Prospectus
February
25,
2022
Invesco
Actively Managed Exchange-Traded Fund Trust
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VRIG |
Invesco
Variable Rate Investment Grade 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.
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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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1
Year |
3
Years |
5
Years |
10
Years |
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$ |
$ |
$ |
$ |
1
2
3
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4
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Inception
Date |
1
Year |
5
Years |
Since
Inception |
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Return
Before Taxes |
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Return
After Taxes on Distributions |
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Return
After Taxes on Distributions and Sale of
Fund
Shares |
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Bloomberg
US Floating Rate Note Index (reflects
no
deduction for fees, expenses or taxes) |
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Management of
the Fund
Investment
Adviser. Invesco
Capital Management LLC.
Investment
Sub-Adviser. Invesco Advisers,
Inc.
Portfolio
Managers
The following
individuals are responsible jointly and primarily for the day-to-day management
of the Fund’s portfolio:
|
Name |
Title
with
Sub-Adviser/Adviser/Trust |
Date
Began
Managing
the
Fund |
Peter
Hubbard |
Head of Equities and
Director of
Portfolio Management of the
Adviser; Vice President of
the Trust |
September
2016 |
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| ||
Philip
Armstrong |
Portfolio Manager (Lead) of
the
Sub-Adviser |
September
2016 |
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Mario
Clemente |
Portfolio Manager of the
Sub-Adviser |
February
2017 |
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Brian P.
Norris |
Portfolio Manager of the
Sub-Adviser |
September
2016 |
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Ken
Purnell |
Portfolio Manager of the
Sub-Adviser |
September
2016 |
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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 cash.
However, the Fund also reserves the right to permit or require Creation Units to
be issued in exchange for a basket of securities. Except when aggregated in
Creation Units, the Shares are not redeemable securities of the
Fund.
Individual
Shares may only be bought and sold in the secondary market (i.e., on a
national securities exchange) through a broker or dealer at a market price.
Because the Shares trade at market prices rather than NAV, Shares may trade at a
price greater than NAV (at a premium), at NAV, or less than NAV (at a discount).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (bid) and the lowest price a
seller is willing to accept for Shares (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”).
Recent
information, including information on the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads, is available online at
www.invesco.com/ETFs.
Tax
Information
The Fund’s
distributions generally are taxed as ordinary income, capital gains or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case your distributions may be taxed as ordinary income when withdrawn from such
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase 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 seeks to
achieve its investment objectives by investing, under normal market conditions,
at least 80% of its net assets (plus any borrowings for investment purposes) in
a portfolio of investment-grade Variable Rate Instruments that are denominated
in U.S. dollars and are issued by U.S. private sector entities or U.S.
government agencies and instrumentalities. The Sub-Adviser will select the
following types of Variable Rate Instruments for the Fund: (i) MBS and ABS (such
as floating rate non-agency commercial MBS, variable rate non-agency residential
MBS, variable rate agency MBS and floating rate non-agency ABS (including
floating rate non-agency commercial real estate CLOs); (ii) floating rate
corporate debt securities (comprised of corporate notes, bonds, debentures or
Rule 144A Securities (defined below)); (iii) floating rate GSE credit risk
transfers; (iv) floating rate U.S. government and agency securities (including
direct obligations of the U.S. government, such as U.S. Treasury bonds, bills
and notes, as well as floating-rate securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, such as U.S. Treasury or agency
debt securities); (v) variable rate preferred stock; and (vi) affiliated ETFs
that invest primarily in any or all of the foregoing securities.
At
least 80% of the Fund’s net assets (plus any borrowings for investment
purposes) will be invested in Variable Rate Instruments that are, at the time of
purchase, investment grade (or in affiliated ETFs that invest primarily in any
or all of the foregoing securities). Under normal market conditions, Variable
Rate Instruments or variable rate preferred stock will be considered investment
grade if, at the time of purchase, they have a rating in one of the highest four
rating categories of at least one NRSRO (e.g., BBB- or higher by S&P and/or
Fitch, or Baa3 or higher by Moody’s). If a security is rated by multiple NRSROs
and receives different ratings, the Fund will treat the security as being rated
in the highest rating category received from any one NRSRO. In addition, unrated
securities may be considered investment grade if, at the time of purchase, and
under normal market conditions, the Sub-Adviser determines that such securities
are of comparable quality based on a fundamental credit analysis of the unrated
security and comparable NRSRO-rated securities.
Under
normal market conditions, at the time that the Fund purchases a security, no
Variable Rate Instrument (excluding U.S. government securities) will represent
more than 30% of the weight of the Variable Rate Instrument component of the
Fund’s portfolio, and the five most heavily weighted portfolio securities will
not, in the aggregate, account for more than 65% of the weight of the Variable
Rate Instrument component of the Fund’s portfolio. Also, under normal market
conditions, on a continuous basis, at least 75% of the Fund’s investments in
corporate debt securities shall have a minimum original principal amount
outstanding of $100 million or more.
In
selecting Variable Rate Instruments for the Fund, the Sub-Adviser will
strategically
allocate the Fund’s assets by analyzing return and risk outlook
5
data for each type
of Variable Rate Instrument. Specifically, in seeking its secondary objective of
capital appreciation, the Fund will seek capital appreciation while mitigating
excess risk from any one type of security by using a strategic allocation of
assets to distribute risk across multiple asset classes. In addition, the Fund
will allocate its investments within each asset class in an attempt to improve
expected returns based on inflation and growth outlook, as well as relative
value across those classes and individual securities.
Under
normal market conditions, the Fund will have investment exposure to a wide
variety of Variable Rate Instruments using this tactical, strategic allocation.
During periods of market volatility, however, the Fund may allocate a
significant portion of its net assets to floating rate U.S. Treasury debt
securities and agency MBS. However, the Fund will not invest more than 20% of
its net assets in the aggregate in ABS or non-agency MBS.
The
Sub-Adviser expects that the Fund’s portfolio will have an average duration of one
year or less. Duration refers to the average life of a debt instrument and
serves as a measure of that instrument’s interest rate risk. In general, when
interest rates increase, the prices of fixed income securities decrease.
Generally speaking, the longer an asset’s duration, the more sensitive the asset
will be to changes in interest rates. For example, a bond with a duration of 10
years usually will decrease in value by 10% if interest rates rise by 1%;
conversely, the bond usually will increase in value by 10% if interest rates
fall by 1%. Therefore, prices of instruments with shorter durations and variable
interest rates, such as the Variable Rate Instruments in which the Fund invests,
are expected to be less sensitive to interest rate changes than instruments with
longer durations, fixed coupons or both.
Although the
Fund will invest at least 80% of its net assets in Variable Rate Instruments that are
investment grade (or in affiliated ETFs that invest primarily in those
securities), it may invest up to 20% of its remaining assets in Variable Rate
Instruments that are rated below investment grade, and/or fixed-rate instruments
of any rating. The Fund may also invest up to 20% of its net assets in Variable
Rate Instruments issued by non-U.S. entities.
Set
forth below is additional information about each of the various strategies the Fund
may employ and each of the instruments in which the Fund may
invest.
Mortgage-Backed
and Asset-Backed Securities
The
Fund may invest in non-agency MBS (such as residential mortgage-backed
securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”)).
Non-agency MBS represent an interest in a pool of mortgage loans made by banks
and other financial institutions to finance purchases of homes, commercial
buildings and other real estate. The individual mortgage loans are packaged or
“pooled” together for sale to investors. As the underlying mortgage loans are
paid off, investors receive principal and interest payments. Certain MBS
(including RMBS and CMBS), where mortgage payments are divided up between paying
the loan’s principal and paying the loan’s interest, are referred to as
“stripped MBS.” Mortgage-backed securities can also be categorized as
collateralized mortgage obligations or real estate mortgage investment conduits,
where they are divided into multiple classes with each class being entitled to a
different share of the principal and/or interest payments received from the pool
of underlying assets.
Non-agency
ABS are similar to non-agency MBS, except that the securities backing
them are assets such as loans, leases, credit card debt, a company’s receivables
or royalties, and not MBS.
The
Fund also may invest in agency MBS. These securities are MBS but, unlike CMBS or
RMBS, they are issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Such entities include, but are not limited to, Fannie Mae,
Freddie Mac, the Government National Mortgage Association (“Ginnie Mae”),
Federal Home Loan Banks, Farm Credit System, Farm Credit Banks, Student Loan
Marketing Association, Resolution Funding Corporation, Financing Corporation and
the FCS Financial Assistance Corporation. Government agency or instrumentality
securities have different
levels of credit
support. For example, Ginnie Mae securities carry a guarantee as to the timely
repayment of principal and interest that is backed by the full faith and credit
of the U.S. government. The full faith and credit guarantee, however, does not
apply to the market prices and yields of the Ginnie Mae securities or to the
NAV, trading price or performance of the Fund, which will vary with changes in
interest rates and other market conditions. Fannie Mae and Freddie Mac
pass-through mortgage certificates are backed by the credit of the respective
instrumentality and are not guaranteed by the U.S. government.
Other
securities issued by government agencies or instrumentalities, including GSEs, may
be backed only by the creditworthiness of the issuing institution, not the U.S.
government, or the issuers may have the right to borrow from the U.S. Treasury
to meet their obligations. Many MBS are pass-through securities, which means
they provide investors with monthly payments consisting of a pro rata share of
regular interest and principal payments as well as unscheduled prepayments on
the underlying mortgage loans. Because prepayment rates of individual mortgage
pools vary, the average life of a particular pool cannot be predicted
accurately. Adjustable-rate MBS have interest rates that adjust periodically to
reflect prevailing market rates.
Commercial
Real Estate CLOs
The
Fund may invest in floating rate non-agency commercial real estate CLOs. Floating rate
non-agency commercial real estate CLOs are typically collateralized by floating
rate commercial real estate first mortgage loans. Commercial real estate CLOs
typically provide a funding source for companies who have originated and hold
commercial mortgage loans as investments. Commercial real estate CLOs may
contain structural features absent in standard CMBS securitizations, including,
but not limited to, a reinvestment period, collateral quality tests and active
management which allows collateral managers to substitute poorly performing
collateral in the collateral pool with collateral that satisfies the deal
documents and specific rating agency criteria.
Floating-Rate
Corporate Debt Securities
The
Fund may invest in floating rate corporate debt securities, including
corporate notes,
bonds, debentures or Rule 144A Securities (as defined below). Corporate debt
securities represent debt obligations of corporate borrowers. Corporate
securities may or may not be secured by collateral. They have interest rates
that reset periodically. The interest rates are generally based on a percentage
above LIBOR, a U.S. bank’s prime or base rate, the overnight federal funds rate,
or another rate.
Corporate
securities in which the Fund invests may be senior or subordinate
obligations of the borrower; however, the Fund will not invest in senior or
junior loans. Senior secured and unsecured corporate securities generally rank
at the top of a borrower’s capital structure in terms of priority of payment,
ahead of any subordinated unsecured debt (high yield) securities or the
borrower’s common equity.
The
Fund also may invest in privately issued securities, including restricted
securities that may be resold only in accordance with Rule 144A.
Credit
Risk Transfers
Credit
risk transfers are unsecured obligations of GSEs such as Fannie Mae and Freddie Mac
that are structured to provide credit protection to the issuer with respect to
defaults and other credit events within pools of residential mortgage loans that
collateralize MBS issued and guaranteed by the GSEs. This credit protection is
achieved by allowing the GSEs to reduce the outstanding class principal balance
of the securities as designated credit events on the loans arise. The GSEs make
monthly payments of accrued interest and periodic payments of principal to the
holders of the securities.
U.S.
Government and Agency Debt Securities
The
Fund may invest in floating rate U.S. government securities, including floating
rate agency debt securities. U.S. government securities include U.S. Treasury
obligations and securities issued or guaranteed by various agencies of the U.S.
government, or by various instrumentalities which have been established or
sponsored by the U.S. government. U.S. Treasury obligations are backed by the
“full faith and credit” of the U.S.
6
government.
Securities issued or guaranteed by federal agencies and U.S. government
sponsored instrumentalities may or may not be backed by the full faith and
credit of the U.S. government.
The
Fund may also allocate its investments into direct obligations of the
U.S.
government (such as Treasury bonds, bills and notes) and in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, including
GSEs.
With
respect to obligations that are not supported by the full faith and credit of the U.S.
Treasury, the Fund must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
government would provide financial support to its agencies or instrumentalities
where it is not obligated to do so.
Variable-Rate
Preferred Stock
The
Fund may invest in variable rate preferred stock. In general, preferred stock is
a class of equity security that is so named because it is “preferred” over
common stock within an issuer’s capital structure. This preference means that an
issuer must pay distributions on its preferred stock before paying dividends on
its common stock, and that claims of preferred stockholders to an issuer’s
assets are placed ahead of claims of common stockholders when an issuer
liquidates. However, as an equity security, preferred stock is junior to an
issuer’s various forms of debt.
Variable-
or floating-rate securities pay interest at rates that adjust whenever a
specified benchmark interest rate (e.g., the LIBOR or a T-Bill rate) changes,
float at a fixed margin above a generally recognized base lending rate, or are
reset or re-determined on specified dates (such as the last day of a month or
calendar quarter). Dividends may be paid on a variable rate percentage of the
fixed par value at which the preferred stock is issued, and preferred stocks
often have a liquidation value that equals the original purchase price of the
stock at the time of issuance.
Other
ETFs
The Fund may
invest in the securities of other affiliated ETFs that invest in any of the foregoing
securities to the extent permitted by the 1940
Act and the rules and regulations
thereunder.
Fixed
Rate and/or Below Investment Grade Instruments
The
Fund may invest up to 20% of its remaining assets in a combination of
Variable Rate Instruments that are rated below investment grade, and/or
fixed-rate instruments of any rating.
The
Fund may invest in the following fixed-rate instruments: (i) fixed-rate MBS and
ABS (including fixed-rate commercial real estate CLOs); (ii) fixed-rate U.S.
government and agency securities; (iii) fixed-rate corporate debt securities
(comprised generally of corporate notes, bonds, debentures or Rule 144A
Securities); (iv) fixed-rate exchange-traded preferred stock; and (v) ETFs that
primarily invest in any or all of the foregoing fixed-rate
securities.
Below
investment grade securities are commonly referred to as “junk” or “high yield”
securities and are considered speculative with respect to the issuer’s capacity
to pay interest and repay principal. Investment in high yield debt securities
generally provides greater income and increased opportunity for capital
appreciation than investment in higher quality securities, but also typically
entails greater price volatility and credit risk. High yield debt securities
often are issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which generally are less able than more financially stable
firms to make scheduled payments of interest and principal.
Temporary
Defensive Strategies
The Fund may take a
temporary defensive position and hold a portion of its assets in cash or cash
equivalents and money market funds (including affiliated money market funds) if
there are inadequate investment opportunities available due to adverse market,
economic, political or other conditions, or atypical circumstances such as
unusually large cash inflows or redemptions. Doing so could help the Fund avoid
losses in the event of
falling market
prices and provide liquidity to make additional investments, but may mean lost
investment opportunities in a period of rising market prices. During these
periods, the Fund may not achieve its investment objective.
Principal
Risks of Investing in the Fund
The following
provides additional information regarding certain of the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund's
“Summary Information” section. Any of the following risks may impact the Fund’s
NAV which could result in the Fund trading at a premium or discount to
NAV.
Market
Risk.
The Fund’s holdings are subject to market fluctuations, and the Fund could lose
money due to short-term market movements and over longer periods during market
downturns. You should anticipate that the value of Shares will decline, more or
less, in correlation with any decline in value of the holdings in the Fund’s
portfolio. The value of a security may decline due to general market conditions,
economic trends or events that are not specifically related to the issuer of the
security or due to factors that affect a particular industry or group of
industries. During a general downturn in the securities markets, multiple asset
classes may be negatively affected. Additionally, natural or environmental
disasters, widespread disease or other public health issues, war, acts of
terrorism 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 healthcare 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.
Management
Risk. The Fund is
subject to management risk because it is an actively managed portfolio. In
managing the Fund’s portfolio holdings, the Sub-Adviser applies investment
techniques and risk analyses in making investment decisions for the Fund, but
there can be no guarantee that these actions will produce the desired
results.
Interest
Rate Risk. Investments in
U.S. Government securities will change in value in response to interest rate
changes and other factors, such as the perception of an issuer’s
creditworthiness. For example, the value of fixed-income securities generally
will decrease when interest rates rise, which may cause a decrease in the value
of the Fund. In addition, the Fund’s investments in fixed-income securities with
longer maturities will fluctuate more in response to interest rate changes.
Specific bonds differ in their sensitivity to changes in interest rates
depending on their individual characteristics. One measure of this sensitivity
is called duration. The longer the duration of a particular bond, the greater
its price sensitivity is to interest rates. Similarly, a longer duration
portfolio of securities has greater price sensitivity. To illustrate, if a
portfolio is composed of fixed income securities with an average duration of
five years, the portfolio’s value can be expected to fall approximately 5% if
interest rates rise by 1%. Conversely, the portfolio’s value can be expected to
rise approximately 5% if interest rates fall by 1%. A similar portfolio with an
average duration of three years is characterized as being less sensitive to
duration, since its value can be expected to fall only 3% in the event interest
rates rise by 1%. In addition, a period of falling or low interest rates may
also prompt some issuers to refinance their existing debt, which could affect
the returns from certain securities and, consequently, the Fund’s
performance.
7
Fixed-Income
Securities Risk. The Fund invests
in fixed-income securities, which are subject to interest rate risk and credit
risk. Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. Fixed-income securities with
longer maturities typically are more sensitive to changes in interest rates,
making them more volatile than securities with shorter maturities. Credit risk
refers to the possibility that the issuer of a security will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt. Debt instruments are subject to varying degrees of credit risk, which may
be reflected in credit ratings. There is a possibility that the credit rating of
a fixed-income security may be downgraded after purchase, which may occur
quickly and without advance warning following sudden market downturns or
unexpected developments involving an issuer, and which may adversely affect the
liquidity and value of the security. Securities issued by the U.S. Government
are subject to limited credit risk; however, securities issued by U.S.
Government agencies are not necessarily backed by the full faith and credit of
the U.S. Government. Due to recent events in the fixed-income markets, including
the potential impact of the Federal Reserve Board tapering its quantitative
easing program, the Fund may be subject to heightened interest rate risk as a
result of a rise in interest rates. In addition, the Fund is subject to the risk
that interest rates may exhibit increased volatility, which could cause the
Fund’s NAV to fluctuate more. A decrease in fixed-income market maker capacity
may act to decrease liquidity in the fixed-income markets and act to further
increase volatility, affecting the Fund’s returns.
Foreign
Fixed-Income Investment Risk. Investments in fixed-income
securities of non-U.S. issuers are subject to the same risks as other debt
securities, notably credit risk, market risk, interest rate risk and liquidity
risk, while also facing risks beyond those associated with investments in U.S.
securities. For example, 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.
Changing
Global Fixed-Income Market Conditions Risk. The historically low interest
rate environment observed over the past several years was created in part by the
Federal Reserve Board (“FRB”) and certain foreign central banks keeping the
federal funds and equivalent foreign rates at, near or below zero. In recent
years, the FRB and certain foreign central banks began “tapering” their
quantitative easing programs, leading to fluctuations in the Federal Funds Rate
and equivalent foreign rates. However, in response to the impact of the COVID-19
pandemic, in March 2020 the FRB announced cuts to the Federal Funds Rate and a
new round of quantitative easing. Because there is little precedent for this
situation, it is difficult to predict the impact of these rate changes and any
future rate changes on various markets. Any additional changes to the monetary
policy by the FRB and foreign central banks or other regulatory actions may
affect interest rates and/or reduce liquidity for fixed-income investments,
particularly those with longer maturities. In addition, decreases in
fixed-income dealer market-making capacity may also potentially lead to
heightened volatility and reduced liquidity in the fixed-income markets. As a
result, the value of the Fund’s investments and share price may decline. Changes
in central bank policies could also result in higher than normal redemptions by
APs, which could potentially increase the Fund’s portfolio turnover rate and
transaction costs.
U.S.
Government Obligations Risk. The Fund may invest in U.S.
government obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities,
including bills, notes and bonds issued by the U.S. Treasury. U.S. Government
securities include securities that are issued or guaranteed by the United States
Treasury, by various agencies of the U.S. Government, or by various
instrumentalities which have been established or sponsored by the U.S.
Government. U.S. Treasury securities are backed by the “full faith and credit”
of the United States. Securities issued or guaranteed by federal agencies and
U.S. Government-sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of those U.S. Government
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the security for ultimate repayment, and may not be able to assert
a claim against the United States itself in the event that the agency or
instrumentality does not meet its commitment. The U.S. Government, its agencies
and instrumentalities do not guarantee the market value of their securities, and
consequently, the value of such securities may fluctuate.
Agency
Debt Risk. Instruments issued
by government agencies, including Fannie Mae and Freddie Mac, generally are
backed only by the general creditworthiness and reputation of the government
agency issuing the instrument and are not backed by the full faith and credit of
the U.S. government. As a result, there is uncertainty as to the current status
of many obligations of Fannie Mae, Freddie Mac and other agencies that are
placed under conservatorship of the federal government.
Mortgage-Backed
and Asset-Backed Securities Risk. Mortgage-backed
securities represent a participation interest in a pool of residential mortgage
loans originated by governmental or private lenders such as banks. They differ
from conventional debt securities, which provide for periodic payment of
interest in fixed amounts and principal payments at maturity or on specified
call dates. Mortgage pass-through securities provide for monthly payments that
are a “pass-through” of the monthly interest and principal payments made by the
individual borrowers on the pooled mortgage loans. Mortgage pass-through
securities may be collateralized by mortgages with fixed rates of interest or
adjustable rates. Mortgage-backed securities have different risk characteristics
than traditional debt securities. Although generally the value of fixed-income
securities increases during periods of falling interest rates and decreases
during periods of rising rates, this is not always the case with mortgage-backed
securities. This is due to the fact that principal on underlying mortgages may
be prepaid at any time as well as other factors. Generally, prepayments will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. The rate of prepayments also may be influenced by
economic and other factors. Prepayment risk includes the possibility that, as
interest rates fall, securities with stated interest rates may have the
principal prepaid earlier than expected, requiring the Fund to invest the
proceeds at generally lower interest rates. Certain mortgage-backed securities
may be more volatile, less liquid and more difficult to value than other
traditional types of debt securities.
Asset-backed
securities have risk characteristics similar to mortgage-backed
securities. Like mortgage-backed securities, they generally decrease in value as
a result of interest rate increases, but may benefit less than other
fixed-income securities from declining interest rates, principally because of
prepayments.
Also,
as in the case of mortgage-backed securities, prepayments generally increase
during a period of declining interest rates although other factors, such as
changes in credit use and payment patterns, also may influence prepayment rates.
Asset-backed securities also involve the risk that various federal and state
consumer laws and other legal, regulatory and economic factors may result in the
collateral backing the securities being insufficient to support payment on the
securities.
Certain
mortgage-backed and asset-backed securities may be more volatile, less
liquid and more difficult to value than other traditional types of debt
securities. Privately-issued mortgage-backed and asset-backed
8
securities may be
less liquid than other types of securities and difficult to sell these
securities at a desired time or price. During periods of market stress or high
redemptions, a fund investing in mortgage-backed and asset-backed securities may
be forced to sell these securities at significantly reduced prices, resulting in
losses. Liquid privately-issued mortgage-backed and asset-backed securities can
become illiquid during periods of market stress. Liquidity risk is even greater
for mortgage pools that include subprime mortgages, which are loans made to
borrowers with weakened credit histories or with lower capacity to make timely
payments on their mortgages.
Collateralized
Loan Obligations Risk. A CLO is an ABS
whose underlying collateral is a pool of loans. Such loans may include domestic
and foreign senior secured loans, senior unsecured loans and subordinate
corporate loans, some of which may be below investment grade or equivalent
unrated loans. Investments in CLOs carry the same risks as investments in loans
directly, as well as other risks, including interest rate risk, credit and
liquidity and valuation risks, and the risk of default. CLOs issue classes or
“tranches” that vary in risk and yield. Losses caused by defaults on underlying
assets are borne first by the holders of subordinate tranches. A CLO may
experience substantial losses attributable to loan defaults. An investment in a
CLO may decrease in market value because of (i) loan defaults or credit
impairment, (ii) the disappearance of subordinate tranches, (iii) market
anticipation of defaults, and (iv) investor aversion to CLO securities as a
class. These risks may be magnified depending on the tranche of the CLO
securities. For example, investments in a junior tranche of CLO securities will
likely be more sensitive to loan defaults or credit impairment than investments
in more senior tranches.
Rule
144A Securities Risk. Rule 144A
Securities are restricted securities that can be purchased only by “qualified
institutional buyers,” as defined under the Securities Act. The market for Rule
144A Securities typically is less active than the market for publicly-traded
securities. As such, investing in Rule 144A Securities may reduce the liquidity
of the Fund’s investments, and the Fund may be unable to sell the security at
the desired time or price, if at all. The purchase price and subsequent
valuation of Rule 144A Securities normally reflect a discount, which may be
significant, from the market price of comparable unrestricted securities for
which a liquid trading market exists. A restricted security that was liquid at
the time of purchase may subsequently become illiquid and its value may decline
as a result. In addition, transaction costs may be higher for restricted
securities than for more liquid securities. The Fund may also have to bear the
expense of registering the securities for resale and the risk of substantial
delays in effecting the registration.
Credit
Risk.
The issuer of instruments in which the Fund invests may be unable to meet
interest and/or principal payments. An issuer’s securities may decrease in value
if its financial strength weakens, which may reduce its credit rating and
possibly its ability to meet its contractual obligations. Even in the case of
collateralized debt obligations, there is no assurance that the sale of
collateral would raise enough cash to satisfy an issuer’s payment obligations or
that the collateral can or will be liquidated.
Short-Term
Bond Risk. The amount of time
until a fixed-income security matures can lead to various risks, including
changes in interest rates over the life of a bond. Short-term fixed income
securities generally provide lower returns than longer-term fixed income
securities. The average maturity of the Fund’s investments will affect the
volatility of the Fund’s share price.
Preferred
Stock Risk. Preferred stock is
subject to issuer-specific and overall market risks that are generally
applicable to equity securities as a whole; however, there are special risks
associated with investing in preferred stock. Preferred stock may be less liquid
than many other types of securities, such as common stock, and generally
provides no voting rights with respect to the issuer. Preferred stock also may
be subordinated to bonds or other debt instruments in an issuer's capital
structure, meaning that an issuer's preferred stock generally pays dividends
only after the issuer makes required payments to holders of its bonds and other
debt. This subjects preferred stock to a greater risk of non-payment than more
senior
securities. Because
of the subordinated position of preferred stock in an issuer's capital
structure, the ability to defer dividend or interest payments for extended
periods of time without triggering an event of default for the issuer, and
certain other features, its quality and value are heavily dependent on the
profitability and cash flows of the issuer rather than on any legal claims to
specific assets. Also, in certain circumstances, an issuer of a preferred stock
may call or redeem it prior to a specified date or may convert it to common
stock, all of which may negatively impact its return.
Preferred
stock may include provisions that permit the issuer, in its discretion, to
defer or omit distributions for a certain period of time. If certain funds own a
security that is deferring or omitting its distributions, the fund may be
required to report the distribution on its tax returns, even though it may not
have received this income. Dividend payments on a preferred security typically
must be declared by the issuer's board of directors, unlike interest payments on
debt securities. However, an issuer's board of directors generally is not under
any obligation to declare a dividend for an issuer (even if such dividends have
accrued). If an issuer of preferred securities experiences economic
difficulties, those securities may lose substantial value due to the reduced
likelihood that the issuer's board of directors will declare a
dividend.
Investments
in Investment Companies Risk.
Investing in other
investment companies subjects the Fund to those risks affecting the investment
company, including the possibility that the value of the underlying securities
held by the investment company could decrease or the portfolio becomes illiquid.
Moreover, the Fund will pay indirectly a proportional share of the fees and
expenses of the investment companies in which it invests. Investments in an
exchange-traded fund are subject to, among other risks, the risk that the
exchange-traded fund’s shares may trade at a discount or premium relative to the
NAV of its shares and the listing exchange may halt trading of the
exchange-traded fund’s shares.
Fixed-Rate
Instrument Risk. Fixed-rate
securities face a significant amount of interest rate risk, since their fixed
coupon makes them more sensitive to changes in interest rates than variable-rate
securities. The coupon rate attached to a fixed-rate security often is payable
at specified dates before the bond reaches maturity; due to a fixed-rate
security’s typically lengthy maturity date, such payments typically are small.
In addition, fixed-rate investments are more susceptible to inflation risk,
which is the risk that the set rates paid on the bond will be less valuable over
time, as the consumer price index rises.
High
Yield Securities (Junk Bond) Risk. Compared to higher
quality debt securities, high yield securities (commonly referred to as “junk
bonds”) involve a greater risk of default or price changes due to changes in the
credit quality of the issuer because they are generally unsecured and may be
subordinated to other creditors’ claims. They are considered speculative with
respect to the issuer’s capacity to pay interest and repay principal. In
addition, high yield debt securities often are issued by smaller, less
creditworthy companies or by highly leveraged (indebted) firms, which generally
are less able than more financially stable firms to make scheduled payments of
interest and principal.
Analysis
of the creditworthiness of issuers of debt securities that are high yield may be
more complex than for issuers of higher quality debt securities, and the use of
credit ratings to select high yield debt securities can involve certain risks.
For example, credit rating agencies may fail to change ratings in a timely
fashion to reflect events since the security was last rated.
In
addition, the values of junk bonds often fluctuate more in response to
company, political,
regulatory or economic developments than higher quality bonds. Their values can
decline significantly over short periods of time or during periods of economic
difficulty when the bonds could be difficult to value or sell at a fair price.
Credit ratings on junk bonds do not necessarily reflect their actual market
value.
Income
Risk.
The Fund’s income may decline when interest rates fall because the Fund may hold
a significant portion of short duration securities and/or securities that have
floating or variable interest rates. To the extent
9
that the Fund
invests in lower yielding bonds, and as the bonds in its portfolio mature, the
Fund needs to purchase additional bonds, thereby reducing the Fund’s
income.
Defaulted
Securities Risk. Defaulted
securities, where the issuer has defaulted on the payment of interest and/or
principal, are speculative and involve the substantial risk that principal will
not be repaid. Defaulted securities and any securities received in an exchange
for such securities may be subject to restrictions on resale.
LIBOR
Transition Risk. The
Fund may have investments in financial instruments that utilize LIBOR as the
reference or benchmark rate for variable interest rate calculations. LIBOR is
intended to measure the rate generally at which banks can lend and borrow from
one another in the relevant currency on an unsecured basis. In the years
following the 2008 final crisis, the integrity of LIBOR was increasingly
questioned because several banks contributing to its calculation were accused of
rate manipulation and because of a general contraction in the unsecured
interbank lending market. As a result, regulators and financial industry working
groups in several jurisdictions have worked over the past several years to
identify alternative reference rates (“ARRs”) to replace LIBOR and to assist
with the transition to the new ARRs. In connection with the transition, on March
5, 2021 the UK Financial Conduct Authority (FCA), the regulator that oversees
LIBOR, announced that the majority of LIBOR rates would cease to be published or
would no longer be representative on January 1, 2022. Consequently, the
publication of most LIBOR rates ceased at the end of 2021, but a selection of
widely used USD LIBOR rates continues to be published until June 2023 to allow
for an orderly transition away from these rates. Additionally, key regulators
have instructed banking institutions to cease entering into new contracts that
reference these USD LIBOR settings after December 31, 2021, subject to certain
limited exceptions.
There remains uncertainty and risks
relating to the continuing LIBOR transition and its effects on the Fund and the
instruments in which the Fund invests. For example, there can be no assurance that the
composition or characteristics of any ARRs or financial instruments in which the Fund invests that utilize ARRs will be similar to or
produce the same value or economic equivalence as LIBOR or that these
instruments will have the same volume or liquidity. Additionally, although
regulators have generally prohibited banking institutions from entering into new
contracts that reference those USD LIBOR settings that continue to
exist, there remains uncertainty and risks relating to
certain “legacy” USD LIBOR instruments that were issued or
entered into before December 31, 2021 and the process by which a
replacement interest rate will be identified and implemented into
these instruments when USD LIBOR is ultimately discontinued. The effects of such
uncertainty and risks in “legacy” USD LIBOR instruments held by the
Fund could result in losses to the Fund.
Call
Risk.
Call risk (also termed prepayment risk) is the risk that a borrower repays its
debts earlier than expected (especially if interest rates decline), resulting in
premature repayment of a debt instrument. If interest rates fall, issuers of
callable securities with high interest coupons may “call” (or repay) their bonds
before their maturity date in accordance with the terms of the security. If such
a repayment were to occur, the Fund would receive the principal (par) amount of
the security and would no longer own that security. Any reinvestment of the
amount of principal received would be subject to reinvestment risk, and the Fund
could be forced to reinvest in a lower yielding security, which could reduce the
Fund’s net investment income. If the Fund purchases a debt security at a premium
to its par value, and that security is called at par, the Fund could lose
money.
Reinvestment
Risk.
Reinvestment risk is the risk that the Fund will not be able to reinvest income
or principal at the same return it is currently earning. Reinvestment risk is
greater during periods of declining interest rates, as prepayments often occur
faster. This may require the Fund to reinvest the proceeds at an earlier date,
and it may be able to do so only at lower yields, thereby reducing its
return.
Extension
Risk. Extension risk
is the opposite of reinvestment risk, and typically occurs when interest
rates rise, thereby causing repayments of
fixed income securities to occur
more slowly than expected by the market. This may drive the prices of these
securities down because their interest rates are lower than the current interest
rate and they have longer duration (resulting in increased sensitivity to
interest rate changes).
Liquidity
Risk.
Liquidity risk exists when a particular investment is difficult to purchase or
sell. If the Fund invests in illiquid securities or current portfolio securities
become illiquid, it may reduce the returns of the Fund because the Fund may be
unable to sell the illiquid securities at an advantageous time or price. In the
event that the Fund voluntarily or involuntarily liquidates portfolio assets
during periods of infrequent trading, it may not receive full value for those
assets.
Issuer-Specific
Changes Risk. The performance of
the Fund depends on the performance of individual securities to which the Fund
has exposure. The value of an individual security or particular type of security
may be more volatile than the market as a whole and may perform worse than the
market as a whole, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, expiration of patent protection, disruptions in supply,
labor problems or shortages, corporate restructurings, fraudulent disclosures or
other factors. Issuers may, in times of distress or at their own discretion,
decide to reduce or eliminate dividends, which may also cause their stock prices
to decline.
Valuation
Risk. Financial
information related to securities of non-U.S. issuers may be less reliable than
information related to securities of U.S. issuers, which may make it difficult
to obtain a current price for a non-U.S. security held by the Fund. In certain
circumstances, market quotations may not be readily available for some
securities, and those securities may be fair valued. The value established for a
security through fair valuation may be different from what would be produced if
the security had been valued using market quotations. Fund securities that are
valued using techniques other than market quotations, including “fair valued”
securities, may be subject to greater fluctuations in their value from one day
to the next than would be the case if market quotations were used. In addition,
there is no assurance that the Fund could sell a portfolio security for the
value established for it at any time, and it is possible that the Fund would
incur a loss because a security is sold at a discount to its established
value.
Valuation
Time Risk. Because
foreign exchanges may be open on days when the Fund does not price its Shares,
the value of the non-U.S. securities in the Fund’s portfolio may change on days
when you will not be able to purchase or sell your Shares. As a result, trading
spreads and the resulting premium or discount on the Shares may widen, and,
therefore, increase the difference between the market price of the Shares and
the NAV of such Shares.
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, may increase this risk.
Cash
Transaction Risk. Unlike most ETFs,
the Fund effects creations and redemptions principally for cash, rather than
principally in-kind because of the nature of the Fund’s investments. ETFs
generally are able to make in-kind redemptions and avoid being taxed on gain on
the distributed
10
portfolio
securities at the Fund level. Because the Fund currently intends to effect
redemptions principally for cash, rather than principally for in-kind
securities, it may be required to sell portfolio securities in order to obtain
the cash needed to distribute redemption proceeds. The Fund may recognize a
capital gain on these sales that might not have been incurred if the Fund had
made a redemption in-kind, and this may decrease the tax efficiency of the Fund
compared to ETFs that utilize an in-kind redemption process, and there may be a
substantial difference in the after-tax rate of return between the Fund and
conventional ETFs.
Market
Trading Risk. The Fund faces
numerous market trading risks, including losses from trading in secondary
markets, periods of high volatility and disruption in the creation/redemption
process of the Fund. Although Shares are listed for trading on a securities
exchange, there can be no assurance that an active trading market for Shares
will develop or be maintained by market makers or APs, that Shares will continue
to trade on any such exchange or that Shares will continue to meet the
requirements for listing on an exchange. Any of these factors, among others, may
lead to the Shares trading at a premium or discount to the Fund’s NAV. As a
result, an investor could lose money over short or long periods. Further, the
Fund may experience low trading volume and wide bid/ask spreads. Bid/ask spreads
vary over time based on trading volume and market liquidity (including for the
underlying securities held by the Fund), and are generally lower if Shares have
more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Additionally, 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
value.
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.
Unlike
conventional ETFs, the Fund is not an index fund. The Fund is actively managed and does not seek
to replicate the performance of a specified index. Index-based ETFs generally
have traded at prices that
closely correspond to NAV per
share. Given the high level of transparency of the Fund’s holdings, the Adviser
believes that the trading experience of the Fund should be similar to that of
index-based ETFs. However, there can be no assurance as to whether and/or the
extent to which the Shares will trade at premiums or discounts to
NAV.
Non-Principal
Investment Strategies
In accordance with the 1940 Act
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 variable rate, investment grade securities (the “80%
investment policy”).
The Fund’s
investment objective and the 80% investment policy are non-fundamental policies that the
Board of Trustees (the “Board”) of Invesco Actively Managed Exchange-Traded Fund
Trust (the “Trust”) may change without shareholder approval upon 60 days’ prior
written notice to shareholders.
The fundamental
and non-fundamental policies of the Fund are set forth in the Fund’s Statement of
Additional Information (“SAI”) under the section “Investment
Restrictions.”
Borrowing
Money
The Fund may borrow
money up to the limits set forth in the Fund’s SAI under the section “Investment
Restrictions.”
Securities
Lending
The Fund may lend
its portfolio securities to brokers, dealers, and other financial institutions.
In connection with such loans, the Fund receives liquid collateral equal to at
least 102% (105% for international securities) of the value of the loaned
portfolio securities. This collateral is marked-to-market on a daily
basis.
Additional
Risks of Investing in the Fund
The Fund may also be subject to
certain other, non-principal risks associated with its investments and
investment strategies. The following provides additional, non-principal risk information
regarding investing in the Fund.
Cybersecurity
Risk.
The Fund, like all companies, may be susceptible to operational and information
security risks. Cybersecurity failures or breaches of the Fund or its service
providers or the issuers of securities in which the Fund invests, have the
ability to cause disruptions and impact business operations, potentially
resulting in financial losses, 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. The Fund and its shareholders could be
negatively impacted as a result.
Large
Shareholder Risk.
Certain shareholders, including a third party investor, the Fund’s investment
adviser or an affiliate of the investment adviser, an AP, a lead market maker,
or another entity, may from time to time own a substantial amount of Shares or
may invest in the Fund and hold its investment for a limited period of time
solely to facilitate the commencement of the Fund or to facilitate the Fund
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment. Dispositions of a large number of
Shares by these shareholders may adversely affect the Fund’s liquidity and net
assets to the extent such transactions are executed directly with the Fund in
the form of redemptions through an AP, rather than executed in the secondary
market. These redemptions may also force the Fund to sell portfolio securities
when it might not otherwise do so, which may negatively impact the Fund’s NAV
and increase the Fund’s brokerage costs. Further, such sales may accelerate the
realization of taxable income and/or gains to shareholders, or the Fund may be
required to sell its more liquid Fund investments to meet a large redemption, in
which case the Fund’s remaining assets may be less liquid, more volatile, and
more difficult to price. To the extent the Fund permits cash purchases, large
purchases of Shares may adversely affect the Fund’s performance to the extent
that the Fund is delayed in investing new cash and is required to maintain a
larger
11
cash position than it ordinarily
would. To the extent these large shareholders transact in shares on the
secondary market, such transactions may account for a large percentage of the
trading volume on the Fund’s exchange and may, therefore, have a material upward
or downward effect on the market price of the Shares. To the extent the Fund
permits redemptions in cash, the Fund may hold a relatively large proportion of
its assets in cash in anticipation of large redemptions, diluting its investment
returns.
Leverage
Risk. To the extent
that the Fund borrows money, it may be leveraged. Leveraging generally
exaggerates the effect on NAV of any increase or decrease in the market value of
the Fund’s portfolio securities. Borrowing creates interest expenses and other
expenses (e.g., commitment fees) for the Fund that affect the Fund’s
performance. Interest expenses are excluded from the Fund expenses borne by the
Adviser under the unitary management fee.
Natural
Disaster/Epidemic Risk. Natural or
environmental disasters, such as earthquakes, fires, floods, hurricanes,
tsunamis and other severe weather-related phenomena generally, and widespread
disease, including pandemics and epidemics, have been and may be highly
disruptive to economies and markets, adversely impacting individual companies,
sectors, industries, markets, currencies, interest and inflation rates, credit
ratings, investor sentiment, and other factors affecting the value of the Fund’s
investments. Additionally, if a sector or sectors in which the Fund is
concentrated is negatively impacted to a greater extent by such events, the Fund
may experience heightened volatility. Given the increasing interdependence among
global economies and markets, conditions in one country, market, or region are
increasingly likely to adversely affect markets, issuers, and/or foreign
exchange rates in other countries, including the U.S. Any such events could have
a significant adverse impact on the value of the Fund’s
investments.
Securities
Lending Risk. Securities lending
involves a risk of loss because the borrower may fail to return the securities
in a timely manner or at all. If the Fund lends its securities and is unable to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Any cash received as
collateral for loaned securities will be invested in an affiliated money market
fund. This investment is subject to market appreciation or depreciation and the
Fund will bear any loss on the investment of its cash collateral.
Trading
Issues Risk. Investors buying or
selling Shares in the secondary market may pay brokerage commissions or other
charges, which may be a significant proportional cost for investors seeking to
buy or sell relatively small amounts of Shares. Moreover, trading in Shares on
The 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, the value of the securities in
the Fund’s portfolio may change on days when shareholders will not be able to
purchase or sell Shares.
Tax Structure of ETFs
Unlike interests in conventional
mutual funds, which typically are bought and sold only at closing NAVs, the
Shares are traded throughout the day in the secondary market on a national
securities exchange and are issued and redeemed principally for cash in Creation
Units at each day’s next calculated NAV. Because the Fund will redeem Shares
principally in cash, investments in the Shares will not typically gain the
tax-advantaged benefits associated with exchange-traded funds that redeem shares
principally in-kind. Such
in-kind
arrangements are designed to protect shareholders from the adverse effects on
the Fund’s portfolio that could arise from frequent cash creation and redemption
transactions. In a conventional mutual fund, redemptions can have an adverse tax
impact on taxable shareholders because the mutual fund may need to sell
portfolio securities to obtain cash to meet such redemptions. These sales may
generate taxable gains that must be distributed to the shareholders of the Fund,
whereas an in-kind redemption mechanism will not lead to a taxable event for the
Fund (to the extent that it uses in-kind redemptions) or its shareholders.
However, the tax advantages of investing in Shares may be less pronounced than
passive ETFs because the Fund is actively managed and, therefore, may have
greater turnover in its portfolio securities, which could result in less tax
efficiency than an investment in a fund that is not actively
managed.
The Fund may
recognize gains as a result of selling its securities. The Fund also may be required to
distribute any such gains to its shareholders to avoid adverse federal income
tax consequences. For information concerning the tax consequences of
distributions, see the section entitled “Dividends, Other Distributions and
Taxes” in this Prospectus.
Portfolio Holdings
A description of
the Trust's policies and procedures with respect to the disclosure of the Fund’s
portfolio holdings is available in the Fund’s SAI, which is available at
www.invesco.com/ETFs.
Management of the Fund
Invesco Capital Management LLC is a
registered investment adviser with its offices at 3500 Lacey Road,
Suite 700, Downers Grove, IL 60515. Invesco Capital Management LLC serves
as the investment adviser to the Invesco Actively Managed Exchange-Traded
Commodity Fund Trust, Invesco Actively Managed Exchange-Traded Fund Trust,
Invesco Exchange-Traded Fund Trust, Invesco Exchange-Traded Fund Trust II,
Invesco Exchange-Traded Self-Indexed Fund Trust and Invesco India
Exchange-Traded Fund Trust, a family of ETFs, with combined assets under
management of $183.7 billion as of December 31, 2021.
As
the Fund’s investment adviser, the Adviser has overall responsibility
for
continuously monitoring the Fund’s investments, managing the Fund’s business
affairs and providing certain clerical, bookkeeping and other administrative
services for the Trust and oversight of the Sub-Adviser.
Invesco
Advisers, Inc., a subsidiary of Invesco Ltd., the parent of Invesco Capital Management LLC, is a
registered investment adviser and serves as the investment sub-adviser to the
Fund and, subject to the supervision of the Adviser and the Board, is
responsible for the investment management of the Fund. The Sub-Adviser’s
principal business address is 1555 Peachtree Street, N.E., Atlanta, Georgia
30309. In addition, the Sub-Adviser serves as the investment adviser to the
Invesco mutual funds with combined assets under management of approximately
$752.4 billion as of December 31, 2021.
Portfolio
Managers
The Adviser and Sub-Adviser each
use teams of portfolio managers, investment strategists and other investment
specialists in managing the Fund. This team approach brings together many
disciplines and leverages the Adviser’s and Sub-Adviser’s extensive resources.
In this regard, Peter Hubbard, Philip Armstrong, Mario Clemente, Brian Norris
and Ken Purnell (the “Portfolio Managers”) are jointly and primarily responsible
for the day-to-day management of the Fund.
Investment
decisions for the Fund are made by investment management teams at the Adviser and
Sub-Adviser. Each Portfolio Manager is responsible for various functions related
to portfolio management, including investing cash flows, coordinating with other
team members to
12
focus on certain
asset classes, implementing investment strategy and researching and reviewing
investment strategy. Each Portfolio Manager has limitations on his or her
authority for risk management and compliance purposes that the Adviser or
Sub-Adviser believes to be appropriate.
■
Peter Hubbard,
Director of Portfolio Management of the Adviser, has been responsible for the
management of the Fund since September 2016. 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.
■
Philip Armstrong, Lead Portfolio
Manager of the Sub-Adviser, has been responsible for the management of the Fund
since September 2016 and has been associated with the Sub-Adviser and/or its
affiliates since 2015.
■
Mario Clemente,
Portfolio Manager of the Sub-Adviser, has been responsible for the management of
the Fund since February 2017 and has been associated with the Sub-Adviser and/or
its affiliates since 2014.
■
Brian P. Norris,
Portfolio Manager of the Sub-Adviser, has been responsible for the management of
the Fund since September 2016 and has been associated with the Sub-Adviser
and/or its affiliates since 2001.
■
Ken Purnell, Portfolio Manager of
the Sub-Adviser, has been responsible for the management of the Fund since
September 2016 and has been associated with the Sub-Adviser and/or its
affiliates since 2011.
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 0.30% 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 the Sub-Adviser’s fees and 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. These waivers do not apply to the Fund’s investment of cash collateral
received for securities lending. These waivers are in place through at least
August 31, 2023, and there is no guarantee that the Adviser will extend them
past that date.
The
Adviser has entered into an Investment Sub-Advisory Agreement with the
Sub-Adviser. The sub-advisory fee is paid by the Adviser to the Sub-Adviser at
40% of the Adviser’s compensation of the sub-advised assets of the
Fund.
A discussion
regarding the basis for the Board’s approval of the Investment Advisory Agreement and
the Investment Sub-Advisory Agreement with respect to the Fund is available in
the Fund’s Semi-Annual Report to Shareholders for the fiscal period ended April
30, 2021.
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 “VRIG.”
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.
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.
13
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 and/or redemptions of the Shares. Cash purchases
and/or redemptions of Creation Units, however, can result in 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 to not accept orders from APs that the Adviser has determined
may be disruptive to the management of the Fund or otherwise are not in the best
interests of the Fund. In recognition of the nature of the
Fund's investments and that its Shares are purchased and redeemed in
Creation Units principally in cash, the Board has adopted policies and
procedures with respect to frequent purchases and redemptions of
Shares, which incorporate the practices
described above, as well as additional trade monitoring for market timing
activities.
Dividends, Other Distributions and Taxes
Dividends
and Other Distributions
Generally,
dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund also intends to distribute its net realized capital gains, if
any, to shareholders annually. Dividends and other distributions may be declared
and paid more frequently to comply with the distribution requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended, 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 following basic tax points
as supplemented below where relevant:
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 higher
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
lower 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. Should the
Fund invest 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 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 Fund’s
shares are held in a tax-advantaged arrangement. A liquidating distribution may
be subject to backup withholding as described below.
■
A shareholder’s
cost basis information will be provided on the sale of any of the shareholder’s
Shares, subject to certain exceptions for exempt recipients. Please contact the
broker (or other nominee) that holds your Shares with respect to reporting of
your cost basis and available elections for your account.
■
At the time you purchase your
Shares, the Fund’s NAV may reflect undistributed income or undistributed capital
gains. A subsequent distribution to you of such amounts, although constituting a
return of your investment, would be taxable. Buying Shares just before the Fund
declares an income dividend or capital gains distribution is sometimes known as
“buying a dividend.” In addition, the Fund’s NAV may, at any time, reflect net
unrealized appreciation, which may result in future taxable distributions to
you.
■
By law, if you do
not provide the Fund with your proper taxpayer identification number and certain
required certifications, you may be subject to backup withholding on any
distributions of income, capital gains, or proceeds from the sale of your
Shares. The Fund also must withhold if the IRS instructs it to do so. When
withholding is required, the amount will be 24% of any distributions or proceeds
paid.
■
An additional 3.8%
Medicare tax is imposed on certain net investment income (including ordinary
dividends and capital gain distributions received from the Fund and net gains
from taxable dispositions of Shares) of U.S. individuals, estates and trusts to
the extent that such person’s “modified adjusted gross income” (in the case of
an individual) or
14
“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.
■
If the Fund invests
in an underlying fund taxed as a RIC, please see any relevant section below for
more information regarding the Fund’s investment in such underlying
fund.
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. All valuations are subject
to review by the Trust’s Board or its delegate.
In determining
NAV, expenses are accrued and applied daily and securities and other assets for
which market quotations are readily available are valued at market value.
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. Investment
companies are valued using such company’s NAV per share, unless the shares are
exchange-traded, in which case they will be valued at the last trade price or
official closing price on the exchanges 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. Debt obligations
(including convertible securities) normally are valued on the basis of prices
provided by independent pricing services. Pricing services generally value debt
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 final
settlement price set by an exchange on which they are principally traded. Listed
options are valued at the mean between the last bid and asked prices from the
exchange on which they principally trade. Options not listed on an exchange are
valued by an independent source at the mean between the last bid and asked
prices. Swaps generally are valued using pricing provided from independent
pricing services. Unlisted securities will
15
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 Trust’s valuation policies and procedures approved by the Board. The Adviser
may use various pricing services or 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 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 that such price is
stale or unreliable, the Adviser will value the security at fair value in good
faith using procedures approved by the Board. Fair value pricing involves
subjective judgments, and 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. If the Fund holds securities that are primarily listed on
foreign exchanges, the value of such securities may change on days when you will
not be able to purchase or sell Shares. In addition, if the Fund seeks to track
an 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 that 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.
16
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, 2021, which is
available upon request.
|
|
Years
Ended October 31, | ||||
|
|
2021 |
2020 |
2019 |
2018 |
2017 |
|
Per
Share Operating Performance: |
|
|
|
|
|
|
Net asset
value at beginning of year |
$24.89 |
$24.94 |
$25.02 |
$25.20 |
$24.98 |
|
Net
investment income(a)
|
0.19 |
0.40 |
0.75 |
0.65 |
0.50 |
|
Net
realized and unrealized gain (loss) on investments |
0.21 |
0.02 |
(0.03) |
(0.15) |
0.29 |
|
Total
from investment operations |
0.40 |
0.42 |
0.72 |
0.50 |
0.79 |
|
Distributions
to shareholders from: |
|
|
|
|
|
|
Net
investment income |
(0.20) |
(0.44) |
(0.80) |
(0.68) |
(0.56) |
|
Return of
capital |
- |
(0.03) |
- |
- |
(0.01) |
|
Total
distributions |
(0.20) |
(0.47) |
(0.80) |
(0.68) |
(0.57) |
|
Net asset
value at end of year |
$25.09 |
$24.89 |
$24.94 |
$25.02 |
$25.20 |
|
Market
price at end of year(b)
|
$25.10 |
$24.89 |
$24.95 |
$25.02 |
$25.22 |
|
Net Asset
Value Total Return(c)
|
1.62% |
1.75% |
2.92% |
2.01% |
3.21% |
|
Market
Price Total Return(c)
|
1.66% |
1.72% |
2.96% |
1.92% |
3.04% |
|
Ratios/Supplemental
Data: |
|
|
|
|
|
|
Net assets
at end of year (000’s omitted) |
$471,652 |
$453,021 |
$391,527 |
$447,868 |
$133,548 |
|
Ratio to
average net assets of: |
|
|
|
|
|
|
Expenses,
after Waivers |
0.30% |
0.29% |
0.30% |
0.30% |
0.30% |
|
Expenses,
prior to Waivers |
0.30% |
0.30% |
0.30% |
0.30% |
0.30% |
|
Net
investment income |
0.77% |
1.64% |
3.00% |
2.59% |
1.98% |
|
Portfolio
turnover rate(d)
|
93% |
99% |
62% |
26% |
23% |
|
(a) |
Based on
average shares outstanding. |
|
(b) |
The mean
between the last bid and ask prices. |
|
(c) |
Net asset
value total return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value
during the
period, and redemption at net asset value on the last day of the period.
Net asset value total return includes adjustments in accordance with
accounting principles generally accepted in
the United
States of America and as such, the net asset value for financial reporting
purposes and the returns based upon those net asset values may differ from
the net asset value and returns
for
shareholder transactions. Market price total return is calculated assuming
an initial investment made at the market price at the beginning of the
period, reinvestment of all dividends and
distributions
at market price during the period, and sale at the market price on the
last day of the period. Total investment returns calculated for a period
of less than one year are not annualized. |
|
(d) |
Portfolio
turnover rate is not annualized for periods less than one year, if
applicable, and does not include securities received or delivered from
processing creations or
redemptions. |
17
Premium/Discount Information
Information showing the number of
days the market price of the Shares was greater (at a premium) and less (at a
discount) than the Fund’s NAV for the most recently completed calendar year and
the most recently completed calendar quarters since that year (or the life of
the Fund, if shorter) is available on the Fund’s website at
www.invesco.com/ETFs.
Other Information
Continuous
Offering
The method by which
Creation Unit Aggregations of Shares are created and traded may raise certain
issues under applicable securities laws. Because new Creation Unit Aggregations
of Shares are issued and sold by the Fund on an ongoing basis, a “distribution,”
as such term is used in the Securities Act, may occur at any point.
Broker-dealers and other persons are cautioned that some activities on their
part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent Shares and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving the solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms also should note that dealers who are not “underwriters” but
are effecting transactions in Shares, whether or not participating in the
distribution of Shares, generally are required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(a)(3)(C) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not “underwriters” but are participating in a distribution (as
contrasted with engaging in ordinary secondary market transactions), and thus
dealing with the Shares that are part of an overallotment within the meaning of
Section 4(a)(3)(C) of the Securities Act, will be unable to take advantage of
the prospectus delivery exemption provided by Section 4(a)(3) of the Securities
Act. For delivery of prospectuses to exchange members, the prospectus delivery
mechanism of Rule 153 under the Securities Act only is available with respect to
transactions on a national exchange.
Delivery
of Shareholder Documents–Householding
Householding is an
option available to certain investors of the Fund. Householding is a method of
delivery, based on the preference of the
individual
investor, in which a single copy of certain shareholder documents can be
delivered to investors who share the same address, even if their accounts are
registered under different names. Householding for the Fund is available through
certain broker-dealers. If you are interested in enrolling in householding and
receiving a single copy of the Prospectus and other shareholder documents,
please contact your broker-dealer. If you currently are enrolled in householding
and wish to change your householding status, please contact your
broker-dealer.
For
More Information
For more detailed
information on the Trust, the Fund and the Shares, you may request a copy of the
Fund’s SAI. The SAI provides detailed information about the Fund and is
incorporated by reference into this Prospectus. This means that the SAI legally
is a part of this Prospectus. Additional information about the Fund’s
investments also is available in the Fund’s Annual and Semi-Annual Reports to
Shareholders. In the Fund’s current Annual Report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance during the last fiscal 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
Actively Managed Exchange-Traded Fund Trust
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 811-22148.
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