Prospectus
J.P. Morgan
Exchange-Traded Funds
August 3,
2022
|
JPMorgan
Active Growth ETF |
Ticker:
JGRO |
Listing
Exchange: NYSE Arca |
The Securities and
Exchange Commission and the Commodity Futures Trading Commission have not
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
JPMorgan
Active Growth ETF
|
| |
|
Management
Fees |
|
|
Total
Annual Fund Operating Expenses |
|
1
|
| ||
|
|
1
Year |
3
Years |
|
SHARES
($) |
|
|
August
3, 2022 | 1
JPMorgan
Active Growth ETF
(continued)
2 | J.P.
Morgan Exchange-Traded Funds
Management
J.P. Morgan
Investment Management Inc. (the adviser)
|
Portfolio
Manager |
Managed
the
Fund
Since |
Primary
Title with
Investment
Adviser |
|
Giri
Devulapally |
2022 |
Managing
Director |
|
Timothy
Parton |
2022 |
Managing
Director |
|
Felise
Agranoff |
2022 |
Managing
Director |
Mr. Parton has announced his
retirement from JPMIM in early 2024. Mr. Parton will continue to serve on
the portfolio management team of the Fund until his retirement, and upon his
retirement, Mr. Devulapally and Ms. Agranoff will continue to be
responsible for the management of the Fund.
Purchase
and Sale of Shares
Individual Shares of
the Fund may only be purchased and sold in secondary market transactions through
brokers or financial intermediaries. Shares of the Fund are listed for trading
on the Exchange, and 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). Certain affiliates of the Fund and the adviser may purchase and
resell Shares pursuant to this prospectus.
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 (ask) when buying or selling Shares in
the secondary market (the “bid-ask spread”).
Recent information,
including information about the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads (when available), is included on the Fund’s
website at jpmorganfunds.com.
Tax
Information
To the extent the
Fund makes distributions, those distributions will be taxed as ordinary income
or capital gains, except when your investment is in an IRA, 401(k) plan or other
tax-advantaged investment plan, in which case you may be subject to federal
income tax upon withdrawal from the tax-advantaged investment plan.
August
3, 2022 | 3
JPMorgan
Active Growth ETF
(continued)
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase
Shares of the Fund through a broker-dealer or other financial intermediary (such
as a bank), the adviser and its related companies may pay the financial
intermediary for the sale of Shares and related services. These payments may
create a conflict of
interest by influencing the broker-dealer or financial intermediary and your
salesperson to recommend the Fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
4 | J.P.
Morgan Exchange-Traded Funds
More
About the Fund
Additional
Information About the Fund's Investment Strategies
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 name, investment
objective and policies of the Fund are similar to other funds advised by the
adviser or its affiliates. However, the investment results of the Fund may be
higher or lower than, and there is no guarantee that the investment results of
the Fund will be comparable to, any other of these funds. A new fund or a fund
with fewer assets under management may be more significantly affected by
purchases and redemptions of its Creation Units (as defined below) than a fund
with relatively greater assets under management would be affected by purchases
and redemptions of its shares. As compared to a larger fund, a new or smaller
fund is more likely to sell a comparatively large portion of its portfolio to
meet significant Creation Unit redemptions, or invest a comparatively large
amount of cash to facilitate Creation Unit purchases, in each case when the fund
otherwise would not seek to do so. Such transactions may cause funds to make
investment decisions at inopportune times or prices or miss attractive
investment opportunities. Such transactions may also accelerate the realization
of taxable income if sales of securities resulted in gains and the fund redeems
Creation Units for cash, or otherwise cause a fund to perform differently than
intended. While such risks may apply to funds of any size, such risks are
heightened in funds with fewer assets under management. In addition, new funds
may not be able to fully implement their investment strategy immediately upon
commencing investment operations, which could reduce investment
performance.
To construct the
portfolio, the portfolio managers leverage the adviser’s Large Cap Growth and
Growth Advantage strategies, which are currently used for other accounts managed
by the adviser. While the Fund’s portfolio holdings will overlap with those
strategies, the Fund’s strategy is unique and its holdings and performance will
differ from an investment in each of those other two strategies. The adviser
generally will execute portfolio transactions for the Fund on a less frequent
basis than those for the other strategies. Trading less frequently could cause
the Fund’s performance to be higher or lower than the performance of the
leveraged strategies in other accounts.
Main
Investment Strategies
The Fund will invest
primarily in equity securities of U.S. large-capitalization companies, but the
adviser has discretion to invest in securities across the whole market
capitalization spectrum, including securities of mid-capitalization and
small-capitalization companies. In implementing its main strategies, the Fund
invests primarily in common stocks.
Derivatives, which
are instruments that have a value based on another instrument, exchange rate or
index, may be used as substitutes for securities in which the Fund can invest.
To the extent the Fund uses derivatives, the Fund will primarily use futures
contracts to more effectively gain targeted equity exposure from its cash
positions.
The Fund invests in
a non-diversified portfolio of securities.
Investment Process: The Fund invests
in companies that the adviser believes have strong earnings growth potential. In
managing the Fund, the adviser employs a process that combines research,
valuation and stock selection to identify companies that the adviser believes
will achieve above-average earnings growth over the next several years. Growth
companies purchased for the Fund include those which based on its research, the
adviser believes have leading competitive positions which will lead to
sustainable growth.
To construct the portfolio, the
portfolio managers leverage the adviser’s Large Cap Growth and Growth Advantage
strategies, which are currently used for other accounts managed by the adviser.
The Fund’s portfolio managers each manage one of these other strategies and will
draw on the insights from the other strategies in managing the Fund. While the
Fund’s portfolio holdings will overlap with those strategies, the Fund’s
strategy is unique and its holdings will differ from an investment in each of
those other two strategies.
As part of its
evaluation of individual companies, the adviser integrates financially material
ESG factors as part of the Fund’s investment process (ESG Integration). ESG
Integration is the systematic inclusion of ESG issues in investment analysis and
investment decisions. In applying ESG Integration in the evaluation of
individual companies, the adviser seeks to assess the impact of ESG factors on
the companies in which the Fund invests. The adviser’s assessment is based on a
proprietary analysis of key opportunities and risks across industries to seek to
identify financially material issues on the Fund’s investments in securities and
ascertain key issues that merit engagement with company management. These
assessments may not be conclusive and securities of companies may be purchased
and retained by the Fund for reasons other than material ESG
factors.
The adviser may sell
a security for several reasons. A security may be sold due to a change in the
company’s fundamentals or if the adviser believes the security is no longer
attractively valued. Investments may also be sold if the adviser identifies a
stock that it believes offers a better investment opportunity.
August
3, 2022 | 5
More
About the Fund
(continued)
Additional
Investment Strategies
Although not part of
the Fund’s main investment strategies, the Fund may also utilize the
following:
•
preferred
stock
•
convertible
securities
•
equity securities
purchased in initial public offerings
•
master limited
partnerships.
In addition, the
Fund may also utilize the following:
•
real estate
investment trusts (REITs) which are pooled vehicles which invest primarily in
income-producing real estate or loans related to real estate
•
foreign securities,
often in the form of depositary receipts
•
derivatives,
including futures contracts, options and swaps. In connection with its main
investment strategies, the Fund may use futures to more effectively gain
targeted equity exposure from its cash position. The Fund is also permitted to
use derivatives such as futures, options and swaps in order to hedge various
investments, for risk management and to opportunistically enhance the Fund’s
returns. Under certain market conditions, the Fund’s use of derivatives for cash
management or other investment management purposes could be
significant.
|
NON-FUNDAMENTAL
INVESTMENT OBJECTIVE |
|
An
investment objective is fundamental if it cannot be changed without the
consent of a majority of the outstanding Shares of the
Fund.
The Fund’s investment objective is not fundamental and may be changed
without the consent of a majority of the outstanding
Shares
of the Fund. |
Securities
Lending. The Fund may engage
in securities lending to increase its income. Securities lending involves the
lending of securities owned by the Fund to financial institutions such as
certain broker-dealers in exchange for cash collateral. The Fund will invest
cash collateral in one or more money market funds advised by the adviser or its
affiliates. The adviser or its affiliates will receive additional compensation
from the affiliated money market funds on the Fund’s investment in such money
market funds. During the term of the loan, the Fund is entitled to receive
amounts equivalent to distributions paid on the loaned securities as well as the
return on the cash collateral investments. Upon termination of the loan, the
Fund is required to return the cash collateral to the borrower plus any agreed
upon rebate. Cash collateral investments will be subject to market depreciation
or appreciation, and the Fund will be responsible for any loss that might result
from its investment of cash collateral. If the adviser determines to make
securities loans, the value of the securities loaned may not exceed
33 1∕3% of the value of
total assets of the Fund. Loan collateral (including any investment of that
collateral) is not subject to the percentage limitations regarding the Fund’s
investments described elsewhere in this prospectus.
The Fund also may
use other non-principal strategies that are not described herein, but which are
described in the Statement of Additional Information.
Investment
Risks
There can be no
assurance that the Fund will achieve its investment objective.
The main risks
associated with investing in the Fund are summarized in the “Risk/Return
Summary” at the front of this prospectus. In addition to the Fund’s main risks,
the Fund may be subject to additional risks in connection with investments and
strategies used by the Fund from time to time. The table below identifies main
risks and some of the additional risks for the Fund.
An investment in the Fund or any other fund may not provide a complete investment program. The suitability of an investment in the Fund should be considered based on the investment objective, strategies and risks described in this prospectus, considered in light of all of the other investments in your portfolio, as well as your risk tolerance, financial goals and time horizons. You may want to consult with a financial advisor to determine if the Fund is suitable for you.
The Fund is subject
to the main risks designated as such in the table below, any of which may
adversely affect the Fund’s net asset value (NAV), market price,
performance and ability to meet its investment objective. The Fund may also be
subject to additional risks that are noted in the table below, as well as those
that are not described herein but which are described in the Statement of
Additional Information.
6 | J.P.
Morgan Exchange-Traded Funds
|
|
Active
Growth ETF |
|
Authorized
Participant Concentration Risk |
• |
|
Convertible
Securities Risk |
○ |
|
Cyber
Security Risk |
○ |
|
Depositary
Receipts Risk |
○ |
|
Derivatives
Risk |
• |
|
Equity
Market Risk |
• |
|
Foreign
Securities Risk |
○ |
|
General
Market Risk |
• |
|
Growth
Investing Risk |
• |
|
Industry
and Sector Focus Risk |
• |
|
Initial
Public Offering (IPO) Risk |
○ |
|
Large
Cap Company Risk |
• |
|
Market
Trading Risk |
• |
|
Master
Limited Partnerships (MLPs) Risk |
○ |
|
New
Fund Risk |
○ |
|
Non-Diversified
Fund Risk |
• |
|
Preferred
Stock Risk |
○ |
|
Prepayment
Risk |
○ |
|
Real
Estate Securities Risk |
○ |
|
Securities
Lending Risk |
○ |
|
Smaller
Company Risk |
• |
|
Transactions
and Liquidity Risk |
○ |
|
Volcker
Rule Risk |
○ |
•
Main
Risks
○
Additional
Risks
Equity
Market Risk. The price of equity
securities may rise or fall because of changes in the broad market or changes in
a company’s financial condition, sometimes rapidly or unpredictably. These price
movements may result from factors affecting individual companies, sectors or
industries selected for the Fund’s portfolio or the securities market as a
whole, such as changes in economic or political conditions. Equity securities
are subject to “stock market risk” meaning that stock prices in general (or in
particular, the prices of the types of securities in which the Fund invests) may
decline over short or extended periods of time. When the value of the Fund’s
securities goes down, your investment in the Fund decreases in
value.
General
Market Risk. Economies and
financial markets throughout the world are becoming increasingly interconnected,
which increases the likelihood that events or conditions in one country or
region will adversely impact markets or issuers in other countries or regions.
Securities in the Fund’s portfolio may underperform in comparison to securities
in general financial markets, a particular financial market or other asset
classes due to a number of factors, including inflation (or expectations for
inflation), deflation (or expectations for deflation), interest rates, global
demand for particular products or resources, market instability, debt crises and
downgrades, embargoes, tariffs, sanctions and other trade barriers, regulatory
events, other governmental trade or market control programs and related
geopolitical events. In addition, the value of the Fund’s investments may be
negatively affected by the occurrence of global events such as war, terrorism,
environmental disasters, natural disasters or events, country instability, and
infectious disease epidemics or pandemics.
For example, the outbreak of
COVID-19 has negatively affected economies,
markets and individual companies throughout the world, including those in which
the Fund invests. The effects of this pandemic to public health and business and
market conditions, including, among other things, reduced consumer demand and economic
output, supply chain disruptions and increased government spending, may continue
to have a significant negative impact on the performance of the Fund’s
investments, increase the Fund’s volatility, negatively impact the Fund’s
arbitrage and pricing mechanisms, exacerbate pre-existing political, social and
economic risks to the Fund, and negatively impact broad segments of businesses
and populations. In addition, governments, their regulatory agencies, or
self-regulatory organizations have taken or may take actions in response to the
pandemic that affect the instruments in
August
3, 2022 | 7
More
About the Fund
(continued)
which the Fund invests, or the
issuers of such instruments, in ways that could have a significant negative
impact on the Fund’s investment performance. The duration and extent of COVID-19
and associated economic and market conditions and uncertainty over the long-term
cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and
the extent to which the associated conditions impact the Fund will also depend
on future developments, which are highly uncertain, difficult to accurately
predict and subject to frequent changes.
Growth
Investing Risk. Growth investing
attempts to identify companies that the adviser believes will experience rapid
earnings growth relative to value or other types of stocks. The value of these
stocks generally is much more sensitive to current or expected earnings than
stocks of other types of companies. Short-term events, such as a failure to meet
industry earnings expectations, can cause dramatic decreases in the growth stock
price compared to other types of stock. Growth stocks may also trade at higher
multiples of current earnings compared to value or other stocks, leading to
inflated prices and thus potentially greater declines in value. The Fund’s
performance may be better or worse than the performance of equity funds that
focus on value stocks or that have a broader investment style.
Large
Cap Company Risk. If the Fund invests
in large cap company securities, it may underperform other funds during periods
when the Fund’s large cap securities are out of favor.
Smaller
Company Risk. (Smaller Cap
Company and Mid Cap Company Risks) Investments in securities of smaller
companies (mid cap and small cap companies) may be riskier, less liquid, more
volatile and more vulnerable to economic, market and industry changes than
securities of larger, more established companies. The securities of smaller
companies may trade less frequently and in smaller volumes than securities of
larger companies. As a result, changes in the price of securities issued by such
companies may be more sudden or erratic than the prices of securities of large
capitalization companies, especially over the short term. These risks are higher
for small cap companies.
Derivatives
Risk.
The Fund may use derivatives in connection with its investment strategies.
Derivatives may be riskier than other types of investments because they may be
more sensitive to changes in economic or market conditions than other types of
investments and could result in losses that significantly exceed the Fund’s
original investment. Derivatives are subject to the risk that changes in the
value of a derivative may not correlate perfectly with the underlying asset,
rate or index. The use of derivatives may not be successful, resulting in losses
to the Fund, and the cost of such strategies may reduce the Fund’s returns.
Certain derivatives also expose the Fund to counterparty risk (the risk that the
derivative counterparty will not fulfill its contractual obligations), including
credit risk of the derivative counterparty. In addition, the Fund may use
derivatives for non-hedging purposes, which increases the Fund’s potential for
loss. Certain derivatives are synthetic instruments that attempt to replicate
the performance of certain reference assets. With regard to such derivatives,
the Fund does not have a claim on the reference assets and is subject to
enhanced counterparty risk.
Investing in
derivatives will result in a form of leverage. Leverage involves special risks.
The Fund may be more volatile than if the Fund had not been leveraged because
the leverage tends to exaggerate any effect on the value of the Fund’s portfolio
securities. Registered investment companies are limited in their ability to
engage in derivative transactions and are required to identify and earmark
assets to provide asset coverage for derivative transactions.
The possible lack of
a liquid secondary market for derivatives and the resulting inability of the
Fund to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
The Fund’s transactions in futures
contracts as a principle strategy and other derivatives could also affect the
amount, timing and character of distributions to shareholders, which may result
in the Fund realizing more short-term capital gain and ordinary income subject
to tax at ordinary income tax rates than it would if it did not engage in such
transactions, which may adversely impact the Fund’s after-tax
return.
|
WHAT
IS A DERIVATIVE? |
|
Derivatives
are securities or contracts (for example, futures and options) that derive
their value from the performance of underlying
assets
or securities. |
Industry
and Sector Focus Risk. At times, the Fund
may increase the relative emphasis of its investments in a particular industry
or sector. The prices of securities of issuers in a particular industry or
sector may be more susceptible to fluctuations due to changes in economic or
business conditions, government regulations, availability of basic resources or
supplies, or other events that affect that industry or sector more than
securities of issuers in other industries and sectors. To the extent that the
Fund increases the relative emphasis of its investments in a particular industry
or sector, its shares’ values may fluctuate in response to events affecting that
industry or sector.
8 | J.P.
Morgan Exchange-Traded Funds
Non-Diversified
Fund Risk. The Fund is
non-diversified and may invest in a smaller number of instruments than a
diversified fund would. This increased investment in fewer issuers may result in
the Fund’s shares being more sensitive to economic results of those issuing the
securities. The value of the Fund’s shares may also be more volatile than the
value of a Fund which invests in more securities.
Market
Trading Risk
Risk
that Shares of the Fund May Trade at Prices Other Than NAV. Shares of the Fund
may trade on the Exchange at prices above, below or at their most recent NAV.
The NAV of the Fund’s Shares, which is calculated at the end of each business
day, will generally fluctuate with changes in the market value of the Fund’s
holdings. The market prices of the Shares will also fluctuate, in some cases
materially, in accordance with changes in NAV and the intraday value of the
Fund’s holdings, as well as the relative supply of and demand for the Shares on
the Exchange. Differences between secondary market prices of Shares and the
intraday value of the Fund’s holdings may be due largely to supply and demand
forces in the secondary market, which may not be the same forces as those
influencing prices for securities held by the Fund at a particular
time.
Given the fact that
Shares can be created and redeemed by authorized participants in Creation Units,
the adviser believes that large discounts or premiums to the NAV of Shares
should not be sustained in the long-term. While the creation/ redemption feature
is designed to make it likely that Shares normally will trade close to the value
of the Fund’s holdings, market prices are not expected to correlate exactly to
the Fund’s NAV due to timing reasons, supply and demand imbalances and other
factors. In addition, disruptions to creations and redemptions, adverse
developments impacting market makers, authorized participants or other market
participants, or high market volatility may result in market prices for Shares
of the Fund that differ significantly from its NAV or to the intraday value of
the Fund’s holdings. As
a result of these factors, among others, the Fund’s Shares may trade at a
premium or discount to NAV, especially during periods of significant market
volatility.
Cost
of Buying or Selling Shares. When you buy or sell
Shares of the Fund through a broker, you will likely incur a brokerage
commission or other charges imposed by brokers. In addition, the market price of
Shares, like the price of any exchange-traded security, includes a “bid-ask
spread” charged by the market makers or other participants that trade the
particular security. The spread of the Fund’s Shares varies over time based on
the Fund’s trading volume and market liquidity and may increase if the Fund’s
trading volume, the spread of the Fund’s underlying securities, or market
liquidity decrease. In times of severe market disruption, including when trading
of the Fund’s holdings may be halted, the bid-ask spread may increase
significantly. This means that Shares may trade at a discount to the Fund’s NAV,
and the discount is likely to be greatest during significant market
volatility.
Short
Selling Risk. Shares of the Fund,
similar to shares of other issuers listed on a stock exchange, may be sold short
and are therefore subject to the risk of increased volatility and price
decreases associated with being sold short.
No
Guarantee of Active Trading Market Risk. While Shares are
listed on the Exchange, there can be no assurance that active trading markets
for the Shares will be maintained by market makers or by authorized
participants. JPMorgan Distribution Services, Inc., the distributor of the
Fund’s Shares (the Distributor), does not maintain a secondary market in the
Shares.
Trading
Issues Risk. Trading in Shares on
the Exchange may be halted due to market conditions or for reasons that, in the
view of the Exchange, make trading in Shares inadvisable. In addition, trading
in Shares on the Exchange is subject to trading halts caused by extraordinary
market volatility pursuant to the Exchange “circuit breaker” rules. If a trading
halt or unanticipated early closing of the Exchange occurs, a shareholder may be
unable to purchase or sell Shares of the Fund.
There can be no
assurance that the requirements of the Exchange necessary to maintain the
listing of the Fund will continue to be met or will remain
unchanged.
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 and none of these authorized participants is or will be obligated
to engage in creation or redemption transactions. To the extent that these
intermediaries exit the business or are unable to or choose not to proceed with
creation and/or redemption orders with respect to the Fund and no other
authorized participant creates or redeems, Shares may trade at a discount to NAV
and possibly face trading halts and/or delisting.
Foreign
Securities Risk. Investments in
foreign securities (including depositary receipts), are subject to special risks
in addition to those of U.S. investments. These risks include political and
economic risks, civil conflicts and war, greater volatility, expropriation and
nationalization risks, sanctions or other measures by the United States or other
governments, currency fluctuations, higher transaction costs, delayed
settlement, possible foreign controls on investment, and less stringent investor
protection and disclosure standards of foreign markets. The securities markets
of many foreign countries are relatively small, with a limited number of
companies representing a small number of industries. If foreign securities are
denominated and traded in a foreign currency, the value of the Fund’s foreign
holdings can be affected by currency exchange rates and exchange control
regulations. In certain markets where securities and other instruments are not
traded “delivery versus payment,” the Fund may not receive timely payment for
August
3, 2022 | 9
More
About the Fund
(continued)
securities or other
instruments it has delivered or receive delivery of securities paid for and may
be subject to increased risk that the counterparty will fail to make payments or
delivery when due or default completely. The Fund may focus its investments in a
single country or small group of countries and be subject to greater volatility
than a more geographically diversified fund.
Real
Estate Securities Risk. The value of real
estate securities in general, and REITs in particular, are subject to the same
risks as direct investments in real estate and mortgages which include, but are
not limited to, sensitivity to changes in real estate values and property taxes,
interest rate risk, tax and regulatory risk, fluctuations in rent schedules and
operating expenses, adverse changes in local, regional or general economic
conditions, deterioration of the real estate market and the financial
circumstances of tenants and sellers, unfavorable changes in zoning, building,
environmental and other laws, the need for unanticipated renovations, unexpected
increases in the cost of energy and environmental factors. Furthermore, a REIT
could fail to qualify for tax free pass-through of its income under the Internal
Revenue Code or fail to maintain its exemption from registration under the 1940
Act, which could produce adverse economic consequences for the REIT and its
investors, including the Fund.
The underlying
mortgage loans may be subject to the risks of default or of prepayments that
occur earlier or later than expected, and such loans may also include so-called
“sub-prime” mortgages. The value of REITs will also rise and fall in response to
the management skill and creditworthiness of the issuer. In particular, the
value of these securities may decline when interest rates rise and will also be
affected by the real estate market and by the management of the underlying
properties. REITs may be more volatile and/or more illiquid than other types of
equity securities. The Fund will indirectly bear its proportionate share of
expenses, including management fees, paid by each REIT in which it invests in
addition to the expenses of the Fund.
In addition, certain
of the companies in which the Fund intends to invest may have developed or
commenced development on properties and may develop additional properties in the
future. Real estate development involves significant risks in addition to those
involved in the ownership and operation of established properties, including the
risks that financing, if needed, may not be available on favorable terms for
development projects, that construction may not be completed on schedule
(resulting in increased debt service expense and construction costs), that
estimates of the costs of construction may prove to be inaccurate and that
properties may not be leased, rented or operated on profitable terms and
therefore will fail to perform in accordance with expectations. As a result, the
value of the Fund’s investment may decrease in value. Real estate securities
have limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate securities are
also subject to heavy cash flow dependency and defaults by borrowers or
tenants.
Depositary
Receipts Risk. The Fund’s
investments may take the form of depositary receipts, including unsponsored
depositary receipts. Unsponsored depositary receipts may not provide as much
information about the underlying issuer and may not carry the same voting
privileges as sponsored depositary receipts. Unsponsored depositary receipts are
issued by one or more depositaries in response to market demand, but without a
formal agreement with the company that issues the underlying
securities.
Prepayment
Risk.
The issuer of certain securities may repay principal in advance, especially when
yields fall. Changes in the rate at which prepayments occur can affect the
return on investment of these securities. When debt obligations are prepaid or
when securities are called, the Fund may have to reinvest in securities with a
lower yield. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher coupons, resulting in an unexpected
capital loss.
Convertible
Securities Risk. A convertible
security generally entitles the holder to receive interest paid or accrued on
debt securities or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities generally have characteristics similar to both debt and
equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with
fluctuations in the market value of the underlying securities. Convertible
securities ordinarily provide a stream of income with generally higher yields
than those of common stock of the same or similar issuers. Convertible
securities generally rank senior to common stock in a corporation’s capital
structure but are usually subordinated to comparable nonconvertible securities.
Convertible securities generally do not participate directly in any dividend
increases or decreases of the underlying securities, although the market prices
of convertible securities may be affected by any dividend changes or other
changes in the underlying securities.
Initial
Public Offering (IPO) Risk. IPO securities have
no trading history, and information about the companies may be available for
very limited periods. The prices of securities sold in IPOs may be highly
volatile and their purchase may involve high transaction costs. At any
particular time or from time to time, the Fund may not be able to invest in
securities issued in IPOs, or invest to the extent desired, because, for
example, only a small portion (if any) of the securities being offered in an IPO
may be made available to the Fund. In addition, under certain market conditions,
a relatively small number of companies may issue securities in IPOs. Similarly,
as the number of purchasers to which IPO securities are allocated increases, the
number of securities issued to the Fund may decrease. The performance of the
Fund during periods when it is unable to invest significantly or at all in IPOs
may be lower than during periods when the Fund is able to do so. In addition, as
the Fund increases in size, the impact of IPOs on the Fund’s performance will
generally decrease.
10 | J.P.
Morgan Exchange-Traded Funds
Master
Limited Partnerships (MLPs) Risk. The Fund may invest
in MLPs whose ownership interests are publicly traded and that primarily derive
their income from, among other industries, the mining, production,
transportation or processing of minerals or natural resources, although they may
also finance entertainment, research and development, real estate and other
projects. Investments held by an MLP may be relatively illiquid, limiting the
MLP’s ability to vary its portfolio promptly in response to changes in economic
or other conditions. In addition, MLPs may have limited financial resources,
their securities may trade infrequently and in limited volume and they may be
subject to more abrupt or erratic price movements than securities of larger or
more broadly-based companies. The risks of investing in an MLP are generally
those inherent in investing in a partnership as opposed to a corporation. For
example, state law governing partnerships is often less restrictive than state
law governing corporations. Accordingly, there may be fewer protections afforded
investors in an MLP than investors in a corporation. Additional risks involved
with investing in an MLP are risks associated with the specific industry or
industries in which the partnership invests, such as the risks of investing in
real estate, or oil and gas industries.
Preferred
Stock Risk. Preferred stock
generally has a preference as to dividends and liquidations over an issuer’s
common stock but ranks junior to debt securities in an issuer’s capital
structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer’s board of directors.
Because preferred stocks generally pay dividends only after the issuing company
makes required payments to holders of its bonds and other debt, the value of
preferred stocks generally is more sensitive than bonds and other debt to actual
or perceived changes in the company’s financial condition or prospects.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
Transactions
and Liquidity Risk. The Fund could
experience a loss when selling securities to meet redemption requests and its
liquidity may be negatively impacted. The risk of loss increases if the
redemption requests are large or frequent, occur in times of overall market
turmoil or declining prices for the securities sold, or when the securities the
Fund wishes to or is required to sell are illiquid. To the extent a large
proportion of Shares are held by a small number of shareholders (or a single
shareholder) including funds or accounts over which the adviser or its
affiliates have investment discretion, the Fund is subject to the risk that
these shareholders will purchase or redeem Shares in large amounts rapidly or
unexpectedly, including as a result of an asset allocation decision made by the
adviser or its affiliates. To the extent these larger shareholders transact in
the secondary market, such transactions may account for a large percentage of
the Fund’s trading volume on the Exchange, which may have a material effect
(upward or downward) on the market price of Shares. In addition to the other
risks described in this section, these transactions could adversely affect the
ability of the Fund to conduct its investment program. The Fund may be unable to
sell illiquid securities at its desired time or price or the price at which the
securities have been valued for purposes of the Fund’s NAV. Illiquidity can be
caused by a drop in overall market trading volume, an inability to find a ready
buyer, or legal restrictions on the securities’ resale. Certain securities that
were liquid when purchased may later become illiquid, particularly in times of
overall economic distress.
Similarly, large
purchases of Shares may adversely affect the Fund’s performance to the extent
that the Fund is delayed in investing new cash and is required to maintain a
larger cash position than it ordinarily would. Large redemptions also could
accelerate the realization of capital gains, increase the Fund’s transaction
costs and impact the Fund’s performance. To the extent redemptions are effected
in cash, an investment in the Fund may be less tax-efficient than an investment
in an ETF that distributes portfolio securities entirely in-kind.
Securities
Lending Risk. The Fund may engage
in securities lending. Securities lending involves counterparty risk, including
the risk that the loaned securities may not be returned or returned in a timely
manner and/or a loss of rights in the collateral if the borrower or the lending
agent defaults. This risk is increased when the Fund’s loans are concentrated
with a single or limited number of borrowers. In addition, the Fund bears the
risk of loss in connection with its investments of the cash collateral it
receives from the borrower. To the extent that the value or return of the Fund’s
investments of the cash collateral declines below the amount owed to a borrower,
the Fund may incur losses that exceed the amount it earned on lending the
security. In situations where the adviser does not believe that it is prudent to
sell the cash collateral investments in the market, the Fund may borrow money to
repay the borrower the amount of cash collateral owed to the borrower upon
return of the loaned securities. This will result in financial leverage, which
may cause the Fund to be more volatile because financial leverage tends to
exaggerate the effect of any increase or decrease in the value of the Fund’s
portfolio securities.
Cyber
Security Risk. As the use of
technology has become more prevalent in the course of business, the Fund has
become more susceptible to operational and financial risks associated with cyber
security, including: theft, loss, misuse, improper release, corruption and
destruction of, or unauthorized access to, confidential or highly restricted
data relating to the Fund and its shareholders; and compromises or failures to
systems, networks, devices and applications relating to the operations of the
Fund and its service providers. Cyber security risks may result in financial
losses to the Fund and its shareholders; the inability of the Fund to transact
business with its shareholders; delays or mistakes in the calculation of the
Fund’s NAV or other materials provided to shareholders; the inability to process
transactions with shareholders or other parties; violations of privacy and other
laws; regulatory fines, penalties and reputational damage; and compliance and
remediation costs, legal fees and other expenses. The Fund’s service providers
(including, but not limited to, the adviser, any sub-advisers, administrator,
transfer agent, and custodian or their agents), financial
August
3, 2022 | 11
More
About the Fund
(continued)
intermediaries,
companies in which the Fund invests and parties with which the Fund engages in
portfolio or other transactions also may be adversely impacted by cyber security
risks in their own businesses, which could result in losses to the Fund or its
shareholders. While measures have been developed which are designed to reduce
the risks associated with cyber security, there is no guarantee that those
measures will be effective, particularly since the Fund does not directly
control the cyber security defenses or plans of its service providers, financial
intermediaries and companies in which it invests or with which it does
business.
Volcker
Rule Risk. Pursuant to Section
619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and certain
rules promulgated thereunder known as the Volcker Rule, if the adviser and/or
its affiliates own 25% or more of the outstanding ownership interests of the
Fund after the permitted seeding period from the implementation of the Fund’s
investment strategy, the Fund could be subject to restrictions on trading that
would adversely impact the Fund’s ability to execute its investment strategy.
Generally, the permitted seeding period is three years from the implementation
of the Fund’s investment strategy. As a result, the adviser and/or its
affiliates may be required to reduce their ownership interests in the Fund at a
time that is sooner than would otherwise be desirable, which may result in the
Fund’s liquidation or, if the Fund is able to continue operating, may result in
losses, increased transaction costs and adverse tax consequences as a result of
the sale of portfolio securities.
New
Fund Risk. The Fund is new
with no operating history. As a result, prospective investors have no track
record or history on which to base their investment decisions. In addition,
until the Fund achieves a certain size, the performance of certain of its
investments may disproportionately impact the performance of the Fund, which may
be subject to heightened volatility. As a new fund, the Fund also may be subject
to a “ramp-up” period during which it may not be fully invested or able to meet
its investment objective or investment policies. In addition, there can be no
assurance that the Fund will grow to or maintain an economically viable
size.
For more information
about risks associated with the types of investments that the Fund purchases,
please read the “Risk/Return Summary” at the front of this prospectus and the
Statement of Additional Information.
Conflicts
of Interest
An investment in a
Fund is subject to a number of actual or potential conflicts of interest. For
example, the Adviser and/or its affiliates provide a variety of different
services to a Fund, for which the Fund compensates them. As a result, the
Adviser and/or its affiliates have an incentive to enter into arrangements with
a Fund, and face conflicts of interest when balancing that incentive against the
best interests of a Fund. The Adviser and/or its affiliates also face conflicts
of interest in their service as investment adviser to other clients, and, from
time to time, make investment decisions that differ from and/or negatively
impact those made by the Adviser on behalf of a Fund. In addition, affiliates of
the Adviser provide a broad range of services and products to their clients and
are major participants in the global currency, equity, commodity, fixed income
and other markets in which a Fund invests or will invest. In certain
circumstances by providing services and products to their clients, these
affiliates’ activities will disadvantage or restrict the Funds and/or benefit
these affiliates. The Adviser may also acquire material non-public information
which would negatively affect the Adviser’s ability to transact in securities
for a Fund. JPMorgan and the Funds have adopted policies and procedures
reasonably designed to appropriately prevent, limit or mitigate conflicts of
interest. In addition, many of the activities that create these conflicts of
interest are limited and/or prohibited by law, unless an exception is available.
For more information about conflicts of interest, see the Potential
Conflicts of Interest section in the
Statement of Additional Information.
Temporary
Defensive and Cash Positions
For liquidity and to
respond to unusual market conditions, the Fund may invest all or most of its
total assets in cash and cash
equivalents for temporary
defensive purposes. These investments may result in a lower yield than
lower-quality or longer-term investments.
|
WHAT
IS A CASH EQUIVALENT? |
|
Cash
equivalents are highly liquid, high-quality instruments with maturities of
three months or less on the date they are purchased.
They
include securities issued by the U.S. government, its agencies and
instrumentalities, repurchase agreements, certificates of
deposit,
bankers’ acceptances, commercial paper, variable rate master demand
notes, money market mutual funds, and bank
deposit
accounts. |
While the Fund is
engaged in a temporary defensive position, it may not meet its investment
objective. These investments may also be inconsistent with the Fund’s main
investment strategies. Therefore, the Fund will pursue a temporary defensive
position only when market conditions warrant.
12 | J.P.
Morgan Exchange-Traded Funds
Disclosure
of Portfolio Holdings
A description of the
policies and procedures with respect to the disclosure of the Fund's portfolio
securities is available in the Fund's Statement of Additional
Information.
Additional
Fee Waiver and/or Expense Reimbursement
Service providers to
the Fund may, from time to time, voluntarily waive all or a portion of any fees
to which they are entitled and/or reimburse certain expenses as they may
determine from time to time. The Fund’s service providers may discontinue or
modify these voluntary actions at any time without notice. Performance for the
Fund, when available, will reflect the voluntary waiver of fees and/or the
reimbursement of expenses, if any. Without these voluntary waivers and/or
expense reimbursements, performance would be less favorable.
August
3, 2022 | 13
The
Fund's Management and Administration
The
Fund's Management and Administration
The Fund is a series
of J.P. Morgan Exchange-Traded Fund Trust, a Delaware statutory trust (the
Trust). The Trust is governed by the Board of Trustees, which is responsible for
overseeing all business activities of the Fund.
The
Fund's Investment Adviser and Administrator
J.P. Morgan
Investment Management Inc. (JPMIM or the adviser) is the investment adviser and
administrator to the Fund. JPMIM is located at 383 Madison Avenue, New York, NY
10179. In addition to managing the Fund's portfolio, JPMIM also provides
administrative services for and oversees the other service providers of the
Fund.
JPMIM is a
wholly-owned subsidiary of JPMorgan Asset Management Holdings Inc., which is a
wholly-owned subsidiary of JPMorgan Chase & Co. (JPMorgan Chase), a bank
holding company.
In rendering
investment advisory services to the Fund, JPMIM uses the portfolio management,
research and other resources of a foreign (non-U.S.) affiliate of JPMIM and may
provide services to the Fund through a “participating affiliate” arrangement, as
that term is used in relief granted by the staff of the SEC. Under this relief,
U.S. registered investment advisers are allowed to use portfolio management or
research resources of advisory affiliates subject to the regulatory supervision
of the registered investment adviser.
A discussion of the
basis the Board of Trustees of the Trust used in approving the management
agreement for the Fund will be available in the first shareholder report for the
Fund.
Management
Fee and Other Expenses
Pursuant to the
Fund’s management agreement, JPMIM is entitled to a management fee, incurred
daily and paid monthly of the Fund’s average daily net assets at the following
rate: 0.44%. Under the management agreement, JPMIM is responsible for
substantially all the expenses of the Fund (including expenses of the Trust
relating to the Fund), except for the management fees, payments under the Fund’s
12b-1 plan (if any), interest expenses, dividend and interest expenses related
to short sales, taxes, acquired fund fees and expenses (other than fees for
funds advised by the adviser and/ or its affiliates), costs of holding
shareholder meetings, and litigation and potential litigation and other
extraordinary expenses not incurred in the ordinary course of the Fund’s
business. Additionally, the Fund shall be responsible for its non-operating
expenses, including brokerage commissions and fees and expenses associated with
the Fund’s securities lending program, if applicable.
The
Portfolio Managers
The portfolio
management team is led by Giri Devulapally, Managing Director of JPMIM and a CFA
charterholder, Timothy Parton, Managing Director of JPMIM and a CFA
charterholder and Felise L. Agranoff, Managing Director of JPMIM and a CFA
charterholder. Mr. Devulapally leads the team primarily responsible for the
portion of the Fund that leverages the adviser’s Large Cap Growth strategy,
while Mr. Parton and Ms. Agranoff lead the team primarily responsible for the
portion of the Fund that leverages the adviser’s Growth Advantage strategy. Mr.
Devulapally is a senior member of the U.S. Equity Growth portfolio management
team and has been a portfolio manager in the firm’s U.S. Equity Group since 2003
when he joined JPMIM. Mr. Parton is also a senior member of the U.S. Equity
Growth portfolio management team and has worked as a portfolio manager for JPMIM
or its affiliates (or their predecessors) since 1988 and has been employed by
the firm since 1986. An employee since 2004, Ms. Agranoff has been a portfolio
manager since 2015 and has been a research analyst in the firm’s U.S. Equity
Group since 2004.
Mr. Parton has announced his
retirement from JPMIM in early 2024. Mr. Parton will continue to serve on the
portfolio management team of the Fund until his retirement, and upon his
retirement Ms. Agranoff will continue to be responsible for the portion of the
Fund that leverages the adviser’s Growth Advantage strategy.
The Statement of Additional
Information provides additional information about the portfolio managers'
compensation, other accounts managed by the portfolio managers and the portfolio
managers' ownership of securities in the Fund.
The
Fund's Distributor
JPMorgan
Distribution Services, Inc. (the Distributor) is the distributor of the Fund's
Shares. The Distributor or its agent distributes Creation Units for the Fund on
an agency basis. The Distributor does not maintain a secondary market in Shares
of the Fund. The Distributor has no role in determining the investment policies
of the Fund or the securities that are purchased or sold by the Fund. The
Distributor’s principal address is 1111 Polaris Parkway, Columbus, OH
43240.
14 | J.P.
Morgan Exchange-Traded Funds
Payments
to Financial Intermediaries
JPMIM and, from time
to time, other affiliates of JPMorgan Chase may, at their own expense and out of
their own legitimate profits, provide cash payments to Financial Intermediaries
whose customers invest in Shares of the Fund. For this purpose, Financial
Intermediaries include financial advisors, investment advisers, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
administrators and others, including various affiliates of JPMorgan Chase, that
may enter into agreements with JPMIM and/or its affiliates. These cash payments
may relate to marketing activities and presentations, educational training
programs, the support of technology platforms and/or reporting systems, or the
Financial Intermediaries’ making Shares of the Fund available to their
customers. Such compensation may provide such Financial Intermediaries with an
incentive to favor sales of Shares of the Fund over other investment options
they make available to their customers. See the Statement of Additional
Information for more information.
August
3, 2022 | 15
Purchase
and Redemption of Shares
Buying
and Selling Shares
In
the Secondary Market. Most investors will
buy and sell Shares of the Fund in secondary market transactions through
brokers. Shares of the Fund are listed and traded on the secondary market on the
Exchange. Shares can be bought and sold throughout the trading day like other
publicly traded shares. There is no minimum investment. Although Shares are
generally purchased and sold in “round lots” of 100 Shares, brokerage firms
typically permit investors to purchase or sell Shares in smaller “odd lots,” at
no per-Share price differential. When buying or selling Shares through a broker,
you will incur customary brokerage commissions and charges, and you may pay some
or all of the spread between the bid and the offered price in the secondary
market on each leg of a round trip (purchase and sale) transaction. The spread
varies over time for Shares of the Fund based on the Fund’s trading volume and
market liquidity, and is generally lower if the Fund has a lot of trading volume
and market liquidity.
Shares of the Fund
trade on the Exchange at prices that may differ to varying degrees from the
daily NAV of the Shares.
Directly
with the Fund. The Fund’s Shares
are issued or redeemed by the Fund at NAV per Share only in a large specified
number of Shares called a “Creation Unit” or multiples thereof. Investors such
as market makers, large investors and institutions who wish to deal in Creation
Units directly with the Fund must have entered into an authorized participant
agreement with the Distributor, or purchase through a dealer that has entered
into such an agreement. Set forth below is a brief description of the procedures
applicable to purchases and redemptions of Creation Units. For more detailed
information, see “Creation and Redemption of Creation Unit Aggregations” in the
Fund's Statement of Additional Information.
Beneficial
Ownership. The Depository
Trust Company (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. For more detailed information, see “Book Entry Only System” in the
Fund's Statement of Additional Information.
Premium/Discount
Information
The Fund has not
commenced operations as of the date of this prospectus and, therefore, does not
have information about the differences between the Fund’s daily market price on
the Exchange and its NAV. When available, information regarding how often the
Shares of the Fund traded on the Exchange at a price above (i.e., at a premium)
or below (i.e., at a discount) the NAV of the Fund for the most recently
completed calendar year and the most recently completed calendar quarters since
that year (or the life of the Fund, if shorter) can be found at
www.jpmorganfunds.com.
Pricing
Shares
Investors that
purchase or sell Shares on the secondary market transact at the market price on
the Exchange. The market price may differ from the Fund’s daily NAV and can be
affected by market forces of supply and demand, economic conditions and other
factors.
The Exchange
disseminates the approximate value of Shares of the Fund every fifteen seconds.
This approximate value should not be viewed as a “real-time” update of the NAV
per Share of the Fund because the approximate value may not be calculated in the
same manner as the NAV, which is computed only once a day. The approximate value
is generally determined by using both 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. The Fund is not involved in,
or responsible for, the calculation or dissemination of the approximate value
and the Fund does not make any representation or warranty as to its
accuracy.
NAV is calculated
each business day as of the close of the New York Stock Exchange (NYSE), which
is typically 4:00 p.m. E.T. On occasion, the NYSE will close before 4:00 p.m.
E.T. When that happens, NAV will be calculated as of the time the NYSE closes.
The Fund will not treat an intraday unscheduled disruption or closure in NYSE
trading as a closure of the NYSE and will calculate NAV as of 4:00 p.m. E.T. if
the particular disruption or closure directly affects only the NYSE. The price
at which a purchase of a Creation Unit is effected is based on the next
calculation of NAV after the order is received in proper form in accordance with
this prospectus. To the
16 | J.P.
Morgan Exchange-Traded Funds
extent the Fund
invests in securities that are primarily listed on foreign exchanges or other
markets that trade on weekends or other days when the Fund does not price its
Shares, the value of the Fund’s Shares may change on days when you will not be
able to purchase or redeem your Shares. The NAV per share of the Fund is equal
to the value of all its assets minus its liabilities, divided by the number of
outstanding shares.
Securities for which
market quotations are readily available are generally valued at their current
market value. Other securities and assets, including securities for which market
quotations are not readily available, market quotations are determined not to be
reliable, or, their value has been materially affected by events occurring after
the close of trading on the exchange or market on which the security is
principally traded but before the Fund’s NAV is calculated, may be valued at
fair value in accordance with policies and procedures adopted by the Trust’s
Board of Trustees. Fair value represents a good faith determination of the value
of a security or other asset based upon specifically applied procedures. Fair
valuation may require subjective determinations. There can be no assurance that
the fair value of an asset is the price at which the asset could have been sold
during the period in which the particular fair value was used in determining the
Fund’s NAV.
Equity securities
listed on a North American, Central American, South American or Caribbean
securities exchange are generally valued at the last sale price on the exchange
on which the security is principally traded. Other foreign equity securities are
fair valued using quotations from independent pricing services, as applicable.
The value of securities listed on the NASDAQ Stock Market, Inc. is generally the
NASDAQ official closing price.
Fixed income
securities are valued using prices supplied by an approved independent third
party or affiliated pricing services or broker/dealers. Those prices are
determined using a variety of inputs and factors as more fully described in the
Statement of Additional Information.
Assets and
liabilities initially expressed in foreign currencies are converted into U.S.
dollars at the prevailing market rates from an approved independent pricing
service as of 4:00 p.m. E.T.
Shares of ETFs are
generally valued at the last sale price on the exchange on which the ETF is
principally traded. Shares of other open-end investment companies are valued at
their respective NAVs.
Options traded on
U.S. securities exchanges are valued at the composite mean price, using the
National Best Bid and Offer quotes.
Options traded on
foreign exchanges are valued at the settled price, or if no settled price is
available, at the last sale price available prior to the calculation of the
Fund’s NAV and will be fair valued by applying fair value factors provided by
independent pricing services, as applicable, for any options involving equity
reference obligations listed on exchanges other than North American, Central
American, South American or Caribbean securities exchanges.
Exchange traded
futures are valued at the last sale price available prior to the calculation of
the Fund’s NAV. Any futures involving equity reference obligations listed on
exchanges other than North American, Central American, South American or
Caribbean securities exchanges will be fair valued by applying fair value
factors provided by independent pricing services, as applicable.
Non-listed
over-the-counter futures are valued utilizing market quotations provided by
approved pricing services.
Swaps and structured
notes are priced generally by an approved independent third party or affiliated
pricing service or at an evaluated price provided by a counterparty or
broker/dealer.
Any derivatives
involving equity reference obligations listed on exchanges other than North
American, Central American, South American or Caribbean securities exchanges
will be fair valued by applying fair value factors provided by independent
pricing services, as applicable.
Frequent
Purchases and Redemptions
The Fund imposes no
restrictions on the frequency of purchases and redemptions. The Board of
Trustees evaluated the risks of market timing activities by the Fund's
shareholders when they considered that no restriction or policy was necessary.
The Board considered that, unlike mutual funds, the Fund issues and redeems its
Shares at NAV only in Creation Units, and the Fund’s Shares may be purchased and
sold on the Exchange at prevailing market prices.
August
3, 2022 | 17
Shareholder
Information
Taxes
on Distributions
The Fund intends to
elect to be treated and to qualify each taxable year as a regulated investment
company. A regulated investment company is not subject to tax at the corporate
level on income and gains from investments that are distributed to shareholders.
The Fund’s failure to qualify as a regulated investment company would result in
corporate-level taxation and, consequently, a reduction in income available for
distribution to shareholders.
The Fund can earn
income and realize capital gain. The Fund deducts any expenses and then pays out
the earnings, if any, to shareholders as distributions.
The Fund generally
declares and distributes net investment income, if any, at least annually. The
Fund will distribute net realized capital gain, if any, at least annually. For
each taxable year, the Fund will distribute substantially all of its net
investment income and net realized capital gain. The amounts of the Fund’s
distributions are driven by federal tax requirements. Such required taxable
distributions to shareholders may be significant even if the Fund's overall
performance for the applicable taxable year is negative.
Distributions of net
investment income generally are taxable as ordinary income. Dividends of net
investment income paid to a non-corporate U.S. shareholder that are properly
reported as qualified dividend income generally will be taxable to such
shareholder at a maximum individual federal income tax rate applicable to
“qualified dividend income” of either 15% or 20%, depending on whether the
individual’s income exceeds certain threshold amounts. The amount of dividend
income that may be so reported by the Fund generally will be limited to the
aggregate of the eligible dividends received by the Fund. In addition, the Fund
must meet certain holding period and other requirements with respect to the
shares on which the Fund received the eligible dividends, and the non-corporate
U.S. shareholder must meet certain holding period and other requirements with
respect to the Fund. The amount of the Fund's distributions that would otherwise
qualify for this favorable tax treatment will be reduced as a result of the
Fund's securities lending activities or high portfolio turnover-rate. Dividends
of net investment income that are not reported as qualified dividend income and
dividends of net short-term capital gain will be taxable to a U.S. shareholder
as ordinary income.
Distributions of net
capital gain (that is, the excess of the net gains from the sale of investments
that the Fund owned for more than one year over the net losses from investments
that the Fund owned for one year or less) that are properly reported by the Fund
as capital gain dividends will be taxable as long-term capital gain, regardless
of how long you have held your Shares in the Fund. The maximum individual
federal income tax rate applicable to long-term capital gains is generally
either 15% or 20%, depending on whether the individual’s income exceeds certain
threshold amounts. Distributions of net short-term capital gain (that is, the
excess of any net short-term capital gain over net long-term capital loss), if
any, will be taxable to U.S. shareholders as ordinary income. Capital gain of a
corporate shareholder is taxed at the same rate as ordinary income.
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 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.
If you buy Shares of
the Fund just before a distribution, you will be subject to tax on the entire
amount of the taxable distribution you receive. Distributions are taxable to you
even if they are paid from income or gain earned by the Fund before your
investment (and thus were included in the price you paid for your Shares). Any
gain resulting from the sale or exchange of Shares generally will be taxable as
long-term or short-term gain, depending upon how long you have held the
Shares.
The Fund’s
investment in derivative instruments may require the Fund to accrue and
distribute income not yet received. In order to generate sufficient cash to make
the requisite distributions, the Fund may be required to liquidate other
investments in its portfolio that it otherwise would have continued to hold,
including at times when it is not advantageous to do so.
The Fund’s
transactions in derivatives 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
shareholders. The Fund’s use of these types of transactions may result in the
Fund realizing more short-term capital gain and ordinary income subject to tax
at ordinary income tax rates than it would if it did not engage in such
transactions.
Please see the
Statement of Additional Information for additional discussion of the tax
consequences of the above-described and other investments to the Fund and its
shareholders.
The dates on which
dividends and capital gain, if any, will be distributed are available online at
www.jpmorganfunds.com.
Early in each
calendar year, you will receive a notice showing the amount of distributions you
received during the preceding calendar year and the tax status of those
distributions.
Any foreign
shareholder would generally be subject to U.S. tax-withholding on distributions
by the Fund, as discussed in the Statement of Additional
Information.
18 | J.P.
Morgan Exchange-Traded Funds
Any investor for
whom the Fund does not have a valid Taxpayer Identification Number may be
subject to backup withholding. The tax considerations described in this section
do not apply to tax-deferred accounts or other non-taxable
entities.
Taxes
on Exchange-Listed Shares Sales
Currently, any
capital gain or loss realized upon a sale of Shares is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as short-term capital gain or loss if the Shares have been held for one
year or less. Capital loss realized on the sale or exchange of Shares held for
six months or less will be treated as long-term capital loss to the extent of
any capital gain dividends received by the shareholder. The ability to deduct
capital losses may be limited.
Taxes
on Purchase and Redemption of Creation Units
At the time of
purchase, an Authorized Participant who exchanges equity 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 and
the exchanger’s aggregate basis in the securities surrendered and the cash paid.
At redemption, a person who exchanges Creation Units for equity securities will
generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the Creation Units and the aggregate market value of the
securities received and the cash received in connection with the redemption. The
Internal Revenue Service, however, may assert that a loss realized upon an
exchange of securities for Creation Units cannot be deducted currently under the
rules governing “wash sales” on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible.
Under current
federal tax laws, any capital gain or loss realized upon redemption of Creation
Units is generally treated as long-term capital gain or loss if the Shares have
been held for more than one year and as a short-term capital gain or loss if the
Shares have been held for one year or less.
If you purchase or
redeem Creation Units, you will be sent a confirmation statement showing how
many and at what price you purchased or sold Shares.
The above is a
general summary of tax implications of investing in the Fund. Because each
investor’s tax consequences are unique, please consult your tax advisor to see
how investing in the Fund and, for individuals and S corporations, selection of
a particular cost method of accounting will affect your own tax
situation.
Availability
of Proxy Voting Record
The Trustees have
delegated the authority to vote proxies for securities owned by the Fund to
JPMIM. When available, a copy of the Fund’s voting record for the most recent
12-month period ended June 30 will be available on the SEC’s website at
www.sec.gov or on the Fund's website at www.jpmorganfunds.com no later than
August 31 of each year. The Fund’s proxy voting record will include, among other
things, a brief description of the matter voted on for each portfolio security,
and will state how each vote was cast, for example, for or against the
proposal.
Other
Information
For purposes of the
Investment Company Act of 1940 (1940 Act), the Fund is treated as a registered
investment company. Section 12(d)(1) of the 1940 Act restricts investments by
investment companies in the securities of other investment companies, including
Shares of the Fund. Registered investment companies are permitted to invest in
the Fund beyond the limits set forth in Section 12(d)(1) subject to certain
terms and conditions.
August
3, 2022 | 19
Financial
Highlights
This section would
ordinarily include Financial Highlights. The Financial Highlights table is
intended to help you understand the Fund’s performance for the Fund’s periods of
operations. Because the Fund has not yet commenced operations as of the date of
this prospectus, no Financial Highlights are shown.
20 | J.P.
Morgan Exchange-Traded Funds
How
to Reach Us
MORE
INFORMATION
For investors who
want more information on the Fund the following documents are available free
upon request:
ANNUAL
AND SEMI-ANNUAL REPORTS
The Fund's annual
and semi-annual reports, when available, will contain more information about the
Fund’s investments and performance. The annual report will also include
details about the market conditions and investment strategies that have a
significant effect on the Fund’s performance.
STATEMENT
OF ADDITIONAL INFORMATION (SAI)
The SAI contains
more detailed information about the Fund and its policies. It is incorporated by
reference into this prospectus. This means, by law, it is considered to be part
of this prospectus.
You can get a free
copy of these documents and other information, or ask us any questions, by
calling us at 1-844-457-6383 (844-4JPM ETF) or writing to:
J.P.
Morgan Exchange-Traded Funds
277 Park Avenue
New York, NY 10172
277 Park Avenue
New York, NY 10172
If you buy your
Shares through a Financial Intermediary, you should contact that Financial
Intermediary directly for more information. You can also find information online
at www.jpmorganfunds.com.
Reports, a copy of
the SAI, and other information about the Fund are also available on the EDGAR
Database on the Commission’s Internet site at http://www.sec.gov, and copies of
this information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected].
Investment Company
Act File No. for the Fund is 811-22903.
©JPMorgan Chase & Co., 2022. All
rights reserved. August 2022.
PR-AGETF-822