Invesco Energy S&P US Select Sector UCITS ETF (XLES.L)

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This Invesco Exchange Traded Fund (ETF) aims to mirror the net total return of the S&P Select Sector Capped 20% Energy Index (referred to as the “Reference Index”), after accounting for charges. This benchmark is composed of companies within the energy segment of the S&P 500 Index. Each constituent's weighting is determined by its float-adjusted market capitalization, with a 19% ceiling on individual holdings; any weight exceeding this cap is subsequently distributed proportionally among the remaining uncapped components. To achieve its investment objective, the fund primarily holds a diversified portfolio of equities. While these holdings are generally the main source of the fund's returns, they are typically distinct from the actual securities comprising the Reference Index. Furthermore, the fund utilizes unfunded swap agreements with approved counterparties. These contracts involve an exchange where the counterparty pays or receives the difference in returns between the Reference Index and the fund's underlying equity basket. This hybrid approach is designed to ensure a more precise and consistent alignment with the Reference Index's performance than would typically be possible through solely holding the index's physical assets. Although the fund's core objective is to track the net total return index, the derivative agreements it enters into are linked to an optimized version of the index that incorporates withholding tax advantages. Consequently, the ETF's performance, prior to the deduction of fees, is expected to surpass that of the conventional net return index. Operating under a passive management strategy, this ETF means that an investment represents the acquisition of shares in an index-following vehicle, rather than direct ownership of the specific assets held by the fund.