Prospectus
August
28, 2024
Invesco
Exchange-Traded Fund Trust
|
SPHQ |
Invesco
S&P 500®
Quality ETF |
NYSE
Arca, Inc. |
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The Invesco
S&P 500® Quality
ETF (the “Fund”) seeks to track the investment results (before fees and
expenses) of the S&P 500® Quality
Index (the “Underlying Index”).
This table
describes the fees and expenses that you may pay if you buy, hold, and sell
shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and example
below.
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the
value
of your investment) | |
|
Management
Fees |
% |
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| |
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Other
Expenses1
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| |
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Total
Annual Fund Operating Expenses |
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Fee
Waivers and Expense Assumption2
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| |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Assumption |
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| |
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1 |
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2 |
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The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses are equal to the Total Annual Fund Operating Expenses After
Fee Waivers and Expense Assumption for the first two years and the Total Annual
Fund Operating Expenses thereafter. This example does not include brokerage
commissions that investors may pay to buy and sell Shares. Although your actual
costs may be higher or lower, your costs, based on these assumptions, would
be:
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
The Fund
generally will invest at least 90% of its total assets in securities that
comprise the Underlying Index.
Strictly
in accordance with its guidelines and mandated procedures, S&P Dow
Jones Indices LLC (“S&P DJI” or the “Index Provider”) compiles, maintains
and calculates the Underlying Index, which is composed of a subset of securities
from the S&P 500® Index that
the Index Provider has determined to have high “quality”—that is, stocks of
companies that seek to generate higher revenue and cash flow than their
counterparts through
prudent use
of assets and finances. The Index Provider assesses a security’s quality based
on the following three fundamental measures: return on equity, accruals ratio
and financial leverage ratio. Return on equity is calculated as the company’s
trailing 12-month earnings per share divided by the company’s latest book value
per share. Accruals ratio is computed using the change of the company’s net
operating assets over the last year divided by the company’s average total
assets over the last two years. Financial leverage is calculated as the
company’s latest total debt divided by the company’s book value. The Index
Provider assesses the quality of securities of companies in the financials or
real estate sectors (according to the Global Industry Classification Standard
(“GICS®”)) based
only on the return on equity and financial leverage ratio measures.
In
selecting constituent securities for the Underlying Index, the Index
Provider
calculates the quality score of each security in the S&P 500® Index and
then selects the 100 stocks with the highest quality score for inclusion in the
Underlying Index. The Index Provider weights each component stock of the
Underlying Index by the product of its quality score multiplied by its market
capitalization in the eligible universe, subject to security and sector
constraints and optimization procedures. Stocks with higher scores receive
relatively greater weights.
As
of June 30, 2024, the
Underlying Index was comprised of 100 constituents with market capitalizations
ranging from $7.1 billion to $3.3
trillion.
The
Fund employs a “full replication” methodology in seeking to track the
Underlying Index, meaning that the Fund generally invests in all of the
securities comprising the Underlying Index in proportion to their weightings in
the Underlying Index.
The
Fund intends to be “diversified,” as defined in the Investment Company Act
of 1940, as amended (the “1940 Act”), to the extent that the Underlying Index is
diversified. The Fund may become “non-diversified” as defined in the 1940 Act
solely as a result of a change in relative market capitalization or index
weighting of one or more constituents of the Underlying Index. Should the Fund
become “non-diversified,” it will no longer be required to meet certain
diversification requirements under the 1940 Act and may invest a greater portion
of its assets in securities of a small group of issuers or in any one individual
issuer than can a diversified fund. Shareholder approval will not be sought when
the Fund crosses from diversified to non-diversified status solely due to a
change in relative market capitalization or index weighting of one or more
constituents of the Underlying Index. In seeking to track the Underlying Index,
the Fund was managed as diversified as of April 30, 2024.
Concentration
Policy. The Fund will
concentrate its investments (i.e., invest 25% or more of the value of its total
assets) in securities of issuers in any one industry or group of industries only
to the extent that the Underlying Index reflects a concentration in that
industry or group of industries. The Fund will not otherwise concentrate its
investments in securities of issuers in any one industry or group of industries.
As of April 30, 2024, the Fund had significant exposure to the information
technology sector. The Fund’s portfolio holdings, and the extent to which it
concentrates its investments, are likely to change over
time.
Principal
Risks of Investing in the Fund
The following
summarizes the principal risks of investing in the Fund.
1
2
The bar chart
below shows how the Fund has performed. The table below the bar chart shows the
Fund’s average annual total returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by showing
how the Fund’s total returns have varied from year to year and by showing how
the Fund’s average annual total returns compared with a broad measure of market
performance and additional indexes with characteristics relevant to the
Fund. The Fund's performance reflects fee waivers, if any,
absent which performance would have been lower. Although the
information shown in the bar chart and the table gives you some idea of the
risks involved in investing in the Fund, the Fund’s past performance (before and
after taxes) is not necessarily indicative of how the Fund will perform in the
future.
Updated
performance information is available online at www.invesco.com/ETFs .
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Period
Ended |
Returns |
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- |
Average Annual Total Returns (for the periods ended December 31, 2023)
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Inception
Date |
1
Year |
5
Years |
10
Years |
|
Return
Before Taxes |
|
% |
% |
% |
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Return
After Taxes on Distributions |
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|
Return
After Taxes on Distributions and Sale of Fund
Shares |
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S&P
500®
Quality Index |
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Blended
- S&P 500®
Quality Index (reflects no
deduction
for fees, expenses or taxes)3 |
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|
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S&P
500®
Index (reflects no deduction for fees,
expenses
or taxes)2 |
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1
2
3
returns shown
are not relevant to investors who hold Shares through tax-advantaged
arrangements, such as 401(k) plans or individual retirement
accounts.
Management
of the Fund
Investment
Adviser. Invesco
Capital Management LLC (the “Adviser”).
Portfolio
Managers
The following
individuals are responsible jointly and primarily for the day-to-day management
of the Fund’s portfolio:
|
Name |
Title
with Adviser/Trust |
Date
Began
Managing
the
Fund |
|
Peter
Hubbard |
Head of
Equities and Director of
Portfolio
Management of the Adviser;
Vice
President of the Trust |
June
2007 |
|
| ||
|
Michael
Jeanette |
Head of
North America Equities and
Senior
Portfolio Manager of the Adviser |
August
2008 |
|
| ||
|
Pratik
Doshi, CFA |
Senior
Portfolio Manager of the Adviser |
August
2020 |
|
| ||
|
Tony
Seisser |
Senior
Portfolio Manager of the Adviser |
August
2014 |
|
| ||
Purchase
and Sale of Shares
The Fund
issues and redeems Shares at NAV only with APs and only in large blocks of
10,000 Shares (each block of Shares is called a “Creation Unit”) or multiples
thereof (“Creation Unit Aggregations”), generally in exchange for the deposit or
delivery of a basket of securities. However, the Fund also reserves the right to
permit or require Creation Units to be issued in exchange for cash. Except when
aggregated in Creation Units, the Shares are not redeemable securities of the
Fund.
Individual
Shares may only be bought and sold in the secondary market (i.e., on a
national securities exchange) through a broker or dealer at a market price.
Because the Shares trade at market prices rather than NAV, Shares may trade at a
price greater than NAV (at a premium), at NAV, or less than NAV (at a discount).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (bid) and the lowest price a
seller is willing to accept for Shares (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”).
Recent
information, including information on the Fund’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available online at
www.invesco.com/ETFs.
Tax
Information
The Fund’s
distributions generally are taxed as ordinary income, capital gains or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case your distributions may be taxed as ordinary income when withdrawn from such
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase Shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund’s distributor or its related companies
may pay the intermediary for certain Fund-related activities, including those
that are designed to make the intermediary more knowledgeable about
exchange-traded products, such as the Fund, as well as for marketing, education
or other initiatives related to the sale or promotion of Shares. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson or financial adviser to recommend the Fund
over another investment. Ask your salesperson or financial adviser or visit your
financial intermediary’s website for more information.
3
Additional Information About the Fund’s Strategies and Risks
Principal
Investment Strategies
The Fund
generally will invest at least 90% of its total assets in securities that
comprise the Underlying Index. The Fund operates as an index fund and is not
actively managed, meaning that it does not seek to outperform the Underlying
Index. Rather, the Fund seeks to generally track the performance of the
Underlying Index as closely as possible (i.e., it seeks to obtain a high degree
of correlation with the Underlying Index and to minimize “tracking error”
between the two). Tracking error means the variation between the Fund’s annual
return and the return of the Underlying Index. Because the Underlying Index is a
financial calculation based on a grouping of financial instruments, while the
Fund is an actual investment portfolio, the Fund may experience tracking error
for a number of reasons when tracking the performance of the Underlying Index.
For example, the Fund incurs operating expenses and transaction costs not
applicable to the Underlying Index.
As
an index fund, the Fund does not take temporary defensive positions during
periods of adverse market, economic or other conditions.
The
Fund employs a “full replication” methodology in seeking to track the
Underlying Index, meaning that it generally invests in all of the securities
comprising the Underlying Index in proportion to the weightings of the
securities in the Underlying Index. However, under various circumstances, it may
not be possible or practicable to purchase all of those securities in those same
weightings. In those circumstances, the Fund may purchase a sample of securities
in the Underlying Index.
A
“sampling” methodology means that the Adviser uses a quantitative analysis to
select securities from the Underlying Index universe to obtain a representative
sample of securities that have, in the aggregate, investment characteristics
similar to the Underlying Index in terms of key risk factors, performance
attributes and other characteristics. These include industry weightings, market
capitalization, return variability, earnings valuation, yield and other
financial characteristics of securities. When employing a sampling methodology,
the Adviser bases the quantity of holdings in the Fund on a number of factors,
including asset size of the Fund, and generally expects the Fund to hold less
than the total number of securities in the Underlying Index. However, the
Adviser reserves the right to invest the Fund in as many securities as it
believes necessary to achieve the Fund’s investment objective. To the extent the
Fund uses a sampling methodology, it may have a larger tracking error than if it
used a full replication methodology.
At
times, the Fund may utilize one or more additional investment techniques in
seeking to track the Underlying Index. Such techniques may include: (i)
overweighting or underweighting a component security in the Fund’s portfolio
compared to its weight in the Underlying Index, (ii) purchasing securities not
contained in the Underlying Index that the Adviser believes are appropriate to
substitute for certain securities in the Underlying Index, (iii) selling
securities included in the Underlying Index in anticipation of their removal
from the Underlying Index, or (iv) purchasing securities not included in the
Underlying Index in anticipation of their addition to the Underlying
Index.
Additional
information about the construction of the Underlying Index is set forth
below.
S&P
500®
Quality Index
The
Underlying Index is constructed from constituents of the S&P 500®
Index (the
“Parent Index”), a float-adjusted market capitalization-weighted index composed
of 500 stocks chosen by S&P DJI that generally represents the U.S.
large-capitalization equities market. Securities selected for the Underlying
Index are those that the Index Provider identifies as being high quality—that
is, stocks of companies that seek to generate higher revenue and cash flow than
their counterparts through prudent use of assets and finances. The Index
Provider first calculates the quality score of each
security in
the Parent Index by determining the average of each component stock’s (1) return
on equity (calculated as the company’s trailing 12-month earnings per share
divided by the company’s latest book value per share); (2) accruals ratio
(computed using the change of the company’s net operating assets over the last
year divided by the company’s average total assets over the last two years); and
(3) financial leverage ratio (calculated as the company’s latest total debt
divided by the company’s book value). The Index Provider assesses the quality
score of securities of companies in the financials or real estate sectors
(according to GICS®) based only
on the return on equity and financial leverage ratio measures.
The
Index Provider then selects 100 stocks with the highest average quality score
for inclusion in the Underlying Index. The Index Provider weights each component
stock of the Underlying Index by the product of its quality score multiplied by
its market capitalization in the eligible universe, subject to security and
sector constraints and optimization procedures. Stocks with higher scores
receive relatively greater weights. The minimum weight of each component stock
is 0.05%, and the maximum weight is the lesser of 5% or 20 times its market
capitalization weight in the Parent Index. No sector (according to
GICS®) comprises
more than 40% of the Underlying Index.
The
Underlying Index is rebalanced semi-annually after market close on the third
Friday in June and December. Additions to and deletions from the Underlying
Index generally occur only at the time of the semi-annual rebalance, but
constituents removed from the Parent
Index are
removed from the Underlying Index simultaneously. Apart from scheduled
rebalances, the Index Provider or its agents may carry out additional ad hoc
rebalances to the Underlying Index in order, for example, to reflect corporate
actions or spinoffs.
The Fund is
rebalanced in accordance with the Underlying Index.
Principal
Risks of Investing in the Fund
The following
provides additional information regarding certain of the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund's
“Summary Information” section. Any of the following risks may impact the Fund’s
NAV which could result in the Fund trading at a premium or discount to
NAV.
Market
Risk. Securities
in the Underlying Index are subject to market fluctuations, and the Fund could
lose money due to short-term market movements and over longer periods during
market downturns. You should anticipate that the value of the Shares will
decline, more or less, in correlation with any decline in value of the
securities in the Underlying Index. The value of a security may decline due to
general market conditions, economic trends or events that are not specifically
related to the issuer of the security or due to factors that affect a particular
industry or group of industries. During a general downturn in the securities
markets, multiple asset classes may be negatively affected. Additionally,
natural or environmental disasters, widespread disease or other public health
issues, war, military conflicts, acts of terrorism, economic crises or other
events could result in increased premiums or discounts to the Fund’s
NAV.
Market
Disruption Risks Related to Armed
Conflict.
As
a
result of
increasingly interconnected global economies
and financial
markets, armed conflict between countries or in a geographic region, for example
the current conflicts
between
Russia
and Ukraine
in Europe
and Hamas and
Israel in the
Middle
East,
has
the potential
to adversely impact the Fund’s investments. Such conflicts, and other
corresponding events, have had, and could continue to have, severe negative
effects on regional and global economic and financial markets, including
increased volatility, reduced liquidity, and overall uncertainty. The negative
impacts may be particularly acute in certain sectors.
The
timing and
duration of such conflicts, resulting sanctions, related events and other
implications cannot be predicted. The foregoing may result in a negative impact
on Fund performance and the value of an investment in the Fund, even beyond any
direct investment exposure the Fund may
4
have to
issuers located in or with significant exposure to an impacted country or
geographic region.
Index
Risk. Unlike many
investment companies that are “actively managed,” the Fund is a “passive”
investor and therefore does not utilize an investing strategy that seeks returns
in excess of the Underlying Index. Therefore, the Fund would not necessarily buy
or sell a security unless that security is added or removed, respectively, from
the Underlying Index, even if that security generally is underperforming. If a
specific security is removed from the Underlying Index, the Fund may be forced
to sell such security at an inopportune time or for a price lower than the
security’s current market value. The Underlying Index may not contain the
appropriate mix of securities for any particular economic cycle. Additionally,
the Fund rebalances its portfolio in accordance with the Underlying Index, and,
therefore, any changes to the Underlying Index’s rebalance schedule will result
in corresponding changes to the Fund’s rebalance schedule. Further, unlike with
an actively managed fund, the Adviser does not use techniques or defensive
strategies designed to lessen the impact of periods of market volatility or
market decline. This means that, based on certain market and economic
conditions, the Fund’s performance could be lower than other types of funds with
investment advisers that actively manage their portfolio assets to take
advantage of market opportunities or defend against market events.
Equity
Risk.
Equity risk
is the risk that the value of equity securities, including common stocks, will
fall. The value of an equity security may fall due to changes in general
economic conditions that impact the market as a whole and that are relatively
unrelated to an issuer or its industry. These conditions include changes in
interest rates, specific periods of overall market turbulence or instability, or
general and prolonged periods of economic decline and cyclical change. An
issuer's common stock in particular may be especially sensitive to, and more
adversely affected by, these general movements in the stock market; it is
possible that a drop in the stock market may depress the price of most or all of
the common stocks that the Fund holds.
In
addition, equity risk includes the risk that investor sentiment toward,
and
perceptions regarding, one or more particular industries or economic sectors
will become negative, resulting in those investors exiting their investments in
those industries, which could cause a reduction in the value of companies in
those industries or sectors more broadly. Price changes of equity securities may
occur in a particular region, industry, or sector of the market, and as a
result, the value of an issuer's common stock may fall solely because of
factors, such as increases in production costs, that negatively impact other
companies in the same industry or in a number of different
industries.
Equity
risk also includes the financial risks of a specific company, including
that the value of the company's securities may fall as a result of factors
directly relating to that company, such as decisions made by its management or
lower demand for the company's products or services. In particular, the common
stock of a company may decline significantly in price over short periods of
time. For example, an adverse event, such as an unfavorable earnings report, may
depress the value of common stock; similarly, the common stock of an issuer may
decline in price if the issuer fails to make anticipated dividend payments
because, among other reasons, the issuer experiences a decline in its financial
condition.
Mid-Capitalization
Company Risk. Securities
of mid-capitalization companies may be more volatile and thinly traded (that is,
less liquid) than those of more established companies. These securities may have
returns that vary, sometimes significantly, from the overall securities market.
Often, mid-capitalization companies and the industries in which they focus are
still evolving and, as a result, they may be more sensitive to changing market
conditions. In addition, mid-capitalization companies are typically less
financially stable than larger, more established companies, and they may depend
on a small number of essential personnel, making them more vulnerable to loss of
personnel. Mid-capitalization companies also normally have less diverse product
lines than large-capitalization companies and are
more
susceptible to adverse developments concerning their products. As such,
mid-capitalization companies typically are more likely to be adversely affected
than large-capitalization companies by changes in earnings results, business
prospects, investor expectations or poor economic or market
conditions.
Industry
Concentration Risk. In following
its methodology, the Underlying Index from time to time may be concentrated to a
significant degree in securities of issuers operating in a single industry or
industry group. To the extent that the Underlying Index concentrates in the
securities of issuers in a particular industry or industry group, the Fund will
also concentrate its investments to approximately the same extent. By
concentrating its investments in an industry or industry group, the Fund may
face more risks than if it were diversified broadly over numerous industries or
industry groups. Such industry-based risks, any of which may adversely affect
the companies in which the Fund invests, may include, but are not limited to,
the following: general economic conditions or cyclical market patterns that
could negatively affect supply and demand in a particular industry, competition
for resources, adverse labor relations, political or world events, obsolescence
of technologies, and increased competition or new product introductions that may
affect the profitability or viability of companies in an industry. In addition,
at times, such industry or industry group may be out of favor and underperform
other industries or the market as a whole. Information about the Fund’s exposure
to a particular sector, industry,
industry
group or sub-industry (as applicable) is available in the Fund’s Annual and
Semi-Annual Reports to Shareholders on the Fund’s website, and on required forms
filed with the SEC.
Information
Technology Sector Risk. Companies in
the information technology sector may be adversely affected by the failure to
obtain, or delays in obtaining, financing or regulatory approval, intense
competition, both domestically and internationally, product compatibility,
consumer preferences, corporate capital expenditure, rapid obsolescence and
competition for the services of qualified personnel. Companies in the
information technology sector also face competition or potential competition
with numerous alternative technologies. In addition, the highly competitive
information technology sector may cause the prices for these products and
services to decline in the future.
Information
technology companies may have limited product lines, markets,
financial resources or personnel. Companies in the information technology sector
are heavily dependent on patent and intellectual property rights. The loss or
impairment of these rights may adversely affect the profitability of these
companies.
The
information technology sector is subject to rapid and significant changes in
technology that are evidenced by the increasing pace of technological upgrades,
evolving industry standards, ongoing improvements in the capacity and quality of
digital technology, shorter development cycles for new products and
enhancements, developments in emerging wireless transmission technologies and
changes in customer requirements and preferences. The success of sector
participants depends substantially on the timely and successful introduction of
new products.
Issuer-Specific
Changes Risk.
The
performance of the Fund depends on the performance of individual securities to
which the Fund has exposure. The value of an individual security or particular
type of security may be more volatile than the market as a whole and may perform
worse than the market as a whole, causing the value of its securities to
decline. Poor performance may be caused by poor management decisions,
competitive pressures, changes in technology, expiration of patent protection,
disruptions in supply, labor problems or shortages, corporate restructurings,
fraudulent disclosures or other factors. Issuers may, in times of distress or at
their own discretion, decide to reduce or eliminate dividends, which may also
cause their stock prices to decline.
Non-Diversification
Risk. To the extent
the Fund becomes non-diversified, the Fund may invest a greater portion of its
assets in
5
securities of
individual issuers than can a diversified fund. As a result, 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.
Non-Correlation
Risk.
The Fund’s
returns may not match the returns of the Underlying Index (that is, it may
experience tracking error) for a number of reasons. For example, the Fund incurs
operating expenses not applicable to the Underlying Index and incurs costs in
buying and selling securities, especially when rebalancing the Fund’s securities
holdings to reflect changes in the composition of the Underlying Index. To the
extent that the Fund has recently commenced operations and/or otherwise has a
relatively small amount of assets, such transaction costs could have a
proportionally greater impact on the Fund. Additionally, if the Fund uses a
sampling methodology, it may result in returns for the Fund that are not as
well-correlated with the return of the Underlying Index as would be the case if
the Fund purchased all of the securities in the Underlying Index in the
proportions represented in the Underlying Index.
The
performance of the Fund and the Underlying Index may vary due to asset
valuation differences and differences between the Fund’s portfolio and the
Underlying Index resulting from legal restrictions, costs or liquidity
constraints. Additionally, if the Fund issues or redeems Creation Units
principally for cash, it will incur higher costs in buying or selling securities
than if it issued and redeemed Creation Units principally in-kind, which may
contribute to tracking error. The Fund may fair value certain of the securities
it holds. To the extent the Fund calculates its NAV based on fair value prices,
the Fund’s ability to track the Underlying Index may be adversely affected.
Since the Underlying Index is not subject to the tax diversification
requirements to which the Fund must adhere, the Fund may be required to deviate
its investments from the securities contained in, and relative weightings of,
the Underlying Index. The Fund may not invest in certain securities included in
the Underlying Index due to liquidity constraints. Liquidity constraints also
may delay the Fund’s purchase or sale of securities included in the Underlying
Index. For tax efficiency purposes, the Fund may sell certain securities to
realize losses, causing it to deviate from the Underlying Index.
The
Fund generally attempts to remain fully invested in the constituents
of the
Underlying Index. However, at times, the Adviser may not fully invest the Fund’s
assets in constituents of the Underlying Index, such as during times of
increased market volatility or other unusual or unexpected circumstances, during
periods of Underlying Index rebalances, or due to cash flows into the Fund, the
need to retain a reserve of cash to meet redemptions and expenses, or low Fund
assets.
The
investment activities of one or more of the Adviser’s affiliates, including
other subsidiaries of the Adviser’s parent company, Invesco Ltd., for their
proprietary accounts and for client accounts also may adversely impact the
Fund’s ability to track the Underlying Index. For example, in regulated
industries, certain emerging or international markets and under corporate and
regulatory ownership definitions, there may be limits on the aggregate amount of
investment by affiliated investors that may not be exceeded, or that may not be
exceeded without the grant of a license or other regulatory or corporate
consent, or, if exceeded, may cause the Adviser, the Fund or other client
accounts to suffer disadvantages or business restrictions. As a result, the Fund
may be restricted in its ability to acquire particular securities due to
positions held by the Fund and the Adviser’s affiliates.
Authorized
Participant Concentration Risk.
Only APs may
engage in creation or redemption transactions directly with the Fund. The Fund
has a limited number of institutions that may act as APs, and such APs have no
obligation to submit creation or redemption orders. Consequently, there is no
assurance that APs will establish or maintain an active trading market for the
Shares. The risk may be heightened to the extent that securities held by the
Fund are traded outside a collateralized settlement system. In that case, APs
may be required to post collateral on certain trades on an agency basis
(i.e., on
behalf of other market participants), which only a limited number of APs may be
able to do. In addition, to the extent that APs exit the business or are unable
to proceed with creation and/or redemption orders with respect to the Fund and
no other AP is able to step forward to create or redeem Creation Units, this may
result in a significantly diminished trading market for Shares, and Shares may
be more likely to trade at a premium or discount to NAV and to face trading
halts and/or delisting.
Market
Trading Risk.
The Fund
faces numerous market trading risks, including losses from trading in secondary
markets, periods of high volatility and disruption in the creation/redemption
process of the Fund. Although Shares are listed for trading on a securities
exchange, there can be no assurance that an active trading market for Shares
will develop or be maintained by market makers or APs, that Shares will continue
to trade on any such exchange or that Shares will continue to meet the
requirements for listing on an exchange. Any of these factors, among others, may
lead to the Shares trading at a premium or discount to the Fund’s NAV. As a
result, an investor could lose money over short or long periods. Further, the
Fund may experience low trading volume and wide bid/ask spreads. Bid/ask spreads
vary over time based on trading volume and market liquidity (including for the
underlying securities held by the Fund), and are generally lower if Shares have
more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity.
In
stressed market conditions, the market for Shares may become less liquid in
response to deteriorating liquidity in the markets for the Fund’s portfolio
holdings, which may cause a variance in the market price of Shares and their
underlying NAV. In addition, an exchange or market may issue trading halts on
specific securities or financial instruments. As a result, the ability to trade
certain securities or financial instruments may be restricted, which may disrupt
the Fund’s creation/redemption process, potentially affect the price at which
Shares trade in the secondary market, and/or result in the Fund being unable to
trade certain securities or financial instruments at all. In these
circumstances, the Fund may be unable to rebalance its portfolio, may be unable
to accurately price its investments and/or may incur substantial trading
losses.
Operational
Risk.
The Fund is
exposed to operational risks arising from a number of factors, including, but
not limited to, human error, processing and communication errors, errors of the
Fund’s service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures. The Fund and the
Adviser seek to reduce these operational risks through controls and procedures.
However, these measures do not address every possible risk and may be inadequate
to address these risks.
Shares
May Trade at Prices Different than NAV.
Shares trade
on a stock exchange at prices at, above or below the Fund’s most recent NAV. The
Fund’s NAV is calculated at the end of each business day and fluctuates with
changes in the market value of the Fund’s holdings. The trading price of the
Shares fluctuates continuously throughout trading hours on the exchange, based
on both the relative market supply of, and demand for, the Shares and the
underlying value of the Fund’s portfolio holdings. As a result, the trading
prices of the Shares may deviate from the Fund’s NAV. ANY OF THESE FACTORS,
AMONG OTHERS, MAY LEAD TO THE SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV.
The Adviser cannot predict whether the Shares will trade below, at or above the
Fund’s NAV. Exchange prices are not expected to correlate exactly with the
Fund’s NAV due to timing reasons, supply and demand imbalances and other
factors. In addition, disruptions to creations and redemptions, including
disruptions at market makers, APs, or other market participants, or periods of
significant market volatility or stress, may result in trading prices for the
Shares that differ significantly from the value of the Fund’s underlying
holdings, with the result that investors may pay significantly more or receive
significantly less than the underlying value of the Shares bought or sold. This
can be reflected as a spread between the bid and ask prices for the Fund quoted
during the day or a premium or discount in the closing price from the Fund’s
NAV. Additionally, APs may be less willing to create or redeem the Shares if
there
6
is a lack of
an active market for such Shares or the Fund’s underlying investments, which may
contribute to the Shares trading at a premium or discount.
Non-Principal
Investment Strategies
The Fund,
after investing at least 90% of its total assets in securities that comprise the
Underlying Index, may invest its remaining assets in securities (including other
funds) not included in the Underlying Index, and in money market instruments,
including repurchase agreements and other funds, including affiliated funds,
that invest exclusively in money market instruments (subject to applicable
limitations under the 1940 Act or exemptions therefrom), convertible securities,
structured notes (notes on which the amount of principal repayment and interest
payments is based on the movement of one or more specified factors, such as the
movement of a particular security or securities index) and in futures contracts,
options,
options on
futures contracts or other derivatives. The Fund may use futures contracts,
options, options on futures contracts and other derivatives, convertible
securities and structured notes to seek performance that corresponds to the
Underlying Index, to seek to hedge portfolio risk and to manage cash
flows.
The
Adviser anticipates that it may take approximately two business days (a
business day is any day that the New York Stock Exchange (“NYSE”) is open) for
additions to and deletions from the Underlying Index to fully settle in the
portfolio composition of the Fund.
The
Fund’s investment objective constitutes a non-fundamental policy that the
Board of Trustees (the “Board”) of the Invesco Exchange-Traded Fund Trust (the
“Trust”) may change without shareholder approval upon 60 days’ prior written
notice to shareholders.
The
fundamental and non-fundamental policies of the Fund are set forth in the Fund’s
Statement of Additional Information (“SAI”) under the section “Investment
Restrictions.”
Borrowing
Money
The Fund may
borrow money up to the limits set forth in the Fund’s SAI under the section
“Investment Restrictions.”
Securities
Lending
The Fund may
lend its portfolio securities to brokers, dealers, and other financial
institutions. In connection with such loans, the Fund receives liquid collateral
equal to at least 102% (105% for international securities) of the value of the
loaned portfolio securities. This collateral is marked-to-market on a daily
basis.
Additional
Risks of Investing in the Fund
The Fund may
also be subject to certain other non-principal risks associated with its
investments and investment strategies. The following provides additional
non-principal risk information regarding investing in the Fund.
Cash
Transaction Risk. The Fund
generally expects to make in-kind redemptions to avoid being taxed at the fund
level on gains on the distributed portfolio securities. However, from time to
time, the Fund reserves the right to effect redemptions for cash, rather than
in-kind. In such circumstances, 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 utilizing an in-kind redemption
process.
Convertible
Securities Risk. A
convertible security generally is a preferred stock that may be converted within
a specified period of time into common stock. Convertible securities
nevertheless remain subject to the risks of both debt securities and equity
securities. As with other equity securities, the value of a convertible security
tends to increase as the price of the underlying stock goes up, and to decrease
as the price of the underlying stock goes down. Declining common stock values
therefore also may cause the value of the Fund’s investments to decline. Like a
debt security, a convertible security provides a fixed-income stream and also
tends to
decrease in value when interest rates rise. Moreover, many convertible
securities have credit ratings that are below investment grade and are subject
to the same risks as lower-rated debt securities, which are considered to have
more speculative characteristics and greater susceptibility to default or
decline in market value than investment grade (or higher-rated)
securities.
Cybersecurity
Risk.
With the
increased use of technologies such as the Internet to conduct business, the
Fund, like all companies, may be susceptible to operational, information
security and related risks. Cybersecurity incidents involving the Fund and its
service providers (including, without limitation, the Adviser, fund accountant,
custodian, transfer agent and financial intermediaries) have the ability to
cause disruptions and impact business operations, potentially resulting in
financial losses, impediments to trading, the inability of Fund shareholders to
transact business, violations of applicable privacy and other laws, regulatory
fines, penalties, reputational damage, reimbursement or other compensation
costs, and/or additional compliance costs. Similar adverse consequences could
result from cybersecurity incidents affecting issuers of securities in which the
Fund invests, counterparties with which the Fund engages, governmental and other
regulatory authorities, exchanges and other financial market operators, banks,
brokers, dealers, insurance companies, other financial institutions and other
parties. The Fund and its shareholders could be negatively impacted as a
result.
Derivatives
Risk. The Fund may
invest in derivatives, including
futures
contracts, options, and options on futures contracts, as applicable. Derivatives
are financial instruments that derive their value from an underlying asset, such
as a security, index or exchange rate. Their use is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. Derivatives may be
riskier than other types of investments and may be more volatile, less tax
efficient and less liquid than other securities.
Derivatives
may be used to create synthetic exposure to an underlying asset or to
seek to hedge a portfolio risk. If the Fund uses derivatives to seek to “hedge”
a portfolio risk, the change in value of a derivative may not correlate as
expected with the underlying asset being hedged, and it is possible that the
hedge therefore may not succeed. In addition, given their complexity,
derivatives may be difficult to value.
Derivatives
are subject to a number of risks including credit risk, interest rate
risk, and market risk. Credit risk refers to the possibility that a counterparty
will be unable and/or unwilling to perform under the agreement. Interest rate
risk refers to fluctuations in the value of an asset resulting from changes in
the general level of interest rates. Over-the-counter derivatives are also
subject to counterparty risk (sometimes referred to as “default risk”), which is
the risk that the other party to the contract will not fulfill its contractual
obligations.
Derivatives
may be especially sensitive to changes in economic and market
conditions, and their use may give rise to a form of leverage. Leverage may
cause the portfolio of the Fund to be more volatile than if the portfolio had
not been leveraged because leverage can exaggerate the effect of any increase or
decrease in the value of securities and other instruments held by the Fund. For
some derivatives, such leverage could result in losses that exceed the original
amount invested in the derivative. The Fund’s use of derivatives may be limited
by the requirements for taxation of the Fund as a regulated investment company,
as well as by regulatory changes.
Index
Provider Risk.
The Fund
seeks to track the investment results, before fees and expenses, of the
Underlying Index, as published by the Index Provider. There is no assurance that
the Index Provider will compile the Underlying Index accurately, or that the
Underlying Index will be determined, composed or calculated accurately. While
the Index Provider gives descriptions of what the Underlying Index is designed
to achieve, the Index Provider generally does not provide any warranty or accept
any liability in relation to the quality, accuracy or completeness of data in
the Underlying Index, and it generally does not guarantee that the Underlying
Index will be
7
in line with
its methodology. Errors made by the Index Provider with respect to the quality,
accuracy and completeness of the data within the Underlying Index may occur from
time to time and may not be identified and corrected by the Index Provider for a
period of time, if at all. Therefore, gains, losses or costs associated with
Index Provider errors will generally be borne by the Fund and its
shareholders.
Index
Rebalancing Risk. Pursuant to
the methodology that the Index Provider uses to calculate and maintain the
Underlying Index, a security may be removed from the Underlying Index in the
event that it does not comply with the eligibility requirements of the
Underlying Index. As a result, the Fund may be forced to sell securities at
inopportune times or for prices other than at current market values or may elect
not to sell such securities on the day that they are removed from the Underlying
Index, due to market conditions or otherwise. Due to these factors, the
variation between the Fund’s annual return and the return of the Underlying
Index may increase significantly.
Apart
from scheduled rebalances, the Index Provider may carry out additional ad
hoc rebalances to the Underlying Index, for example, to correct an error in the
selection of index constituents. When the Fund in turn rebalances its portfolio,
any transaction costs and market exposure arising from such portfolio
rebalancing will be borne by the Fund and its shareholders. Unscheduled
rebalances also expose the Fund to additional tracking error risk. Therefore,
errors and additional ad hoc rebalances carried out by the Index Provider may
increase the Fund’s costs and market exposure.
Large
Shareholder Risk.
Certain
shareholders, including a third party investor, the Adviser or an affiliate of
the Adviser, an AP, a lead market maker, or another entity, may from time to
time own a substantial amount of Shares or may invest in the Fund and hold its
investment for a limited period of time solely to facilitate the commencement of
the Fund or to facilitate the Fund achieving a specified size or scale. There
can be no assurance that any large shareholder would not redeem its investment.
Dispositions of a large number of Shares by these shareholders may adversely
affect the Fund’s liquidity and net assets to the extent such transactions are
executed directly with the Fund in the form of redemptions through an AP, rather
than executed in the secondary market. These redemptions may also force the Fund
to sell portfolio securities when it might not otherwise do so, which may
negatively impact the Fund’s NAV and increase the Fund’s brokerage costs.
Further, such sales may accelerate the realization of taxable income and/or
gains to shareholders, or the Fund may be required to sell its more liquid Fund
investments to meet a large redemption, in which case the Fund’s remaining
assets may be less liquid, more volatile, and more difficult to price. To the
extent the Fund permits cash purchases, large purchases of Shares may adversely
affect the Fund’s performance to the extent that the Fund is delayed in
investing new cash and is required to maintain a larger cash position than it
ordinarily would. To the extent these large shareholders transact in shares on
the secondary market, such transactions may account for a large percentage of
the trading volume on the Fund’s exchange and may, therefore, have a material
upward or downward effect on the market price of the Shares. To the extent the
Fund permits redemptions in cash, the Fund may hold a relatively large
proportion of its assets in cash in anticipation of large redemptions, diluting
its investment returns.
Leverage
Risk. To the
extent that the Fund borrows money it may be leveraged. Leveraging generally
exaggerates the effect on NAV of any increase or decrease in the market value of
the Fund’s portfolio securities. Borrowing creates interest expenses and other
expenses (e.g., commitment fees) for the Fund that affect the Fund’s
performance.
Money
Market Funds Risk. Money market
funds are subject to management fees and other expenses, and the Fund's
investments in money market funds will cause it to bear proportionately the
costs incurred by the money market funds' operations while simultaneously paying
its own management fees and expenses. An investment in a money market fund is
not a bank account and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency; it is possible to lose
money by
investing in a money market fund. To the extent that the Fund invests in money
market funds, the Fund will be subject to the same risks that investors
experience when investing in money market funds. These risks may include the
impact of significant fluctuations in assets as a result of the cash sweep
program or purchase and redemption activity in those funds.
Money
market funds are open-end registered investment companies that
historically have traded at a stable $1.00 per share price. However, money
market funds that do not meet the definition of a “retail money market fund” or
“government money market fund” under the 1940 Act are required to transact at a
floating NAV per share (i.e., in a manner similar to how all other non-money
market mutual funds transact), instead of at a $1.00 stable share price. Money
market funds may also impose liquidity fees in certain
circumstances,
including
times of market stress or heavy redemptions. If the Fund invested in a money
market fund with a floating NAV, the impact on the trading and value of the
money market instrument may negatively affect the Fund's return
potential.
Natural
Disaster/Epidemic Risk. Natural or
environmental disasters, such as earthquakes, fires, floods, hurricanes,
tsunamis and other severe weather-related phenomena generally, and widespread
disease, including pandemics and epidemics, have been and may be highly
disruptive to economies and markets, adversely impacting individual companies,
sectors, industries, markets, currencies, interest and inflation rates, credit
ratings, investor sentiment, and other factors affecting the value of the Fund’s
investments. Additionally, if a sector or sectors in which the Underlying Index
is concentrated is negatively impacted to a greater extent by such events, the
Fund may experience heightened volatility. Given the increasing interdependence
among global economies and markets, conditions in one country, market, or region
are increasingly likely to adversely affect markets, issuers, and/or foreign
exchange rates in other countries, including the U.S. Any such events could have
a significant adverse impact on the value of the Fund’s
investments.
Repurchase
Agreements Risk. Repurchase
agreements are agreements pursuant to which the Fund acquires securities from a
third party with the understanding that the seller will repurchase them at a
fixed price on an agreed date. Repurchase agreements may be characterized as
loans secured by the underlying securities. If the seller of securities under a
repurchase agreement defaults on its obligation to repurchase the underlying
securities, as a result of its bankruptcy or otherwise, the Fund will seek to
dispose of such securities, which could involve costs or delays. If the seller
becomes insolvent and subject to liquidation or reorganization under applicable
bankruptcy or other laws, the Fund’s ability to dispose of the underlying
securities may be restricted. If the seller fails to repurchase the securities,
the Fund may suffer a loss to the extent proceeds from the sale of the
underlying securities are less than the repurchase prices.
Risks
of Futures and Options. The Fund may
enter into U.S. futures contracts, options and options on futures contracts to
simulate full investment in the Underlying Index, or to manage cash flows. The
Fund will not use futures or options for speculative purposes. The Fund intends
to use futures and options contracts to limit its risk exposure to levels
comparable to direct investment in securities.
An
option gives a holder the right to buy or sell a specific security or
instrument,
including a
futures contract, at a specified price within a specified period of time. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in the underlying futures contract at a
specified price at any time prior to the expiration date of the option.
Exchanges can limit the number of futures or options positions that can be held
or controlled by the Fund or the investment adviser, thus limiting the ability
to implement the Fund’s strategies.
Options are
subject to correlation risk,
and the
successful use of options depends on the investment adviser’s ability to predict
correctly
future price
fluctuations and the degree of correlation between the markets for options and
the underlying instruments. Options are also particularly subject to leverage
risk and can be subject to liquidity risk.
Because
option
8
premiums
paid
or received
by the Fund are small in relation to
the
market
value of the
investments underlying the options, the Fund is exposed to the risk that buying
and selling options can be more speculative
than
investing directly in securities.
Futures
contracts are typically
exchange-traded contracts that provide for the future delivery of a specified
amount of a specific instrument at a specified future price and
date,
or for cash
settlement
(payment of
the gain or loss on the contract). Futures contracts are subject to the risk of
imperfect correlation between movements in the price of the instruments and the
price of the underlying securities. Because futures contracts project price
levels in the future, market circumstances may cause a discrepancy between the
price of an index future and the movement in the Underlying Index. In the event
of adverse price movements, the Fund would remain required to make daily cash
payments to maintain its required margin. There is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Futures markets are highly volatile and the use of futures may
increase the volatility of the Fund’s NAV. Futures are also subject to leverage
risk and liquidity risk. The risk of loss in trading futures contracts
potentially is unlimited.
Securities
Lending Risk.
Securities
lending involves a risk of loss because the borrower may fail to return the
securities in a timely manner or at all. If the Fund lends its securities and is
unable to recover the securities loaned, it may sell the collateral and purchase
a replacement security in the market. Lending securities entails a risk of loss
to the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Any cash received as
collateral for loaned securities will be invested in an affiliated money market
fund. This investment is subject to market appreciation or depreciation and the
Fund will bear any loss on the investment of its cash collateral.
Structured
Notes Risk. Investments
in structured notes involve risks including interest rate risk, credit risk and
market risk. Interest rate risk refers to fluctuations in the value of a note
resulting from changes in the general level of interest rates. When the general
level of interest rates goes up, the prices of notes tend to go down. Credit
risk refers to the possibility that the issuer of a note will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt. Depending on the factors used, changes in interest rates and movement of
such factors may cause significant price fluctuations. Structured notes may be
less liquid than other types of securities and more volatile than the reference
factor underlying the note. This means that the Fund may lose money if the
issuer of the note defaults, as the Fund may not be able to readily close out
its investment in such notes without incurring losses.
Trading
Issues Risk. Investors
buying or selling Shares in the secondary market may pay brokerage commissions
or other charges, which may be a significant proportional cost for investors
seeking to buy or sell relatively small amounts of Shares. Moreover, trading in
Shares on the NYSE Arca, Inc. (the “Exchange”) may be halted due to market
conditions or for reasons that, in the view of the Exchange, make trading in
Shares inadvisable. In addition, trading in Shares on the Exchange is subject to
trading halts caused by extraordinary market volatility pursuant to the
Exchange’s “circuit breaker” rules. There can be no assurance that the
requirements of the Exchange necessary to maintain the listing of the Fund will
continue to be met or will remain unchanged. Foreign exchanges may be open on
days when Shares are not priced, and therefore, if the Fund holds securities
that are primarily listed on such exchanges, the value of such securities in the
Fund’s portfolio may change on days when shareholders will not be able to
purchase or sell Shares.
Tax Structure of ETFs
Unlike
interests in conventional mutual funds, which typically are bought and sold only
at closing NAVs, Shares are traded throughout the day in the secondary market on
a national securities exchange, and are created and
redeemed
principally in-kind in Creation Units at each day’s next calculated NAV. These
in-kind arrangements are designed to protect shareholders from the adverse
effects on the Fund’s portfolio that could arise from frequent cash creation and
redemption transactions. In a conventional mutual fund, redemptions can have an
adverse tax impact on taxable shareholders because the mutual fund may need to
sell portfolio securities to obtain cash to meet such redemptions. These sales
may generate taxable gains that must be distributed to the shareholders of the
mutual fund, whereas the Shares’ in-kind redemption mechanism generally will not
lead to such taxable events for the Fund or its shareholders.
The
Fund may recognize gains as a result of rebalancing its securities holdings to
reflect changes in the securities included in the Underlying Index. The Fund
also may be required to distribute any such gains to its shareholders to avoid
adverse federal income tax consequences. For information concerning the tax
consequences of distributions, see the section entitled “Dividends, Other
Distributions and Taxes” in this prospectus.
Portfolio Holdings
A description
of the Trust's policies and procedures with respect to the disclosure of the
Fund’s portfolio holdings is available in the Fund’s SAI, which is available at
www.invesco.com/ETFs.
Management of the Fund
Invesco
Capital Management LLC is a registered investment adviser with its offices at
3500 Lacey Road, Suite 700, Downers Grove, IL 60515. Invesco Capital
Management LLC serves as the investment adviser to the Invesco Actively Managed
Exchange-Traded Commodity Fund Trust, Invesco Actively Managed Exchange-Traded
Fund Trust, Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund
Trust II, Invesco Exchange-Traded Self-Indexed Fund Trust and Invesco India
Exchange-Traded Fund Trust, a family of ETFs, with combined assets under
management of $258.8 billion as of June 30, 2024.
As
the Fund’s investment adviser, the Adviser has overall responsibility
for selecting
and continuously monitoring the Fund’s investments, managing the Fund’s business
affairs, and providing certain clerical, bookkeeping and other administrative
services for the Trust.
Portfolio
Managers
The Adviser
uses a team of portfolio managers, investment strategists and other investment
specialists in managing the Fund. This team approach brings together many
disciplines and leverages the Adviser's extensive resources. In this regard,
Peter Hubbard, Michael Jeanette, Pratik Doshi,
CFA and Tony
Seisser (the “Portfolio Managers”) are jointly and primarily responsible for the
day-to-day management of the Fund.
Each
Portfolio Manager is responsible for various functions related to portfolio
management, including investing cash flows, coordinating with other team members
to focus on certain asset classes, implementing investment strategies and
researching and reviewing investment strategies.
Each
Portfolio Manager has limitations on their authority for risk management
and compliance purposes that the Adviser believes to be
appropriate.
■
Peter
Hubbard, Head of Equities and Director of Portfolio Management of the Adviser
and Vice President of the Trust, has been responsible for the management of the
Fund since June 2007. He has been responsible for the management of certain
funds in the Invesco family of ETFs since June 2007 and has been associated with
the Adviser since 2005.
■
Michael
Jeanette, Head of North America Equities and Senior Portfolio Manager of the
Adviser, has been responsible for the management of
9
the Fund
since August 2008. He has been responsible for the management of certain funds
in the Invesco family of ETFs since August 2008 and has been associated with the
Adviser since 2008.
■
Pratik Doshi,
CFA, Senior Portfolio Manager of the Adviser, has been responsible for the
management of the Fund since August 2020. He has been responsible for the
management of certain funds in the Invesco family of ETFs since October 2019 and
has been associated with the Adviser since 2018.
■
Tony Seisser,
Senior Portfolio Manager of the Adviser, has been responsible for the management
of the Fund since August 2014. He has been responsible for the management of
certain funds in the Invesco family of ETFs since August 2014 and has been
associated with the Adviser since 2013.
The
Fund's SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts that the Portfolio Managers manage and
the Portfolio Managers' ownership of Shares.
Advisory
Fees
Pursuant to
an investment advisory agreement between the Adviser and the Trust (the
“Investment Advisory Agreement”), the Fund pays the Adviser for its services an
annual fee equal to 0.15% of its average daily net assets (the “Advisory
Fee”).
The
Fund is responsible for all of its own expenses, including, but not limited to,
the investment advisory fees, costs of transfer agency, custody, fund
administration, legal, audit and other services, interest, taxes, Acquired Fund
Fees and Expenses, if any, brokerage commissions and other expenses connected
with executions of portfolio transactions, licensing fees related to the
Underlying Index, any distribution fees or expenses, litigation expenses, fees
payable to the Trust’s Board members and officers who are not “interested
persons” of the Trust or the Adviser, expenses incurred in connection with the
Board members’ services, including travel expenses and legal fees of counsel for
those members of the Board who are not “interested persons” of the Trust or the
Adviser and extraordinary expenses, including proxy expenses (except for such
proxies related to: (i) changes to the Investment Advisory Agreement, (ii) the
election of any Board member who is an “interested person” of the Trust, or
(iii) any other matters that directly benefit the Adviser).
The
Trust and the Adviser have entered into an Amended and Restated Excess
Expense Agreement (the “Expense Agreement”) on behalf of the Fund pursuant to
which the Adviser has agreed to waive fees and/or pay Fund expenses to the
extent necessary to prevent the operating expenses of the Fund (excluding
interest expenses, offering costs (as defined below), brokerage commissions and
other trading expenses, taxes, Acquired Fund Fees and Expenses, if applicable,
and extraordinary expenses) from exceeding 0.15% of its average daily net assets
per year (the “Expense Cap”), at least until August 31, 2026.
The
offering costs excluded from the Expense Cap for the Fund are: (a) initial legal
fees pertaining to the Shares offered for sale; (b) initial SEC and state
registration fees; and (c) initial fees paid to be listed on an
exchange.
The
Expense Agreement provides that the fees waived and/or expenses borne by the
Adviser are subject to recapture by the Adviser for up to three years from the
date the fees were waived or the expenses were incurred, but no recapture
payment will be made by the Fund if it would result in the Fund exceeding (i)
the Expense Cap or (ii) the expense cap in effect at the time the fees and/or
expenses subject to recapture were waived and/or borne by the
Adviser.
The
Fund may invest in money market funds that are managed by affiliates of
the Adviser and other funds (including ETFs) managed by the Adviser or
affiliates of the Adviser (collectively, “Underlying Affiliated Investments”).
The indirect portion of the advisory fees that the Fund incurs through such
Underlying Affiliated Investments is in addition to the Advisory Fee payable to
the Adviser by the Fund. Therefore, the Adviser has agreed to waive the Advisory
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 Underlying Affiliated
Investments or (ii) the Advisory Fee available to be waived. This waiver does
not apply to the Fund's investment of cash collateral received for securities
lending. This waiver is in place through at least August 31, 2026, and there is
no guarantee that the Adviser will extend it past that date. This waiver is not
subject to recapture.
A
discussion regarding the Board’s basis
for approving the Investment Advisory Agreement with respect to the Fund is
available on the Fund’s website and filed on the Trust’s Form N-CSR for the
fiscal year ended April 30, 2024.
How to Buy and Sell Shares
The Fund
issues or redeems its Shares at NAV per Share only in Creation Units or Creation
Unit Aggregations.
Most
investors buy and sell Shares in secondary market transactions through
brokers. Shares are listed for trading on the secondary market on the Exchange.
Shares can be bought and sold throughout the trading day like other publicly
traded shares. There is no minimum investment. Although Shares generally are
purchased and sold in “round lots” of 100 Shares, brokerage firms typically
permit investors to purchase or sell Shares in smaller “odd lots,” at no per
share price differential. When buying or selling Shares through a broker, you
will incur customary brokerage commissions and charges, and you may pay some or
all of the spread between the bid and the offered price in the secondary market
on each leg of a round trip (purchase and sale) transaction.
The Shares
trade on the Exchange under the symbol “SPHQ.”
Share prices
are reported in dollars and cents per Share.
APs
may acquire Shares directly from the Fund, and APs may tender their Shares
for redemption directly to the Fund, at NAV per Share, only in Creation Units or
Creation Unit Aggregations, and in accordance with the procedures described in
the SAI.
Under
normal circumstances, the Fund will pay out redemption proceeds to a
redeeming AP within one day after the AP’s redemption request is received, in
accordance with the process set forth in the Fund’s SAI and/or as set forth in
the agreement between the AP and the Fund’s distributor, or as otherwise agreed
to by the Fund and the AP. However, the Fund reserves the right, including under
stressed market conditions, to take up to seven days after the receipt of a
redemption request to pay an AP, all as permitted by the 1940 Act. If the Fund
has foreign investments in a country where local market holiday(s) prevent the
Fund from delivering such foreign investments to an AP in response to a
redemption request, the Fund may take up to 15 days after the receipt of the
redemption request to deliver such investments to the AP.
The
Fund anticipates meeting redemption requests either by paying redemption
proceeds to an AP primarily through in-kind redemptions or in cash. Cash used
for redemptions will be raised from the sale of portfolio assets or may come
from existing holdings of cash or cash equivalents. If the Fund holds Rule 144A
securities, an AP that is not a “qualified institutional buyer,” as such term is
defined under Rule 144A of the Securities Act of 1933, as amended (the
“Securities Act”), will not be able to receive those Rule 144A
securities.
The
Fund may liquidate and terminate at any time without shareholder approval.
Book
Entry
Shares are
held in book-entry form, which means that no stock certificates are issued. The
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares and is recognized as the record owner of all Shares for all
purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
Participants in DTC include securities brokers and dealers, banks,
10
trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you hold in
book entry or “street name” form.
Share
Trading Prices
The trading
prices of Shares on the Exchange may differ from the Fund’s daily NAV. Market
forces of supply and demand, economic conditions and other factors may affect
the trading prices of Shares.
Frequent Purchases and Redemptions of Shares
Shares may be
purchased and redeemed directly from the Fund only in Creation Units by APs. The
vast majority of trading in Shares occurs on the secondary market and does not
involve the Fund directly. In-kind purchases and redemptions of Creation Units
by APs and cash trades on the secondary market are unlikely to cause many of the
harmful effects of frequent purchases or redemptions of the Shares. Cash
purchases and/or redemptions of Creation Units, however, can result in increased
tracking error, disruption of portfolio management, dilution to the Fund and
increased transaction costs, which could negatively impact the Fund’s ability to
achieve its investment objective, and may lead to the realization of capital
gains. These consequences may increase as the frequency of cash purchases and
redemptions of Creation Units by APs increases. However, direct trading by APs
is critical to ensuring that Shares trade at or close to NAV.
To
minimize these potential consequences of frequent purchases and redemptions
of Shares, the Fund imposes transaction fees on purchases and redemptions of
Creation Units to cover the custodial and other costs the Fund incurs in
effecting trades. In addition, the Adviser monitors trades by APs for patterns
of abusive trading and the Fund reserves the right not to accept orders from APs
that the Adviser has determined may be disruptive to the management of the Fund,
or otherwise are not in the best interests of the Fund. For these reasons, the
Board has not adopted policies and procedures with respect to frequent purchases
and redemptions of Shares.
Dividends, Other Distributions and Taxes
Dividends
and Other Distributions
Generally,
dividends from net investment income, if any, are declared and paid quarterly by
the Fund. The Fund also intends to distribute its net realized capital gains, if
any, to shareholders annually. Dividends and other distributions may be declared
and paid more frequently to comply with the distribution requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and
to avoid a federal excise tax imposed on regulated investment
companies.
Distributions
in cash may be reinvested automatically in additional whole Shares
only if the broker through whom you purchased Shares makes such option
available.
Taxes
The Fund
intends to qualify each year as a regulated investment company (“RIC”) and, as
such, is not subject to entity-level tax on the income and gain it distributes.
If you are a taxable investor, dividends and distributions you receive generally
are taxable to you whether you reinvest distributions in additional Shares or
take them in cash. Every year, you will be sent
information
showing the amount of dividends and distributions you received during the prior
calendar year. In addition, investors in taxable accounts should be aware of the
basic tax points listed below:
Fund
Tax Basics
■
The Fund
earns income generally in the form of dividends or interest on its investments.
This income, less expenses incurred in the operation of the Fund, constitutes
the Fund’s net investment income from which dividends may be paid to
shareholders. If you are a taxable investor, distributions of net investment
income generally are taxable to you as ordinary income.
■
Distributions
of net short-term capital gains are taxable to you as ordinary income. A fund
with a high portfolio turnover rate (a measure of how frequently assets within
the fund are bought and sold) is more likely to generate short-term capital
gains than a fund with a low portfolio turnover rate.
■
Distributions
of net long-term capital gains are taxable to you as long-term capital gains no
matter how long you have owned your Shares.
■
A portion of
income dividends paid by the Fund may be reported as qualified dividend income
eligible for taxation by individual shareholders at long-term capital gain
rates, provided certain holding period requirements are met. These reduced rates
generally are available for dividends derived from the Fund’s investment in
stocks of domestic corporations and qualified foreign corporations. If the Fund
invests primarily in debt securities, either none or only a nominal portion of
the dividends paid by the Fund will be eligible for taxation at these reduced
rates.
■
The use of
derivatives by the Fund may cause the Fund to realize higher amounts of ordinary
income or short-term capital gain, distributions from which are taxable to
individual shareholders at ordinary income tax rates rather than at the more
favorable tax rates for long-term capital gain.
■
Distributions
declared to shareholders with a record date in October, November or December—if
paid to you by the end of January—are taxable for federal income tax purposes as
if received in December.
■
Any long-term
or short-term capital gains realized on the sale of your Shares will be subject
to federal income tax.
■
If the Fund
is terminated, a shareholder will receive a liquidating distribution(s) which
should be treated as payment in exchange for the Shares held by the shareholder.
As a result, each shareholder should recognize gain or loss in an amount equal
to the difference between the shareholder’s adjusted tax basis in his or her
shares and the liquidating distribution(s) he or she receives, except to the
extent the Shares are held in a tax-advantaged arrangement. A liquidating
distribution may be subject to backup withholding as described
below.
■
A
shareholder’s cost basis information will be provided on the sale of any of the
shareholder’s Shares, subject to certain exceptions for exempt recipients.
Please contact the broker (or other nominee) that holds your Shares with respect
to reporting of your cost basis and available elections for your
account.
■
At the time
you purchase your Shares, the Fund’s NAV may reflect undistributed income or
undistributed capital gains. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be taxable. Buying
Shares just before the Fund declares an income dividend or capital gains
distribution is sometimes known as “buying a dividend.” In addition, the Fund’s
NAV may, at any time, reflect net unrealized appreciation, which may result in
future taxable distributions to you.
■
By law, if
you do not provide the Fund with your proper taxpayer identification number and
certain required certifications, you may be
11
subject to
backup withholding on any distributions of income, capital gains, or proceeds
from the sale of your Shares. The Fund also must withhold if the IRS instructs
it to do so. When withholding is required, the amount will be 24% of any
distributions or proceeds paid.
■
An additional
3.8% Medicare tax is imposed on certain net investment income (including
ordinary dividends and capital gain distributions received from the Fund and net
gains from taxable dispositions of Shares) of U.S. individuals, estates and
trusts to the extent that such person’s “modified adjusted gross income” (in the
case of an individual) or “adjusted gross income” (in the case of an estate or
trust) exceeds a threshold amount. This Medicare tax, if applicable, is reported
by you on, and paid with, your federal income tax return.
■
You will not
be required to include the portion of dividends paid by the Fund derived from
interest on U.S. government obligations in your gross income for purposes of
personal and, in some cases, corporate income taxes in many state and local tax
jurisdictions. The percentage of dividends that constitutes dividends derived
from interest on federal obligations will be determined annually. This
percentage may differ from the actual percentage of interest received by the
Fund on federal obligations for the particular days on which you hold
shares.
■
Fund
distributions and gains from the sale of Shares generally are subject to state
and local income taxes.
■
If the Fund
qualifies to pass through the tax benefits from foreign taxes it pays on its
investments, and elects to do so, then any foreign taxes it pays on these
investments may be passed through to you. You will then be required to include
your pro rata share of these taxes in gross income, even though not
actually received by you, and will be entitled either to deduct your share of
these taxes in computing your taxable income, or to claim a foreign tax credit
for these taxes against your U.S. federal income tax.
■
Foreign
investors should be aware that U.S. withholding, special certification
requirements to avoid U.S. backup withholding and claim any treaty benefits, and
estate taxes may apply to an investment in the Fund.
■
Under the
Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax is imposed
on income dividends made by the Fund to certain foreign entities, referred to as
foreign financial institutions or non-financial foreign entities, that fail to
comply (or be deemed compliant) with extensive reporting and withholding
requirements designed to inform the U.S. Department of the Treasury of
U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of
Shares; however, based on proposed regulations issued by the IRS, which can be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). The Fund may disclose the
information that it receives from its shareholders to the IRS, non-U.S. taxing
authorities or other parties as necessary to comply with FATCA or similar laws.
Withholding also may be required if a foreign entity that is a shareholder of
the Fund fails to provide the Fund with appropriate certifications or other
documentation concerning its status under FATCA.
■
To the extent
the Fund invests in an underlying fund that is taxed as a RIC, please see the
section titled “Taxes – Taxation of the Funds” in the Fund’s SAI for more
information regarding the tax consequences of such investment.
■
The above
discussion concerning the taxability of Fund dividends and distributions and of
sales of Shares is inapplicable to investors that generally are exempt from
federal income tax, such as retirement plans that are qualified under Section
401 and 403 of the Code and individual retirement accounts (“IRAs”) and Roth
IRAs.
Taxes
on Purchase and Redemption of Creation Units
To the extent
that the Fund permits in-kind transactions, an AP that exchanges equity
securities for a Creation Unit generally will recognize a capital gain or loss
equal to the difference between the market value of the Creation Units at the
time of exchange (plus any cash received by the AP as part of the issue) and the
sum of the AP's aggregate basis in the securities surrendered plus any cash
component paid. Similarly, an AP that redeems a Creation Unit in exchange for
securities generally will recognize a capital gain or loss equal to the
difference between the AP's basis in the Creation Units (plus any cash paid by
the AP as part of the redemption) and the aggregate market value of the
securities received (plus any cash received by the AP as part of the
redemption). The IRS, however, may assert that a loss realized upon an exchange
of securities for a Creation Unit, or of a Creation Unit for securities, cannot
be deducted currently under the rules governing “wash sales” or on the ground
that there has been no significant change in the AP's economic position. An AP
exchanging securities should consult its own tax advisor(s) with respect to
whether wash sale rules apply and when a loss otherwise might not be
deductible.
Any
capital gain or loss realized on a redemption of a Creation Unit generally is
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as short-term capital gain or loss if the Shares have been
held for one year or less, assuming that such Creation Units are held as a
capital asset. If you purchase or redeem one or more Creation Units, you will be
sent a confirmation statement showing how many Shares you purchased or sold and
at what price.
The
foregoing discussion summarizes some of the more important
possible consequences under current federal, state and local tax law of an
investment in the Fund. It is not a substitute for personal tax advice. You also
may be subject to state, local and/or foreign tax on the Fund's distributions
and sales and/or redemptions of Shares. Consult your personal tax advisor(s)
about the potential tax consequences of an investment in the Shares under all
applicable tax laws.
Distributor
Invesco
Distributors, Inc. (the “Distributor”) serves as the distributor of Creation
Units for the Fund on an agency basis. The Distributor does not maintain a
secondary market in Shares. The Distributor is an affiliate of the
Adviser.
Net Asset Value
The NAV for
the Fund will be calculated and disseminated daily on each day that the NYSE is
open for trading. The Bank of New York Mellon (“BNYM”) normally calculates the
Fund’s NAV as of the regularly scheduled close of business of the NYSE (normally
4:00 p.m., Eastern time). The Fund’s NAV is based on prices at the time of
closing, and U.S. fixed-income assets may be valued as of the announced closing
time for trading in fixed-income instruments in a particular market or exchange.
NAV is calculated by deducting all of the Fund’s liabilities from the total
value of its assets and then dividing the result by the number of Shares
outstanding, rounding to the nearest cent. Generally, the portfolio securities
are recorded in the NAV no later than the trade date plus one day. In
determining NAV, expenses are accrued and applied daily and securities and other
assets for which market quotations are readily available and reliable are valued
at market value. The Trust’s Board has designated the Adviser to fair value the
Fund’s portfolio securities and other assets for which market quotations are not
readily available and reliable in accordance with Board-approved policies and
related Adviser procedures (the “Valuation Procedures”), subject to the Board’s
oversight.
12
Securities
listed or traded on an exchange (except convertible securities)
generally are valued at the last trade price or official closing price that day
as of the close of the exchange where the security primarily trades. Securities
of investment companies that are not exchange-traded (e.g., open-end mutual
funds) are valued using such company’s end-of-business day NAV per share,
whereas securities of investment companies that are exchange-traded are valued
at the last trade price or official closing price on the exchange on which they
primarily trade. Deposits, other obligations of U.S. and non-U.S. banks and
financial institutions, and cash equivalents are valued at their daily account
value. Fixed-income securities (including convertible securities) normally are
valued on the basis of prices provided by independent pricing services. Pricing
services generally value fixed-income securities assuming orderly transactions
of institutional round lot size, but the Fund may hold or transact in the same
securities in smaller, odd lot sizes. Odd lots often trade at lower prices than
institutional round lots, and their value may be adjusted accordingly. Futures
contracts are valued at the daily settlement price set by an exchange on which
they are principally traded. U.S. exchange-traded options are valued at the mean
between the last bid and asked prices from the exchange on which they
principally trade. Non-U.S. exchange-traded options are valued at the final
settlement price set by the exchange on which they trade. Options not listed on
an exchange and swaps generally are valued using pricing provided from
independent pricing services. Unlisted securities will be valued using prices
provided by independent pricing services or by another method that the Adviser,
in its judgment, believes better reflects the security’s fair value in
accordance with the Valuation Procedures. Foreign exchange-traded equity
securities are valued at their market value if market quotations are available
and reliable. The Adviser may use various pricing services to obtain market
quotations as well as fair value prices. The Adviser may discontinue the use of
any pricing service at any time.
At
times, a listed security’s market price may not be readily available.
Moreover,
even when market quotations are available for a security, they may be stale or
unreliable. A security’s last market quotation may become stale because, among
other reasons, (i) the security is not traded frequently, (ii) the security
ceased trading before its exchange closed; (iii) market or issuer-specific
events occurred after the security ceased trading; or (iv) the passage of time
between when the security’s trading market closes and when the Fund calculates
its NAV caused the quotation to become stale. A security’s last market quotation
may become unreliable because of (i) certain issuer- or security-specific
events, including a merger or insolvency, (ii) events which affect a
geographical area or an industry segment, such as political events or natural
disasters, or (iii) market events, such as a significant movement in the U.S.
market. When a security’s market price is not readily available, or the Adviser
determines, in its judgment, that such price is stale or unreliable, the Adviser
will value the security at fair value in good faith using the Valuation
Procedures.
Fair
value pricing involves subjective judgments, and fair value pricing methods may
change from time to time. Consequently, while such determinations may be made in
good faith, it may nevertheless be more difficult for the Adviser to accurately
assign a daily value, and Fund securities that are fair valued may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. Because of the inherent uncertainties of
valuation, and the degree of subjectivity in such decisions, it is possible that
a fair value determination for a security is materially different than the value
that could be realized upon the sale of the security. There is no assurance that
the Fund could sell a portfolio security for the value established for it at any
time, and it is possible that the Fund would incur a loss if a security is sold
at a discount to its established value. Because the Fund seeks to track the
Underlying Index, the use of fair value pricing could result in a difference
between the prices used to calculate the Fund’s NAV and the prices used by the
Underlying Index, which may increase the Fund’s tracking
error.
Fund Service Providers
BNYM, 240
Greenwich Street, New York, New York 10286, is the administrator, custodian,
transfer agent and fund accounting and dividend disbursing agent for the
Fund.
Stradley
Ronon Stevens & Young, LLP, 191 North Wacker Drive, Suite 1601, Chicago,
Illinois 60606, and 2000 K Street, NW, Suite 700, Washington, D.C. 20006, serves
as legal counsel to the Trust.
PricewaterhouseCoopers
LLP (“PwC”), One North Wacker Drive, Chicago, Illinois 60606, serves as the
Fund’s independent registered public accounting firm. PwC is responsible for
auditing the annual financial statements of the Fund and assists in the
preparation and/or review of the Fund’s federal and state income tax
returns.
13
Financial Highlights
The financial
highlights table below is intended to help you understand the Fund’s financial
performance for the past five fiscal years. Certain information reflects
financial results for a single Share. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and other
distributions).
This information has been derived from the Fund’s financial statements, which
have been audited by PwC, whose report, along with the Fund’s financial
statements, is available on the Fund’s website and is included in the Fund’s
Form N-CSR filed with the SEC, which is available upon
request.
|
|
Years
Ended April 30, | ||||
|
|
2024 |
2023 |
2022 |
2021 |
2020 |
|
Per
Share Operating Performance: |
|
|
|
|
|
|
Net
asset value at beginning of year |
$48.11 |
$46.37 |
$45.73 |
$33.61 |
$33.29 |
|
Net
investment income(a) |
0.80 |
0.82 |
0.70 |
0.63 |
0.61 |
|
Net
realized and unrealized gain on investments |
10.18 |
1.76 |
0.60 |
12.11 |
0.35 |
|
Total
from investment operations |
10.98 |
2.58 |
1.30 |
12.74 |
0.96 |
|
Distributions
to shareholders from: |
|
|
|
|
|
|
Net
investment income |
(0.78
) |
(0.84
) |
(0.66
) |
(0.62
) |
(0.64
) |
|
Net
asset value at end of year |
$58.31 |
$48.11 |
$46.37 |
$45.73 |
$33.61 |
|
Market
price at end of year(b) |
$58.30 |
$48.11 |
$46.36 |
$45.75 |
$33.62 |
|
Net
Asset Value Total Return(c) |
22.97
% |
5.78
% |
2.76
% |
38.23
% |
3.03
% |
|
Market
Price Total Return(c) |
22.95
% |
5.80
% |
2.70
% |
38.26
% |
3.03
% |
|
Ratios/Supplemental
Data: |
|
|
|
|
|
|
Net
assets at end of year (000’s omitted) |
$8,618,326 |
$4,817,491 |
$3,657,788 |
$2,670,218 |
$1,756,210 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
Expenses,
after Waivers |
0.15
% |
0.15
% |
0.15
% |
0.15
% |
0.15
% |
|
Expenses,
prior to Waivers |
0.23
% |
0.19
% |
0.19
% |
0.19
% |
0.21
% |
|
Net
investment income |
1.50
% |
1.82
% |
1.40
% |
1.59
% |
1.79
% |
|
Portfolio
turnover rate(d) |
47
% |
65
% |
48
% |
57
% |
56
% |
|
(a) |
Based
on average shares outstanding. |
|
(b) |
The
mean between the last bid and ask prices. |
|
(c) |
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. |
|
(d) |
Portfolio
turnover rate is not annualized for periods less than one year, if
applicable, and does not include securities received or delivered from
processing creations or
redemptions. |
14
Index Provider
No entity
that creates, compiles, sponsors or maintains the Underlying Index is or will be
an affiliated person, as defined in Section 2(a)(3) of the 1940 Act, or an
affiliated person of an affiliated person, of the Trust, the Adviser, the
Distributor or a promoter of the Fund.
Neither
the Adviser nor any affiliate of the Adviser has any rights to influence the
selection of the securities in the Underlying Index.
The
Underlying Index is calculated and maintained by the Index Provider or its
affiliate, agent or partner. The Index Provider is not affiliated with the
Trust, the Adviser or the Distributor. The Adviser has entered into a license
agreement with the Index Provider. The Fund is entitled to use the Underlying
Index pursuant to a sub-licensing agreement with the Adviser.
Disclaimers
The
Underlying Index is a product of S&P Dow Jones Indices LLC or its affiliates
(“S&P DJI”) and has been licensed for use by the Adviser. Standard &
Poor’s® and
S&P® are
registered trademarks of Standard & Poor’s Financial Services LLC
(“S&P”) and Dow Jones® is a
registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These
trademarks have been licensed for use by S&P DJI and sublicensed for certain
purposes to the Adviser.
The
Fund is not sponsored, endorsed, sold or promoted by S&P DJI, Dow Jones,
S&P or any of their respective affiliates. S&P DJI does not make any
representation or warranty, express or implied, to the owners of the Fund, the
Adviser, any Distributor or promoter of the Fund, or any member of the public
regarding the advisability of investing in securities generally or in the Fund
particularly or the ability of the Underlying Index to track general market
performance. Past performance of an index is not an indication or guarantee of
future results. S&P DJI’s only relationship to the Adviser with respect to
the Underlying Index is the licensing of the Underlying Index and certain
trademarks, service marks and/or trade names of S&P DJI and/or its
licensors. The Underlying Index is determined, composed and calculated by
S&P DJI without regard to the Fund, the Adviser, any Distributor or promoter
of the Fund. S&P DJI has no obligation to take the needs of the Adviser or
the owners of the Fund into consideration in determining, composing or
calculating the Underlying Index. S&P DJI is not responsible for and has not
participated in the determination of the price and amount of the Shares, in the
timing of the issuance or sale of the Shares or in the determination or
calculation of the equation by which the Shares are converted into cash, cash
surrendered, redeemed, etc. as applicable. S&P DJI has no obligation or
liability in connection with the administration, marketing or trading of the
Fund. There is no assurance that investment products based on the Underlying
Index will accurately track index performance or provide positive investment
returns. S&P DJI is not an investment adviser or tax advisor. A tax advisor
should be consulted to evaluate the impact of any tax-exempt securities on
portfolios and the tax consequences of making any particular investment
decision. Inclusion of a security within the Underlying Index is not a
recommendation by S&P DJI to buy, sell, or hold such security, nor is it
considered to be investment advice.
S&P
DJI DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS
AND/OR THE COMPLETENESS OF THE UNDERLYING INDEX OR ANY DATA RELATED THERETO OR
ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION
(INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DJI
INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS,
OMISSIONS, OR DELAYS IN CALCULATING THE UNDERLYING INDEX. S&P DJI MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY
THE ADVISER, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE UNDERLYING INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DJI BE
LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST
TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DJI
AND THE ADVISER, OTHER THAN THE LICENSORS OF THE UNDERLYING INDEX.
The
Adviser does not guarantee the accuracy and/or the completeness of the
Underlying Index or any data included therein, and the Adviser shall have no
liability for any errors, omissions, restatements, re-calculations or
interruptions therein. The Adviser makes no warranty, express or implied, as to
results to be obtained by the Fund, owners of the Shares or any other person or
entity from the use of the Underlying Index or any data included therein. The
Adviser makes no express or implied warranties and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the Underlying Index or any data included therein. Without limiting
any of the foregoing, in no event shall the Adviser have any liability for any
special, punitive, direct, indirect or consequential damages (including lost
profits) arising out of matters relating to the use of the Underlying Index,
even if notified of the possibility of such damages.
Premium/Discount Information
Information
showing the number of days the market price of the Shares was greater (at a
premium) and less (at a discount) than the Fund’s NAV for the most recently
completed calendar year and the most recently completed calendar quarters since
that year (or the life of the Fund, if shorter) is available on the Fund’s
website at www.invesco.com/ETFs.
Other Information
Continuous
Offering
The method by
which Creation Unit Aggregations of Shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Unit
Aggregations of Shares are issued and sold by the Fund on an ongoing basis, a
“distribution,” as such term is used in the Securities Act, may occur at any
point. Broker-dealers and other persons are cautioned that some activities on
their part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent Shares and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving the solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of
15
the
broker-dealer or its client in the particular case, and the examples mentioned
above should not be considered a complete description of all the activities that
could lead to a characterization as an underwriter.
Broker-dealer
firms also should note that dealers who are not “underwriters”
but are effecting transactions in Shares, whether or not participating in the
distribution of Shares, generally are required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(a)(3)(C) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not “underwriters” but are participating in a distribution (as
contrasted with engaging in ordinary secondary market transactions), and thus
dealing with the Shares that are part of an overallotment within the meaning of
Section 4(a)(3)(C) of the Securities Act, will be unable to take advantage of
the prospectus delivery exemption provided by Section 4(a)(3) of the Securities
Act. For delivery of prospectuses to exchange members, the prospectus delivery
mechanism of Rule 153 under the Securities Act only is available with respect to
transactions on a national exchange.
Delivery
of Shareholder Documents–Householding
Householding
is an option available to certain investors of the Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Fund is available through certain broker-dealers. If
you are interested in enrolling in householding and receiving a single copy of
the prospectus and other shareholder documents, please contact your
broker-dealer. If you currently are enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
For
More Information
For more
detailed information on the Trust, the Fund and the Shares, you may request a
copy of the Fund’s SAI. The SAI provides detailed information about the Fund and
is incorporated by reference into this prospectus. This
means that
the SAI legally is a part of this prospectus. Additional information about the
Fund’s investments also is available in the Fund’s Annual and Semi-Annual
Reports to Shareholders and on Form N-CSR filed with the SEC. In the Fund’s
current Annual Report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
the last fiscal year. In Form N-CSR you will find the Fund’s annual and
semi-annual financial statements. If you have questions about the Fund or Shares
or you wish to obtain the SAI, Annual Report and/or Semi-Annual Report, or the
Fund’s financial statements, free of charge, or to make shareholder inquiries,
please:
|
Call: |
Invesco
Distributors, Inc. at 1-800-983-0903
Monday
through Friday
8:00
a.m. to 5:00 p.m. Central Time |
|
Write: |
Invesco
Exchange-Traded Fund Trust
c/o
Invesco Distributors, Inc.
11
Greenway Plaza
Houston,
Texas 77046-1173 |
|
Visit: |
www.invesco.com/ETFs |
Reports
and other information about the Fund are available on the EDGAR
Database on the SEC's website at www.sec.gov, and copies of this information may
be obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: [email protected].
No
person is authorized to give any information or to make any representations
about the Fund and its Shares not contained in this prospectus, and you should
not rely on any other information. Read and keep this prospectus for future
reference.
Dealers
effecting transactions in the Shares, whether or not participating
in this distribution, generally are required to deliver a prospectus. This is in
addition to any obligation of dealers to deliver a prospectus when acting as
underwriters.
The Trust's
registration number under the 1940 Act is 811-21265.
16
