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Invesco Annual Report to Shareholders

 

October 31, 2023

    

IMSI      Invesco Municipal Strategic Income ETF


Table of Contents

 

The Market Environment

     3  

Management’s Discussion of Fund Performance

     4  

Schedule of Investments

     7  

Statement of Assets and Liabilities

     10  

Statement of Operations

     11  

Statement of Changes in Net Assets

     12  

Financial Highlights

     13  

Notes to Financial Statements

     14  

Report of Independent Registered Public Accounting Firm

     21  

Fund Expenses

     22  

Tax Information

     23  

Trustees and Officers

     24  

 

    2    

 

 

 

 


 

The Market Environment

 

Fixed Income

The beginning of the fiscal year was headlined by the US Federal Reserve (the Fed) continuing its rapid tightening of monetary policy in an effort to combat inflation via higher interest rates, while simultaneously engineering a soft landing so as to not push the economy into a recession. The Fed aggressively raised its federal funds rate at the beginning of the fiscal year: a 0.75% hike in November 2022, its largest hike since 1994, a 0.50% hike in December and a 0.25% hike in January, to a target federal funds rate of 4.50% to 4.75%.1

A January 2023 rally gave way to a February selloff as higher-than-expected inflation, a tight labor market and solid economic growth indicated that the Fed’s monetary policy would remain tight for the foreseeable future, raising the risk of a deeper than expected recession. In March, significant volatility plagued fixed income markets as the failure of two US regional banks, Silicon Valley Bank and Signature Bank, prompted steep losses in the banking sector. The subsequent takeover of Credit Suisse and ongoing fear that bank troubles would spread pushed overall corporate spread premiums wider over the fiscal year. However, issues did not seem to be systemic, as policymakers responded swiftly which calmed markets. The Fed, aiming to further stabilize markets, continued course with its hawkish policy and announced two 0.25% hikes in March and May, resulting in a target federal funds rate of 5.00% to 5.25%.1 Markets stabilized due to milder inflation data and better-than-expected corporate earnings.

Through the second quarter of 2023, global economic growth remained resilient but bifurcated as emerging markets and Asian economies showed robust growth while developed western economies had sluggish yet positive growth. US labor markets maintained momentum with unemployment still at historic lows despite a slight uptick at the end of May. Inflation generally eased in developed economies, largely driven by moderation in the goods component of inflation. However, core inflation remained more stubborn and led developed country central banks to continue tightening, showcased by another 0.25% hike by the Fed in July, increasing the target rate from 5.25% to 5.50%, its highest level since June 2006.1 While rates remained elevated across all maturities on the yield curve, the two-year Treasury rates increased from 3.45% to 4.85% during the fiscal year, while 10-year Treasury rates increased from 3.53% to 4.48%.2 At the end of the fiscal year, the yield curve remained inverted. Additionally, in August, US debt was downgraded by the Fitch credit rating agency from AAA to AA on the premise of expected fiscal deterioration over the next three years.3 Despite the higher-than-expected Gross Domestic Product for the third quarter, the Fed held interest rates steady at its September and October 2023 meetings, but left open the possibility of another rate hike

before the end of the calendar year.1 As of the end of the fiscal year, we believe markets have priced in that the Fed is near the end or has finished its interest rate hiking cycle, with the expectation that the US is likely to avoid a substantial broad-based recession. We anticipate economic activity will remain relatively resilient. In the US, we believe rate hikes are ending and inflation will continue to fall significantly, albeit imperfectly. As we enter 2024, we expect a more positive growth outlook to unfold as the US economy recovers.

 

1 

Source: Federal Reserve of Economic Data

2 

Source: US Department of the Treasury

3 

Source: Fitch Ratings

 

A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. Not Rated indicates the debtor was not rated and should not be interpreted as indicating low quality. For more information on S&P Global Ratings’ rating methodology, please visit spglobal.com and select ‘Understanding Credit Ratings’ under ‘AboutRatings’ on the homepage. For more information on Moody’s rating methodology, please visit ratings.moodys.com and select ‘RatingMethodologies’ on the homepage.

 

    3    

 

 

 

 


 

 

IMSI    Management’s Discussion of Fund Performance
   Invesco Municipal Strategic Income ETF (IMSI)

 

The Invesco Municipal Strategic Income ETF (the “Fund”) is an actively managed exchange-traded fund (“ETF”) that seeks current income exempt from federal income tax. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in investments the income from which is exempt from federal income taxes (municipal securities) and in derivatives and other instruments that have economic characteristics similar to such securities.

The municipal securities in which the Fund will invest include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, the interest on which is exempt from federal income tax, at the time of issuance, in the opinion of bond counsel or other counsel to the issuers of such securities. The types of municipal securities in which the Fund will invest include fixed and variable rate securities. The Fund will normally maintain a weighted average portfolio duration of less than 7.5 years.

The Fund will invest between 50%—65% of its total assets in low- to medium-quality municipal securities, which Invesco Advisers, Inc. (the “Sub-Adviser”) defines as bonds (i) rated BBB or lower by S&P Global Ratings (“S&P”), Baa or lower by Moody’s Investors Services, Inc. (“Moody’s”), or an equivalent rating by another nationally recognized statistical rating organization (“NRSRO”), or (ii) unrated securities determined by the Sub-Adviser to be of comparable quality, each at the time of purchase. Medium-and lower-quality securities are inclusive of some securities rated investment grade; however, many bonds in which the Fund will invest are rated “below investment grade” (commonly referred to as “high yield securities” or “junk bonds” with more speculative characteristics than investment grade securities). Below investment grade bonds are those rated below the four highest rating categories of S&P, Moody’s, Fitch Ratings (“Fitch”) or another NRSRO (or, in the case of unrated securities, determined by the Sub-Adviser to be comparable to securities rated below investment-grade).

The Fund will primarily invest in municipal securities that were part of an issuance of $100 million or more. The Fund will also primarily invest in municipal securities with a minimum outstanding face value of $15 million.

In managing the Fund, the Sub-Adviser uses a process for selecting securities for purchase and sale that is based on intensive credit research and involves extensive due diligence on each issuer. The credit research process utilized by the Sub-Adviser to implement the Fund’s investment strategy in pursuit of the Fund’s investment objective considers factors that include, but are not limited to, an issuer’s operations and capital structure.

The Fund has no policy limiting its investments in municipal securities whose issuers are located in the same state, territory or possession of the United States. However, it is not the present intention of the Fund to invest more than 25% of the value of its net assets in issuers located in the same state, territory or possession of the United States.

During the fiscal period from the Fund’s inception (December 9, 2022, the first day of trading on the exchange) through October 31, 2023, on a market price basis, the Fund returned (2.08)%. On a net asset value (“NAV”) basis, the Fund returned (1.67)%. During the same time period, the S&P Municipal Bond 50% Investment Grade/50% High Yield Index (the “Benchmark Index”) returned (2.99)%. Additionally, the S&P Municipal Bond High Yield Index returned (3.17)% during the fiscal period. The Benchmark Index is a custom index created by Invesco to serve as the Fund’s benchmark and is composed of the following indexes: S&P Municipal Bond Investment Grade Index (50%) and S&P Municipal Bond High Yield Index (50%). The S&P Municipal Bond Investment Grade Index consists of bonds in the S&P Municipal Bond Index that are rated investment grade and the S&P Municipal Bond High Yield Index consists of bonds in the S&P Municipal Bond Index that are not rated or are rated below investment grade.

The majority of the Fund’s outperformance relative to the Benchmark Index during the period can be attributed to the Fund’s overweight allocation to bonds with duration between 1-5 years. For the fiscal period ended October 31, 2023, bonds with duration less than 1 year were the largest contributor to the Fund’s return. Bonds with duration between 9-11 years were the largest detractor from the Fund’s return during the period.

Positions that contributed most significantly to the Fund’s return for the fiscal period ended October 31, 2023, included Main Street Natural Gas Inc., 4.51% coupon (portfolio average weight of 1.72%), and Michigan Strategic Fund, 4.00% coupon (portfolio average weight of 1.68%). Positions that detracted most significantly from the Fund’s return included Lee Memorial Health System, 4.00% coupon (portfolio average weight of 3.15%), and Tuscaloosa County Industrial Development Authority, 4.50% coupon (portfolio average weight of 1.20%).

 

Credit Sector
(% of the Fund’s Total Investments)
as of October 31, 2023
 
Revenue Bonds      88.51  
General Obligation Bonds      7.02  
Other      2.75  
Pre-Refunded Bonds      1.72  

 

 

  4  

 


 

Invesco Municipal Strategic Income ETF (IMSI) (continued)

 

Top Ten Fund Holdings
(% of the Fund’s Net Assets)
as of October 31, 2023
 
Security   
New York Transportation Development Corp., Series 2023, RB, 6.00%, 04/01/2035      3.63  
California (State of) Community Choice Financing Authority (Green Bonds), Series 2023, RB, 5.00%, 08/01/2029      3.48  
Lee Memorial Health System, Series 2019 A-1, Ref. RB, 4.00%, 04/01/2037      3.09  
Metropolitan Transportation Authority, Series 2016 B, Ref. RB, 5.00%, 11/15/2037      2.61  
Portland (Port of), OR (Green Bonds), Twenty Ninth Series 2023, RB, 5.25%, 07/01/2039      2.50  
Allentown (City of), PA Neighborhood Improvement Zone Development Authority, Series 2022, Ref. RB, 5.00%, 05/01/2033      1.84  
Illinois (State of) Finance Authority (Uchicago Medicine), Series 2022 B-2, RB, 5.00%, 08/15/2027      1.81  
Tobacco Settlement Financing Corp., Series 2018 A, Ref. RB, 5.00%, 06/01/2033      1.80  
Pennsylvania (State of) Economic Development Financing Authority (Penndot Major Bridges (The)), Series 2022, RB, 5.50%, 06/30/2038      1.80  
New Jersey (State of) Transportation Trust Fund Authority, Series 2019, RB, 5.25%, 06/15/2043      1.77  
Total      24.33  

Growth of a $10,000 Investment Since Inception

 

LOGO

Fund Performance History as of October 31, 2023

 

    Fund Inception  
Index   Cumulative  
S&P Municipal Bond 50% Investment Grade / 50% High Yield Index     (2.99 )% 
S&P Municipal Bond High Yield Index     (3.17
Fund  
NAV Return     (1.67
Market Price Return     (2.08

 

 

  5  

 


 

Invesco Municipal Strategic Income ETF (IMSI) (continued)

 

Fund Inception: December 9, 2022

Performance quoted above represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate, and shares of the Fund (“Fund Shares”), when redeemed or sold, may be worth more or less than their original cost. Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See the current prospectus for more information. According to the Fund’s current prospectus, as supplemented to date, the Fund’s expense ratio of 0.50% includes a unitary management fee of 0.39% and estimated interest expense of 0.11%. NAV and Market Price returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and Market Price, respectively. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund Shares. See invesco.com/ETFs to find the most recent month-end performance numbers.

Performance results for the indexes stated above are based upon a hypothetical investment in their respective constituent securities. The returns of an index do not represent Fund returns. An investor cannot invest directly in an index. The indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the hypothetical performance shown. In addition, the results actual investors might have achieved would have differed from those shown because of differences in the timing, amounts of their investments, and fees and expenses associated with an investment in the Fund.

Notes Regarding Index and Fund Performance History:

 

-

Cumulative Inception returns for the Fund and indexes are based on the inception date of the Fund.

 

 

  6  

 


 

Invesco Municipal Strategic Income ETF (IMSI)

October 31, 2023

Schedule of Investments

 

     Interest
Rate
     Maturity
Date
     Principal
Amount
(000)
     Value  

Municipal Obligations-101.99%

           

Alabama-2.96%

           

Black Belt Energy Gas District (The), Series 2022 C-1, RB(a)

     5.25%        06/01/2029      $ 500      $      501,141  

Tuscaloosa (County of), AL Industrial Development Authority (Hunt Refining), Series 2019 A, Ref. IDR(b)

     4.50%        05/01/2032        389        343,965  
           

 

 

 
              845,106  
           

 

 

 

Arizona-3.30%

           

Chandler (City of), AZ Industrial Development Authority (Intel Corp.), Series 2007, RB(a)(c)

     4.10%        06/15/2028        500        486,408  

Pima (County of), AZ Industrial Development Authority (American Leadership Academy), Series 2022, Ref. RB(b)

     4.00%        06/15/2031        500        453,801  
           

 

 

 
              940,209  
           

 

 

 

Arkansas-1.60%

           

Arkansas (State of) Development Finance Authority (U.S. Steel Corp.) (Green Bonds), Series 2023, RB(c)

     5.70%        05/01/2053        500        456,297  
           

 

 

 

California-11.90%

           

California (State of) Community Choice Financing Authority (Green Bonds), Series 2023, RB(a)

     5.00%        08/01/2029        1,000        993,942  

California (State of) Infrastructure & Economic Development Bank, Series 2020, RB(a)(b)(c)

     3.65%        01/31/2024        500        497,216  

California (State of) Pollution Control Financing Authority (Poseidon Resources L.P.), Series 2023, RB(b)(c)

     5.00%        07/01/2038        500        496,886  

California (State of) Public Finance Authority (Enso Village) (Green Bonds), Series 2021, RB(b)

     5.00%        11/15/2036        500        456,905  

California (State of) Statewide Communities Development Authority (Loma Linda University Medical Center), Series 2014, RB

     5.25%        12/01/2034        500        498,186  

California County Tobacco Securitization Agency, Series 2020 A, Ref. RB

     5.00%        06/01/2024        450        451,627  
           

 

 

 
              3,394,762  
           

 

 

 

Colorado-1.58%

           

Centerra Metropolitan District No. 1 (In the City of Loveland), Series 2017, RB(b)

     5.00%        12/01/2037        500        449,461  
           

 

 

 

District of Columbia-1.73%

           

Metropolitan Washington Airports Authority, Series 2019 A, Ref. RB(c)

     5.00%        10/01/2037        500        493,124  
           

 

 

 

Florida-4.73%

           

Lee Memorial Health System, Series 2019 A-1, Ref. RB

     4.00%        04/01/2037        1,000        882,475  

Miami Beach (City of), FL, Series 2017, Ref. RB

     5.00%        09/01/2047        500        467,881  
           

 

 

 
              1,350,356  
           

 

 

 

Georgia-1.75%

           

Main Street Natural Gas, Inc., Subseries 2018 D, RB, (SOFR + 0.83%)(a)(d)(e)

     4.46%        12/01/2023        500        499,751  
           

 

 

 

Illinois-7.46%

           

Chicago (City of), IL, Series 2015 A, GO Bonds

     5.50%        01/01/2033        250        249,979  

Chicago (City of), IL (Chicago Works), Series 2023 A, GO Bonds.

     4.00%        01/01/2035        500        451,486  

Chicago (City of), IL Board of Education, Series 2012 B, Ref. GO Bonds

     5.00%        12/01/2033        500        476,365  

Illinois (State of) Finance Authority (Rush University Medical Center), Series 2015 A, Ref. RB

     5.00%        11/15/2038        445        434,378  

Illinois (State of) Finance Authority (Uchicago Medicine), Series 2022 B-2, RB(a)

     5.00%        08/15/2027        500        515,420  
           

 

 

 
              2,127,628  
           

 

 

 

Indiana-2.52%

           

Indiana (State of) Finance Authority (United States Steel Corp.), Series 2021 A, Ref. RB

     4.13%        12/01/2026        500        482,522  

Whiting (City of), IN (BP Products North America, Inc.), Series 2015, RB(a)(c)

     4.40%        06/10/2031        250        237,936  
           

 

 

 
              720,458  
           

 

 

 

Iowa-1.59%

           

Iowa (State of) Finance Authority (Iowa Fertilizer Co.), Series 2022, Ref. RB(a)

     4.00%        12/01/2032        500        454,284  
           

 

 

 

Kentucky-1.60%

           

Kentucky (Commonwealth of) Economic Development Finance Authority (Next Generation Kentucky Information Highway), Series 2015 A, RB

     4.25%        07/01/2035        500        457,241  
           

 

 

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    7    

 

 

 

 


 

Invesco Municipal Strategic Income ETF (IMSI)–(continued)

October 31, 2023

 

    

 

     Interest
Rate
    Maturity
Date
     Principal
Amount
(000)
     Value  

Maryland-3.24%

          

Maryland Economic Development Corp. (Purple Line) (Green Bonds), Series 2022 A, RB(c)

     5.00%       11/12/2028      $ 500      $      496,931  

Rockville (City of), MD (Ingleside at King Farm), Series 2017 A-1, Ref. RB

     5.00%       11/01/2037        500        426,815  
          

 

 

 
             923,746  
          

 

 

 

Michigan-1.70%

          

Michigan (State of) Strategic Fund (Green Bonds), Series 2021, RB(a)(c)

     4.00%       10/01/2026        500        484,869  
          

 

 

 

New Jersey-3.57%

          

New Jersey (State of) Transportation Trust Fund Authority, Series 2019, RB

     5.25%       06/15/2043        500        504,738  

Tobacco Settlement Financing Corp., Series 2018 A, Ref. RB

     5.00%       06/01/2033        500        514,185  
          

 

 

 
             1,018,923  
          

 

 

 

New York-12.73%

          

Metropolitan Transportation Authority, Series 2016 B, Ref. RB

     5.00%       11/15/2037        750        744,648  

New York (City of), NY Municipal Water Finance Authority, Series 2023 CC, VRD RB(f)

     4.00%       06/15/2053        500        500,000  

New York Transportation Development Corp., Series 2023, RB(c)(g)

     6.00%       04/01/2035        1,000        1,036,185  

New York Transportation Development Corp. (American Airlines, Inc.), Series 2021, Ref. RB(c)

     3.00%       08/01/2031        500        419,930  

New York Transportation Development Corp. (Delta Air Lines, Inc. LaGuardia Airport Terminals C&D Redevelopment), Series 2020, RB(c)

     4.00%       10/01/2030        500        460,044  

Westchester County Local Development Corp., Series 2021, Ref. RB(b)

     2.88%       07/01/2026        500        471,489  
          

 

 

 
             3,632,296  
          

 

 

 

North Dakota-1.26%

          

Ward (County of), ND (Trinity Obligated Group), Series 2017 C, RB

     5.00%       06/01/2034        410        358,965  
          

 

 

 

Ohio-2.56%

          

Buckeye Tobacco Settlement Financing Authority, Series 2020 B-2, Ref. RB

     5.00%       06/01/2055        300        245,759  

Ohio (State of) Air Quality Development Authority (Pratt Paper LLC), Series 2017, RB(b)(c)

     3.75%       01/15/2028        500        483,714  
          

 

 

 
             729,473  
          

 

 

 

Oregon-2.49%

          

Portland (Port of), OR (Green Bonds), Twenty Ninth Series 2023, RB(c)

     5.25%       07/01/2039        700        711,758  
          

 

 

 

Pennsylvania-5.00%

          

Allentown (City of), PA Neighborhood Improvement Zone Development Authority, Series 2022, Ref. RB

     5.00%       05/01/2033        525        523,616  

Montgomery (County of), PA Industrial Development Authority (Constellation Energy), Series 2023 B, Ref. RB

     4.10%       06/01/2029        400        389,666  

Pennsylvania (State of) Economic Development Financing Authority (Penndot Major Bridges (The)), Series 2022, RB(c)

     5.50%       06/30/2038        500        512,689  
          

 

 

 
             1,425,971  
          

 

 

 

Puerto Rico-3.29%

          

Puerto Rico (Commonwealth of), Series 2021 A-1, GO Bonds

     4.00%       07/01/2033        500        435,782  

Puerto Rico (Commonwealth of) Aqueduct & Sewer Authority, Series 2022 A, Ref. RB(b)

     5.00%       07/01/2028        500        501,615  
          

 

 

 
             937,397  
          

 

 

 

South Carolina-1.75%

          

Patriots Energy Group Financing Agency, Series 2023, RB(a)

     5.25%       08/01/2031        500        498,027  
          

 

 

 

Texas-9.92%

          

Harris County Industrial Development Corp. (Energy Transfer L.P.), Series 2023, Ref. RB(a)

     4.05%       06/01/2033        250        233,819  

Houston (City of), TX, Series 2023 A, Ref. RB, (INS - AGM)(c)(h)

     5.25%       07/01/2048        500        493,159  

Houston (City of), TX Airport System (United Airlines, Inc.), Series 2021 B-1, RB(c)

     4.00%       07/15/2041        500        396,567  

Mission Economic Development Corp. (Natgasoline), Series 2018, Ref. RB(b)(c)

     4.63%       10/01/2031        500        470,678  

New Hope Cultural Education Facilities Finance Corp. (Outlook at Windhaven (The)), Series 2022 B3, RB

     4.25%       10/01/2026        500        482,971  

Tender Option Bond Trust Receipts/Certificates, Series 2021, VRD RB,
(LOC - Morgan Stanley Mun Fdg)(b)(f)(i)

     4.49%       06/15/2056        300        300,000  

Texas Private Activity Bond Surface Transportation Corp. (Blueridge Transportation Group, LLC SH 288 Toll Lanes), Series 2016, RB(c)

     5.00%       12/31/2045        500        452,399  
          

 

 

 
             2,829,593  
          

 

 

 

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    8    

 

 

 

 


 

Invesco Municipal Strategic Income ETF (IMSI)–(continued)

October 31, 2023

 

    

 

     Interest
Rate
     Maturity
Date
     Principal
Amount
(000)
     Value  

Utah-1.50%

           

Black Desert Public Infrastructure District, Series 2021 A, GO Bonds(b)

     3.25%        03/01/2031      $ 500      $ 427,911  
           

 

 

 

Virginia-3.15%

           

Norfolk (City of), VA Redevelopment & Housing Authority (Fort Norfolk Retirement Community, Inc. - Harbor’s Edge), Series 2019 A, RB

     5.00%        01/01/2034        500        441,732  

Virginia (Commonwealth of) Small Business Financing Authority, Series 2022, RB(c)

     4.00%        07/01/2032        500        457,263  
           

 

 

 
              898,995  
           

 

 

 

Washington-3.34%

           

Washington (State of) Convention Center Public Facilities District, Series 2018, RB

     5.00%        07/01/2043        500        479,301  

Washington (State of) Health Care Facilities Authority (Providence Health & Services), Series 2012 A, RB

     5.00%        10/01/2042        500        472,920  
           

 

 

 
              952,221  
           

 

 

 

Wisconsin-3.77%

           

Wisconsin (State of) Health & Educational Facilities Authority (Aspirus Inc. Obligated Group), Series 2021, RB

     4.00%        08/15/2040        500        428,215  

Wisconsin (State of) Health & Educational Facilities Authority (Camillus Health System), Series 2019, Ref. RB

     5.00%        11/01/2046        500        364,417  

Wisconsin (State of) Public Finance Authority (Prime Healthcare Foundation, Inc.), Series 2018 A, RB

     5.00%        12/01/2027        285        282,917  
           

 

 

 
              1,075,549  
           

 

 

 

TOTAL INVESTMENTS IN SECURITIES-101.99%
(Cost $30,480,461)

              29,094,371  

OTHER ASSETS LESS LIABILITIES-(1.99%)

              (567,892
           

 

 

 

NET ASSETS-100.00%

            $ 28,526,479  
           

 

 

 

 

Investment Abbreviations:
AGM   -Assured Guaranty Municipal Corp.
GO   -General Obligation
IDR   -Industrial Development Revenue Bonds
INS   -Insurer
LOC   -Letter of Credit
RB   -Revenue Bonds
Ref.   -Refunding
SOFR   -Secured Overnight Financing Rate
VRD   -Variable Rate Demand

Notes to Schedule of Investments:

(a) 

Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put.

(b) 

Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at October 31, 2023 was $5,353,641, which represented 18.77% of the Fund’s Net Assets.

(c) 

Security subject to the alternative minimum tax.

(d) 

Advance refunded; secured by an escrow fund of U.S. Government obligations or other highly rated collateral.

(e) 

Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on October 31, 2023.

(f) 

Demand security payable upon demand by the Fund at specified time intervals no greater than thirteen months. Interest rate is redetermined periodically by the issuer or agent based on current market conditions. Rate shown is the rate in effect on October 31, 2023.

(g) 

All or a portion of the security position is when-issued or delayed delivery to be delivered and settled after period end.

(h) 

Principal and/or interest payments are secured by the bond insurance company listed.

(i) 

Principal and interest payments are fully enhanced by a letter of credit from the bank listed or a predecessor bank, branch or subsidiary.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    9    

 

 

 

 


 

Statement of Assets and Liabilities    

October 31, 2023    

 

    

Invesco Municipal

Strategic Income

       ETF (IMSI)        

 

Assets:

       

Investments in securities, at value

      $ 29,094,371    

Cash

        52,700    

Receivable for:

                

Dividends and interest

        412,900    
     

 

 

   

Total assets

        29,559,971    
     

 

 

   

Liabilities:

       

Payable for:

       

Investments purchased

        1,023,940    

Accrued unitary management fees

        9,552    
     

 

 

   

Total liabilities

        1,033,492    
     

 

 

   

Net Assets

      $ 28,526,479    
     

 

 

   

Net assets consist of:

       

Shares of beneficial interest

      $ 30,000,011    

Distributable earnings (loss)

        (1,473,532  
     

 

 

   

Net Assets

      $ 28,526,479    
     

 

 

   

Shares outstanding (unlimited amount authorized, $ 0.01 par value)

        600,001    

Net asset value

      $ 47.54    
     

 

 

   

Market price

      $ 47.53    
     

 

 

   

Investments in securities, at cost

      $ 30,480,461    
     

 

 

   

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    10    

 

 

 

 


 

Statement of Operations    

For the period ended October 31, 2023    

 

    

Invesco Municipal

Strategic Income

ETF (IMSI)(a)

 

Investment income:

       

Interest income

      $ 1,135,317    
     

 

 

   

Total investment income

        1,135,317    
     

 

 

   

Expenses:

       

Unitary management fees

                 104,623    

Tax expenses

        39    
     

 

 

   

Total expenses

        104,662    
     

 

 

   

Net investment income

        1,030,655    
     

 

 

   

Realized and unrealized gain (loss) from:

       

Net realized gain (loss) from unaffiliated investments

        (95,440  
     

 

 

   

Change in net unrealized appreciation (depreciation) on unaffiliated investment securities

        (1,386,090  
     

 

 

   

Net realized and unrealized gain (loss)

        (1,481,530  
     

 

 

   

Net increase (decrease) in net assets resulting from operations

      $ (450,875  
     

 

 

   

 

(a) 

For the period December 7, 2022 (commencement of investment operations) through October 31, 2023.    

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    11    

 

 

 

 


 

Statement of Changes in Net Assets

For the period ended October 31, 2023

 

    Invesco Municipal Strategic
Income ETF (IMSI)
    2023(a)

Operations:

            

Net investment income

         $   1,030,655    

Net realized gain (loss)

           (95,440 )    

Change in net unrealized appreciation (depreciation)

           (1,386,090 )    
        

 

 

     

Net increase (decrease) in net assets resulting from operations

           (450,875 )    
        

 

 

     

Distributions to Shareholders from:

            

Distributable earnings

           (1,022,696 )    
        

 

 

     

Shareholder Transactions:

            

Proceeds from shares sold

                      30,000,050               
        

 

 

     

Net increase in net assets resulting from share transactions

           30,000,050    
        

 

 

     

Net increase in net assets

           28,526,479    
        

 

 

     

Net assets:

            

Beginning of period

           -    
        

 

 

     

End of period

         $ 28,526,479    
        

 

 

     

Changes in Shares Outstanding:

            

Shares sold

           600,001    

Shares outstanding, beginning of period

           -    
        

 

 

     

Shares outstanding, end of period

           600,001    
        

 

 

     

 

(a) 

For the period December 7, 2022 (commencement of investment operations) through October 31, 2023.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    12    

 

 

 

 


 

Financial Highlights

Invesco Municipal Strategic Income ETF (IMSI)

 

    

For the Period

December 7, 2022(a)

Through

October 31,

              2023             

 

Per Share Operating Performance:

       

Net asset value at beginning of period

      $ 50.00    
     

 

 

   

Net investment income(b)

        1.72    

Net realized and unrealized gain (loss) on investments

        (2.48  
     

 

 

   

Total from investment operations

        (0.76  
     

 

 

   

Distributions to shareholders from:

                         

Net investment income

        (1.70  
     

 

 

   

Net asset value at end of period

      $ 47.54    
     

 

 

   

Market price at end of period(c)

      $ 47.53    
     

 

 

   

Net Asset Value Total Return(d)

        (1.61 )%(e)   

Market Price Total Return(d)

        (1.63 )%(e)   

Ratios/Supplemental Data:

       

Net assets at end of period (000’s omitted)

      $ 28,526    

Ratio to average net assets of:

       

Expenses

        0.39 %(f)   

Net investment income

        3.82 %(f)   

Portfolio turnover rate(g)

        87  

 

(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 (1.67)%. The market price total return from Fund Inception to October 31, 2023 was (2.08)%.

(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.

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

 

    13    

 

 

 

 


Notes to Financial Statements

Invesco Actively Managed Exchange-Traded Fund Trust

October 31, 2023

NOTE 1–Organization

Invesco Actively Managed Exchange-Traded Fund Trust (the “Trust”) was organized as a Delaware statutory trust and is authorized to have multiple series of portfolios. The Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). This report includes Invesco Municipal Strategic Income ETF (IMSI) (the “Fund”).

The Fund represents a separate series of the Trust. The shares of the Fund are referred to herein as “Shares” or “Fund’s Shares.” The Fund’s Shares are listed and traded on the Cboe BZX Exchange, Inc.

The market price of a Share may differ to some degree from the Fund’s net asset value (“NAV”). Unlike conventional mutual funds, the Fund issues and redeems Shares on a continuous basis, at NAV, only in a large specified number of Shares, each called a “Creation Unit.” Creation Units are issued and redeemed principally in exchange for the deposit or delivery of cash. Except when aggregated in Creation Units by authorized participants (“APs”), Shares are not individually redeemable securities of the Fund.

The investment objective of the Fund is to seek current income exempt from federal income tax.

NOTE 2–Significant Accounting Policies

The following is a summary of the significant accounting policies followed by the Fund in preparation of its financial statements.

The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services–Investment Companies.

A.

Security Valuation - Securities, including restricted securities, are valued according to the following policies:

A security listed or traded on an exchange is generally valued at its trade price or official closing price that day as of the close of the exchange where the security is principally traded or, lacking any trades or official closing price on a particular day, the security may be valued at the closing bid or ask price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued using prices provided by an independent pricing service they may be considered fair valued. Futures contracts are valued at the daily settlement price set by an exchange on which they are principally traded. Where a final settlement price exists, exchange-traded options are valued at the final settlement price from the exchange where the option principally trades. Where a final settlement price does not exist, exchange-traded options are valued at the mean between the last bid and ask price generally from the exchange where the option principally 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.

Deposits, other obligations of U.S. and non-U.S. banks and financial institutions are valued at their daily account value.

Fixed income securities (including convertible debt securities) generally are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Securities with a demand feature exercisable within one to seven days are valued at par. Pricing services generally value debt obligations 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. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.

Foreign securities’ (including foreign exchange contracts’) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the London world markets. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Invesco Capital Management LLC (the “Adviser”) may use various pricing services to obtain market quotations as well as fair value prices. Because trading hours for certain foreign securities end before the close of the New York Stock Exchange (“NYSE”), closing market quotations may become not representative of market value in the Adviser’s judgment (“unreliable”). If, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, a significant event occurs that makes the closing price of the security unreliable, the Adviser may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith in accordance with Board-approved policies and related Adviser procedures (“Valuation Procedures”). Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the

 

    14    

 

 

 

 


 

 

closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American depositary receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, the potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.

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.

Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The mean between the last bid and ask prices may be used to value debt obligations, including corporate loans, and unlisted equity securities.

Securities for which market quotations are not readily available are fair valued by the Adviser in accordance with the Valuation Procedures. If a fair value price provided by a pricing service is unreliable, the Adviser will fair value the security using the Valuation Procedures. Issuer-specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.

The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.

Valuations change in response to many factors, including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general market conditions which 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, acts of terrorism, significant governmental actions or adverse investor sentiment generally and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.

The price the Fund could receive upon the sale of any investment may differ from the Adviser’s valuation of the investment, particularly for securities that are valued using a fair valuation technique. When fair valuation techniques are applied, the Adviser uses available information, including both observable and unobservable inputs and assumptions, to determine a methodology that will result in a valuation that the Adviser believes approximates market value. 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, the Fund could realize a greater or lesser than expected gain or loss upon the sale of the investment.

B.

Investment Transactions and Investment Income - Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale or disposition of securities are computed on the specific identified cost basis. Interest income is recorded on an accrual basis from settlement date and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Realized gains, dividends and interest received by the Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes.

The Fund may periodically participate in litigation related to the Fund’s investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.

Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund’s NAV and, accordingly, they reduce the Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the Adviser.

C.

Country Determination - For the purposes of presentation in the Schedule of Investments, the Adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors may include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues, the country that has the primary market for the issuer’s securities and its

 

    15    

 

 

 

 


 

 

“country of risk” as determined by a third party service provider, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted.

D.

Dividends and Distributions to Shareholders - The Fund declares and pays dividends from net investment income, if any, to its shareholders monthly and records such dividends on the ex-dividend date. Generally, the Fund distributes net realized taxable capital gains, if any, annually in cash and records them on the ex-dividend date. Such distributions on a tax basis are determined in conformity with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America (“GAAP”). Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a tax return of capital at fiscal year-end.

E.

Federal Income Taxes - The Fund intends to comply with the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute substantially all of the Fund’s taxable earnings to its shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized gains) that is distributed to the shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.

The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments for in-kind transactions, losses deferred due to wash sales, and passive foreign investment company adjustments, if any.

The Fund files U.S. federal tax returns and tax returns in certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.

F.

Expenses - The Fund has agreed to pay an annual unitary management fee to the Adviser. Out of the unitary management fee, the Adviser pays Invesco Advisers, Inc.’s (the “Affiliated Sub-Adviser” or “Invesco”) fees and substantially all expenses of the Fund, including the costs of transfer agency, custody, fund administration, legal, audit and other services, except for distribution fees, if any, brokerage expenses, taxes, interest, 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 the Adviser (an “Interested Trustee”), or (iii) any other matters that directly benefit the Adviser).

Expenses of the Trust that are excluded from the Fund’s unitary management fee and are directly identifiable to the Fund are applied to the Fund. Expenses of the Trust that are excluded from the Fund’s unitary management fee and are not readily identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative net assets of the Fund.

To the extent the Fund invests in other investment companies, the expenses shown in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the investment companies in which it invests. The effects of such investment companies’ expenses are included in the realized and unrealized gain or loss on the investments in the investment companies.

G.

Accounting Estimates - The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements, including estimates and assumptions related to taxation. Actual results could differ from these estimates. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print.

H.

Indemnifications - Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. Each Board member who is not an “interested person” (as defined in the 1940 Act) of the Trust or the Adviser (each, an “Independent Trustee”) is also indemnified against certain liabilities arising out of the performance of their duties to the Trust pursuant to an Indemnification Agreement between such trustee and the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote.

I.

Securities Purchased on a When-Issued and Delayed Delivery Basis - The Fund may purchase and sell interests in corporate loans and corporate debt securities and other portfolio securities on a when issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Fund actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value of the interests or securities at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of acquiring such securities, it may sell such securities prior to the settlement date.

 

    16    

 

 

 

 


 

 

J.

Other Risks

AP 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. This 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 Fund Shares, and Shares may be more likely to trade at a premium or discount to the Fund’s 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.

Call Risk. If interest rates fall, it is possible that issuers of callable securities with high interest coupons will “call” (or prepay) their bonds before their maturity date. If an issuer exercises such a call during a period of declining interest rates, the Fund may have to replace such called security with a lower yielding security. If that were to happen, the Fund’s net investment income could fall.

Cash Transaction Risk. Most exchange-traded funds (“ETFs”) generally make in-kind redemptions to avoid being taxed at the fund level on gains on the distributed portfolio securities. However, unlike most ETFs, the Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind, because of the nature of the Fund’s investments. As such, the Fund may be required to sell portfolio securities to obtain the cash needed to distribute redemption proceeds. Therefore, 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. 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.

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 which could potentially increase the Fund’s portfolio turnover rate and transaction costs.

Fixed-Income Securities Risk. Fixed-income securities 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 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.

High Yield Securities (Junk Bond) Risk. Compared to higher quality debt securities, high yield debt securities (commonly referred to as “junk bonds”) involve a greater risk of default or price changes due to changes in the credit quality of the issuer because they are generally unsecured and may be subordinated to other creditors’ claims. They are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. High yield debt securities often are issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which generally are less able than more financially stable firms to make scheduled payments of interest and principal. The values of junk bonds often fluctuate more in response to company, political, regulatory or economic developments than higher quality bonds, and their values can decline significantly over short periods of time or during periods of economic difficulty when the bonds could be difficult to value or sell at a fair price.

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, including duration. “Duration risk” is related to interest rate risk; it refers to the risks associated with the sensitivity of a bond’s price to a one percent change in interest rates. Bonds with longer durations (i.e., a greater length of time until they reach maturity) face greater duration risk, meaning that they tend to exhibit greater volatility and are more sensitive to changes in interest rates than bonds with shorter durations.

 

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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.

Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. In managing the Fund’s portfolio securities, the Affiliated Sub-Adviser applies investment techniques and risk analyses in making investment decisions, but there can be no guarantee that these will produce the desired results.

Market Risk. The Fund’s holdings are subject to market fluctuations. You should anticipate that the value of the Shares will decline more or less, in correlation with any decline in value of the holdings in the Fund’s portfolio. Additionally, natural or environmental disasters, widespread disease or other public health issues, war, military conflict, acts of terrorism, economic crisis or other events could result in increased premiums or discounts to the Fund’s NAV.

Municipal Issuer Focus Risk. The municipal issuers in which the Fund invests may be located in the same geographic area or may pay their interest obligations from revenue of similar projects, such as hospitals, airports, utility systems and housing finance agencies. This may make the Fund’s investments more susceptible to similar social, economic, political or regulatory occurrences, making the Fund more susceptible to experience a drop in its share price than if the Fund had been more diversified across issuers that did not have similar characteristics.

Municipal Securities Risk. The Fund invests in municipal securities. Municipal securities are subject to the risk that litigation, legislation or other political events, local business or economic conditions or the bankruptcy of the issuer could have a significant effect on the ability of an issuer of municipal securities to make payments of principal and/or interest. Political changes and uncertainties in the municipal market related to taxation, legislative changes or the rights of municipal security holders can significantly affect municipal securities. Because many securities are issued to finance similar projects, especially those relating to education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal market. In addition, changes in the financial condition of an individual municipal issuer can affect the overall municipal market. If the Internal Revenue Service (“IRS”) determines that an issuer of a municipal security has not complied with applicable tax requirements, interest from the security could become taxable and the security could decline significantly in value.

Non-Diversified Fund Risk. Because the Fund is non-diversified and can invest a greater portion of its assets in securities of individual issuers than can 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.

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 Fund 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.

NOTE 3–Investment Advisory Agreement and Other Agreements

The Trust has entered into an Investment Advisory Agreement with the Adviser on behalf of the Fund, pursuant to which the Adviser has overall responsibility for the selection and ongoing monitoring of the Fund’s investments, managing the Fund’s business affairs, providing certain clerical, bookkeeping and other administrative services, and oversight of the Affiliated Sub-Adviser.

Pursuant to the Investment Advisory Agreement, the Fund accrues daily and pays monthly to the Adviser an annual unitary management fee of 0.39% of the Fund’s average daily net assets. Out of the unitary management fee, the Adviser pays the Affiliated Sub-Adviser’s fees and substantially all expenses of the Fund, including the costs of transfer agency, custody, fund administration, legal, audit and other services, except for distribution fees, if any, brokerage expenses, taxes, interest, 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 an Interested Trustee, or (iii) any other matters that directly benefit the Adviser).

The Adviser has entered into an Investment Sub-Advisory Agreement with the Affiliated Sub-Adviser. The sub-advisory fee for the Fund is paid by the Adviser to the Affiliated Sub-Adviser at 40% of the Adviser’s compensation of the sub-advised assets of the Fund.

Through at least August 31, 2025, the Adviser has contractually agreed to waive the management fee payable by the Fund in an amount equal to the lesser of: (i) 100% of the net advisory fees earned by the Adviser or an affiliate of the Adviser that are attributable to the Fund’s investments 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 or (ii) the management fee available to be waived. There is no guarantee that the Adviser will extend the waiver of these fees past that date.

 

    18    

 

 

 

 


 

 

For the period December 7, 2022 (commencement of investment operations) through October 31, 2023, no fees were waived.

The Trust has entered into a Distribution Agreement with Invesco Distributors, Inc. (the “Distributor”), which serves as the distributor of Creation Units for the Fund. The Distributor does not maintain a secondary market in the Shares. The Fund is not charged any fees pursuant to the Distribution Agreement. The Distributor is an affiliate of the Adviser.

The Trust has entered into service agreements whereby BNYM, a wholly-owned subsidiary of The Bank of New York Mellon Corporation, serves as the administrator, custodian, fund accountant and transfer agent for the Fund.

NOTE 4–Security Transactions with Affiliated Funds

The Fund is permitted to purchase securities from or sell securities to certain other affiliated funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund that is or could be considered an “affiliated person” by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers is made in reliance on Rule 17a-7 of the 1940 Act and, to the extent applicable, related SEC staff positions. Each such transaction is effected at the security’s “current market price”, as provided for in these procedures and Rule 17a-7.

For the period December 7, 2022 (commencement of investment operations) through October 31, 2023, the Fund engaged in securities purchases of $4,401,863 and securities sales of $8,568,500 with affiliates, which resulted in net realized gains (losses) of $(6,612).

NOTE 5–Additional Valuation Information

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:

Level 1 -   Prices are determined using quoted prices in an active market for identical assets.
Level 2 -   Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others.
Level 3 -   Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Adviser’s assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information.

As of October 31, 2023, all of the securities in the Fund were valued based on Level 2 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.

NOTE 6–Distributions to Shareholders and Tax Components of Net Assets

Tax Character of Distributions to Shareholders Paid During the Period December 7, 2022 (Commencement of Investment Operations) through October 31, 2023:

 

     2023  

Ordinary income*

   $ 28,749  

Ordinary income-Tax-Exempt

     993,947  

 

*

Includes short-term capital gain distributions, if any.    

Tax Components of Net Assets at Fiscal Period-End:    

 

Undistributed tax-exempt income

   $ 7,998  

Net unrealized appreciation (depreciation) – investments

     (1,386,090

Capital loss carryforward

     (95,440

Shares of beneficial interest

     30,000,011  
  

 

 

 

Total net assets

   $ 28,526,479  
  

 

 

 

 

    19    

 

 

 

 


 

 

Capital loss carryforwards are calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforwards actually available for the Fund to utilize. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.

The Fund has a capital loss carryforward as of October 31, 2023, as follows:

 

     No expiration     
     Short-Term    Long-Term    Total
   $95,440    $-    $95,440

NOTE 7–Investment Transactions

For the period December 7, 2022 (commencement of investment operations) through October 31, 2023, the cost of securities purchased and the proceeds from sales of securities (other than short-term securities, U.S. Government obligations, money market funds and in-kind transactions, if any) were $53,763,121 and $23,148,311, respectively.

As of October 31, 2023, the aggregate cost of investments, including any derivatives, on a tax basis includes adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end:

 

Aggregate unrealized appreciation of investments

   $ 13,997  

Aggregate unrealized (depreciation) of investments

     (1,400,087
  

 

 

 

Net unrealized appreciation (depreciation) of investments

   $ (1,386,090
  

 

 

 

Cost of investments for tax purposes is $30,480,461.

NOTE 8–Reclassification of Permanent Differences

Primarily as a result of differing book/tax treatment of excise taxes, undistributed net investment income (loss) was increased by $39, undistributed net realized gain (loss) was increased by $0 and Shares of beneficial interest were decreased by $39. These reclassifications had no effect on the net assets of the Fund.

NOTE 9–Trustees’ and Officer’s Fees

The Adviser, as a result of the Fund’s unitary management fee, pays remuneration to the Independent Trustees and an Officer of the Trust on behalf of the Fund. The Interested Trustee does not receive any Trustees’ fees.

The Trust has adopted a deferred compensation plan (the “Plan”). Under the Plan, each Independent Trustee who has executed a Deferred Fee Agreement (a “Participating Trustee”) may defer receipt of all or a portion of their compensation (“Deferral Fees”). Such Deferral Fees are deemed to be invested in select Invesco ETFs. The Deferral Fees payable to a Participating Trustee are valued as of the date such Deferral Fees would have been paid to a Participating Trustee. The value increases with contributions or with increases in the value of the Shares selected, and the value decreases with distributions or with declines in the value of the Shares selected. Obligations under the Plan represent unsecured claims against the general assets of the Fund.

NOTE 10–Capital

Shares are issued and redeemed by the Fund only in Creation Units consisting of a specified number of Shares as set forth in the Fund’s prospectus. Only APs are permitted to purchase or redeem Creation Units from the Fund. Such transactions are principally permitted in exchange for the deposit or delivery of cash. The Fund also reserves the right to permit or require Creation Units to be issued in exchange for the deposit or delivery of a basket of securities (“Deposit Securities”). However, cash in an amount equivalent to the value of certain securities may be substituted, generally when the securities are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.

To the extent that the Fund permits transactions in exchange for Deposit Securities, the Fund may issue Shares in advance of receipt of Deposit Securities subject to various conditions, including a requirement to maintain on deposit with the Trust cash at least equal to 105% of the market value of the missing Deposit Securities. In accordance with the Trust’s Participant Agreement, Creation Units will be issued to an AP, notwithstanding the fact that the corresponding Deposit Securities have not been received in part or in whole, in reliance on the undertaking of the AP to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by the AP’s delivery and maintenance of collateral consisting of cash in the form of U.S. dollars in immediately available funds having a value (marked-to-market daily) at least equal to 105%, which the Adviser may change from time to time, of the value of the missing Deposit Securities.

Certain transaction fees may be charged by the Fund for creations and redemptions, which are treated as increases in capital. Transactions in the Fund’s Shares are disclosed in detail in the Statement of Changes in Net Assets.

 

    20    

 

 

 

 


 

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Invesco Actively Managed Exchange-Traded Fund Trust and Shareholders of Invesco Municipal Strategic Income ETF

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco Municipal Strategic Income ETF (one of the funds constituting Invesco Actively Managed Exchange-Traded Fund Trust, referred to hereafter as the “Fund”) as of October 31, 2023, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the period December 7, 2022 (commencement of investment operations) through October 31,2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations, changes in its net assets, and the financial highlights for the period December 7, 2022 (commencement of investment operations) through October 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

December 21, 2023

We have served as the auditor of one or more of the investment companies in the Invesco group of investment companies since at least 1995. We have not been able to determine the specific year we began serving as auditor.

 

    21    

 

 

 

 


 

 

Calculating your ongoing Fund expenses

Example

As a shareholder of the Invesco Municipal Strategic Income ETF (the “Fund”), you incur a unitary management fee. In addition to the unitary management fee, a shareholder may pay distribution fees, if any, brokerage expenses, taxes, interest, 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 an Interested Trustee, or (iii) any other matters that directly benefit the Adviser). The expense example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2023 through October 31, 2023.

Actual Expenses

The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annualized rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transaction costs, such as sales charges and brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

               Annualized    
     Beginning    Ending    Expense Ratio   Expenses Paid
     Account Value    Account Value    Based on the   During the
     May 1, 2023    October 31, 2023    Six-Month Period   Six-Month Period(1)

Invesco Municipal Strategic Income ETF (IMSI)

                  

Actual

     $ 1,000.00      $ 966.10        0.39 %     $ 1.93

Hypothetical (5% return before expenses)

       1,000.00        1,023.24        0.39       1.99

 

(1) 

Expenses are calculated using the annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six-month period ended October 31, 2023. Expenses are calculated by multiplying the Fund’s annualized expense ratio by the average account value for the period, then multiplying the result by 184/365. Expense ratios for the most recent six-month period may differ from expense ratios based on the annualized data in the Financial Highlights.

 

    22    

 

 

 

 


 

 

Tax Information

Form 1099-DIV, Form 1042-S and other year–end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisers.

The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state’s requirement.

The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2023:

 

Qualified Business Income*

     0%  

Qualified Dividend Income*

     0%  

Corporate Dividends Received Deduction*

     0%  

U.S. Treasury Obligations*

     0%  

Business Interest Income*

     98%  

Qualified Interest Income*

     98%  

Tax Exempt Income*

     97%  

 

*

The above percentages are based on ordinary income dividends paid to shareholders during the Fund’s fiscal year.

 

    23    

 

 

 

 


 

 

Trustees and Officers

The Independent Trustees of the Trust, their term of office and length of time served, their principal business occupations during at least the past five years, the number of portfolios in the Fund Complex (as defined below) overseen by each Independent Trustee and the other directorships, if any, held by each Independent Trustee are shown below.

As of November 28, 2023

 

Name, Address and Year of

Birth of Independent Trustees

 

Position(s)

Held

with Trust

 

Term of

Office

and

Length of

Time

Served*

 

Principal

Occupation(s) During

the Past 5 Years

 

Number of

Portfolios

in Fund

Complex**

Overseen by

Independent

Trustees

 

Other

Directorships

Held by

Independent

Trustees During

the Past 5 Years

Ronn R. Bagge–1958

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Vice Chair of the Board; Chair of the Nominating and Governance Committee and Trustee   Vice Chair since 2018; Chair of the Nominating and Governance Committee and Trustee since 2008   Founder and Principal, YQA Capital Management LLC (1998-Present); formerly, Owner/CEO of Electronic Dynamic Balancing Co., Inc. (high-speed rotating equipment service provider).   213   Chair (since 2021) and member (since 2017) of the Joint Investment Committee, Mission Aviation Fellowship and MAF Foundation; Trustee, Mission Aviation Fellowship (2017-Present).

Todd J. Barre–1957

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Trustee   Since 2010   Formerly, Assistant Professor of Business, Trinity Christian College (2010-2016); Vice President and Senior Investment Strategist (2001-2008), Director of Open Architecture and Trading (2007-2008), Head of Fundamental Research (2004-2007) and Vice President and Senior Fixed Income Strategist (1994-2001), BMO Financial Group/Harris Private Bank.   213   None.

 

*

This is the date the Independent Trustee began serving the Trust. Each Independent Trustee serves an indefinite term, until his or her successor is elected.

**

Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Adviser and any affiliated person of the Adviser.

 

    24    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of

Birth of Independent Trustees

 

Position(s)

Held

with Trust

 

Term of

Office

and

Length of

Time

Served*

 

Principal

Occupation(s) During

the Past 5 Years

 

Number of

Portfolios

in Fund

Complex**

Overseen by

Independent

Trustees

 

Other

Directorships

Held by

Independent

Trustees During

the Past 5 Years

Edmund P. Giambastiani,

Jr.–1948

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Trustee   Since 2019   President, Giambastiani Group LLC (national security and energy consulting) (2007-Present); Director, First Eagle Alternative Credit LLC (2020-Present); Advisory Board Member, Massachusetts Institute of Technology Lincoln Laboratory (federally-funded research development) (2010-Present); Defense Advisory Board Member, Lawrence Livermore National Laboratory (2013-Present); formerly, Director, The Boeing Company (2009-2021); Trustee, MITRE Corporation (federally funded research development) (2008-2020); Director, THL Credit, Inc. (alternative credit investment manager) (2016-2020); Chair (2015-2016), Lead Director (2011-2015) and Director (2008-2011), Monster Worldwide, Inc. (career services); United States Navy, career nuclear submarine officer (1970-2007); Seventh Vice Chairman of the Joint Chiefs of Staff (2005- 2007); first NATO Supreme Allied Commander Transformation (2003-2005); Commander, U.S. Joint Forces Command (2002-2005).   213   Trustee, U.S. Naval Academy Foundation Athletic & Scholarship Program (2010- Present); formerly, Trustee, certain funds of the Oppenheimer Funds complex (2013-2019); Advisory Board Member, Maxwell School of Citizenship and Public Affairs of Syracuse University (2012-2016).

 

*

This is the date the Independent Trustee began serving the Trust. Each Independent Trustee serves an indefinite term, until his or her successor is elected.

**

Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Adviser and any affiliated person of the Adviser.

 

    25    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of

Birth of Independent Trustees

 

Position(s)

Held

with Trust

 

Term of

Office

and

Length of

Time

Served*

 

Principal

Occupation(s) During

the Past 5 Years

 

Number of

Portfolios

in Fund

Complex**

Overseen by

Independent

Trustees

 

Other

Directorships

Held by

Independent

Trustees During

the Past 5 Years

Victoria J. Herget–1951

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Trustee   Since 2019   Formerly, Managing Director (1993-2001), Principal (1985-1993), Vice President (1978-1985) and Assistant Vice President (1973-1978), Zurich Scudder Investments (investment adviser) (and its predecessor firms).   213   Trustee Emerita (2017-Present), Trustee (2000-2017) and Chair (2010-2017), Newberry Library; Trustee, Chikaming Open Lands (2014-Present); Member (2002- Present), Rockefeller Trust Committee; formerly, Trustee, Mather LifeWays (2001-2021); Trustee, certain funds in the Oppenheimer Funds complex (2012-2019); Board Chair (2008-2015) and Director (2004-2018), United Educators Insurance Company; Independent Director, First American Funds (2003-2011); Trustee (1992-2007), Chair of the Board of Trustees (1999-2007), Investment Committee Chair (1994-1999) and Investment Committee member (2007-2010), Wellesley College; Trustee, BoardSource (2006-2009); Trustee, Chicago City Day School (1994-2005).

 

*

This is the date the Independent Trustee began serving the Trust. Each Independent Trustee serves an indefinite term, until his or her successor is elected.

**

Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Adviser and any affiliated person of the Adviser.

 

    26    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of

Birth of Independent Trustees

 

Position(s)

Held

with Trust

 

Term of

Office

and

Length of

Time

Served*

 

Principal

Occupation(s) During

the Past 5 Years

 

Number of

Portfolios

in Fund

Complex**

Overseen by

Independent

Trustees

 

Other

Directorships

Held by

Independent

Trustees During

the Past 5 Years

Marc M. Kole–1960

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Chair of the Audit Committee and Trustee   Chair of the Audit Committee and Trustee since 2008   Formerly, Managing Director of Finance (2020-2021) and Senior Director of Finance (2015-2020), By The Hand Club for Kids (not-for-profit); Chief Financial Officer, Hope Network (social services) (2008-2012); Assistant Vice President and Controller, Priority Health (health insurance) (2005-2008); Regional Chief Financial Officer, United Healthcare (2005); Chief Accounting Officer, Senior Vice President of Finance, Oxford Health Plans (2000-2004); Audit Partner, Arthur Andersen LLP (1996-2000).   213   Formerly, Treasurer (2018-2021), Finance Committee Member (2015-2021) and Audit Committee Member (2015), Thornapple Evangelical Covenant Church; Board and Finance Committee Member (2009-2017) and Treasurer (2010-2015, 2017), NorthPointe Christian Schools.

Yung Bong Lim–1964

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Chair of the Investment Oversight Committee and Trustee   Chair of the Investment Oversight Committee since 2014; Trustee since 2013   Managing Partner, RDG Funds LLC (real estate) (2008-Present); formerly, Managing Director, Citadel LLC (1999-2007).   213   Board Director, Beacon Power Services, Corp. (2019-Present); formerly, Advisory Board Member, Performance Trust Capital Partners, LLC (2008-2020).

 

*

This is the date the Independent Trustee began serving the Trust. Each Independent Trustee serves an indefinite term, until his or her successor is elected.

**

Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Adviser and any affiliated person of the Adviser.

 

    27    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of
Birth of Independent Trustees
 

Position(s)
Held

with Trust

 

Term of
Office

and

Length of
Time
Served*

 

Principal

Occupation(s) During

the Past 5 Years

 

Number of
Portfolios

in Fund
Complex**
Overseen by
Independent
Trustees

 

Other

Directorships

Held by

Independent

Trustees During

the Past 5 Years

Joanne Pace–1958

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Trustee   Since 2019   Formerly, Senior Advisor, SECOR Asset Management, LP (2010-2011); Managing Director and Chief Operating Officer, Morgan Stanley Investment Management (2006-2010); Partner and Chief Operating Officer, FrontPoint Partners, LLC (alternative investments) (2005-2006); Managing Director (2003-2005), Global Head of Human Resources and member of Executive Board and Operating Committee (2004-2005), Global Head of Operations and Product Control (2003-2004), Credit Suisse (investment banking); Managing Director (1997-2003), Controller and Principal Accounting Officer (1999-2003), Chief Financial Officer (temporary assignment) for the Oversight Committee, Long Term Capital Management (1998-1999), Morgan Stanley.   213   Board Director, Horizon Blue Cross Blue Shield of New Jersey (2012- Present); Governing Council Member (2016-Present) and Chair of Education Committee (2017-2021), Independent Directors Council (IDC); Council Member, New York-Presbyterian Hospital’s Leadership Council on Children’s and Women’s Health (2012-Present); formerly, Advisory Board Director, The Alberleen Group LLC (2012-2021); Board Member, 100 Women in Finance (2015-2020); Trustee, certain funds in the Oppenheimer Funds complex (2012-2019); Lead Independent Director and Chair of the Audit and Nominating Committee of The Global Chartist Fund, LLC, Oppenheimer Asset Management (2011-2012); Board Director, Managed Funds Association (2008-2010); Board Director (2007-2010) and Investment Committee Chair (2008-2010), Morgan Stanley Foundation.

 

*

This is the date the Independent Trustee began serving the Trust. Each Independent Trustee serves an indefinite term, until his or her successor is elected.

**

Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Adviser and any affiliated person of the Adviser.

 

    28    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of
Birth of Independent Trustees
 

Position(s)
Held

with Trust

 

Term of
Office

and

Length of
Time
Served*

 

Principal

Occupation(s) During

the Past 5 Years

 

Number of
Portfolios

in Fund
Complex**
Overseen by
Independent
Trustees

 

Other

Directorships

Held by

Independent

Trustees During

the Past 5 Years

Gary R. Wicker–1961

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Trustee   Since 2013   Senior Vice President of Global Finance and Chief Financial Officer, RBC Ministries (publishing company) (2013-Present); formerly, Executive Vice President and Chief Financial Officer, Zondervan Publishing (a division of Harper Collins/NewsCorp) (2007-2012); Senior Vice President and Group Controller (2005- 2006), Senior Vice President and Chief Financial Officer (2003-2004), Chief Financial Officer (2001-2003), Vice President, Finance and Controller (1999-2001) and Assistant Controller (1997-1999), divisions of The Thomson Corporation (information services provider); Senior Audit Manager (1994-1997), PricewaterhouseCoopers LLP.   213   Board Member and Treasurer, Our Daily Bread Ministries Canada (2015- Present); Board and Finance Committee Member, West Michigan Youth For Christ (2010- Present).

Donald H. Wilson–1959

c/o Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Chair of the Board and Trustee   Chair since 2012; Trustee since 2008   Chair, President and Chief Executive Officer, McHenry Bancorp Inc. and McHenry Savings Bank (subsidiary) (2018-Present); formerly, Chair and Chief Executive Officer, Stone Pillar Advisors, Ltd. (2010-2017); President and Chief Executive Officer, Stone Pillar Investments, Ltd. (advisory services to the financial sector) (2016-2018); Chair, President and Chief Executive Officer, Community Financial Shares, Inc. and Community Bank—Wheaton/ Glen Ellyn (subsidiary) (2013-2015); Chief Operating Officer, AMCORE Financial, Inc. (bank holding company) (2007-2009); Executive Vice President and Chief Financial Officer, AMCORE Financial, Inc. (2006-2007); Senior Vice President and Treasurer, Marshall & Ilsley Corp. (bank holding company) (1995-2006).   213   Director, Penfield Children’s Center (2004-Present); Board Chair, Gracebridge Alliance, Inc. (2015-Present).

 

*

This is the date the Independent Trustee began serving the Trust. Each Independent Trustee serves an indefinite term, until his or her successor is elected.

**

Fund Complex includes all open- and closed-end funds (including all of their portfolios) advised by the Adviser and any affiliated person of the Adviser.

 

    29    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

The executive officers of the Trust, their term of office and length of time served, and their principal business occupations during at least the past five years are shown below:

 

Name, Address and Year of Birth    

of Executive Officers

 

Position(s)

Held

with Trust

 

Length of

Time

Served*

 

Principal

Occupation(s) During

the Past 5 Years

Brian Hartigan–1978

Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  President and Principal Executive Officer   Since 2023   President and Principal Executive Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust (2023-Present); Managing Director and Global Head of ETFs, Indexed Strategies, SMAs and Model Portfolios, Chief Executive Officer and Principal Executive Officer, Invesco Capital Management LLC (2023-Present); Chief Executive Officer, Manager and Principal Executive Officer, Invesco Specialized Products, LLC (2023-Present); Director, Co-Chief Executive Officer and Co-President, Invesco Capital Markets, Inc. (2020-Present); Manager and President, Invesco Investment Advisers LLC (2020-Present); formerly, Global Head of ETF Investments and Indexed Strategy (2020-2023); Global Head of ETF Investments (2017-2020); Head of Investments-PowerShares (2015-2017) and Executive Director, Product Development, Invesco Capital Markets, Inc. (2010-2015).

Adrien Deberghes–1967

Invesco Capital

Management LLC

11 Greenway Plaza

Houston, TX 77046

  Vice President   Since 2020   Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange- Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust (2020-Present); Head of the Fund Office of the CFO, Fund Administration and Vice President, Invesco Advisers, Inc. (2020-Present); Principal Financial Officer, Treasurer (2020-Present) and Senior Vice President (2023-Present), The Invesco Funds; formerly, Vice President, The Invesco Funds (2020-2023); Senior Vice President and Treasurer, Fidelity Investments (2008-2020).

Kelli Gallegos–1970

Invesco Capital

Management LLC

11 Greenway Plaza

Houston, TX 77046

  Vice President and Treasurer   Since 2018   Vice President, Invesco Advisers, Inc. (2020-Present); Principal Financial and Accounting Officer- Pooled Investments, Invesco Specialized Products, LLC (2018-Present); Vice President and Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust (2018-Present); Principal Financial and Accounting Officer-Pooled Investments, Invesco Capital Management LLC (2018-Present); Vice President and Assistant Treasurer (2008-Present), The Invesco Funds; formerly, Principal Financial Officer (2016-2020) and Assistant Vice President (2008-2016), The Invesco Funds; Assistant Treasurer, Invesco Specialized Products, LLC (2018); Assistant Treasurer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange- Traded Fund Trust and Invesco Actively Managed Exchange-Traded Fund Trust (2012-2018), Invesco Actively Managed Exchange-Traded Commodity Fund Trust (2014-2018) and Invesco Exchange-Traded Self-Indexed Fund Trust (2016-2018); and Assistant Treasurer, Invesco Capital Management LLC (2013-2018).

 

*

This is the date each Officer began serving the Trust in their current position. Each Officer serves an indefinite term, until his or her successor is elected.

 

    30    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of Birth    

of Executive Officers

 

Position(s)

Held

with Trust

 

Length of

Time

Served*

 

Principal

Occupation(s) During the

Past 5 Years

Adam Henkel–1980

Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Secretary   Since 2020   Head of Legal and Secretary, Invesco Capital Management LLC and Invesco Specialized Products, LLC (2020-present); Secretary, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange- Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust (2020-Present); Assistant Secretary, Invesco Capital Markets, Inc. (2020-Present); Assistant Secretary, The Invesco Funds (2014-Present); Manager (2020-Present) and Secretary (2022-Present), Invesco Indexing LLC; Assistant Secretary, Invesco Investment Advisers LLC (2020-Present); formerly, Assistant Secretary of Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Commodity Fund Trust (2014-2020); Chief Compliance Officer of Invesco Capital Management LLC (2017); Chief Compliance Officer of Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust and Invesco Actively Managed Exchange-Traded Commodity Fund Trust (2017); Senior Counsel, Invesco, Ltd. (2013-2020); Assistant Secretary, Invesco Specialized Products, LLC (2018-2020).

Peter Hubbard–1981

Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Vice President   Since 2009   Vice President, Invesco Specialized Products, LLC (2018-Present); Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust (2009-Present), Invesco Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present) and Invesco Exchange-Traded Self-Indexed Fund Trust (2016-Present); Vice President and Director of Portfolio Management, Invesco Capital Management LLC (2010-Present); Vice President, Invesco Advisers, Inc. (2020-Present); formerly, Vice President of Portfolio Management, Invesco Capital Management LLC (2008-2010); Portfolio Manager, Invesco Capital Management LLC (2007- 2008); Research Analyst, Invesco Capital Management LLC (2005-2007); Research Analyst and Trader, Ritchie Capital, a hedge fund operator (2003-2005).

Rudolf E. Reitmann–1971

Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Vice President   Since 2013   Head of Global Exchange Traded Funds Services, Invesco Specialized Products, LLC (2018-Present); Vice President, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust (2013-Present), Invesco Actively Managed Exchange-Traded Commodity Fund Trust (2014- Present) and Invesco Exchange-Traded Self-Indexed Fund Trust (2016-Present); Head of Global Exchange Traded Funds Services, Invesco Capital Management LLC (2013-Present); Vice President, Invesco Capital Markets, Inc. (2018-Present).

 

*

This is the date each Officer began serving the Trust in their current position. Each Officer serves an indefinite term, until his or her successor is elected.

 

    31    

 

 

 

 


 

Trustees and Officers–(continued)

    

    

    

    

 

Name, Address and Year of Birth    

of Executive Officers

 

Position(s)

Held

with Trust

 

Length of

Time

Served*

 

Principal

Occupation(s) During the

Past 5 Years

Melanie Zimdars–1976

Invesco Capital

Management LLC

3500 Lacey Road

Suite 700

Downers Grove, IL 60515

  Chief Compliance Officer   Since 2017   Chief Compliance Officer, Invesco Specialized Products, LLC (2018-Present); Chief Compliance Officer, Invesco Capital Management LLC (2017-Present); Chief Compliance Officer, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II, Invesco India Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust, Invesco Actively Managed Exchange-Traded Commodity Fund Trust and Invesco Exchange-Traded Self-Indexed Fund Trust (2017-Present); formerly, Vice President and Deputy Chief Compliance Officer, ALPS Holding, Inc. (2009-2017); Mutual Fund Treasurer/ Chief Financial Officer, Wasatch Advisors, Inc. (2005-2008); Compliance Officer, U.S. Bancorp Fund Services, LLC (2001-2005).

 

*

This is the date each Officer began serving the Trust in their current position. Each Officer serves an indefinite term, until his or her successor is elected.

Availability of Additional Information About the Trustees

The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request at (800) 983-0903.

 

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Proxy Voting Policies and Procedures

A description of the Trust’s proxy voting policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge and upon request, by calling (800) 983-0903. This information is also available on the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov.

Information regarding how the Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is available, without charge and upon request, by (i) calling (800) 983-0903; or (ii) accessing the Trust’s Form N-PX on the Commission’s website at www.sec.gov.

Quarterly Portfolios

The Trust files its complete schedule of portfolio holdings for the Fund with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Forms N-PORT are available on the Commission’s website at www.sec.gov.

Frequency Distribution of Discounts and Premiums

A table showing the number of days the market price of the Fund’s shares was greater than the Fund’s net asset value, and the number of days it was less than the Fund’s net asset value (i.e., premium or discount) for the most recently completed calendar year, and the calendar quarters since that year end (or the life of the Fund, if shorter) may be found at the Fund’s website at www.invesco.com/ETFs.


 

 

©2023 Invesco Capital Management LLC                               
3500 Lacey Road, Suite 700      
Downers Grove, IL 60515    P-IMSI-AR-1                                                 invesco.com/ETFs