25.50 |
|
Net
Asset Value Total Return(d) |
7.60%(e) |
|
Market
Price Total Return(d) |
7.63%(e) |
|
Ratios/Supplemental
Data: |
|
|
Net
assets at end of period (000’s omitted) |
$33,132 |
|
Ratio
to average net assets of: |
|
|
Expenses,
after Waivers |
0.17%(f) |
|
Expenses,
prior to Waivers |
0.27%(f) |
|
Net
investment income |
6.44%(f) |
|
Portfolio
turnover rate(g) |
88% |
|
(a) |
Commencement
of investment operations. |
|
(b) |
Based
on average shares outstanding. |
|
(c) |
The
mean between the last bid and ask prices. |
|
(d) |
Net
asset value total return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value
during
the period, and redemption at net asset value on the last day of the
period. Net asset value total return includes adjustments in accordance
with accounting principles generally accepted in
the
United States of America and as such, the net asset value for financial
reporting purposes and the returns based upon those net asset values may
differ from the net asset value and returns
for
shareholder transactions. Market price total return is calculated assuming
an initial investment made at the market price at the beginning of the
period, reinvestment of all dividends and
distributions
at market price during the period, and sale at the market price on the
last day of the period. Total investment returns calculated for a period
of less than one year are not annualized. |
|
(e) |
The
net asset value total return from Fund Inception (December 9, 2022, the
first day of trading on the exchange) to October 31, 2023 was 7.51%. The
market price total return from Fund Inception
to October 31, 2023 was 7.25%. |
|
(f) |
Annualized. |
|
(g) |
Portfolio
turnover rate is not annualized for periods less than one year, if
applicable, and does not include securities received or delivered from
processing creations or
redemptions. |
14
Premium/Discount Information
Information showing
the number of days the market price of the Shares was greater (at a premium) and
less (at a discount) than the Fund’s NAV for the most recently completed
calendar year and the most recently completed calendar quarters since that year
(or the life of the Fund, if shorter) is available on the Fund’s website at
www.invesco.com/ETFs.
Other Information
Continuous
Offering
The method by which
Creation Unit Aggregations of Shares are created and traded may raise certain
issues under applicable securities laws. Because new Creation Unit Aggregations
of Shares are issued and sold by the Fund on an ongoing basis, a “distribution,”
as such term is used in the Securities Act, may occur at any point.
Broker-dealers and other persons are cautioned that some activities on their
part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent Shares and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving the solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms also should note that dealers who are not “underwriters” but
are effecting transactions in Shares, whether or not participating in the
distribution of Shares, generally are required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(a)(3)(C) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not “underwriters” but are participating in a distribution (as
contrasted with engaging in ordinary secondary market transactions), and thus
dealing with the Shares that are part of an overallotment within the meaning of
Section 4(a)(3)(C) of the Securities Act, will be unable to take advantage of
the prospectus delivery exemption provided by Section 4(a)(3) of the Securities
Act. For delivery of prospectuses to exchange members, the prospectus delivery
mechanism of Rule 153 under the Securities Act only is available with respect to
transactions on a national exchange.
Delivery
of Shareholder Documents–Householding
Householding is an
option available to certain investors of the Fund. Householding is a method of
delivery, based on the preference of the
individual
investor, in which a single copy of certain shareholder documents can be
delivered to investors who share the same address, even if their accounts are
registered under different names. Householding for the Fund is available through
certain broker-dealers. If you are interested in enrolling in householding and
receiving a single copy of the prospectus and other shareholder documents,
please contact your broker-dealer. If you currently are enrolled in householding
and wish to change your householding status, please contact your
broker-dealer.
For
More Information
For more detailed
information on the Trust, the Fund and the Shares, you may request a copy of the
Fund’s SAI. The SAI provides detailed information about the Fund and is
incorporated by reference into this prospectus. This means that the SAI legally
is a part of this prospectus. Additional information about the Fund’s
investments also is available in the Fund’s Annual and Semi-Annual Reports to
Shareholders. In the Fund’s current Annual Report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance during the last fiscal period. If you have
questions about the Fund or Shares or you wish to obtain the SAI, Annual Report
and/or Semi-Annual Report, free of charge, or to make shareholder inquiries,
please:
|
Call: |
Invesco
Distributors, Inc. at 1-800-983-0903
Monday
through Friday
8:00
a.m. to 5:00 p.m. Central Time |
|
Write: |
Invesco
Actively Managed Exchange-Traded Fund Trust
c/o
Invesco Distributors, Inc.
11
Greenway Plaza
Houston,
Texas 77046-1173 |
|
Visit: |
www.invesco.com/ETFs |
Reports
and other information about the Fund are available on the EDGAR Database on
the SEC's Internet site at www.sec.gov, and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address: [email protected].
No
person is authorized to give any information or to make any representations
about the Fund and its Shares not contained in this prospectus, and you should
not rely on any other information. Read and keep this prospectus for future
reference.
Dealers
effecting transactions in the Shares, whether or not participating
in this distribution, generally are required to deliver a prospectus. This is in
addition to any obligation of dealers to deliver a prospectus when acting as
underwriters.
The
Trust's registration number under the 1940 Act is 811-22148.
15
