Prospectus
February
28,
2023
Invesco
Exchange-Traded Fund Trust II
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Invesco
DWA Developed Markets Momentum ETF |
The
Nasdaq Stock Market LLC |
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 DWA
Developed Markets Momentum ETF (the “Fund”) seeks to track the investment
results (before fees and expenses) of the Dorsey Wright® Developed
Markets Technical Leaders 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.
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Management
Fees |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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The example assumes
that you invest $10,000 in the Fund for the time periods indicated and then sell
all of your Shares at the end of those periods. The example also assumes that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. This example does not include brokerage commissions that
investors may pay to buy and sell Shares. Although your actual costs may be
higher or lower, your costs, based on these assumptions, would
be:
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1
Year |
3
Years |
5
Years |
10
Years |
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$ |
$ |
$ |
$ |
The Fund generally
will invest at least 90% of its total assets in the securities that comprise the
Underlying Index.
Strictly
in accordance with its guidelines and mandated procedures, Dorsey Wright &
Associates, LLC (“Dorsey Wright” or the “Index Provider”) selects securities
pursuant to its proprietary selection methodology for inclusion in the
Underlying Index, which is designed to identify securities that demonstrate
powerful relative strength characteristics.
“Relative
strength” is an investing technique that seeks to determine the strongest
performing securities by measuring certain factors, such as a security’s
relative performance against the overall market or a security’s relative
strength value, which is derived by comparing the rate of increase of the
security’s price over a set period as compared to that of a benchmark
index.
The
Underlying Index is comprised of equity securities of large capitalization
companies based in countries classified as developed markets, excluding the
United States. Dorsey Wright selects securities for inclusion in the Underlying
Index from an eligible universe of the largest 1,000 constituents by market
capitalization within the Nasdaq Developed Markets Ex United States Index
(except for U.S.-listed American depositary
receipts (“ADRs”)
or foreign listings). The Index Provider assigns a relative strength score to
each eligible security and selects approximately 100 securities with the
greatest scores for inclusion in the Underlying Index. Component security
weights are based on relative scores, with securities with higher scores
receiving larger weights.
As
of December 31, 2022, the
Underlying Index was comprised of 101
securities with
market capitalizations ranging from $1.9 billion to $366.4 billion.
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 is “diversified” under the Investment Company Act of 1940, as amended (the
“1940 Act”). The Fund may become “non-diversified” 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. Shareholder approval will not be sought when the Fund crosses from
diversified to non-diversified status under such circumstances.
The following
summarizes the principal risks of investing in the Fund.
Market
Risk.
Securities in the Underlying Index are subject to market fluctuations. You
should anticipate that the value of the Shares will decline, more or less, in
correlation with any decline in value of the securities in the Underlying Index.
Additionally, natural or environmental disasters, widespread disease or other
public health issues, war, military conflict, acts of terrorism,
economic crisis or
other events could result in increased premiums or discounts to the Fund’s net
asset value (“NAV”).
Index
Risk.
Unlike many investment companies, the Fund 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. 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.
Foreign
Investment Risk. Investments in the
securities of non-U.S. issuers involve risks beyond those associated with
investments in U.S. securities. Foreign securities may have relatively low
market liquidity, greater market volatility, decreased publicly available
information and less reliable financial information about issuers, and
inconsistent and potentially less stringent accounting, auditing and financial
reporting requirements and standards of practice, including recordkeeping
standards, comparable to those applicable to domestic issuers. Foreign
securities also are subject to the risks of expropriation, nationalization,
political instability or other adverse political or economic developments and
the difficulty of enforcing obligations in other countries. Investments in
foreign securities also may be subject to dividend withholding or confiscatory
taxes, currency blockage and/or transfer restrictions and higher transactional
costs. As the Fund will invest in
1
securities
denominated in foreign currencies, fluctuations in the value of the U.S. dollar
relative to the values of other currencies may adversely affect investments in
foreign securities and may negatively impact the Fund’s returns.
Equity
Risk.
Equity risk is the risk that the value of equity securities, including common
stocks, may fall due to both changes in general economic conditions that impact
the market as a whole, as well as factors that directly relate to a specific
company or its industry. Such general economic conditions include changes in
interest rates, periods of market turbulence or instability, or general and
prolonged periods of economic decline and cyclical change. 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 one or more industries 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 more broadly.
The value of a company's common stock may fall solely because of factors, such
as an increase in production costs, that negatively impact other companies in
the same region, industry or sector of the market. A company's common stock also
may decline significantly in price over a short period of time due to factors
specific to that company, including decisions made by its management or lower
demand for the company's products or services. For example, an adverse event,
such as an unfavorable earnings report or the failure to make anticipated
dividend payments, may depress the value of common stock.
Mid-Capitalization
Company Risk. Investing in
securities of mid-capitalization companies involves greater risk than
customarily is associated with investing in larger, more established companies.
These companies' securities may be more volatile and less liquid than those of
more established companies and may have returns that vary, sometimes
significantly, from the overall securities market. Mid-capitalization companies
tend to have less experienced management as well as limited product and market
diversification and financial resources compared to larger capitalization
companies. 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.
Geographic
Concentration Risk.
The
Fund may from time to time have a substantial amount of its assets invested in
securities of issuers located in a single country or a limited number of
countries. Adverse economic, political or social conditions in those countries
may therefore have a significant negative impact on the Fund’s investment
performance. For example, a natural or other disaster could occur in a country
or geographic region in which the Fund invests, which could affect the economy
or particular business operations of companies in that specific country or
geographic region and adversely impact the Fund’s investments in the affected
region.
Canada
Investment Risk. Because the Fund
invests a significant portion of its assets in companies that are domiciled in
Canada, the Fund is particularly sensitive to political, economic and social
conditions in that country. Canada is a major producer of metals. The Canadian
economy is especially dependent on the demand for, and supply of, natural
resources, and the Canadian market is relatively concentrated in issuers
involved in the production and distribution of natural resources. Any adverse
events that affect Canada’s major industries may have a negative impact on the
overall Canadian economy and the shares of the
Fund.
European
Investment Risk. The Economic and
Monetary Union of the European Union (the “EU”) requires compliance with
restrictions on inflation rates, deficits, interest rates, debt levels and
fiscal and monetary controls, each of which may significantly affect every
country in Europe. Decreasing imports or exports, changes in governmental or EU
regulations on trade, changes in the exchange rate of the euro, the default or
threat of default by an EU member country on its sovereign debt, and recessions
in an EU member country may have a significant adverse effect on the economies
of EU member countries. Separately,
the European Union
faces issues involving its membership, structure, procedures and policies. The
exit of one or more member states from the European Union, such as the departure
of the UK (known as “Brexit”), would place its currency and banking system in
jeopardy. The exit by the UK or other member states will likely result in
increased volatility, illiquidity and potentially lower economic growth in the
affected markets, which will adversely affect the Fund’s
investments.
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.
Currency
Risk.
Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could
decline if the currency of a non-U.S. market in which the Fund invests
depreciates against the U.S. dollar. Generally, an increase in the value of the
U.S. dollar against a foreign currency will reduce the value of a security
denominated in that foreign currency, thereby decreasing the Fund's overall NAV.
Exchange rates may be volatile and may change quickly and unpredictably in
response to both global economic developments and economic conditions, causing
an adverse impact on the Fund. As a result, investors have the potential for
losses regardless of the length of time they intend to hold Shares.
Issuer-Specific
Changes Risk. The value of an
individual security or particular type of security may be more volatile than the
market as a whole and may perform differently from the value of the market as a
whole.
Non-Diversification
Risk.
To the extent
the Fund becomes non-diversified, the Fund may invest a greater portion of its
assets in 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.
Valuation
Risk.
Financial information related to securities of non-U.S. issuers may be less
reliable than information related to securities of U.S. issuers, which may make
it difficult to obtain a current price for a non-U.S. security held by the Fund.
In certain circumstances, market quotations may not be readily available for
some Fund securities, and those securities may be fair valued. The value
established for a security through fair valuation may be different from what
would be produced if the security had been valued using market quotations. Fund
securities that are valued using techniques other than market quotations,
including “fair valued” securities, may be subject to greater fluctuations in
their value from one day to the next than would be the case if market quotations
were used. In addition, there is no assurance that the Fund could sell a
portfolio security for the value established for it at any time, and it is
possible that the Fund would incur a loss because a security is sold at a
discount to its established value.
Valuation
Time Risk. Because foreign
exchanges may be open on days when the Fund does not price its Shares, the value
of the non-U.S. securities in the Fund’s portfolio may change on days when you
will not be able to purchase or sell your Shares. As a result, trading spreads
and the resulting premium or discount on the Shares may widen, and, therefore,
2
increase the
difference between the market price of the Shares and the NAV of such
Shares.
Portfolio
Turnover Risk. The Fund may
engage in frequent trading of its portfolio securities in connection with the
rebalancing or adjustment of the Underlying Index. A portfolio turnover rate of
200%, for example, is equivalent to the Fund buying and selling all of its
securities two times during the course of a year. A high portfolio turnover rate
(such as 100% or more) could result in high brokerage costs for the Fund. While
a high portfolio turnover rate can result in an increase in taxable capital
gains distributions to the Fund’s shareholders, the Fund will seek to utilize
the in-kind creation and redemption mechanism (described below) to minimize
realization of capital gains to the extent possible.
Non-Correlation
Risk.
The Fund's return may not match the return of the Underlying Index 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. In addition, 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.
Authorized
Participant Concentration Risk. Only authorized
participants (“APs”) may engage in creation or redemption transactions directly
with the Fund. The Fund has a limited number of institutions that may act as APs
and such APs have no obligation to submit creation or redemption orders.
Consequently, there is no assurance that APs will establish or maintain an
active trading market for the Shares. This risk may be heightened to the extent
that securities held by the Fund are traded outside a collateralized settlement
system. In that case, APs may be required to post collateral on certain trades
on an agency basis (i.e., on behalf of other market participants), which only a
limited number of APs may be able to do. In addition, to the extent that APs
exit the business or are unable to proceed with creation and/or redemption
orders with respect to the Fund and no other AP is able to step forward to
create or redeem Creation Units (as defined below), 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 the Fund's NAV and to face trading
halts and/or delisting. Investments in non-U.S. securities, which may have lower
trading volumes
or
could experience extended market closures or trading halts, may increase the
risk that APs may not be able to effectively create or redeem Creation Units or
the risk that the Shares may be halted and/or delisted.
Market
Trading Risk. The Fund faces
numerous market trading risks, including the potential lack of an active market
for the Shares, losses from trading in secondary markets, and disruption in the
creation/redemption process of the Fund. 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. Any of these factors may lead to the Shares
trading at a premium or discount to the Fund's
NAV.
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
its investment adviser, Invesco Capital Management LLC (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 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 an additional index with characteristics relevant to the
Fund.
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, 2022)
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Inception
Date |
1
Year |
5
Years |
10
Years |
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Return
Before Taxes |
- |
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Return
After Taxes on Distributions |
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- |
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Return
After Taxes on Distributions and Sale of
Fund
Shares |
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Dorsey
Wright®
Developed Markets Technical
Leaders
Index (Net) net
of withholding taxes, but reflects no
deduction
for fees, expenses or other taxes) |
- |
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MSCI
EAFE®
Index (Net) (reflects reinvested
dividends
net of withholding taxes, but reflects
no
deduction for fees, expenses or other taxes) |
- |
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Management
of the Fund
Investment
Adviser. Invesco Capital
Management LLC (the “Adviser”).
3
Portfolio
Managers
The following
individuals are responsible jointly and primarily for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser/Trust |
Date
Began
Managing
the
Fund |
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Peter
Hubbard |
Head of
Equities and Director of
Portfolio
Management of the
Adviser;
Vice President of the Trust |
December
2007 |
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Michael
Jeanette |
Senior
Portfolio Manager of the
Adviser |
February
2015 |
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Pratik
Doshi |
Portfolio
Manager of the Adviser |
February
2020 |
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Tony
Seisser |
Portfolio
Manager of the Adviser |
February
2015 |
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Purchase
and Sale of Shares
The Fund issues and
redeems Shares at NAV only with APs and only in large blocks of 50,000 Shares
(each block of Shares is called a “Creation Unit”) or multiples thereof
(“Creation Unit Aggregations”), generally in exchange for the deposit or
delivery of 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 the
Fund through a broker-dealer or other financial intermediary (such as a bank),
the Fund’s distributor or its related companies may pay the intermediary for
certain Fund-related activities, including those that are designed to make the
intermediary more knowledgeable about exchange-traded products, such as the
Fund, as well as for marketing, education or other initiatives related to the
sale or promotion of Shares. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson or
financial adviser to recommend the Fund over another investment. Ask your
salesperson or financial adviser or visit your financial intermediary’s website
for more information.
Additional Information About the Fund’s Strategies and Risks
Principal
Investment Strategies
The Fund 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.
Dorsey
Wright®
Developed Markets Technical Leaders Index
The Underlying
Index is a modified market capitalization-weighted index of large capitalization
companies based in countries with developed economies, excluding the United
States, that includes securities that demonstrate powerful relative strength
characteristics. Such securities are selected for the Underlying Index pursuant
to Dorsey Wright’s proprietary methodology, which emphasizes a security’s
momentum and takes into account, among other factors, the performance of each of
the companies in the eligible universe as compared to benchmark
indices.
The
Index Provider selects components from an eligible universe of approximately 1,000
securities of large capitalization companies from countries other than the
United States with developed markets, as determined by the Underlying Index
methodology. Eligible securities must be one of the largest 1,000 constituents
by market capitalization within the Nasdaq Developed Markets Ex United States
Index (except for U.S.-listed ADRs or foreign listings) and have a minimum
three-month average daily
4
dollar trading
volume of $1 million. Eligible securities must also (i) be classified as either
a common stock,
depositary receipt,
or shares of beneficial interest of a real estate investment trust, (ii) be
issued by a company that has not entered into a definitive agreement or other
arrangement that likely would result in the security no longer being eligible
for inclusion in the Underlying Index, and (iii) be issued by a company that
does not have annual financial statements with an audit opinion that is
currently withdrawn. Only one security per issuer is permitted; if an issuer has
multiple securities, the security selected for possible inclusion in the
Underlying Index will be based on Dorsey Wright’s proprietary screening. The
Index Provider assigns a relative strength score for each eligible security
based on the security’s intermediate- and long-term price movements relative to
a representative market benchmark index. The Index Provider then ranks the
eligible securities by their relative strength score, selects approximately 100
securities with the greatest scores for inclusion in the Underlying Index and
weights each component security based on its relative strength score. Securities
with higher scores receive larger weights.
The
Underlying Index is rebalanced quarterly, after the close of the last
trading day in
March, June, September and December. At each rebalance, the Index Provider
ensures that all securities with weights greater than 5% of the Underlying
Index, in the aggregate, do not exceed 25% of the Underlying Index. Component
securities that cease to remain eligible for inclusion in the Underlying Index
are removed and are not replaced until the next quarterly rebalance. 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 spin-offs. 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 conflict, acts of terrorism,
economic crisis or
other events could result in increased premiums or discounts to the Fund’s
NAV.
COVID-19
Risk.
The “COVID-19” strain of coronavirus has resulted in instances of market
closures and dislocations, extreme volatility, liquidity constraints and
increased trading costs. Efforts to contain its spread have resulted in travel
restrictions, disruptions of health care
systems, business
operations (including business closures) and supply chains, layoffs, lower
consumer demand and employee availability, and defaults and credit downgrades,
among other significant economic impacts that have disrupted global economic
activity across many industries. Such economic impacts may exacerbate other
pre-existing political, social and economic risks locally or globally and cause
general concern and uncertainty. The full economic impact and ongoing effects of
COVID-19 (or other future epidemics or pandemics) at the macro-level and on
individual businesses are unpredictable and may result in significant and
prolonged effects on the Fund’s performance.
Market
Disruption Risks Related to Russia-Ukraine Conflict.
Following Russia’s
invasion of Ukraine in late February 2022, various countries, including the
United States, as well as North Atlantic Treaty
Organization
(“NATO”) member countries and the European Union, issued broad-ranging economic
sanctions against Russia. The war in Ukraine (and the potential for further
sanctions in response to Russia’s continued military activity) may escalate.
These 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 including, but not
limited to, energy and financials. Russia may take additional countermeasures or
retaliatory actions (including cyberattacks), which could exacerbate negative
consequences on global financial markets. The duration of the conflict and
corresponding sanctions and related events cannot be predicted. The foregoing
may result in a negative impact on Fund performance and the value of an
investment in the Fund, even beyond any direct investment exposure the Fund may
have to Russian issuers or the adjoining geographic regions.
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.
Foreign
Investment Risk. Investments in
foreign securities involve risks that are beyond those associated with
investments in U.S. securities. Fluctuations in the value of the U.S. dollar
relative to the values of other currencies may adversely affect investments in
foreign securities, and foreign securities may have relatively low market
liquidity, decreased publicly available information about issuers, and
inconsistent and potentially less stringent accounting, auditing and financial
reporting requirements and standards of practice, including recordkeeping
standards, comparable to those applicable to domestic issuers.
Foreign
securities also are subject to the risks of expropriation, nationalization or
other adverse political or economic developments and the difficulty of enforcing
obligations in other countries. Investments in foreign securities also may be
subject to dividend withholding or confiscatory taxes, currency blockage and/or
transfer restrictions and higher transactional costs. Each country has different
laws specific to that country that impact investment, which may increase the
risks to which investors are subject. Country-specific rules or legislation
addressing investment-related transactions may inhibit or prevent certain
transactions from transpiring in a particular country.
Furthermore,
foreign exchanges and broker-dealers generally are subject to less
government and exchange scrutiny and regulation than their U.S. counterparts.
Differences in clearance and settlement procedures in foreign markets may cause
delays in settlement of the Fund's trades effected in those markets and could
result in losses to the Fund due to subsequent declines in the value of the
securities subject to the trades. Depositary receipts also involve substantially
identical risks to those associated with investments in foreign securities.
Additionally, the issuers of certain depositary receipts, particularly
unsponsored or unregistered
5
depositary
receipts, have no obligation to distribute shareholder communications to the
holders of such receipts or to pass through to them any voting rights with
respect to the deposited securities.
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.
Geographic
Concentration Risk. Funds that are
less diversified across geographic regions or countries are generally riskier
than more geographically diversified funds. The economies and financial markets
of certain regions can be interdependent and may all decline at the same time. A
natural or other disaster could occur in a country or geographic region in which
the Fund invests, which could affect the economy or particular business
operations of companies in that specific country or geographic region and
adversely impact the Fund's investments in the affected region. The Schedule of
Investments included in the Fund’s annual and semi-annual reports identifies the
countries in which the Fund had invested and the level of investment, as of the
date of the reports.
Canada
Investment Risk. Because the Fund
invests a significant portion of its assets in companies that are domiciled in
Canada, the Fund is particularly sensitive to political, economic and social
conditions
in that country.
The Canadian economy is heavily dependent on relationships with certain key
trading partners. The United States is Canada’s largest trading and investment
partner, and the Canadian economy is significantly affected by developments in
the U.S. economy. Any downturn in U.S. economic activity is likely to have an
adverse impact on the Canadian economy. In addition, Canada is a large producer
and supplier of natural resources (e.g., metals, oil, natural gas and
agricultural products). The Canadian economy is especially dependent on the
demand for, and supply of, those natural resources, and the Canadian market is
relatively concentrated in issuers involved in the production and distribution
of natural resources. As a result, the Canadian economy is sensitive to
fluctuations in certain commodity prices, and any adverse events that affect
Canada’s major industries may have a negative impact on the overall Canadian
economy and the shares of the Fund.
European
Investment Risk. The EU requires
compliance with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or EU regulations on trade, changes in the exchange rate of the euro, the
default or threat of default by an EU member country on its sovereign debt, and
recessions in an EU member country may have a significant adverse effect on the
economies of EU member countries. In recent years, the European financial
markets have experienced volatility and adverse trends due to concerns about
rising government debt levels of several European countries, including Greece,
Spain, Ireland, Italy and Portugal. A default or debt restructuring by any
European country would adversely impact holders of that country's debt and
sellers of credit default swaps linked to that country's creditworthiness. These
events have adversely affected the exchange rate of the euro and may continue to
significantly affect every country in Europe, including EU member countries that
do not use the euro and non-EU member countries.
The
UK
departure from the EU (known as “Brexit”) could have wide ranging implications
for the UK’s economy, including: possible inflation or recession, depreciation
of the pound, or disruption to Britain’s trading arrangements with the rest of
Europe. The UK is one of Europe’s largest economies; its departure from the EU
also may negatively impact the EU and Europe as a whole, such as by causing
volatility within the union, triggering prolonged economic downturns in certain
European countries or sparking additional member states to contemplate departing
the EU (thereby perpetuating political instability in the region). An exit by
other member states will likely result in increased volatility, illiquidity and
potentially lower economic growth in the affected markets, which will adversely
affect the Fund’s investments.
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 industry or industry
6
group is available
in the Fund’s Annual and Semi-Annual Reports to Shareholders, as well as on
required forms filed with the SEC.
Currency
Risk.
Because the Fund’s NAV is determined in U.S. dollars, the Fund’s NAV could
decline if the currency of the non-U.S. market in which the Fund invests
depreciates against the U.S. dollar, even if the value of the Fund’s holdings,
measured in the foreign currency, increases. Generally, an increase in the value
of the U.S. dollar against a foreign currency will reduce the value of a
security denominated in that foreign currency, thereby decreasing the Fund’s
overall NAV. In addition, fluctuations in the exchange values of currencies
could affect the economy or particular business operations of companies in a
geographic region in which the Fund invests, causing an adverse impact on the
Fund. As a result, investors have the potential for losses regardless of the
length of time they intend to hold Shares.
When
the Fund receives income in foreign currencies, the Fund will compute and
distribute its income in U.S. dollars, and the computation of income will be
made on the date that the Fund earns the income at the foreign exchange rates in
effect on that date. Therefore, if the values of the relevant foreign currencies
fall relative to the U.S. dollar between the earning of the income and the time
at which the Fund converts the foreign currencies to U.S. dollars, the Fund may
be required to liquidate securities in order to make distributions if it has
insufficient cash in U.S. dollars to meet distribution requirements.
Furthermore,
the Fund may incur costs in connection with conversions between U.S.
dollars and foreign currencies. Foreign exchange dealers realize a profit based
on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forwards, futures or options contracts to
purchase or sell foreign currencies.
Issuer-Specific
Changes Risk. The performance of
the Fund depends on the performance of individual securities to which the Fund
has exposure. The value of an individual security or particular type of security
may be more volatile than the market as a whole and may perform worse than the
market as a whole, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, expiration of patent protection, disruptions in supply,
labor problems or shortages, corporate restructurings, fraudulent disclosures or
other factors. Issuers may, in times of distress or at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Non-Diversification
Risk.
To the
extent the Fund becomes non-diversified, the Fund may invest a greater portion
of its assets in 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.
Valuation
Risk.
Financial information related to securities of non-U.S. issuers may be less
reliable than information related to securities of U.S. issuers, which may make
it difficult to obtain a current price for a non-U.S. security held by the Fund.
In certain circumstances, market quotations may not be readily available for
some securities, and those securities may be fair valued. The value established
for a security through fair valuation may be different from what would be
produced if the security had been valued using market quotations. Fund
securities that are valued using techniques other than market quotations,
including “fair valued” securities, may be subject to greater fluctuations in
their value from one day to the next than would be the case if market quotations
were used. In addition, there is no assurance that the Fund could sell a
portfolio security for the value established for it at
any time, and it is
possible that the Fund would incur a loss because a security is sold at a
discount to its established value.
Valuation
Time Risk. Because foreign
exchanges may be open on days when the Fund does not price its Shares, the value
of the non-U.S. securities in the Fund’s portfolio may change on days when you
will not be able to purchase or sell your Shares. As a result, trading spreads
and the resulting premium or discount on the Shares may widen, and, therefore,
increase the difference between the market price of the Shares and the NAV of
such Shares.
Portfolio
Turnover Risk. The Fund may
engage in frequent trading of its portfolio securities in connection with the
rebalancing or adjustment of the Underlying Index, which may result in a high
portfolio turnover rate. A portfolio turnover rate of 200%, for example, is
equivalent to the Fund buying and selling all of its securities two times during
the course of a year. A high portfolio turnover rate (such as 100% or more)
could result in high brokerage costs for the Fund. While a high portfolio
turnover rate can result in an increase in taxable capital gains distributions
to the Fund’s shareholders, the Fund will seek to utilize the in-kind creation
and redemption mechanism (described below) to minimize the realization of
capital gains to the extent possible.
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 approach, 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, the Adviser may not fully invest the Fund’s assets at
times, either as a result of cash flows into the Fund, to retain a reserve of
cash to meet redemptions and expenses, or because of low 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
7
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. Investments in non-U.S. securities, which may
have lower trading volumes or could experience extended market closures or
trading halts, may increase the risk that APs may not be able to effectively
create or redeem Creation Units or the risk that the Shares may be halted and/or
delisted.
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 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 and options on futures contracts. The Fund may use futures contracts,
options, options on futures contracts, convertible securities and structured
notes to seek performance that corresponds to the Underlying Index, 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.
In
accordance with 1940 Act rules, the Fund has adopted a policy to invest, under
normal circumstances, at least 80% of the value of its net assets, plus the
amount of any borrowing for investment purposes, in the particular types of
securities, and/or in securities of companies operating in the particular
industries, economic sectors, countries or geographical regions, that are
suggested by the Fund’s name (the “80% investment policy”). The Fund considers
the securities suggested by its name to be those securities that comprise the
Underlying Index. Therefore, the Fund anticipates meeting its 80% investment
policy because it already generally invests at least 90% of its total assets in
the securities that comprise the Underlying Index, in accordance with its
principal investment strategies.
The
Fund’s investment objective and the 80% investment policy are non-fundamental
policies that the Board of Trustees (“Board”) of the Invesco Exchange-Traded
Fund Trust II (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.”
8
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, such as 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 hedge a
portfolio risk. If the Fund uses derivatives 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 (OTC) 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 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
9
directly with the
Fund in the form of redemptions through an AP, rather than executed in the
secondary market. These redemptions may also force the Fund to sell portfolio
securities when it might not otherwise do so, which may negatively impact the
Fund’s NAV and increase the Fund’s brokerage costs. Further, such sales may
accelerate the realization of taxable income and/or gains to shareholders, or
the Fund may be required to sell its more liquid Fund investments to meet a
large redemption, in which case the Fund’s remaining assets may be less liquid,
more volatile, and more difficult to price. To the extent the Fund permits cash
purchases, large purchases of Shares may adversely affect the Fund’s performance
to the extent that the Fund is delayed in investing new cash and is required to
maintain a larger cash position than it ordinarily would. To the extent these
large shareholders transact in shares on the secondary market, such transactions
may account for a large percentage of the trading volume on the Fund’s exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares. To the extent the Fund permits redemptions in cash, the
Fund may hold a relatively large proportion of its assets in cash in
anticipation of large redemptions, diluting its investment returns.
Leverage
Risk.
To the extent that the Fund borrows money, it may be leveraged. Leveraging
generally exaggerates the effect on NAV of any increase or decrease in the
market value of the Fund’s portfolio securities. Borrowing creates interest
expenses and other expenses (e.g., commitment fees) for the Fund that affect the
Fund’s performance. Interest expenses are excluded from the Fund expenses borne
by the Adviser under the unitary management fee.
Licensing,
Custody and Settlement Risk. Approval of
governmental authorities may be required prior to investing in the securities of
companies based in certain foreign countries. Delays in obtaining such an
approval would delay investments in the particular country, and, as a
consequence, the Fund may not be able to invest in all of the securities
included in the Underlying Index while an approval is pending. Rules adopted
under the 1940 Act permit the Fund to maintain its foreign securities and cash
in the custody of certain eligible non-U.S. banks and securities depositories.
Certain banks in foreign countries that are eligible foreign sub-custodians may
be recently organized or otherwise lack extensive operating experience. In
addition, in certain countries there may be legal restrictions or limitations on
the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Thus, there
may be a risk that settlement may be delayed and that cash or securities of the
Fund may be in jeopardy because of failures of or defects in the systems. Under
the laws of certain countries in which the Fund invests, the Fund may be
required to release local shares before receiving cash payment or may be
required to make cash payment prior to receiving local shares.
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
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 and redemption gates for use in times of market stress. 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.
REIT
Risk.
The REITs in which the Fund may invest will be subject to risks inherent in the
direct ownership of real estate. These risks include, among others: fluctuations
in the value of the underlying properties; defaults by borrowers or tenants;
market saturation; changes in general and local economic conditions; decreases
in market rates for rents; changes in the availability, cost and terms of
mortgage funds; increased competition, property taxes, capital expenditures, or
operating expenses; and other occurrences, including the impact of changes in
environmental laws that may affect the real estate industry. A REIT that fails
to comply with federal tax requirements affecting REITs may be subject to
federal income taxation, or the federal tax requirement that a REIT distribute
substantially all of its net income to its shareholders may result in a REIT
having insufficient capital for future expenditures. The value of a REIT can
depend on the structure of and cash flow generated by the REIT. In addition,
like mutual funds, REITs have expenses, including advisory and administration
fees, that their shareholders pay. As a result, an investor may absorb duplicate
levels of fees when the Fund invests in REITs. In addition, REITs are subject to
certain provisions under federal tax law. The failure of a company to qualify as
a REIT could have adverse consequences for the Fund, including significantly
reducing the return to the Fund on its investment in such company. Mortgage
REITs lend money to developers and owners of properties and invest primarily in
mortgages and similar real estate interests. Mortgage REITs receive interest
payments from the owners of the mortgaged properties. Accordingly, mortgage
REITs are subject to the credit risk of the borrowers to whom they extend funds.
Credit risk is the risk that the borrower will not be able to make interest and
principal payments on the loan to the REIT when they are due. Mortgage REITs
also are subject to the risk that the value of mortgaged properties may be less
than the amounts owed on the properties. If a mortgage REIT is required to
foreclose on a borrower, the amount recovered in connection with the foreclosure
may be less than the amount owed to the mortgage REIT. Mortgage REITs are
subject to significant interest rate risk. During periods when interest rates
are declining, mortgages are often refinanced or prepaid. Refinancing or
prepayment of mortgages may reduce the yield of mortgage REITs. When interest
rates decline, however, the value of a REIT’s investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT’s investment in fixed rate obligations can be expected to
decline. In addition, rising interest rates generally increase the costs of
obtaining financing, which could cause the value of a mortgage REIT’s
investments to decline. A REIT’s investment in adjustable rate obligations may
react differently to interest rate changes than an investment in fixed rate
obligations. As interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT’s investment in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
10
Mortgage
REITs typically use leverage (and in many cases, may be highly leveraged),
which increases investment risk and could adversely affect a REIT’s operations
and market value in periods of rising interest rates, increased interest rate
volatility, downturns in the economy and reductions in the availability of
financing or deterioration in the conditions of the REIT’s mortgage-related
assets.
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 an
index
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. Options can offer large amounts
of leverage, which may result in the Fund’s NAV being more sensitive to changes
in the value of the related instrument. The purchase of put or call options
could be based upon predictions as to anticipated trends; such predictions could
prove to be incorrect resulting in loss of part or all of the premium paid. The
risk of trading uncovered call options in some strategies (e.g., selling
uncovered stock index futures contracts) potentially is unlimited.
Futures
contracts provide for the future sale by one party and purchase by another party of
a specified amount of a specific instrument or index at a specified future time
and at a specified price. Because futures contracts project price levels in the
future, market circumstances may cause a discrepancy between the price of the
stock 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. 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 Nasdaq Stock Market LLC (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
11
family of ETFs,
with combined assets under management of $173.9 billion as of December 31,
2022.
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 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 December 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,
Senior Portfolio Manager of the Adviser, has been responsible for the management
of the Fund since February 2015. 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,
Portfolio Manager of the Adviser, has been responsible for the management of the
Fund since February 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. Prior to joining the Adviser, Mr. Doshi earned his
MBA from the University of Chicago from 2016 to 2018.
◾
Tony Seisser,
Portfolio Manager of the Adviser, has been responsible for the management of the
Fund since February 2015. 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 an annual management fee equal
to 0.80% of its average daily net assets (the “Advisory Fee”).
The
Advisory Fee paid by the Fund to the Adviser is an annual unitary management fee. Out
of the unitary management fee, the Adviser pays for substantially all expenses
of the Fund, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, except for distribution fees,
if any, brokerage expenses, taxes, interest, Acquired Fund Fees and Expenses, if
any, litigation expenses, and other extraordinary expenses, including proxy
expenses (except for such proxies related to: (i) changes to the Investment
Advisory Agreement, (ii) the election of any Board member who is an “interested
person” of the Trust, or (iii) any other matters that directly benefit 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, 2024, and there is
no guarantee that the Adviser will extend it past that date.
A
discussion regarding the basis for the Board’s approval of the Investment Advisory
Agreement with respect to the Fund is available in the Fund’s Semi-Annual Report
to Shareholders for the fiscal period ended April 30, 2022.
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 “PIZ.”
Share
prices are reported in dollars and cents per Share.
APs
may acquire Shares directly from the Fund, and APs may tender their Shares for
redemption directly to the Fund, at NAV per Share, only in Creation Units or
Creation Unit Aggregations, and in accordance with the procedures described in
the SAI.
Under
normal circumstances, the Fund will pay out redemption proceeds to a
redeeming AP within two days after the AP’s redemption request is received, in
accordance with the process set forth in the Fund’s SAI and in the agreement
between the AP and the Fund’s distributor. However, the Fund reserves the right,
including under stressed market conditions, to take up to seven days after the
receipt of a redemption request to pay an AP, all as permitted by the 1940 Act.
If the Fund has foreign investments in a country where local market holiday(s)
prevent the Fund from delivering such foreign investments to an AP in response
to a redemption request, the Fund may take up to 15 days after the receipt of
the redemption request to deliver such investments to the AP.
The
Fund anticipates meeting redemption requests 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.
12
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you hold in
book entry or “street name” form.
Share
Trading Prices
The trading prices
of Shares on the Exchange may differ from the Fund’s daily NAV. Market forces of
supply and demand, economic conditions and other factors may affect the trading
prices of Shares.
Frequent Purchases and Redemptions of Shares
Shares may be
purchased and redeemed directly from the Fund only in Creation Units by APs. The
vast majority of trading in Shares occurs on the secondary market and does not
involve the Fund directly. In-kind purchases and redemptions of Creation Units
by APs and cash trades on the secondary market are unlikely to cause many of the
harmful effects of frequent purchases or redemptions of the Shares. Cash
purchases and/or redemptions of Creation Units, however, can result in increased
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.
13
◾
By law, if you do
not provide the Fund with your proper taxpayer identification number and certain
required certifications, you may be subject to backup withholding on any
distributions of income, capital gains, or proceeds from the sale of your
Shares. The Fund also must withhold if the IRS instructs it to do so. When
withholding is required, the amount will be 24% of any distributions or proceeds
paid.
◾
An additional 3.8%
Medicare tax is imposed on certain net investment income (including ordinary
dividends and capital gain distributions received from the Fund and net gains
from taxable dispositions of Shares) of U.S. individuals, estates and trusts to
the extent that such person’s “modified adjusted gross income” (in the case of
an individual) or “adjusted gross income” (in the case of an estate or trust)
exceeds a threshold amount. This Medicare tax, if applicable, is reported by you
on, and paid with, your federal income tax return.
◾
You will not be
required to include the portion of dividends paid by the Fund derived from
interest on U.S. government obligations in your gross income for purposes of
personal and, in some cases, corporate income taxes in many state and local tax
jurisdictions. The percentage of dividends that constitutes dividends derived
from interest on federal obligations will be determined annually. This
percentage may differ from the actual percentage of interest received by the
Fund on federal obligations for the particular days on which you hold
shares.
◾
Fund distributions
and gains from the sale of Shares generally are subject to state and local
income taxes.
◾
If the Fund
qualifies to pass through the tax benefits from foreign taxes it pays on its
investments, and elects to do so, then any foreign taxes it pays on these
investments may be passed through to you. You will then be required to include
your pro rata share of these taxes in gross income, even though not
actually received by you, and will be entitled either to 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
14
available and
reliable in accordance with Board-approved policies and related Adviser
procedures (the “Valuation Procedures”), subject to the Board’s
oversight.
Securities
listed or traded on an exchange (except convertible securities)
generally are valued at the last trade price or official closing price that day
as of the close of the exchange where the security primarily trades. Securities
of investment companies that are not exchange-traded (e.g., open-end mutual
funds) are valued using such company’s end-of-business day NAV per share,
whereas securities of investment companies that are exchange-traded
are
valued at the last trade price or official closing price on the exchange on
which they primarily trade. Deposits, other obligations of U.S. and non-U.S.
banks and financial institutions, and cash equivalents are valued at their daily
account value. Fixed-income securities (including convertible securities)
normally are valued on the basis of prices provided by independent pricing
services. Pricing services generally value fixed-income
securities assuming
orderly transactions of institutional round lot size, but the Fund may hold or
transact in the same securities in smaller, odd lot sizes. Odd lots often trade
at lower prices than institutional round lots, and their value may be adjusted
accordingly. Futures contracts are valued at the daily settlement price set by
an exchange on which they are principally traded. U.S.
exchange-traded
options are valued at the mean between the last bid and asked prices from the
exchange on which they principally trade. Non-U.S.
exchange-traded
options are valued at the final settlement price set by the exchange on which
they trade. Options not listed on an exchange and swaps generally are valued
using pricing provided from independent pricing services. Unlisted securities
will be valued using prices provided by independent pricing services or by
another method that the Adviser, in its judgment, believes better reflects the
security’s fair value in accordance with the Valuation Procedures.
Foreign
exchange-traded equity securities are valued at their market value if market
quotations are available and reliable. The Adviser may use various pricing
services to obtain market quotations as well as fair value prices. The Adviser
may discontinue the use of any pricing service at any time.
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.
15
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 included in the Fund’s Annual Report for the fiscal year ended
October 31, 2022, which is available upon request.
|
|
Years
Ended October 31, | ||||
|
|
2022 |
2021 |
2020 |
2019 |
2018 |
|
Per
Share Operating Performance: |
|
|
|
|
|
|
Net
asset value at beginning of year |
$39.99 |
$29.82 |
$27.18 |
$24.53 |
$27.30 |
|
Net
investment income(a) |
0.40 |
0.22(b) |
0.13 |
0.30 |
0.24 |
|
Net
realized and unrealized gain (loss) on investments |
(13.59) |
10.12 |
2.77 |
2.70 |
(2.68) |
|
Total
from investment operations |
(13.19) |
10.34 |
2.90 |
3.00 |
(2.44) |
|
Distributions
to shareholders from: |
|
|
|
|
|
|
Net
investment income |
(0.77) |
(0.17) |
(0.26) |
(0.35) |
(0.33) |
|
Net
asset value at end of year |
$26.03 |
$39.99 |
$29.82 |
$27.18 |
$24.53 |
|
Market
price at end of year(c) |
$26.00 |
$40.09 |
$29.77 |
$27.10 |
$24.47 |
|
Net
Asset Value Total Return(d) |
(33.25)% |
34.70% |
10.82% |
12.31% |
(9.09)% |
|
Market
Price Total Return(d) |
(33.49)% |
35.26% |
10.96% |
12.25% |
(9.48)% |
|
Ratios/Supplemental
Data: |
|
|
|
|
|
|
Net
assets at end of year (000’s omitted) |
$101,514 |
$251,951 |
$155,043 |
$175,327 |
$223,182 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
Expenses |
0.80% |
0.80% |
0.80% |
0.81% |
0.80% |
|
Net
investment income |
1.22% |
0.59%(b) |
0.47% |
1.18% |
0.88% |
|
Portfolio
turnover rate(e) |
152% |
161% |
115% |
106% |
94% |
|
(a) |
Based
on average shares outstanding. |
|
(b) |
Net
investment income per share and the ratio of net investment income to
average net assets includes income received from foreign withholding tax
claims. Net investment income per share and
the
ratio of net investment income to average net assets excluding the foreign
withholding tax claims are $0.16 and 0.44%,
respectively. |
|
(c) |
The
mean between the last bid and ask prices. |
|
(d) |
Net
asset value total return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value
during
the period, and redemption at net asset value on the last day of the
period. Net asset value total return includes adjustments in accordance
with accounting principles generally accepted in
the
United States of America and as such, the net asset value for financial
reporting purposes and the returns based upon those net asset values may
differ from the net asset value and returns
for
shareholder transactions. Market price total return is calculated assuming
an initial investment made at the market price at the beginning of the
period, reinvestment of all dividends and
distributions
at market price during the period, and sale at the market price on the
last day of the period. Total investment returns calculated for a period
of less than one year are not annualized. |
|
(e) |
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. |
16
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 Fund is not
sponsored, endorsed, sold or promoted by Dorsey Wright, and Dorsey Wright does
not make any representation regarding the advisability of investing in Shares of
the Fund.
There
is no relationship between Dorsey Wright and the Adviser other than a license by
Dorsey Wright to the Adviser of certain Dorsey Wright trademarks and trade
names, and the Dorsey Wright® Developed
Markets Technical Leaders Index for use by the Adviser.
Such
trademarks, trade names and the Underlying Index have been created and
developed by Dorsey Wright without regard to and independently of the Adviser,
its businesses, its development of the Fund and/or any prospective investor. The
Adviser has arranged with Dorsey Wright to license indexes, such as the
Underlying Index, based on Point & Figure Analysis for possible inclusion in
products which the Adviser independently develops and promotes. The licensing of
any model such as the Underlying Index to the Adviser is not an offer to
purchase or sell, or a solicitation. A determination that any portion of an
investor’s portfolio should be devoted to any product developed by the Adviser
with reference to a Dorsey Wright Index is a determination made solely by the
Adviser serving the investor or the investor himself, not Dorsey
Wright.
Dorsey
Wright is not responsible for and has not participated in the determination of
the prices and amount of Shares, the timing of the issuance or sale of Shares or
in the determination of any financial calculations relating thereto. Dorsey
Wright has no obligation or liability in connection with the administration of
the Trust or marketing of the Shares. Dorsey Wright does not guarantee the
accuracy and/or the completeness of the Underlying Index or any data included
therein. Dorsey Wright shall have no liability for any errors, omissions or
interruptions therein. Dorsey Wright makes no warranty, express or implied, as
to results to be obtained by the Distributor, the Adviser, the Trust or owners
of Shares, or any other person or entity, from the use of the Underlying Index,
or any data included therein in connection with the Fund, or for any other use.
Dorsey Wright expressly disclaims all warranties and conditions of
merchantability, title or fitness for a particular purpose or use, with respect
to the Fund or the Underlying Index or to any data included therein, except as
set forth in the respective license agreements with the Adviser. Without
limiting any of the foregoing, in no event shall Dorsey Wright have any
liability for any incidental, special, exemplary, punitive, indirect or
consequential damages (including lost profits), however caused and on any theory
of liability, whether in contract, strict liability or tort (including
negligence or otherwise), resulting from the use of the Underlying Index or any
data included therein, even if notified of the possibility of such
damages.
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 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.
17
Delivery
of Shareholder Documents–Householding
Householding is an
option available to certain investors of the Fund. Householding is a method of
delivery, based on the preference of the individual investor, in which a single
copy of certain shareholder documents can be delivered to investors who share
the same address, even if their accounts are registered under different names.
Householding for the Fund is available through certain broker-dealers. If you
are interested in enrolling in householding and receiving a single copy of the
prospectus and other shareholder documents, please contact your broker-dealer.
If you currently are enrolled in householding and wish to change your
householding status, please contact your broker-dealer.
For
More Information
For more detailed
information on the Trust, the Fund and the Shares, you may request a copy of the
Fund’s SAI. The SAI provides detailed information about the Fund and is
incorporated by reference into this prospectus. This means that the SAI legally
is a part of this prospectus. Additional information about the Fund’s
investments also is available in the Fund’s Annual and Semi-Annual Reports to
Shareholders. In the Fund’s current Annual Report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance during the last fiscal year. If you have questions about the
Fund or Shares or you wish to obtain the SAI, Annual Report and/or Semi-Annual
Report, free of charge, or to make shareholder inquiries, please:
|
Call: |
Invesco
Distributors, Inc. at 1-800-983-0903
Monday
through Friday
8:00
a.m. to 5:00 p.m. Central
Time |
|
Write: |
Invesco
Exchange-Traded Fund Trust II
c/o
Invesco Distributors, Inc.
11
Greenway Plaza, Suite 1000
Houston,
Texas 77046-1173 |
|
Visit: |
www.invesco.com/ETFs |
Reports
and other information about the Fund are available on the EDGAR Database on
the SEC's Internet site at www.sec.gov, and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address: [email protected].
No
person is authorized to give any information or to make any representations
about the Fund and its Shares not contained in this prospectus, and you should
not rely on any other information. Read and keep this prospectus for future
reference.
Dealers
effecting transactions in the Shares, whether or not participating
in this distribution, generally are required to deliver a prospectus. This is in
addition to any obligation of dealers to deliver a prospectus when acting as
underwriters.
The
Trust's registration number under the 1940 Act is 811-21977.
18
