Prospectus
John
Hancock
Mortgage-Backed Securities ETF
Mortgage-Backed Securities ETF
Fixed
income
September 1, 2025
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NYSE
Arca: |
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JHMB |
The Securities
and Exchange Commission has not approved or disapproved these securities or
passed upon the adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
The summary
section is a concise look at the investment objective, fees and expenses,
principal investment strategies, principal risks, past performance, and
investment management.
Fund
details
More about
topics covered in the summary section, including descriptions of the investment
strategies and various risk factors that investors should understand before
investing.
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16 |
Shareholder
information
Details
regarding buying and selling shares, as well as information about distributions,
taxation, and other matters relating to an investment in the
fund.
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22 |
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23 |
Other
information
Additional
information regarding the market price and net asset value of the fund, as well
as information relating to the continuous offering of the fund’s
shares.
For more
information See
back cover
Fund
summary
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Management
fee |
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Other
expenses |
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Total
annual fund operating expenses |
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Contractual
expense reimbursement |
-
1 |
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Total
annual fund operating expenses after expense
reimbursements |
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1
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Expenses
($) |
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1
year |
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3
years |
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5
years |
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10
years |
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1
Fund
summary
Principal
risks
The fund’s
main risks are listed below in alphabetical order, not in order of importance.
Before
investing, be sure to read the additional descriptions of these risks beginning
on page 6 of the prospectus.
2
Fund
summary
3
Fund
summary
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Since
inception |
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1
year |
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Before
tax |
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- |
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after
tax on distributions |
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- |
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after
tax on distributions, with sale |
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- |
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Bloomberg
U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
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- |
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Bloomberg
U.S. MBS Index (reflects no deduction for fees, expenses, or
taxes) |
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- |
Investment
management
Investment
advisor
John Hancock
Investment Management LLC
Subadvisor
Manulife
Investment Management (US) LLC
Portfolio
management
The following
individuals are jointly and primarily responsible for the day-to-day management
of the fund’s portfolio.
4
Fund
summary
|
David
A. Bees, CFA |
Jeffrey
N. Given, CFA |
Howard
C. Greene, CFA |
Connor
Minnaar, CFA |
Pranay
Sonalkar, CFA |
|
Portfolio
Manager
Managed
the fund since
2021 |
Senior
Portfolio Manager,
Co-Head
of U.S. Core and
Core-Plus
Fixed Income
Managed
the fund since
2021 |
Senior
Portfolio Manager,
Co-Head
of U.S. Core and
Core-Plus
Fixed Income
Managed
the fund since
2021 |
Portfolio
Manager
Managed
the fund since
2022 |
Portfolio
Manager
Managed
the fund since
2024 |
Purchase
and sale of fund shares
The fund will
issue and redeem shares at NAV only with authorized participants and only in a
large specified number of shares, each called a “creation unit,” or multiples
thereof, in exchange for the deposit or delivery of a basket of securities
and/or cash. Except when aggregated in creation units, the shares are not
redeemable securities of the fund.
Individual
shares of the fund may be purchased and sold only in secondary market
transactions through brokers or financial intermediaries. Shares of the fund are
listed and traded on the NYSE Arca. Because shares trade at market prices rather
than NAV, shares of the fund may trade at a price greater than NAV (premium) or
less than NAV (discount).
An investor
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase shares of the fund (bid) and the lowest price a
seller is willing to accept for shares of the fund (ask) when buying or selling
shares in the secondary market (bid-ask spread).
Recent
information, including information about the fund’s NAV, market price, premiums
and discounts, and bid-ask spreads, is included on the fund’s website at
jhinvestments.com/etf.
Taxes
The fund’s
distributions are taxable, and will be taxed as ordinary income and/or capital
gains, unless you are investing through a tax-deferred arrangement, such as a
401(k) plan or individual retirement account. Withdrawals from such tax-deferred
arrangements may be subject to tax at a later date.
Payments
to broker-dealers and other financial intermediaries
The advisor
and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the fund shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the fund over another investment. Ask your financial advisor or visit
your financial intermediary’s website for more information.
5
Fund
details
Principal
investment strategies
Investment
Objective:
The fund seeks
a high level of current income while seeking to outperform the benchmark over a
market cycle.
The fund is an
ETF, which is a fund that trades like other publicly-traded securities. The fund
is not an index fund. The fund is actively managed and does not seek to
replicate the performance of a specified index.
The Board of
Trustees can change the fund’s investment objective and strategy without
shareholder approval. The fund will provide written notice to shareholders at
least 60 days prior to a change in its 80% investment policy.
Under normal
market conditions, the fund invests at least 80% of its net assets (plus any
borrowings for investment purposes) in mortgage-backed securities. The fund may
invest in mortgage-related securities issued or guaranteed by U.S. governmental
entities and privately issued mortgage-related securities. These may include
residential mortgage-backed securities, commercial mortgage-backed securities
and to-be-announced mortgage contracts, and may be rated investment grade or
below. Investment-grade securities are rated from AAA to BBB- by S&P Global
Ratings (S&P) or by Fitch Ratings (Fitch) or from Aaa to Baa3 by Moody’s
Investors Service, Inc. (Moody’s), or comparable rating by any nationally
recognized statistical rating organization (NRSRO), or their unrated
equivalents. Below investment-grade securities are rated BB and below by S&P
or Fitch or Ba and below by Moody’s, or comparable rating by any NRSRO, or their
unrated equivalents. The fund will limit its investment in below investment
grade securities to 20% of its net assets at time of purchase. The fund’s
investment policies are based on credit ratings at the time of purchase. There
is no limit on the fund’s average maturity.
The manager focuses on
bottom-up sector allocation and security selection in making investment
decisions. When making sector allocations, the manager considers each sector’s
place in the business cycle, forward looking trends and historical and technical
factors before relative value decisions are made. The manager uses bottom-up
fundamental research to find individual securities that appear comparatively
undervalued. The manager considers environmental, social, and/or governance
(ESG) factors, alongside other relevant factors, as part of its investment
process. ESG factors may include, but are not limited to, matters regarding
board diversity, climate change policies, and supply chain and human rights
policies. The ESG characteristics utilized in the fund’s investment process may
change over time and one or more characteristics may not be relevant with
respect to all issuers that are eligible fund investments. Because ESG factors
are considered alongside other relevant factors, the manager may determine that
an investment is appropriate notwithstanding its relative ESG characteristics.
Under normal market conditions, the fund will not invest more than 5% of its net
assets in derivatives transactions. Derivatives transactions include credit
default swaps, foreign currency forward contracts, futures contracts, and
options. The fund may engage in derivatives transactions to reduce risk and/or
obtain efficient market exposure. The fund’s investments in U.S. government and
agency securities may or may not be supported by the full faith and credit of
the United States. The fund may trade securities actively.
The fund may
invest up to 20% of its net assets in non-mortgage-backed securities including
other asset-backed securities and collateralized loan obligations (CLOs) and
cash and cash equivalents.
The fund may
invest in U.S. dollar-denominated securities of foreign governments and
corporations. Under normal market conditions, the fund will limit its
investments in U.S. dollar-denominated foreign securities (excluding Canadian
securities) to 25% of its total assets. The fund may invest in bonds issued by
master limited partnerships.
Due to the
nature of certain of the fund’s investments, the fund intends to effect a
portion of creations and redemptions for cash, rather than in-kind
securities.
The fund may
deviate from its principal investment strategies during transition periods,
which may include the reassignment of portfolio management, a change in
investment objective or strategy, a reorganization or liquidation, or the
occurrence of large inflows or outflows.
Additional
investment strategies
Other
investments
The fund may also invest, to
the extent permitted by the Investment Company Act of 1940, as amended, in other
affiliated and unaffiliated funds, such as open-end or closed-end management
investment companies, including other ETFs.
Temporary
defensive investing
In abnormal
circumstances, the fund may temporarily invest extensively in investment-grade
short-term securities, cash, or cash equivalents for the purpose of protecting
the fund in the event the manager determines that market, economic, political,
or other conditions warrant a defensive posture.
To the extent
that the fund is in a defensive position, its ability to achieve its
investment objective will be limited.
Principal
risks of investing
An investment
in the fund is not a bank deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The fund’s
shares will go up and down in price, meaning that you could lose money by
investing in the fund. Many factors influence a fund’s performance. The fund's
investment strategy may not produce the intended results.
Instability in
the financial markets has led many governments, including the U.S. government,
to take a number of unprecedented actions designed to support certain financial
institutions and segments of the financial markets that have experienced extreme
volatility and, in some cases, a lack of liquidity. Federal, state, and other
governments, and their regulatory agencies or self-regulatory organizations, may
take actions that affect the regulation of the instruments in which the fund
invests, or the issuers of such instruments, in ways that are unforeseeable.
Legislation or regulation may also change the way in which the fund itself is
regulated. Such legislation or regulation could limit or preclude the fund’s
ability to achieve its investment objective. In addition, political events
within the United States and abroad could negatively impact
6
Fund
details
financial
markets and the fund’s performance. Further, certain municipalities of the
United States and its territories are financially strained and may face the
possibility of default on their debt obligations, which could directly or
indirectly detract from the fund’s performance.
Governments or
their agencies may also acquire distressed assets from financial institutions
and acquire ownership interests in those institutions. The implications of
government ownership and disposition of these assets are unclear, and such a
program may have positive or negative effects on the liquidity, valuation, and
performance of the fund’s portfolio holdings. Furthermore, volatile financial
markets can expose the fund to greater market and liquidity risk, increased
transaction costs, and potential difficulty in valuing portfolio instruments
held by the fund.
The principal
risks of investing in the fund are summarized in its fund summary above. Below
are descriptions of the main factors that may play a role in shaping the fund’s
overall risk profile. The descriptions appear in alphabetical order, not in
order of importance. For further details about fund risks, including additional
risk factors that are not discussed in this prospectus because they are not
considered primary factors, see the fund’s Statement of Additional Information
(SAI).
Active
trading market risk
While the
fund’s shares are listed on NYSE Arca, there can be no assurance that active
trading markets for the shares will develop or be maintained by market makers or
authorized participants, and there are no obligations of market makers to make a
market in the fund’s shares or to submit purchase or redemption orders for
creation units. Although market makers will generally take advantage of
differences between the NAV and the trading price of fund shares through
arbitrage opportunities, there is no guarantee that they will do so. Decisions
by market makers or authorized participants to reduce their role with respect to
market making or creation/redemption activities in times of market stress could
inhibit the effectiveness of the arbitrage process in maintaining the
relationship between the underlying value of the fund’s portfolio securities and
the fund’s market price. This reduced effectiveness could result in shares
trading at a discount to NAV and also in greater than normal intraday bid-ask
spreads for shares.
Authorized
participant concentration risk
Only an
authorized participant may engage in creation or redemption transactions
directly with the fund. The fund has a limited number of intermediaries that act
as authorized participants. To the extent that these intermediaries exit the
business or are unable to proceed with creation and/or redemption orders with
respect to the fund and no other authorized participant is able to create or
redeem in their place, shares may trade at a discount to NAV and may face
delisting. This may in turn result in a significantly diminished trading market
for fund shares. Authorized participant concentration risk may be heightened for
ETFs, such as the fund, that invest in securities or instruments that have lower
trading volumes or in securities issued by non-U.S. issuers.
Cash
transactions risk
The fund
intends to effect some or all of its creation and redemption transactions using
cash, rather than in-kind securities. As a result, an investment in the fund may
be less tax-efficient than an investment in an ETF that effects all of its
creation and redemption transactions in-kind. In
order to
obtain the cash needed to distribute redemption proceeds, the fund may be
required to sell portfolio securities which may cause the fund to recognize
capital gains or losses and incur higher brokerage costs. To the extent that the
maximum additional charge for creation or redemption transactions is
insufficient to cover these costs and expenses, the fund’s NAV could be
negatively impacted.
Changing
distribution levels risk
The
distribution amounts paid by the fund generally depend on the amount of income
and/or dividends paid by the fund’s investments. As a result of market, interest
rate and other circumstances, the amount of cash available for distribution by
the fund and the fund’s distribution rate may vary or decline. The risk of such
variability is accentuated in currently prevailing market and interest rate
circumstances.
Credit
and counterparty risk
This is the
risk that an issuer of a U.S. government security, the issuer or guarantor of a
fixed-income security, the counterparty to an over-the-counter (OTC) derivatives
contract (see “Hedging, derivatives, and other strategic transactions risk”), or
a borrower of a fund’s securities will be unable or unwilling to make timely
principal, interest, or settlement payments, or otherwise honor its obligations.
Credit risk associated with investments in fixed-income securities relates to
the ability of the issuer to make scheduled payments of principal and interest
on an obligation. A fund that invests in fixed-income securities is subject to
varying degrees of risk that the issuers of the securities will have their
credit ratings downgraded or will default, potentially reducing the fund’s share
price and income level. Nearly all fixed-income securities are subject to some
credit risk, which may vary depending upon whether the issuers of the securities
are corporations, domestic or foreign governments, or their subdivisions or
instrumentalities. U.S. government securities are subject to varying degrees of
credit risk depending upon whether the securities are supported by the full
faith and credit of the United States; supported by the ability to borrow from
the U.S. Treasury; supported only by the credit of the issuing U.S. government
agency, instrumentality, or corporation; or otherwise supported by the United
States. For example, issuers of many types of U.S. government securities (e.g.,
the Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National
Mortgage Association (Fannie Mae), and Federal Home Loan Banks), although
chartered or sponsored by Congress, are not funded by congressional
appropriations, and their fixed-income securities, including asset-backed and
mortgage-backed securities, are neither guaranteed nor insured by the U.S.
government. An agency of the U.S. government has placed Fannie Mae and Freddie
Mac into conservatorship, a statutory process with the objective of returning
the entities to normal business operations. It is unclear what effect this
conservatorship will have on the securities issued or guaranteed by Fannie Mae
or Freddie Mac. As a result, these securities are subject to more credit risk
than U.S. government securities that are supported by the full faith and credit
of the United States (e.g., U.S. Treasury bonds). When a fixed-income security
is not rated, a manager may have to assess the risk of the security itself.
Asset-backed securities, whose principal and interest payments are supported by
pools of other assets, such as credit card receivables and automobile loans, are
subject to further risks, including the risk that the obligors of the underlying
assets default on payment of those assets.
7
Fund
details
Funds that
invest in below-investment-grade securities, also called junk bonds (e.g.,
fixed-income securities rated Ba or lower by Moody’s Investors Service, Inc. or
BB or lower by S&P Global Ratings or Fitch Ratings, as applicable, at the
time of investment, or determined by a manager to be of comparable quality to
securities so rated) are subject to increased credit risk. The sovereign debt of
many foreign governments, including their subdivisions and instrumentalities,
falls into this category. Below-investment-grade securities offer the potential
for higher investment returns than higher-rated securities, but they carry
greater credit risk: their issuers’ continuing ability to meet principal and
interest payments is considered speculative, they are more susceptible to real
or perceived adverse economic and competitive industry conditions, and they may
be less liquid than higher-rated securities.
In addition, a
fund is exposed to credit risk to the extent that it makes use of OTC
derivatives (such as forward foreign currency contracts and/or swap contracts)
and engages to a significant extent in the lending of fund securities or the use
of repurchase agreements. OTC derivatives transactions can be closed out with
the other party to the transaction. If the counterparty defaults, a fund will
have contractual remedies, but there is no assurance that the counterparty will
be able to meet its contractual obligations or that, in the event of default, a
fund will succeed in enforcing them. A fund, therefore, assumes the risk that it
may be unable to obtain payments owed to it under OTC derivatives contracts or
that those payments may be delayed or made only after the fund has incurred the
costs of litigation. While the manager intends to monitor the creditworthiness
of contract counterparties, there can be no assurance that the counterparty will
be in a position to meet its obligations, especially during unusually adverse
market conditions.
Currency
risk
If currencies
do not perform as the manager expects, the fund could have significant losses
which exceed the amount invested in the currency instruments since currency
transactions involve a small investment of cash relative to the magnitude of the
risks assumed, thereby magnifying the impact of any resulting gain or loss.
Currency risk includes the risk that fluctuations in exchange rates may
adversely affect the U.S. dollar value of a fund’s investments. Currency risk
includes both the risk that currencies in which a fund’s investments are traded,
or currencies in which a fund has taken an active investment position, will
decline in value relative to the U.S. dollar and, in the case of hedging
positions, that the U.S. dollar will decline in value relative to the currency
being hedged. Currency rates in foreign countries may fluctuate significantly
for a number of reasons, including the forces of supply and demand in the
foreign exchange markets, actual or perceived changes in interest rates, and
intervention (or the failure to intervene) by U.S. or foreign governments or
central banks, or by currency controls or political developments in the U.S. or
abroad. Certain funds may engage in proxy hedging of currencies by entering into
derivative transactions with respect to a currency whose value is expected to
correlate to the value of a currency the fund owns or wants to own. This
presents the risk that the two currencies may not move in relation to one
another as expected. In that case, the fund could lose money on its investment
and also lose money on the position designed to act as a proxy hedge. A fund may
also take active currency positions and may cross-hedge currency exposure
represented by its securities into another foreign currency. This may
result in a
fund’s currency exposure being substantially different than that suggested by
its securities investments. All funds with foreign currency holdings and/or that
invest or trade in securities denominated in foreign currencies or related
derivative instruments may be adversely affected by changes in foreign currency
exchange rates. Derivative foreign currency transactions (such as futures,
forwards and swaps) may also involve leveraging risk, in addition to currency
risk. Leverage may disproportionately increase a fund’s portfolio losses and
reduce opportunities for gain when interest rates, stock prices or currency
rates are changing.
Economic
and market events risk
Events in
certain sectors historically have resulted, and may in the future result, in an
unusually high degree of volatility in the financial markets, both domestic and
foreign. These events have included, but are not limited to: bankruptcies,
corporate restructurings, and other similar events; bank failures; governmental
efforts to limit short selling and high frequency trading; measures to address
U.S. federal and state budget deficits; social, political, and economic
instability in Europe; economic stimulus by the Japanese central bank; dramatic
changes in energy prices and currency exchange rates; and China’s economic
slowdown. Interconnected global economies and financial markets increase the
possibility that conditions in one country or region might adversely impact
issuers in a different country or region. Both domestic and foreign equity
markets have experienced increased volatility and turmoil, with issuers that
have exposure to the real estate, mortgage, and credit markets particularly
affected. Financial institutions could suffer losses as interest rates rise or
economic conditions deteriorate.
In addition,
relatively high market volatility and reduced liquidity in credit and
fixed-income markets may adversely affect many issuers worldwide. Actions taken
by the U.S. Federal Reserve (Fed) or foreign central banks to stimulate or
stabilize economic growth, such as interventions in currency markets, could
cause high volatility in the equity and fixed-income markets. Reduced liquidity
may result in less money being available to purchase raw materials, goods, and
services from emerging markets, which may, in turn, bring down the prices of
these economic staples. It may also result in emerging-market issuers having
more difficulty obtaining financing, which may, in turn, cause a decline in
their securities prices.
In response to
certain economic conditions, including periods of high inflation, governmental
authorities and regulators may respond with significant fiscal and monetary
policy changes such as raising interest rates. The fund may be subject to
heightened interest rate risk when the Federal Reserve Board (Fed) raises
interest rates. Recent and potential future changes in government monetary
policy may affect interest rates. It is difficult to accurately predict the
timing, frequency or magnitude of potential interest rate increases or decreases
by the Fed and the evaluation of macro-economic and other conditions that could
cause a change in approach in the future. If the Fed and other central banks
increase the federal funds rate and equivalent rates, such increases generally
will cause market interest rates to rise and could cause the value of a fund’s
investments, and the fund’s net asset value (NAV), to decline, potentially
suddenly and significantly. As a result, the fund may experience high
redemptions and, as a result, increased portfolio
8
Fund
details
turnover,
which could increase the costs that the fund incurs and may negatively impact
the fund’s performance.
In addition, if the Fed
increases the target Fed funds rate, any such rate increases, among other
factors, could cause markets to experience continuing high volatility. A
significant increase in interest rates may cause a decline in the market for
equity securities. These events and the possible resulting market volatility may
have an adverse effect on the fund.
Political turmoil within the
United States and abroad may also impact the fund. Although the U.S. government
has honored its credit obligations, it remains possible that the United States
could default on its obligations. While it is impossible to predict the
consequences of such an unprecedented event, it is likely that a default by the
United States would be highly disruptive to the U.S. and global securities
markets and could significantly impair the value of the fund’s investments.
Similarly, political events within the United States at times have resulted, and
may in the future result, in a shutdown of government services, which could
negatively affect the U.S. economy, decrease the value of many fund investments,
and increase uncertainty in or impair the operation of the U.S. or other
securities markets. The imposition by the U.S. of import tariffs on goods from
foreign countries and reciprocal tariffs levied on U.S.
goods may lead to
price volatility and instability in U.S. and global investment markets. Among
other effects, tariffs may increase the cost of production for certain goods or
reduce demand for products, which could affect the performance of the fund’s
investments. It is not known whether, or to what extent, any tariff or other
trade protections may affect the fund or its investments.
Uncertainties surrounding the
sovereign debt of a number of European Union (EU) countries and the viability of
the EU have disrupted and may in the future disrupt markets in the United States
and around the world. If one or more countries leave the EU, as the United
Kingdom (UK) did in January
of 2020 (commonly
referred to as “Brexit”), or the EU dissolves, the global securities
markets likely
will be significantly disrupted.
A widespread health crisis
such as a global pandemic could cause substantial market volatility, exchange
trading suspensions and closures, which may lead to less liquidity in certain
instruments, industries, sectors or the markets generally, and may ultimately
affect fund performance. For example, the coronavirus (COVID-19) pandemic has
resulted and may continue to result in significant disruptions to global
business activity and market volatility due to disruptions in market access,
resource availability, facilities operations, imposition of tariffs, export
controls and supply chain disruption, among others. The impact of a health
crisis and other epidemics and pandemics that may arise in the future, could
affect the global economy in ways that cannot necessarily be foreseen at the
present time. A health crisis may exacerbate other pre-existing political,
social and economic risks. Any such impact could adversely affect the fund’s
performance, resulting in losses to your investment.
Political and
military events, including in Ukraine, North Korea, Russia, Venezuela, Iran,
Syria, and other areas of the Middle East, and nationalist unrest in Europe and
South America, also may cause market disruptions.
As a result of
continued political tensions and armed conflicts, including the Russian invasion
of Ukraine commencing in February of 2022, the
extent and
ultimate result of which are unknown at this time, the United States and the EU,
along with the regulatory bodies of a number of countries, have imposed economic
sanctions on certain Russian corporate entities and individuals, and certain
sectors of Russia’s economy, which may result in, among other things, the
continued devaluation of Russian currency, a downgrade in the country’s credit
rating, and/or a decline in the value and liquidity of Russian securities,
property or interests. These sanctions could also result in the immediate freeze
of Russian securities and/or funds invested in prohibited assets, impairing the
ability of a fund to buy, sell, receive or deliver those securities and/or
assets. These sanctions or the threat of additional sanctions could also result
in Russia taking counter measures or retaliatory actions, which may further
impair the value and liquidity of Russian securities. The United States and
other nations or international organizations may also impose additional economic
sanctions or take other actions that may adversely affect Russia-exposed issuers
and companies in various sectors of the Russian economy. Any or all of these
potential results could lead Russia’s economy into a recession. Economic
sanctions and other actions against Russian institutions, companies, and
individuals resulting from the ongoing conflict may also have a substantial
negative impact on other economies and securities markets both regionally and
globally, as well as on companies with operations in the conflict region, the
extent to which is unknown at this time. The United States and the EU have also
imposed similar sanctions on Belarus for its support of Russia’s invasion of
Ukraine. Additional sanctions may be imposed on Belarus and other countries that
support Russia. Any such sanctions could present substantially similar risks as
those resulting from the sanctions imposed on Russia, including substantial
negative impacts on the regional and global economies and securities
markets.
In addition,
there is a risk that the prices of goods and services in the United States and
many foreign economies may decline over time, known as deflation. Deflation may
have an adverse effect on stock prices and creditworthiness and may make
defaults on debt more likely. If a country’s economy slips into a deflationary
pattern, it could last for a prolonged period and may be difficult to reverse.
Further, there is a risk that the present value of assets or income from
investments will be less in the future, known as inflation. Inflation rates may
change frequently and drastically as a result of various factors, including
unexpected shifts in the domestic or global economy, and a fund’s investments
may be affected, which may reduce a fund’s performance. Further, inflation may
lead to the rise in interest rates, which may negatively affect the value of
debt instruments held by the fund, resulting in a negative impact on a fund’s
performance. Generally, securities issued in emerging markets are subject to a
greater risk of inflationary or deflationary forces, and more developed markets
are better able to use monetary policy to normalize markets.
ESG
integration risk
The manager
considers ESG factors that it deems relevant or additive, along with other
material factors and analysis, when managing the fund. The portion of the fund’s
investments for which the manager considers these ESG factors may vary, and
could increase or decrease over time. In certain situations, the extent to which
these ESG factors may be applied according to the manager’s integrated
investment process may not include U.S. Treasuries, government securities, or
other asset classes.
9
Fund
details
ESG factors
may include, but are not limited to, matters regarding board diversity, climate
change policies, and supply chain and human rights policies. Incorporating ESG
criteria and making investment decisions based on certain ESG characteristics,
as determined by the manager, carries the risk that the fund may perform
differently, including underperforming, funds that do not utilize ESG criteria,
or funds that utilize different ESG criteria. Integration of ESG factors into
the fund’s investment process may result in a manager making different
investments for the fund than for a fund with a similar investment universe
and/or investment style that does not incorporate such considerations in its
investment strategy or processes, and the fund’s investment performance may be
affected. Because ESG factors are one of many considerations for the fund, the
manager may nonetheless include companies with low ESG characteristics or
exclude companies with high ESG characteristics in the fund’s
investments.
The ESG
characteristics utilized in the fund’s investment process may change over time,
and different ESG characteristics may be relevant to different investments.
Although the manager has established its own structure to oversee ESG
integration in accordance with the fund’s investment objective and strategies,
successful integration of ESG factors will depend on the manager’s skill in
researching, identifying, and applying these factors, as well as on the
availability of relevant data. The method of evaluating ESG factors and
subsequent impact on portfolio composition, performance, proxy voting decisions
and other factors, is subject to the interpretation of the manager in accordance
with the fund’s investment objective and strategies. ESG factors may be
evaluated differently by different managers, and may not carry the same meaning
to all investors and managers. The manager may employ active shareowner
engagement to raise ESG issues with the management of select portfolio
companies. The regulatory landscape with respect to ESG investing in the United
States is evolving and any future rules or regulations may require the fund to
change its investment process with respect to ESG
integration.
ETF
trading risk
The market
price of shares, like other exchange-traded securities, may include a “bid-ask
spread” (the difference between the price at which investors are willing to buy
shares and the price at which investors are willing to sell shares). The bid-ask
spread may vary over time based on the fund’s trading volume and market
liquidity and may increase as a result of a decrease in the fund’s trading
volume, the spread of the fund’s underlying securities, or reduced market
liquidity. The bid-ask spread may increase significantly in times of market
disruption, meaning that shares may trade at a discount to the fund’s NAV. Such
discount is likely to be greatest during significant market volatility. In
stressed market conditions, the market for a fund’s shares may become less
liquid in response to deteriorating liquidity in the markets for the fund’s
underlying portfolio holdings. This in turn could lead to differences between
the market price of the fund’s shares and the underlying value of those
shares.
Shares of the
fund, similar to shares of other publicly-traded securities, may be sold short
and are therefore subject to the risk of increased volatility and price
decreases associated with being sold short.
The fund’s
underlying securities may be traded in markets that close at a different time
than the NYSE Arca. Liquidity in those securities may be reduced after the
applicable closing times. Accordingly, during the time when the NYSE Arca is
open but after the applicable market closing, fixing or settlement times,
bid-ask spreads on the NYSE Arca and the corresponding premium or discount to
the shares’ NAV may widen.
Fixed-income
securities risk
Fixed-income
securities are generally subject to two principal types of risk, as well as
other risks described below: (1) interest-rate risk and (2) credit quality
risk.
Credit
quality risk.
Fixed-income
securities are subject to the risk that the issuer of the security will not
repay all or a portion of the principal borrowed and will not make all interest
payments. If the credit quality of a fixed-income security deteriorates after a
fund has purchased the security, the market value of the security may decrease
and lead to a decrease in the value of the fund’s investments. An issuer’s
credit quality could deteriorate as a result of poor management decisions,
competitive pressures, technological obsolescence, undue reliance on suppliers,
labor issues, shortages, corporate restructurings, fraudulent disclosures, or
other factors. Funds that may invest in lower-rated fixed-income securities,
commonly referred to as junk securities, are riskier than funds that may invest
in higher-rated fixed-income securities.
Interest-rate
risk.
Fixed-income
securities are affected by changes in interest rates. When interest rates
decline, the market value of fixed-income securities generally can be expected
to rise. Conversely, when interest rates rise, the market value of fixed-income
securities generally can be expected to decline. The longer the duration or
maturity of a fixed-income security, the more susceptible it is to interest-rate
risk. Duration is a measure of the price sensitivity of a debt security, or a
fund that invests in a portfolio of debt securities, to changes in interest
rates, whereas the maturity of a security measures the time until final payment
is due. Duration measures sensitivity more accurately than maturity because it
takes into account the time value of cash flows generated over the life of a
debt security.
In response to
certain economic conditions, including periods of high inflation, governmental
authorities and regulators may respond with significant fiscal and monetary
policy changes such as raising interest rates. The fund may be subject to
heightened interest rate risk when the Federal Reserve Board (Fed) raises
interest rates. Recent and potential future changes in government monetary
policy may affect interest rates. It is difficult to accurately predict the
timing, frequency or magnitude of potential interest rate increases or decreases
by the Fed and the evaluation of macro-economic and other conditions that could
cause a change in approach in the future. If the Fed and other central banks
increase the federal funds rate and equivalent rates, such increases generally
will cause market interest rates to rise and could cause the value of a fund’s
investments, and the fund’s net asset value (NAV), to decline, potentially
suddenly and significantly. As a result, the fund may experience high
redemptions and, as a result, increased portfolio turnover, which could increase
the costs that the fund incurs and may negatively impact the fund’s
performance.
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In certain
market conditions, governmental authorities and regulators may considerably
lower interest rates, which, in some cases could result in negative interest
rates. These actions, including their reversal or potential ineffectiveness,
could further increase volatility in securities and other financial markets and
reduce market liquidity. To the extent the fund has a bank deposit or holds a
debt instrument with a negative interest rate to maturity, the fund would
generate a negative return on that investment. Similarly, negative rates on
investments by money market funds and similar cash management products could
lead to losses on investments, including on investments of the fund’s uninvested
cash.
Investment-grade
fixed-income securities in the lowest rating category risk.
Investment-grade
fixed-income securities in the lowest rating category (such as Baa by Moody’s
Investors Service, Inc. or BBB by S&P Global Ratings or Fitch Ratings, as
applicable, and comparable unrated securities) involve a higher degree of risk
than fixed-income securities in the higher rating categories. While such
securities are considered investment-grade quality and are deemed to have
adequate capacity for payment of principal and interest, such securities lack
outstanding investment characteristics and have speculative characteristics as
well. For example, changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher-grade securities.
Prepayment
of principal risk.
Many types of
debt securities, including floating-rate loans, are subject to prepayment risk.
Prepayment risk is the risk that, when interest rates fall, certain types of
obligations will be paid off by the borrower more quickly than originally
anticipated and the fund may have to invest the proceeds in securities with
lower yields. Securities subject to prepayment risk can offer less potential for
gains when the credit quality of the issuer improves.
Foreign
securities risk
Funds that
invest in securities traded principally in securities markets outside the United
States are subject to additional and more varied risks, as the value of foreign
securities may change more rapidly and extremely than the value of U.S.
securities. Less information may be publicly available regarding foreign
issuers, including foreign government issuers. Foreign securities may be subject
to foreign taxes and may be more volatile than U.S. securities. Currency
fluctuations and political and economic developments may adversely impact the
value of foreign securities. The securities markets of many foreign countries
are relatively small, with a limited number of companies representing a small
number of industries. Additionally, issuers of foreign securities may not be
subject to the same degree of regulation as U.S. issuers. Reporting, accounting,
and auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. There are generally higher commission rates on foreign
portfolio transactions, transfer taxes, higher custodial costs, and the
possibility that foreign taxes will be charged on dividends and interest payable
on foreign securities, some or all of which may not be reclaimable. Also,
adverse changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency or assets from a country);
political changes; or diplomatic developments could adversely affect a fund’s
investments.
In the event
of nationalization, expropriation, confiscatory taxation, or other confiscation,
the fund could lose a substantial portion of, or its entire investment in, a
foreign security. Some of the foreign securities risks are also applicable to
funds that invest a material portion of their assets in securities of foreign
issuers traded in the United States.
Hedging,
derivatives, and other strategic transactions risk
The ability of
a fund to utilize hedging, derivatives, and other strategic transactions to
benefit the fund will depend in part on its manager’s ability to predict
pertinent market movements and market risk, counterparty risk, credit risk,
interest-rate risk, and other risk factors, none of which can be assured. The
skills required to utilize hedging and other strategic transactions are
different from those needed to select a fund’s securities. Even if the manager
only uses hedging and other strategic transactions in a fund primarily for
hedging purposes or to gain exposure to a particular securities market, if the
transaction does not have the desired outcome, it could result in a significant
loss to a fund. The amount of loss could be more than the principal amount
invested. These transactions may also increase the volatility of a fund and may
involve a small investment of cash relative to the magnitude of the risks
assumed, thereby magnifying the impact of any resulting gain or loss. For
example, the potential loss from the use of futures can exceed a fund’s initial
investment in such contracts. In addition, these transactions could result in a
loss to a fund if the counterparty to the transaction does not perform as
promised.
A fund may
invest in derivatives, which are financial contracts with a value that depends
on, or is derived from, the value of underlying assets, reference rates, or
indexes. Derivatives may relate to stocks, bonds, interest rates, currencies or
currency exchange rates, and related indexes. A fund may use derivatives for
many purposes, including for hedging and as a substitute for direct investment
in securities or other assets. Derivatives may be used in a way to efficiently
adjust the exposure of a fund to various securities, markets, and currencies
without a fund actually having to sell existing investments and make new
investments. This generally will be done when the adjustment is expected to be
relatively temporary or in anticipation of effecting the sale of fund assets and
making new investments over time. Further, since many derivatives have a
leverage component, adverse changes in the value or level of the underlying
asset, reference rate, or index can result in a loss substantially greater than
the amount invested in the derivative itself. Certain derivatives have the
potential for unlimited loss, regardless of the size of the initial investment.
When a fund uses derivatives for leverage, investments in that fund will tend to
be more volatile, resulting in larger gains or losses in response to market
changes. To limit risks associated with leverage, a fund is required to comply
with Rule 18f-4 under the Investment Company Act of 1940, as amended (the
Derivatives Rule) as outlined below. For a description of the various derivative
instruments the fund may utilize, refer to the SAI.
The regulation
of the U.S. and non-U.S. derivatives markets has undergone substantial change in
recent years and such change may continue. In particular, the Dodd-Frank Wall
Street Reform and Consumer Protection Act, and regulations promulgated or
proposed thereunder require many derivatives to be cleared and traded on an
exchange, expand entity registration requirements, impose business conduct
requirements on dealers that enter into swaps with a pension plan,
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endowment,
retirement plan or government entity, and required banks to move some
derivatives trading units to a non-guaranteed affiliate separate from the
deposit-taking bank or divest them altogether. Although the Commodity Futures
Trading Commission (CFTC) has released final rules relating to clearing,
reporting, recordkeeping and registration requirements under the legislation,
many of the provisions are subject to further final rule making, and thus its
ultimate impact remains unclear. New regulations could, among other things,
restrict the fund’s ability to engage in derivatives transactions (for example,
by making certain types of derivatives transactions no longer available to the
fund) and/or increase the costs of such derivatives transactions (for example,
by increasing margin or capital requirements), and the fund may be unable to
fully execute its investment strategies as a result. Limits or restrictions
applicable to the counterparties with which the fund engages in derivative
transactions also could prevent the fund from using these instruments or affect
the pricing or other factors relating to these instruments, or may change the
availability of certain investments.
The
Derivatives Rule mandates that a fund adopt and/or implement: (i) value-at-risk
limitations (VaR); (ii) a written derivatives risk management program; (iii) new
Board oversight responsibilities; and (iv) new reporting and recordkeeping
requirements. In the event that a fund’s derivative exposure is 10% or less of
its net assets, excluding certain currency and interest rate hedging
transactions, it can elect to be classified as a limited derivatives user
(Limited Derivatives User) under the Derivatives Rule, in which case the fund is
not subject to the full requirements of the Derivatives Rule. Limited
Derivatives Users are excepted from VaR testing, implementing a derivatives risk
management program, and certain Board oversight and reporting requirements
mandated by the Derivatives Rule. However, a Limited Derivatives User is still
required to implement written compliance policies and procedures reasonably
designed to manage its derivatives risks.
The
Derivatives Rule also provides special treatment for reverse repurchase
agreements, similar financing transactions and unfunded commitment agreements.
Specifically, a fund may elect whether to treat reverse repurchase agreements
and similar financing transactions as “derivatives transactions” subject to the
requirements of the Derivatives Rule or as senior securities equivalent to bank
borrowings for purposes of Section 18 of the Investment Company Act of 1940. In
addition, when-issued or forward settling securities transactions that
physically settle within 35-days are deemed not to involve a senior
security.
At any time
after the date of this prospectus, legislation may be enacted that could
negatively affect the assets of the fund. Legislation or regulation may change
the way in which the fund itself is regulated. The advisor cannot predict the
effects of any new governmental regulation that may be implemented, and there
can be no assurance that any new governmental regulation will not adversely
affect the fund’s ability to achieve its investment objectives.
The use of
derivative instruments may involve risks different from, or potentially greater
than, the risks associated with investing directly in securities and other, more
traditional assets. In particular, the use of derivative instruments exposes a
fund to the risk that the counterparty to an OTC derivatives contract will be
unable or unwilling to make timely settlement payments or otherwise honor its
obligations. OTC derivatives
transactions
typically can only be closed out with the other party to the transaction,
although either party may engage in an offsetting transaction that puts that
party in the same economic position as if it had closed out the transaction with
the counterparty or may obtain the other party’s consent to assign the
transaction to a third party. If the counterparty defaults, the fund will have
contractual remedies, but there is no assurance that the counterparty will meet
its contractual obligations or that, in the event of default, the fund will
succeed in enforcing them. For example, because the contract for each OTC
derivatives transaction is individually negotiated with a specific counterparty,
a fund is subject to the risk that a counterparty may interpret contractual
terms (e.g., the definition of default) differently than the fund when the fund
seeks to enforce its contractual rights. If that occurs, the cost and
unpredictability of the legal proceedings required for the fund to enforce its
contractual rights may lead it to decide not to pursue its claims against the
counterparty. The fund, therefore, assumes the risk that it may be unable to
obtain payments owed to it under OTC derivatives contracts or that those
payments may be delayed or made only after the fund has incurred the costs of
litigation. While a manager intends to monitor the creditworthiness of
counterparties, there can be no assurance that a counterparty will meet its
obligations, especially during unusually adverse market conditions. To the
extent a fund contracts with a limited number of counterparties, the fund’s risk
will be concentrated and events that affect the creditworthiness of any of those
counterparties may have a pronounced effect on the fund. Derivatives are also
subject to a number of other risks, including market risk, liquidity risk and
operational risk. Since the value of derivatives is calculated and derived from
the value of other assets, instruments, or references, there is a risk that they
will be improperly valued. Derivatives also involve the risk that changes in
their value may not correlate perfectly with the assets, rates, or indexes they
are designed to hedge or closely track. Suitable derivatives transactions may
not be available in all circumstances. The fund is also subject to the risk that
the counterparty closes out the derivatives transactions upon the occurrence of
certain triggering events. In addition, a manager may determine not to use
derivatives to hedge or otherwise reduce risk exposure. Government legislation
or regulation could affect the use of derivatives transactions and could limit a
fund’s ability to pursue its investment strategies.
A detailed
discussion of various hedging and other strategic transactions appears in the
SAI. To the extent that the fund utilizes the following list of certain
derivatives and other strategic transactions, it will be subject to associated
risks. The main risks of each appear below.
Credit
default swaps.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
interest-rate risk, risk of default of the underlying reference obligation, and
risk of disproportionate loss are the principal risks of engaging in
transactions involving credit default swaps.
Foreign
currency forward contracts.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
foreign currency risk, and risk of disproportionate loss are the principal risks
of engaging in transactions involving foreign currency forward
contracts.
Foreign
currency swaps.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
foreign currency risk, and
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risk of
disproportionate loss are the principal risks of engaging in transactions
involving foreign currency swaps.
Futures
contracts.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
and risk of disproportionate loss are the principal risks of engaging in
transactions involving futures contracts.
Interest-rate
swaps.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
interest-rate risk, and risk of disproportionate loss are the principal risks of
engaging in transactions involving interest-rate swaps.
Options.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
and risk of disproportionate loss are the principal risks of engaging in
transactions involving options. Counterparty risk does not apply to
exchange-traded options.
Options
on futures.
Counterparty
risk, liquidity risk (i.e., the inability to enter into closing transactions),
and risk of disproportionate loss are the principal risks of engaging in
transactions involving options on futures. Counterparty risk does not apply to
exchange-traded options.
High
portfolio turnover risk
A high fund
portfolio turnover rate (over 100%) generally involves correspondingly greater
brokerage commission and tax expenses, which must be borne directly by a fund
and its shareholders, respectively. The portfolio turnover rate of a fund may
vary from year to year, as well as within a year.
Liquidity
risk
The extent (if
at all) to which a security may be sold or a derivative position closed without
negatively impacting its market value may be impaired by reduced market activity
or participation, legal restrictions, or other economic and market impediments.
Funds with principal investment strategies that involve investments in
securities of companies with smaller market capitalizations, foreign securities,
derivatives, or securities with substantial market and/or credit risk tend to
have the greatest exposure to liquidity risk. Exposure to liquidity risk may be
heightened for funds that invest in securities of emerging markets and related
derivatives that are not widely traded, and that may be subject to purchase and
sale restrictions.
The capacity
of traditional dealers to engage in fixed-income trading has not kept pace with
the bond market’s growth. As a result, dealer inventories of corporate bonds,
which indicate the ability to “make markets,” i.e., buy or sell a security at
the quoted bid and ask price, respectively, are at or near historic lows
relative to market size. Because market makers provide stability to fixed-income
markets, the significant reduction in dealer inventories could lead to decreased
liquidity and increased volatility, which may become exacerbated during periods
of economic or political stress.
Lower-rated
and high-yield fixed-income securities risk
Lower-rated
fixed-income securities are defined as securities rated below investment grade
(such as Ba and below by Moody’s Investors Service, Inc. and BB and below by
S&P Global Ratings and Fitch Ratings, as
applicable)
(also called junk bonds). The general risks of investing in these securities are
as follows:
Risk
to principal and income.
Investing in
lower-rated fixed-income securities is considered speculative. While these
securities generally provide greater income potential than investments in
higher-rated securities, there is a greater risk that principal and interest
payments will not be made. Issuers of these securities may even go into default
or become bankrupt.
Price
volatility.
The price of
lower-rated fixed-income securities may be more volatile than securities in the
higher-rated categories. This volatility may increase during periods of economic
uncertainty or change. The price of these securities is affected more than
higher-rated fixed-income securities by the market’s perception of their credit
quality, especially during times of adverse publicity. In the past, economic
downturns or increases in interest rates have, at times, caused more defaults by
issuers of these securities and may do so in the future. Economic downturns and
increases in interest rates have an even greater effect on highly leveraged
issuers of these securities.
Liquidity.
The market for
lower-rated fixed-income securities may have more limited trading than the
market for investment-grade fixed-income securities. Therefore, it may be more
difficult to sell these securities, and these securities may have to be sold at
prices below their market value in order to meet redemption requests or to
respond to changes in market conditions.
Dependence
on manager’s own credit analysis.
While a
manager may rely on ratings by established credit rating agencies, it will also
supplement such ratings with its own independent review of the credit quality of
the issuer. Therefore, the assessment of the credit risk of lower-rated
fixed-income securities is more dependent on the manager’s evaluation than the
assessment of the credit risk of higher-rated securities.
Additional
risks regarding lower-rated corporate fixed-income securities.
Lower-rated
corporate fixed-income securities (and comparable unrated securities) tend to be
more sensitive to individual corporate developments and changes in economic
conditions than higher-rated corporate fixed-income securities. Issuers of
lower-rated corporate fixed-income securities may also be highly leveraged,
increasing the risk that principal and income will not be
repaid.
Additional
risks regarding lower-rated foreign government fixed-income
securities.
Lower-rated
foreign government fixed-income securities are subject to the risks of investing
in foreign countries described under “Foreign securities risk.” In addition, the
ability and willingness of a foreign government to make payments on debt when
due may be affected by the prevailing economic and political conditions within
the country. Emerging-market countries may experience high inflation, interest
rates, and unemployment, as well as exchange-rate fluctuations which adversely
affect trade and political uncertainty or instability. These factors increase
the risk that a foreign government will not make payments when
due.
Master
limited partnership (MLP) risk
Investing in
MLPs involves certain risks related to investing in the underlying assets of
MLPs and risks associated with pooled investment
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vehicles. MLPs
holding credit-related investments are subject to interest-rate risk and the
risk of default on payment obligations by debt securities. In addition,
investments in the debt and securities of MLPs involve certain other risks,
including risks related to limited control and limited rights to vote on matters
affecting MLPs, risks related to potential conflicts of interest between an MLP
and the MLP’s general partner, cash flow risks, dilution risks and risks related
to the general partner’s right to require unit-holders to sell their common
units at an undesirable time or price. The fund’s investments in MLPs may be
subject to legal and other restrictions on resale or may be less liquid than
publicly traded securities. Certain MLP securities may trade in lower volumes
due to their smaller capitalizations, and may be subject to more abrupt or
erratic price movements and may lack sufficient market liquidity to enable the
fund to effect sales at an advantageous time or without a substantial drop in
price. If the fund is one of the largest investors in an MLP, it may be more
difficult for the fund to buy and sell significant amounts of such investments
without an unfavorable impact on prevailing market prices. Larger purchases or
sales of MLP investments by the fund in a short period of time may cause
abnormal movements in the market price of these investments. As a result, these
investments may be difficult to dispose of at an advantageous price when the
fund desires to do so. During periods of interest rate volatility, these
investments may not provide attractive returns, which may adversely impact the
overall performance of the fund.
MLPs in which
the fund may invest operate oil, natural gas, petroleum, or other facilities
within the energy sector. As a result, the fund will be susceptible to adverse
economic, environmental, or regulatory occurrences impacting the energy sector.
MLPs and other companies operating in the energy sector are subject to specific
risks, including, among others, fluctuations in commodity prices; reduced
consumer demand for commodities such as oil, natural gas, or petroleum products;
reduced availability of natural gas or other commodities for transporting,
processing, storing, or delivering; slowdowns in new construction; extreme
weather or other natural disasters; and threats of attack by terrorists on
energy assets. Additionally, changes in the regulatory environment for energy
companies may adversely impact their profitability. Over time, depletion of
natural gas reserves and other energy reserves may also affect the profitability
of energy companies.
Global oil
prices declined significantly at the beginning of 2020 and have experienced
significant price volatility, including a period where an oil-price futures
contract fell into negative territory for the first time in history, as demand
for oil slowed and oil storage facilities reached their storage capacities.
Varying levels of demand and production and continued oil price volatility may
continue to adversely impact MLPs and energy infrastructure
companies.
Mortgage-backed
and asset-backed securities risk
Mortgage-related
securities issued or guaranteed by U.S. government entities.
Mortgage-backed
securities represent participating interests in pools of residential mortgage
loans, which are issued or guaranteed by the U.S. government, its agencies, or
its instrumentalities. However, the guarantee of these types of securities
relates to the principal and interest payments, and not to the market value of
such securities. In addition, the guarantee only relates to the
mortgage-backed
securities held by the fund and not the purchase of shares of the
fund.
Mortgage-backed
securities are issued by lenders, such as mortgage bankers, commercial banks,
and savings and loan associations. Such securities differ from conventional debt
securities, which provide for the periodic payment of interest in fixed amounts
(usually semiannually) with principal payments at maturity or on specified
dates. Mortgage-backed securities provide periodic payments which are, in
effect, a pass-through of the interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. A
mortgage-backed security will mature when all the mortgages in the pool mature
or are prepaid. Therefore, mortgage-backed securities do not have a fixed
maturity and their expected maturities may vary when interest rates rise or
fall.
When interest
rates fall, homeowners are more likely to prepay their mortgage loans. An
increased rate of prepayments on the fund’s mortgage-backed securities will
result in an unforeseen loss of interest income to the fund as the fund may be
required to reinvest assets at a lower interest rate. Because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed-income securities when interest rates
fall.
When interest
rates rise, homeowners are less likely to prepay their mortgage loans. A
decreased rate of prepayments lengthens the expected maturity of a
mortgage-backed security. Therefore, the prices of mortgage-backed securities
may decrease more than prices of other fixed-income securities when interest
rates rise.
The yield of
mortgage-backed securities is based on the average life of the underlying pool
of mortgage loans. The actual life of any particular pool may be shortened by
unscheduled or early payments of principal and interest. Principal prepayments
may result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is affected
by a wide range of economic, demographic, and social factors and, accordingly,
it is not possible to accurately predict the average life of a particular pool.
The actual prepayment experience of a pool of mortgage loans may cause the yield
realized by the fund to differ from the yield calculated on the basis of the
average life of the pool. In addition, if the fund purchases mortgage-backed
securities at a premium, the premium may be lost in the event of early
prepayment, which may result in a loss to the fund.
Prepayments
tend to increase during periods of falling interest rates, while during periods
of rising interest rates, prepayments are likely to decline. Monthly interest
payments received by a fund have a compounding effect, which will increase the
yield to shareholders as compared to debt obligations that pay interest
semiannually. Because of the reinvestment of prepayments of principal at current
rates, mortgage-backed securities may be less effective than U.S. Treasury bonds
of similar maturity at maintaining yields during periods of declining interest
rates. Also, although the value of debt securities may increase as interest
rates decline, the value of these pass-through types of securities may not
increase as much, due to their prepayment feature.
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Privately
issued mortgage-backed securities.
Non-agency, or
privately issued, mortgage securities provide for the monthly principal and
interest payments made by individual borrowers to pass through to investors on a
corporate basis, and in privately issued collateralized mortgage obligations, as
further described below. Privately issued mortgage securities are subject to
many of the same risks as agency and U.S. government mortgage-backed securities,
discussed above, but are issued by private originators of, or investors in,
mortgage loans, including mortgage bankers, commercial banks, investment banks,
savings and loan associations, and special purpose subsidiaries of the
foregoing. Since privately issued mortgage certificates are not guaranteed by an
entity having the credit status of an agency such as Freddie Mac, such privately
issued securities generally are structured with one or more types of credit
enhancement, including liquidity protection and default protection.
Collateralized
mortgage obligations (CMOs).
A fund may
invest in mortgage-backed securities called CMOs. CMOs are issued in separate
classes with different stated maturities. As the mortgage pool experiences
prepayments, the pool pays off investors in classes with shorter maturities
first. By investing in CMOs, a fund may manage the prepayment risk of
mortgage-backed securities. However, prepayments may cause the actual maturity
of a CMO to be substantially shorter than its stated maturity.
Asset-backed
securities.
Asset-backed
securities include interests in pools of debt securities, commercial or consumer
loans, or other receivables. The value of these securities depends on many
factors, including changes in interest rates, the availability of information
concerning the pool and its structure, the credit quality of the underlying
assets, the market’s perception of the servicer of the pool, and any credit
enhancement provided. In addition, asset-backed securities have prepayment risks
similar to mortgage-backed securities.
Inverse
interest-only securities.
Inverse
interest-only securities that are mortgage-backed securities are subject to the
same risks as other mortgage-backed securities. In addition, the coupon on an
inverse interest-only security can be extremely sensitive to changes in
prevailing interest rates.
TBA
mortgage contracts.
To-be-announced
(TBA) mortgage contracts involve a risk of loss if the value of the underlying
security to be purchased declines prior to delivery date. The yield obtained for
such securities may be higher or lower than yields available in the market on
delivery date.
Operational
and cybersecurity risk
With the
increased use of technologies, such as mobile devices and “cloud”-based service
offerings and the dependence on the internet and computer systems to perform
necessary business functions, the fund’s service providers are susceptible to
operational and information or cybersecurity risks that could result in losses
to the fund and its shareholders. Intentional cybersecurity breaches include
unauthorized access to systems, networks, or devices (such as through “hacking”
activity or “phishing”); infection from computer viruses or other malicious
software code; and attacks that shut down, disable, slow, or otherwise disrupt
operations, business processes, or website access or
functionality.
Cyber-attacks can also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on the service
providers’ systems or websites rendering them unavailable to intended users or
via “ransomware” that renders the systems inoperable until appropriate actions
are taken. In addition, unintentional incidents can occur, such as the
inadvertent release of confidential information (possibly resulting in the
violation of applicable privacy laws).
A
cybersecurity breach could result in the loss or theft of customer data or
funds, loss or theft of proprietary information or corporate data, physical
damage to a computer or network system, or costs associated with system repairs.
Such incidents could cause a fund, the advisor, a manager, or other service
providers to incur regulatory penalties, reputational damage, additional
compliance costs, litigation costs or financial loss. In addition, such
incidents could affect issuers in which a fund invests, and thereby cause the
fund’s investments to lose value.
Cyber-events
have the potential to materially affect the fund and the advisor’s relationships
with accounts, shareholders, clients, customers, employees, products, and
service providers. The fund has established risk management systems reasonably
designed to seek to reduce the risks associated with cyber-events. There is no
guarantee that the fund will be able to prevent or mitigate the impact of any or
all cyber-events.
The fund is
exposed to operational risk 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 system failures.
In addition,
other disruptive events, including (but not limited to) natural disasters and
public health crises may adversely affect the fund’s ability to conduct
business, in particular if the fund’s employees or the employees of its service
providers are unable or unwilling to perform their responsibilities as a result
of any such event. Even if the fund’s employees and the employees of its service
providers are able to work remotely, those remote work arrangements could result
in the fund’s business operations being less efficient than under normal
circumstances, could lead to delays in its processing of transactions, and could
increase the risk of cyber-events.
Premium/discount
risk
The NAV of the
fund and the value of your investment will fluctuate. Disruptions to creations
and redemptions or the market price of the fund’s holdings, the existence of
extreme market volatility or potential lack of an active trading market for
shares may result in shares trading at a significant premium or discount to NAV
and/or in a reduced liquidity of your investment. If a shareholder purchases
shares at a time when the market price is at a premium to the NAV or sells
shares at a time when the market price is at a discount to the NAV, the
shareholder may sustain losses. The advisor cannot predict whether shares will
trade below, at or above their NAV. Price differences may be due, in large part,
to the fact that supply and demand forces at work in the secondary trading
market for shares will be closely related to, but not identical to, the same
forces influencing the prices of the securities of the fund’s underlying
portfolio holdings trading individually or in the aggregate at any point in
time. Given the nature of the relevant markets for certain of the fund’s
15
Fund
details
securities,
shares may trade at a larger premium or discount to the NAV than shares of other
ETFs. In addition, in stressed market conditions, the market for shares may
become less liquid in response to deteriorating liquidity in the markets for the
fund’s underlying portfolio holdings. While the creation/redemption feature is
designed to make it more likely that the fund’s shares normally will trade on
stock exchanges at prices close to the fund’s next calculated 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, authorized participants or market participants, or during periods of
significant market volatility, may result in trading prices for shares of a fund
that differ significantly from its NAV. Any of these factors may lead to the
shares trading at a premium or discount to the fund’s NAV. Although market
makers will generally take advantage of differences between the NAV and the
trading price of fund shares through arbitrage opportunities, there is no
guarantee that they will do so.
During periods
of volatility, a shareholder may be unable to sell his or her shares or may
incur significant losses if he or she sells shares. There are various methods by
which investors can purchase and sell shares and various orders that may be
placed. Investors should consult their financial intermediary before purchasing
or selling shares of the fund.
Sector
risk
When a fund’s
investments are focused in one or more sectors of the economy, they are less
broadly invested across industries or sectors than other funds. This means that
focused funds tend to be more volatile than other funds, and the values of their
investments tend to go up and down more rapidly. In addition, a fund that
invests in particular sectors is particularly susceptible to the impact of
market, economic, political, regulatory, and other conditions and risks
affecting those sectors. From time to time, a small number of companies may
represent a large portion of a single sector or a group of related sectors as a
whole.
Trading
issues risk
Trading in
shares of the fund on NYSE Arca may be halted due to market conditions or for
reasons that, in the view of NYSE Arca, make trading in shares inadvisable. In
addition, trading in shares on NYSE Arca is subject to trading halts caused by
extraordinary market volatility pursuant to NYSE Arca’s “circuit breaker” rules.
If a trading halt or unanticipated early closing of NYSE Arca occurs, a
shareholder may be unable to purchase or sell shares of the fund. There can be
no assurance that the requirements of NYSE Arca necessary to maintain the
listing of the fund will continue to be met or will remain
unchanged.
Additional
risks of investing
Large
shareholder risk
Certain
accounts or advisor affiliates, including other funds advised by the advisor or
third parties, may from time to time own (beneficially or of record) or control
a substantial amount of the fund’s shares, including through seed capital
arrangements. Such shareholders may at times be considered to control the fund.
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 authorized
participant (as defined
in
“Shareholder information—Buying and selling shares” on page 20 of this
prospectus), rather than executed in the secondary market. These redemptions may
also force the fund to sell securities, which may increase the fund’s brokerage
costs. To the extent these large shareholders transact in shares of the fund on
the secondary market, such transactions may account for a large percentage of
the trading volume on the exchange and may, therefore, have a material effect
(upward or downward), on the market price of the fund’s shares.
Who’s
who
The following
are the names of the various entities involved with the fund’s investment and
business operations, along with brief descriptions of the role each entity
performs.
Board
of Trustees
The Trustees
oversee the fund’s business activities and retain the services of the various
firms that carry out the fund’s operations.
Investment
advisor
The investment
advisor manages the fund’s business and investment activities.
John
Hancock Investment Management LLC
200 Berkeley Street
Boston, MA 02116
200 Berkeley Street
Boston, MA 02116
Founded in
1968, the advisor is an indirect principally owned subsidiary of John Hancock
Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife
Financial Corporation.
The advisor’s parent company
has been helping individuals and institutions work toward their financial goals
since 1862. The advisor offers investment solutions managed by leading
institutional money managers, taking a disciplined team approach to portfolio
management and research, leveraging the expertise of seasoned investment
professionals. As of June 30, 2025, the advisor had total assets under
management of approximately $169.9 billion.
Subject to
general oversight by the Board of Trustees, the advisor manages and supervises
the investment operations and business affairs of the fund. The advisor selects,
contracts with and compensates one or more subadvisors to manage all or a
portion of the fund’s portfolio assets, subject to oversight by the advisor. In
this role, the advisor has supervisory responsibility for managing the
investment and reinvestment of the fund’s portfolio assets through proactive
oversight and monitoring of the subadvisor and the fund, as described in further
detail below. The advisor is responsible for developing overall investment
strategies for the fund and overseeing and implementing the fund’s continuous
investment programs and provides a variety of advisory oversight and investment
research services. The advisor also provides management and transition services
associated with certain fund events (e.g., strategy, portfolio manager, or
subadvisor changes) and coordinates and oversees services provided under other
agreements.
The advisor
has ultimate responsibility to oversee a subadvisor and recommend to the Board
of Trustees its hiring, termination, and replacement. In this capacity, the
advisor, among other things: (i) monitors on a daily basis the compliance of the
subadvisor with the
16
Fund
details
investment
objectives and related policies of the fund; (ii) monitors significant changes
that may impact the subadvisor's overall business and regularly performs due
diligence reviews of the subadvisor; (iii) reviews the performance of the
subadvisor; and (iv) reports periodically on such performance to the Board of
Trustees. The advisor employs a team of investment professionals who provide
these ongoing research and monitoring services.
The fund
relies on an order from the Securities and Exchange Commission (SEC) permitting
the advisor, subject to approval by the Board of Trustees, to appoint a
subadvisor or change the terms of a subadvisory agreement without obtaining
shareholder approval. The fund, therefore, is able to change subadvisors or the
fees paid to a subadvisor, from time to time, without the expense and delays
associated with obtaining shareholder approval of the change. This order does
not, however, permit the advisor to appoint a subadvisor that is an affiliate of
the advisor or the fund (other than by reason of serving as a subadvisor to the
fund), or to increase the subadvisory fee of an affiliated subadvisor, without
the approval of the shareholders.
Management
fee
The fund pays
the advisor a management fee for its services to the fund. The advisor in turn
pays the fees of the subadvisor. The management fee is stated as an annual
percentage of the aggregate net assets of the fund (together with the assets of
any other applicable fund identified in the advisory agreement) determined in
accordance with the following schedule, and that rate is applied to the average
daily net assets of the fund.
|
Average
daily net assets ($) |
Annual
rate (%) |
|
All
asset levels |
0.34 |
During its most recent fiscal
period, the fund paid the advisor a management fee equal to 0.13% of average
daily net assets (including any waivers and/or
reimbursements).
The basis for the Board of
Trustees’ approval of the advisory fees, and of the investment advisory
agreement overall, including the subadvisory agreement, is discussed in the
fund’s most recent Form N-CSRS filing for the period ended October
31.
Additional
information about fund expenses
The fund’s
annual operating expenses will likely vary throughout the period and from year
to year. The fund’s expenses for the current fiscal year may be higher than the
expenses listed in the fund’s “Annual fund operating expenses” table, for some
of the following reasons: (i) a significant decrease in average net assets may
result in a higher advisory fee rate if any advisory fee breakpoints are not
achieved; (ii) a significant decrease in average net assets may result in an
increase in the expense ratio because certain fund expenses do not decrease as
asset levels decrease; or (iii) fees may be incurred for extraordinary events
such as fund tax expenses.
Subadvisor
The subadvisor
handles the fund’s portfolio management activities, subject to oversight by the
advisor.
Manulife
Investment Management (US) LLC
197 Clarendon Street
Boston, MA 02116
197 Clarendon Street
Boston, MA 02116
Manulife Investment Management
(US) LLC (Manulife IM (US)) provides investment advisory services to individual
and institutional investors. Manulife IM (US) is a wholly owned subsidiary of
John Hancock Life Insurance Company (U.S.A.) (a subsidiary of Manulife Financial
Corporation) and, as of June 30, 2025, had total assets under management of
approximately $221.3 billion.
The following
are brief biographical profiles of the leaders of the fund’s investment
management team, in alphabetical order. These managers are jointly and primarily
responsible for the day-to-day management of the fund’s portfolio. These
managers are employed by Manulife IM (US). For more details about these
individuals, including information about their compensation, other accounts they
manage, and any investments they may have in the fund, see the
SAI.
David
A. Bees, CFA
●
Portfolio
Manager
●
Managed the
fund since 2021
●
Joined the
subadvisor in 2001
●
Began business
career in 2000
Jeffrey
N. Given, CFA
●
Senior
Portfolio Manager, Co-Head of U.S. Core and Core-Plus Fixed Income
●
Managed the
fund since 2021
●
Joined the
subadvisor in 1993
●
Began business
career in 1993
Howard
C. Greene, CFA
●
Senior
Portfolio Manager, Co-Head of U.S. Core and Core-Plus Fixed Income
●
Managed the
fund since 2021
●
Joined the
subadvisor in 2002
●
Began business
career in 1983
Connor
Minnaar, CFA
●
Portfolio
Manager
●
Managed the
fund since 2022
●
Joined the
subadvisor in 2006
●
Began business
career in 2002
Pranay
Sonalkar, CFA
●
Portfolio
Manager
●
Managed the
fund since 2024
●
Joined the
subadvisor in 2014
●
Began business
career in 2007
17
Fund
details
Custodian
The custodian
holds the fund’s assets, settles all portfolio trades, and collects most of the
valuation data required for calculating the fund’s net asset
value.
State
Street Bank and Trust Company
One Congress Street, Suite 1
Boston, MA 02114
One Congress Street, Suite 1
Boston, MA 02114
Principal
distributor
The principal
distributor distributes creation units for the fund on an agency basis, does not
maintain a secondary market in shares of the fund, and has no role in
determining the investment policies of the fund or the securities that are
purchased or sold by the fund. The distributor is not affiliated with the
advisor, the subadvisor or any other service provider for the fund.
Foreside
Fund Services, LLC,
a
wholly owned subsidiary of Foreside Financial Group, LLC (dba ACA
Group)
Three Canal Plaza, Suite 100
Portland, ME 04101
Three Canal Plaza, Suite 100
Portland, ME 04101
Transfer
agent
The transfer
agent handles shareholder services, including recordkeeping and statements,
distribution of dividends, and processing of creation and redemption
orders.
State
Street Bank and Trust Company
One Congress Street, Suite 1
Boston, MA 02114
One Congress Street, Suite 1
Boston, MA 02114
Additional
information
The fund has
entered into contractual arrangements with various parties that provide services
to the fund, which may include, among others, the advisor, subadvisor,
custodian, principal distributor, and transfer agent, as described above and in
the SAI. Fund shareholders are not parties to, or intended or “third-party”
beneficiaries of, any of these contractual arrangements. These contractual
arrangements are not intended to, nor do they, create in any individual
shareholder or group of shareholders any right, either directly or on behalf of
the fund, to either: (a) enforce such contracts against the service providers;
or (b) seek any remedy under such contracts against the service
providers.
This
prospectus provides information concerning the fund that you should consider in
determining whether to purchase shares of the fund. Each of this prospectus, the
SAI, or any contract that is an exhibit to the fund’s registration statement, is
not intended to, nor does it, give rise to an agreement or contract between the
fund and any investor. Each such document also does not give rise to any
contract or create rights in any individual shareholder, group of shareholders,
or other person. The foregoing disclosure should not be read to suggest any
waiver of any rights conferred by federal or state securities laws.
18
Fund
details
Financial
highlights
This table
details the financial performance of the fund, including total return
information showing how much an investment in the fund has increased or
decreased for the periods shown below (assuming reinvestment of all dividends
and distributions). Certain information reflects financial results for a single
fund share.
The financial statements of
the fund as of April 30, 2025, have been audited by PricewaterhouseCoopers LLP
(PwC), the fund’s independent registered public accounting firm. The report of
PwC, along with the fund’s financial statements in the fund’s Form N-CSR filing
for the fiscal period ended April 30, 2025, has been incorporated by reference
into the SAI. Copies of the fund’s most recent Form N-CSR filing are available
upon request.
|
Mortgage-Backed
Securities ETF | ||||
|
Period
ended
Per
share operating performance |
4-30-25 |
4-30-24 |
4-30-23 |
4-30-22
1 |
|
Net
asset value, beginning of period |
$20.91 |
$21.81 |
$22.77 |
$25.00 |
|
Net
investment income2 |
1.04 |
0.88 |
0.84 |
0.38 |
|
Net
realized and unrealized gain (loss) on investments |
0.87 |
(0.81
) |
(0.88
) |
(2.22
) |
|
Total
from investment operations |
1.91 |
0.07 |
(0.04
) |
(1.84
) |
|
Less
distributions |
|
|
|
|
|
From
net investment income |
(1.00
) |
(0.97
) |
(0.92
) |
(0.39
) |
|
Net
asset value, end of period |
$21.82 |
$20.91 |
$21.81 |
$22.77 |
|
Total
return (%)3 |
9.28 |
0.30 |
(0.03
) |
(7.43
)4 |
|
Ratios
and supplemental data |
|
|
|
|
|
Net
assets, end of period (in millions) |
$133 |
$40 |
$27 |
$25 |
|
Ratios
(as a percentage of average net assets): |
|
|
|
|
|
Expenses
before reductions |
0.60 |
0.78 |
0.97 |
0.93
5 |
|
Expenses
including reductions |
0.39 |
0.39 |
0.39 |
0.39
5 |
|
Net
investment income |
4.81 |
4.13 |
3.85 |
2.20
6 |
|
Portfolio
turnover (%) |
67 |
53 |
20 |
33 |
|
1 |
Period
from 8-18-21 (commencement of operations) to
4-30-22. |
|
2 |
Based
on average daily shares outstanding. |
|
3 |
Total
returns would have been lower had certain expenses not been reduced during
the applicable periods. |
|
4 |
Not
annualized. |
|
5 |
Annualized.
Certain expenses are presented unannualized. |
|
6 |
Annualized. |
19
Shareholder
information
Buying
and selling shares
Shares of the
fund may be acquired or redeemed directly from the fund only in creation units
or multiples thereof, as discussed in the “Creations and redemptions” section of
this prospectus. Only an authorized participant may engage in creation or
redemption transactions directly with the fund. An authorized participant is
either a “participating party” (i.e., a broker-dealer or other participant in
the clearing process through the Continuous Net Settlement System of the
National Securities Clearing Corporation) or a Depository Trust Company
participant, in either case, who has executed an agreement with the distributor
and transfer agent with respect to creations and redemptions of creation units.
Once created, shares of the fund generally trade in the secondary market in
amounts less than a creation unit.
Shares of the
fund are listed for trading on a national securities exchange during the trading
day. Shares can be bought and sold throughout the trading day like shares of
other publicly traded companies. However, there can be no guarantee that an
active trading market will develop or be maintained, or that the fund shares
listing will continue or remain unchanged. The Trust does not impose any minimum
investment for shares of a fund purchased on an exchange. Buying or selling the
fund’s shares involves certain costs that apply to all securities transactions.
When buying or selling shares of the fund through a financial intermediary, you
may incur a brokerage commission or other charges determined by your financial
intermediary. Due to these brokerage costs, if any, frequent trading may detract
significantly from investment returns. In addition, you may also incur the cost
of the spread (the difference between the bid price and the ask price). The
commission is frequently a fixed amount and may be a significant cost for
investors seeking to buy or sell small amounts of shares. The spread varies over
time for shares of the fund based on its trading volume and market liquidity,
and is generally less if the fund has more trading volume and market liquidity
and more if the fund has less trading volume and market liquidity.
The fund’s
primary listing exchange is NYSE Arca. NYSE Arca is open for trading Monday
through Friday and is closed on the following holidays: New Year’s Day, Martin
Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Juneteenth,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
A “Business
Day” with respect to the fund is each day the New York Stock Exchange, NYSE Arca
and the Trust are open and includes any day that the fund is required to be open
under Section 22(e) of the Investment Company Act. Orders from authorized
participants to create or redeem creation units will only be accepted on a
Business Day. On days when NYSE Arca closes earlier than normal, the fund may
require orders to create or redeem creation units to be placed earlier in the
day. Please see the SAI for more information.
Section
12(d)(1) of the Investment Company Act restricts investments by registered
investment companies and companies relying on Section 3(c)(1) or Section 3(c)(7)
of the Investment Company Act in the securities of other investment
companies.
The Board of
Trustees has not adopted a policy of monitoring for frequent purchases and
redemptions of fund shares (“frequent trading”) that appear to attempt to take
advantage of potential arbitrage opportunities presented by a lag between a
change in the value of the fund’s portfolio
securities after the close of
the primary markets for the fund’s portfolio securities and the reflection of
that change in the fund’s NAV (“market timing”). The Trust believes this is
appropriate because ETFs, such as the fund, are intended to be attractive to
arbitrageurs, as trading activity is critical to ensuring that the market price
of fund shares remains at or close to NAV. Since the fund issues and redeems
creation units at NAV plus applicable transaction fees, and the fund’s shares
may be purchased and sold on NYSE Arca at prevailing market prices, the risks of
frequent trading are limited.
Rule
12b-1 fees
Rule 12b-1
fees may be paid to the fund’s distributor and may be used by the distributor
for expenses relating to the distribution of, and shareholder or administrative
services for holders of, creation units, and for the payment of service fees
that come within Rule 2341 of the Conduct Rules of the Financial Industry
Regulatory Authority (FINRA).
Because Rule
12b-1 fees may be paid out of the fund’s assets on an ongoing basis, over time
they may increase the cost of your investment and may cost shareholders more
than other types of sales charges. Currently, no Rule 12b-1 fees are
charged.
Your
broker-dealer or agent may charge you a fee to effect transactions in creation
units.
Payment
to broker-dealers and other financial intermediaries
The advisor or
its affiliates make payments to broker-dealers, registered investment advisers,
banks or other intermediaries (together, “intermediaries”) related to marketing
activities and presentations, educational training programs, conferences, the
development of technology platforms and reporting systems, or their making
shares of the fund and certain other John Hancock funds available to their
customers generally and in certain investment programs. Such payments, which may
be significant to the intermediary, are not made by the fund. Rather, such
payments are made by the advisor or its affiliates from their own resources,
which come directly or indirectly in part from fees paid by the John Hancock
funds complex. Payments of this type are sometimes referred to as
revenue-sharing payments. A financial intermediary may make decisions about
which investment options it recommends or makes available, or the level of
services provided, to its customers based on the payments it is eligible to
receive. Therefore, such payments to an intermediary create conflicts of
interest between the intermediary and its customers and may cause the
intermediary to recommend the fund or other John Hancock funds over another
investment. More information regarding these payments is contained in the fund’s
SAI. Please contact your salesperson or other investment professional for more
information regarding any such payments his or her firm may receive from the
advisor or its affiliates.
Valuation
of fund shares
The NAV for
shares of the fund is normally determined once daily as of the close of regular
trading on the NYSE (typically 4:00 p.m., Eastern
time, on each Business Day that the NYSE is open). In case of emergency or other
disruption resulting in the NYSE not opening for trading or the NYSE closing at
a time other than the regularly scheduled close, the NAV may
20
Shareholder
information
be determined
as of the regularly scheduled close of the NYSE pursuant to the advisor’s
Valuation Policies and Procedures. The time at which shares and transactions are
priced and until which orders are accepted may vary to the extent permitted by
the Securities and Exchange Commission and applicable regulations. Shares of the
fund may be purchased through a broker in the secondary market by individual
investors at market prices which may vary throughout the day and may differ from
the NAV. On holidays or other days when the NYSE is closed, the NAV is not
calculated and the fund does not transact purchase or redemption requests.
Trading of securities that are primarily listed on foreign exchanges may take
place on weekends and U.S. business holidays on which the fund’s NAV is not
calculated. Consequently, the fund’s portfolio securities may trade and the NAV
of the fund’s shares may be significantly affected on days when a shareholder
will not be able to purchase or redeem shares of the fund.
The NAV is computed by
dividing the total assets of the fund (which may include realized and unrealized
capital gain and income), minus liabilities of the fund, by the number of fund
shares outstanding. The current NAV of the fund is available on our website at
jhinvestments.com/etf.
Valuation
of portfolio securities
The Board has
designated the fund’s advisor as the valuation designee to perform fair value
functions for the fund in accordance with the advisor's valuation policies and
procedures. As valuation designee, the advisor will determine the fair value, in
good faith, of securities and other assets held by the fund for which market
quotations are not readily available and, among other things, will assess and
manage material risks associated with fair value determinations, select, apply
and test fair value methodologies, and oversee and evaluate pricing services and
other valuation agents used in valuing the fund's investments. The advisor is
subject to Board oversight and reports to the Board information regarding the
fair valuation process and related material matters. The advisor carries out its
responsibilities as valuation designee through its Pricing
Committee.
Portfolio
securities are valued by various methods that are generally described below.
Portfolio securities also may be fair valued by the advisor’s Pricing Committee
in certain instances pursuant to procedures established by the advisor and
adopted by the Board of Trustees. Equity securities are generally valued at the
last sale price or, for certain markets, the official closing price as of the
close of the relevant exchange. Securities not traded on a particular day are
valued using last available bid prices. A security that is listed or traded on
more than one exchange is typically valued at the price on the exchange where
the security was acquired or most likely will be sold. In certain instances, the
Pricing Committee may determine to value equity securities using prices obtained
from another exchange or market if trading on the exchange or market on which
prices are typically obtained did not open for trading as scheduled, or if
trading closed earlier than scheduled, and trading occurred as normal on another
exchange or market. Equity securities traded principally in foreign markets are
typically valued using the last sale price or official closing price in the
relevant exchange or market. On any day a foreign market is closed and the NYSE
is open, any foreign securities will typically be valued using the last price or
official closing price obtained from the relevant exchange on the prior business
day.
Debt
obligations are typically valued based on evaluated prices provided by an
independent pricing vendor. The value of securities denominated in foreign
currencies is converted into U.S. dollars at the exchange rate supplied by an
independent pricing vendor, generally determined as of 4:00 p.m. London time.
Forward foreign currency contracts are valued at the prevailing forward rates
which are based on foreign currency exchange spot rates and forward points
supplied by an independent pricing vendor. Exchange-traded options are valued at
the mid-price of the last quoted bid and ask prices. Futures contracts whose
settlement prices are determined as of the close of the NYSE are typically
valued based on the settlement price, while other futures contracts are
typically valued at the last traded price on the exchange on which they trade as
of the close of the NYSE. Foreign equity index futures that trade in the
electronic trading market subsequent to the close of regular trading may be
valued at the last traded price in the electronic trading market as of the close
of the NYSE. Swaps and unlisted options are generally valued using evaluated
prices obtained from an independent pricing vendor. Shares of other open-end
investment companies that are not ETFs (underlying funds) are valued based on
the NAVs of such underlying funds.
Pricing
vendors may use matrix pricing or valuation models that utilize certain inputs
and assumptions to derive values, including transaction data, broker-dealer
quotations, credit quality information, general market conditions, news, and
other factors and assumptions. The fund may receive different prices when it
sells odd-lot positions than it would receive for sales of institutional round
lot positions. Pricing vendors generally value securities assuming orderly
transactions of institutional round lot sizes, but a fund may hold or transact
in such securities in smaller, odd lot sizes.
The Pricing
Committee engages in oversight activities with respect to pricing vendors, which
includes, among other things, monitoring significant or unusual price
fluctuations above predetermined tolerance levels from the prior day,
back-testing of pricing vendor prices against actual trades, conducting periodic
due diligence meetings and reviews, and periodically reviewing the inputs,
assumptions and methodologies used by these vendors. Nevertheless, market
quotations, official closing prices, or information furnished by a pricing
vendor could be inaccurate, which could lead to a security being valued
incorrectly.
If market
quotations, official closing prices, or information furnished by a pricing
vendor are not readily available or are otherwise deemed unreliable or not
representative of the fair value of such security because of market- or
issuer-specific events, a security will be valued at its fair value as
determined in good faith by the Board’s valuation designee, the advisor. In
certain instances, therefore, the Pricing Committee may determine that a
reported valuation does not reflect fair value, based on additional information
available or other factors, and may accordingly determine in good faith the fair
value of the assets, which may differ from the reported valuation.
Fair value
pricing of securities is intended to help ensure that the fund’s NAV reflects
the fair market value of the fund’s portfolio securities as of the close of
regular trading on the NYSE (as opposed to a value that no longer reflects
market value as of such close). The use of fair value pricing has the effect of
valuing a security based upon the price the fund
21
Shareholder
information
might
reasonably expect to receive if it sold that security in an orderly transaction
between market participants, but does not guarantee that the security can be
sold at the fair value price. Further, because of the inherent uncertainty and
subjective nature of fair valuation, a fair valuation price may differ
significantly from the value that would have been used had a readily available
market price for the investment existed and these differences could be
material.
Regarding the
fund’s investment in an underlying fund that is not an ETF, which (as noted
above) is valued at such underlying fund’s NAV, the prospectus for such
underlying fund explains the circumstances and effects of fair value pricing for
that underlying fund. The fund relies on a third-party service provider for
assistance with the daily calculation of the fund’s NAV. The third-party service
provider, in turn, relies on other parties for certain pricing data and other
inputs used in the calculation of the fund’s NAV. Therefore, the fund is subject
to certain operational risks associated with reliance on its service provider
and that service provider’s sources of pricing and other data. NAV calculation
may be adversely affected by operational risks arising from factors such as
errors or failures in systems and technology. Such errors or failures may result
in inaccurately calculated NAVs, delays in the calculation of NAVs and/or the
inability to calculate NAV over extended time periods. The fund may be unable to
recover any losses associated with such failures.
Distributions
The fund pays
distributions from its investment income and from net realized capital
gains.
Distributions
from net investment income and distributions from net capital gains, if any, are
declared and paid as follows:
|
|
Investment
income
dividends |
Capital
gains
distributions | |
|
|
Declared |
Paid |
Declared
and
Paid |
|
John
Hancock Mortgage-Backed
Securities
ETF |
Monthly |
Monthly |
Annually |
Dividends and
other distributions on shares of the fund are distributed on a pro rata basis to
beneficial owners of such shares. Dividend payments are made through Depository
Trust Company (DTC) participants and indirect participants (each as described in
the “Book entry” section, below) to beneficial owners then of record with
proceeds received from the fund.
No dividend
reinvestment service is provided by the fund. Broker-dealers may make available
the DTC book-entry dividend reinvestment service for use by beneficial owners of
the fund for reinvestment of their dividend distributions. Beneficial owners
should contact their broker to determine the availability and costs of the
service and the details of participation therein. Brokers may require beneficial
owners to adhere to specific procedures and timetables. If this service is
available and used, dividend distributions of both income and realized gains
will be automatically reinvested in additional whole shares of the fund
purchased in the secondary market.
Book
entry
DTC serves as
securities depository for the shares. (The shares may be held only in book-entry
form; stock certificates will not be issued.) DTC, or its nominee, is the record
or registered owner of all outstanding shares. Beneficial ownership of shares
will be shown on the records of DTC or its participants (described below).
Beneficial owners of shares are not entitled to have shares registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and are not considered the registered holder
thereof. Accordingly, to exercise any rights of a holder of shares, each
beneficial owner must rely on the procedures of: (i) DTC; (ii) “DTC
participants,” i.e., securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own DTC; and (iii) “indirect participants,” i.e.,
brokers, dealers, banks and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly,
through which such beneficial owner holds its interests. The Trust understands
that under existing industry practice, in the event the Trust requests any
action of holders of shares, or a beneficial owner desires to take any action
that DTC, as the record owner of all outstanding shares, is entitled to take,
DTC would authorize the DTC participants to take such action and that the DTC
participants would authorize the indirect participants and beneficial owners
acting through such DTC participants to take such action and would otherwise act
upon the instructions of beneficial owners owning through them. As described
above, the Trust recognizes DTC or its nominee as the owner of all shares for
all purposes.
Creations
and redemptions
Prior to
trading in the secondary market, shares of the fund are “created” at NAV by
market makers, large investors and institutions only in block-size creation
units. Each “creator” or “authorized participant” enters into an authorized
participant agreement with the fund’s distributor.
A creation
transaction, which is subject to acceptance by the transfer agent, generally
takes place when an authorized participant deposits into the fund a designated
portfolio of securities and/or cash in exchange for a specified number of
creation units.
Similarly,
shares can be redeemed only in creation units, generally for a designated
portfolio of securities and/or cash. Except when aggregated in creation units,
shares are not redeemable by the fund.
The prices at
which creations and redemptions occur are based on the next calculation of NAV
after a creation or redemption order is received in an acceptable form under the
authorized participant agreement.
Only an
authorized participant may create or redeem creation units directly with the
fund. In the event of a system failure or other interruption, including
disruptions at market makers or authorized participants, orders to purchase or
redeem creation units either may not be executed according to the fund’s
instructions or may not be executed at all, or the fund may not be able to place
or change orders.
When the fund
engages in in-kind transactions, the fund intends to comply with the U.S.
federal securities laws in accepting securities for deposit and satisfying
redemptions with redemption securities by, among
22
Shareholder
information
other means,
assuring that any securities accepted for deposit and any securities used to
satisfy redemption requests will be sold in transactions that would be exempt
from registration under the Securities Act of 1933, as amended (Securities Act).
Further, an authorized participant that is not a “qualified institutional
buyer,” as such term is defined under Rule 144A of the Securities Act, will not
be able to receive restricted securities eligible for resale under Rule
144A.
Creations and
redemptions must be made through a firm that is either a member of the
Continuous Net Settlement System of the National Securities Clearing Corporation
or a DTC participant and has executed an agreement with the distributor with
respect to creations and redemptions of creation unit aggregations. Information
about the procedures regarding creation and redemption of creation units
(including the cut-off times for receipt of creation and redemption orders) and
the applicable transaction fees is included in the fund’s SAI.
The fund
typically expects to wire redemption proceeds between 1 and 3 business days
following the receipt of the redemption request. Processing time is not
dependent on the chosen delivery method. In unusual circumstances, the fund may
temporarily suspend the processing of sell requests or may postpone payment of
proceeds for up to three Business Days or longer, as allowed by federal
securities laws.
Under normal
market conditions, the fund typically expects to meet redemption requests
through holdings of cash or cash equivalents or through sales of portfolio
securities, and may access other available liquidity facilities. In unusual or
stressed market conditions, such as, for example, during a period of time in
which a foreign securities exchange is closed, in addition to the methods used
in normal market conditions, the fund may meet redemption requests through the
use of its line of credit, interfund lending facility, redemptions in kind, or
such other liquidity means or facilities as the fund may have in place from time
to time.
Taxation
As with any
investment, you should consider how your investment in the fund will be taxed.
The tax information below is provided as general information. More tax
information is available in the SAI. You should consult your tax advisor about
the federal, state, local or foreign tax consequences of your investment in the
fund. Except as otherwise noted, the tax information provided assumes that you
are a U.S. citizen or resident.
Unless your
investment is through an IRA or other tax-advantaged account, you should
carefully consider the possible tax consequences of fund distributions and the
sale of your fund shares.
Distributions
The fund
contemplates declaring as dividends each year all or substantially all of its
taxable income. Distributions you receive from the fund are generally subject to
federal income tax, and may also be subject to state or local taxes. This is
true whether you reinvest your distributions in additional fund shares or
receive them in cash. For federal income tax purposes, the fund’s distributions
attributable to net investment income and short-term capital gains are taxable
to you as ordinary income while distributions of long-term capital gains are
taxable to you as long-term capital gains, no matter how long you have owned
your fund shares.
Under current
provisions of the Code, the maximum individual rate applicable to long-term
capital gains is generally either 15% or 20%, depending on whether the
individual’s income exceeds certain threshold amounts. Fund distributions to
noncorporate shareholders attributable to dividends received by the fund from
U.S. and certain qualified foreign corporations will generally be taxed at the
long-term capital gain rate, as long as certain other requirements are met. For
these lower rates to apply, the non-corporate shareholder must own fund shares
for at least 61 days during the 121-day period beginning 60 days before the
fund’s ex-dividend date. The percentage of dividends eligible for the lower
rates may be reduced as a result of the fund’s securities lending activities,
hedging activities or high portfolio turnover rate.
A percentage
of the fund’s dividends paid to corporate shareholders may be eligible for the
corporate dividends-received deduction. This percentage may, however, be reduced
as a result of the fund’s securities lending activities, hedging activities or
high portfolio turnover rate.
Distributions
in excess of the fund’s current and accumulated earnings and profits are treated
as a tax-free return of your investment to the extent of your basis in the
shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of shares. A distribution will reduce the fund’s NAV per share and
may be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of capital.
Character and tax status of all distributions will be available to shareholders
after the close of each calendar year.
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 redemptions or other taxable dispositions of fund shares) of U.S.
individuals, estates and trusts to the extent that such person’s “modified
adjusted gross income” (in the case of an individual) or “adjusted gross income”
(in the case of an estate or trust) exceeds certain threshold
amounts.
The fund’s
transactions in derivatives (such as futures contracts and swaps) will be
subject to special tax rules, the effect of which may be to accelerate income to
the fund, defer losses to the fund, cause adjustments in the holding periods of
the fund’s securities and convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount, timing and
character of distributions to you. The fund’s use of derivatives may result in
the fund realizing more short-term capital gains and ordinary income subject to
tax at ordinary income tax rates than it would if it did not use
derivatives.
Although
distributions are generally treated as taxable to you in the year they are paid,
distributions declared in October, November or December but paid in January are
taxable as if they were paid in December.
The fund may
be subject to foreign withholding or other foreign taxes on income or gain from
certain foreign securities. In general, the fund may deduct these taxes in
computing its taxable income.
If you buy
shares of the fund before it makes a distribution, the distribution will be
taxable to you even though it may actually be a return of a portion of your
investment. This is known as “buying into a dividend.”
23
Shareholder
information
Taxes
on creations and redemptions of creation units
A person who
exchanges securities for creation units generally will recognize a gain or loss.
The gain or loss will be equal to the difference between the market value of the
creation units at the time of exchange and the sum of the exchanger’s aggregate
basis in the securities surrendered and the amount of any cash paid for such
creation units. A person who exchanges creation units for securities will
generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the creation units and the sum of the aggregate market
value of the securities received. The Internal Revenue Service (IRS), however,
may assert that a loss realized upon an exchange of primarily securities for
creation units cannot be deducted currently under the rules governing “wash
sales,” or on the basis that there has been no significant change in economic
position. Persons exchanging securities for creation units or redeeming creation
units should consult their own tax adviser with respect to whether wash sale
rules apply and when a loss might be deductible and the tax treatment of any
creation or redemption transaction.
Under current
U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of creation units is generally treated as long-term
capital gain or loss if the shares (or securities surrendered) have been held
for more than one year and as a short-term capital gain or loss if the shares
(or securities surrendered) have been held for one year or
less.
Sales
of fund shares
Your sale of
fund shares is a taxable transaction for federal income tax purposes, and may
also be subject to state and local taxes. When you sell your shares, you will
generally recognize a capital gain or loss in an amount equal to the difference
between your adjusted tax basis in the shares and the amount received.
Generally, this capital gain or loss is long-term or short-term depending on
whether your holding period exceeds one year, except that any loss realized on
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends that were received on the shares.
Additionally, any loss realized on a sale or redemption of shares of a fund may
be disallowed under “wash sale” rules to the extent the shares disposed of are
replaced with other shares of that fund within a period of 61 days beginning 30
days before and ending 30 days after the date of disposition, such as pursuant
to a dividend reinvestment in shares of that fund. If disallowed, the loss will
be reflected in an adjustment to the basis of the shares
acquired.
Other
information
You may be
subject to backup withholding at a rate of 24% with respect to taxable
distributions if you do not provide your correct taxpayer identification number,
or certify that it is correct, or if you have been notified by the IRS that you
are subject to backup withholding.
Non-U.S.
investors are generally subject to U.S. withholding tax with respect to
dividends received from the fund and may be subject to estate tax with respect
to their fund shares.
Withholding of
U.S. tax (at a 30% rate) is required with respect to payments of taxable
dividends made to certain non-U.S. 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. Shareholders may be requested to provide
additional information to enable the applicable withholding agent to determine
whether withholding is required.
Reporting to
you and the IRS is required annually on Form 1099-B not only the gross proceeds
of fund shares you sell or redeem but also their cost basis. Shareholders should
contact their intermediaries with respect to reporting of cost basis and
available elections with respect to their accounts. You should carefully review
the cost basis information provided by the applicable intermediary and make any
additional basis, holding period or other adjustments that are required when
reporting these amounts on your federal income tax returns.
24
Other
information
Disclaimers
IOPV
THE FUND IS
NOT SPONSORED, ENDORSED, SOLD OR MARKETED BY ICE DATA INDICES, LLC, OR ITS
AFFILIATES (ICE DATA) OR THEIR RESPECTIVE THIRD PARTY SUPPLIERS.
ICE DATA OR
ITS THIRD PARTY SUPPLIERS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE IOPVS, ETF STATISTICS, FUND OR ANY FUND DATA
INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
Continuous
offering
The method by
which creation units are created and traded may raise certain issues under
applicable securities laws. Because new creation units are issued and sold by
the Trust 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 that could render them statutory underwriters and subject them to the
prospectus delivery 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 units after placing an order with the transfer agent for review
and approval by 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 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
categorization as an underwriter.
Broker dealers
who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
shares that are part of an “unsold allotment” within the meaning of Section
4(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the Investment Company Act. As a result, broker dealer firms
should note that dealers who are not underwriters but are participating in a
distribution (as contrasted with ordinary secondary market transactions) and
thus dealing with the Shares that are part of an overallotment within the
meaning of Section 4(3)(A) of the Securities Act would be unable to take
advantage of the prospectus delivery exemption provided by Section 4(3) of the
Securities Act. Firms that incur a prospectus delivery obligation with respect
to shares are reminded that, under Rule 153 of the Securities Act, a prospectus
delivery obligation under Section 5(b)(2)
of the
Securities Act owed to an exchange member in connection with a sale on NYSE Arca
is satisfied by the fact that the prospectus is available at NYSE Arca upon
request. The prospectus delivery mechanism provided in Rule 153 is only
available with respect to transactions on an exchange.
In addition,
certain affiliates of the fund and the advisor may purchase and resell fund
shares pursuant to this prospectus.
Intraday
value
The trading
prices of the fund’s shares in the secondary market generally differ from the
fund’s daily NAV and are affected by market forces such as the supply of and
demand for fund shares and underlying securities held by the fund, economic
conditions and other factors. Information regarding the intraday value of the
fund’s shares (IOPV) is disseminated every 15 seconds throughout each trading
day by the national securities exchange on which the fund’s shares are listed or
by market data vendors or other information providers. The IOPV is based on the
current market value of the securities and/or cash required to be deposited in
exchange for a creation unit. The IOPV does not necessarily reflect the precise
composition of the current portfolio of securities held by the fund at a
particular point in time or the best possible valuation of the current
portfolio. Therefore, the IOPV should not be viewed as a “real-time” update of
the fund’s NAV, which is computed only once a day. The IOPV is generally
determined by using current market quotations and/or price quotations obtained
from broker-dealers and other market intermediaries that may trade in the
portfolio securities held by the fund and valuations based on current market
rates. The quotations and/or valuations of certain fund holdings may not be
updated during U.S. trading hours if such holdings do not trade in the United
States. The fund is not involved in, or responsible for, the calculation or
dissemination of the IOPV and makes no warranty as to its accuracy.
25
For
more information
Annual/semiannual
reports to shareholders
Additional information about
the fund’s investments is available in the fund’s annual and semiannual reports
to shareholders and in Form N-CSR. In the fund’s annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the fund’s performance during its last fiscal year. In Form N-CSR, you
will find the fund's annual and semiannual financial
statements.
Statement
of Additional Information (SAI)
The SAI
contains more detailed information on all aspects of the fund and includes a
summary of the fund’s policy regarding disclosure of its portfolio holdings, as
well as legal and regulatory matters. A current SAI has been filed with the SEC
and is incorporated by reference into (and is legally a part of) this
prospectus.
To
obtain a free copy of these documents or request other
information
There are several ways you can
get a current annual/semiannual report, Form N-CSR, other information such as
fund financial statements that the fund files on Form N-CSR, prospectus, or SAI
from John Hancock, request other information, or make
inquiries:
Online:
jhinvestments.com/etf
By
mail:
John Hancock
Investment Management
200 Berkeley Street
Boston, MA 02116
By phone: 800-225-6020
200 Berkeley Street
Boston, MA 02116
By phone: 800-225-6020
You can also
view or obtain copies of these documents through the SEC:
Online:
sec.gov
© 2025 John Hancock
Exchange-Traded Fund Trust
200 Berkeley Street, Boston, MA 02116
800-225-6020, jhinvestments.com
200 Berkeley Street, Boston, MA 02116
800-225-6020, jhinvestments.com
Manulife, Manulife
Investments, Stylized M Design, and Manulife Investments & Stylized M Design
are trademarks of The Manufacturers Life Insurance Company and John Hancock, and
the Stylized John Hancock Design are trademarks of John Hancock Life Insurance
Company
(U.S.A.). Each
are used by it and by its affiliates under license.
SEC file number:
811-22733
8250PN 9/1/25
8250PN 9/1/25