2022-05-03JohnHancockCorporateBondETF_StatutoryProspectus_FYE430_09-01-22
Prospectus
John
Hancock
Multifactor
Developed International
ETF
International
equity
September
1, 2022
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.
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Fund
summary |
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The
summary section is a concise look at the investment objective,
fees and expenses, principal investment strategies,
principal risks, past performance, and investment
management. |
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Fund
details |
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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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Shareholder
information |
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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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Index
provider |
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Information
on who constructs the index that the fund seeks
to replicate. |
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Other
information |
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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 |
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John
Hancock Multifactor Developed International ETF
Investment
objective
To seek to
provide investment results that closely correspond, before fees and expenses, to
the performance of the John Hancock Dimensional Developed
International Index (the Index).
Fees
and expenses
This table
describes the fees and expenses you may pay if you buy, hold, and sell shares of
the fund. You may
pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
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Annual
fund operating expenses (%)
(expenses that you pay each year as a percentage of the value of your
investment) |
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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 reimbursement1
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Total
annual fund operating expenses after expense
reimbursements |
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The
advisor contractually agrees to reduce its management fee or, if
necessary, make payment to the fund in an amount equal to the amount by
which expenses of the fund
exceed 0.39% of average daily net assets. Expenses means all the expenses
of the fund, excluding (a) taxes, (b) brokerage commissions, (c) interest
expense, (d)
litigation and indemnification expenses and other extraordinary expenses
not incurred in the ordinary course of the fund’s business, (e) borrowing
costs, (f) prime brokerage
fees, (g) acquired fund fees and expenses paid indirectly, and (h) short
dividend expense. This agreement expires on August 31, 2023,
unless renewed by mutual
agreement of the fund and the advisor based upon a determination that this
is appropriate under the circumstances at that time. The advisor also
contractually
agrees to waive a portion of its management fee and/or reimburse expenses
for the fund and certain other John Hancock funds according to an asset
level
breakpoint schedule that is based on the aggregate net assets of all the
funds participating in the waiver or reimbursement. This waiver is
allocated proportionally
among the participating funds. During its most recent fiscal year, the
fund’s reimbursement amounted to 0.01% of the fund’s average daily net
assets. This
agreement expires on July
31, 2024,
unless renewed by mutual agreement of the fund and the advisor based upon
a determination that this is appropriate under the
circumstances at that time. |
Expense
example
This
example is intended to help you compare the cost of investing in the fund with
the cost of investing in other funds. Please see below a hypothetical
example
showing the expenses of a $10,000 investment in the fund for the time periods
indicated assuming you redeem all of your shares at the end of those
periods. The example assumes a 5% average annual return and that fund expenses
will not change over the periods. The example does not take into
account brokerage commissions that you may pay on your purchases and sales of
shares of the fund. Although your actual costs may be higher or
lower, based on these assumptions, your costs would
be:
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Expenses
($) |
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1
year |
40 |
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3
years |
132 |
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5
years |
232 |
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10
years |
527 |
Portfolio
turnover
The fund
pays transaction costs, such as commissions, when it buys and sells securities
(or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when fund
shares are held in a taxable account. These costs, which are not reflected
in annual fund operating expenses or in the example, affect the fund’s
performance. During its most recent fiscal year, the fund’s portfolio
turnover
rate was 10% of the average value of its
portfolio.
Principal
investment strategies
The fund
normally invests at least 80% of its net assets (plus any borrowings for
investment purposes) in securities included in the fund’s Index, in depositary
receipts representing securities included in the fund’s Index and in underlying
stocks in respect of depositary receipts included in the fund’s Index. The
Index is developed and maintained by Dimensional Fund Advisors LP and is
designed to comprise a subset of securities associated with developed
markets outside the U.S. and Canada. Eligible securities are generally
considered to be those with market capitalizations in the top 85% of
the
eligible country and the top 90% of all securities in the eligible countries at
the time of reconstitution. The selection and weighting of securities in
the Index
involves a rules-based process that may sometimes be referred to as multifactor
investing, factor-based investing, strategic beta, or smart beta. With
respect to each country, securities are classified according to their market
capitalization, relative price, and
profitability.
Weights for
individual securities are determined by adjusting their free-float adjusted
market capitalization weight within the universe of eligible securities
so that securities with smaller market capitalizations, lower relative price and
higher profitability generally receive an increased weight relative to
their unadjusted weight, and vice versa.
This
process can be summarized as follows:
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Adjustments for market
capitalization:
Securities’ weights are generally determined on a country specific basis and
based primarily on market capitalization.
Within each country, eligible securities are assigned into one of two groups
based on size, with the intent of increasing the weights of securities
with smaller market capitalizations within the eligible universe and decreasing
weights of securities with larger market capitalizations within the
eligible universe. Securities in the smaller market capitalization group will
have a larger adjustment factor applied to their free-float market capitalization.
Securities in the larger market capitalization group will receive a lower
adjustment factor.
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Adjustments for relative price and
profitability:
Adjustments for relative price and profitability may be implemented within each
country. Within each country,
securities (other than real estate investment trusts (REITs), or REIT-like
entities) are assigned to a relative price group and to a profitability
group.
REITs and REIT-like entities are types of real estate companies that pool
investors’ funds for investment primarily in income producing real estate or
real estate related loans or interests. REITs or REIT-like entities are
generally assigned to separate relative price and profitability groups.
Relative
price adjustment factors are assigned with the intent of increasing the weights
of securities with lower relative prices and decreasing the weights of
securities with higher relative prices. Similarly, profitability adjustment
factors are assigned with the intent of increasing the weights of securities
with higher profitability and decreasing the weights of securities with lower
profitability.
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Securities are then weighted after taking into account their free-float, size,
relative price and profitability adjustments, subject to a cap of 4% on a
single
company at the time of reconstitution. The weight of any single company engaged
in a securities-related business will be reduced if such company’s
weight reaches or exceeds 4.75% between
reconstitutions.
The Index
is reconstituted and rebalanced on a semiannual basis. The fund, using an
indexing investment approach, attempts to approximate the investment
performance of the Index by investing in a portfolio of securities that
generally replicates the Index. The fund may concentrate its investments
in a particular country, region, industry or group of industries to the extent
that the Index concentrates in a country, region, industry or group of
industries.
As of July
31, 2022, the
following countries are designated as Index-eligible countries: Australia,
Austria, Belgium, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. The list of designated Index-eligible countries may vary over time. In
addition to the countries listed above, the fund may continue to hold
investments in countries that are not currently designated as an Index-eligible
country, but had been authorized for investment in the past, and may
reinvest distributions received in connection with such existing investments in
such previously Index-eligible country. The Index may include securities
associated with an eligible country, such as, among others: (a) securities of a
company that is incorporated and domiciled within an eligible country and
that has an issued security that trades on an eligible exchange in an eligible
country; (b) securities of a company that derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed in an eligible country; (c) securities of a company that holds at
least 50% of its assets in an eligible country; (d) securities of a company that
has a security denominated in the currency of an eligible country for the
purpose of financing operations in that eligible country; (e) securities of
companies in eligible countries in the form of depositary shares; or (f)
securities
that provide financial exposure to and derive their value from securities issued
by a company in an eligible country. As a result, the value of the
securities may reflect economic and market forces in such other countries or
regions as well as in the eligible
countries.
Principal
risks
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. Many
factors affect performance, and fund shares
will fluctuate in price, meaning you could lose
money.
During
periods of heightened market volatility or reduced liquidity, governments, their
agencies, or other regulatory bodies, both within the United States and
abroad, may take steps to intervene. These actions, which could include
legislative, regulatory, or economic initiatives, might have unforeseeable
consequences and could adversely affect the fund’s performance or otherwise
constrain the fund’s ability to achieve its investment objective.
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 12
of the prospectus.
Active
trading market risk. Active
trading markets for fund shares may not be developed or maintained by market
makers or authorized participants.
Market makers are not obligated to make a market in the fund’s shares or to
submit purchase or redemption orders for creation
units.
Authorized
participant concentration risk. To the
extent that authorized participants are unable or otherwise unavailable to
proceed with creation and/or
redemption orders and no other authorized participant is able to create or
redeem in their place, shares may trade at a discount to net asset value (NAV)
and may face delisting.
Economic
and market events risk. Events in
the U.S. and global financial markets, including actions taken by the U.S.
Federal Reserve or foreign central
banks to stimulate or stabilize economic growth, may at times result in
unusually high market volatility, which could negatively impact
performance.
Reduced liquidity in credit and fixed-income markets could adversely affect
issuers worldwide. Banks and financial services companies could
suffer losses if interest rates rise or economic conditions
deteriorate.
Equity
securities risk. The price
of equity securities may decline due to changes in a company’s financial
condition or overall market conditions.
ETF
trading risk. The market
price of shares may include a bid-ask spread (the difference between the prices
at which investors are willing to buy and sell
shares), which may vary over time and may increase for various reasons,
including decreased trading volume or reduced market
liquidity.
Foreign
securities risk. 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. If applicable, depositary
receipts are subject to most of the risks associated with investing
in foreign securities directly because the value of a depositary receipt is
dependent upon the market price of the underlying foreign equity security.
Depositary receipts are also subject to liquidity
risk.
Index
risk. Because
the fund is not “actively” managed, its performance could be lower than funds
that may actively shift their portfolio assets to take advantage
of market opportunities or to lessen the impact of a market decline or a decline
in the value of one or more issuers. Errors in the construction
or calculation of the Index may occur from time to time. Any such errors may not
be identified and corrected for some period of time, which may
have an adverse impact on the fund and its
shareholders.
Industry
or sector investing risk. The
performance of a fund that focuses on a single industry or sector of the economy
depends in large part on the performance
of that industry or sector. As a result, the value of an investment may
fluctuate more widely since it is more susceptible to market, economic,
political, regulatory, and other conditions and risks affecting that industry or
sector than a fund that invests more broadly across industries and
sectors.
Investing
in developed countries risk. The fund’s
investment in a developed country issuer may subject the fund to regulatory,
political, currency, security,
economic and other risks associated with developed countries. Developed
countries tend to represent a significant portion of the global economy and
have generally experienced slower economic growth than some less developed
countries. In addition, developed countries may be impacted by
changes to the economic conditions of certain key trading partners, regulatory
burdens, debt burdens and the price or availability of certain
commodities.
Large
company risk. Larger
companies may grow more slowly than smaller companies or be slower to respond to
business developments. Large-capitalization
securities may underperform the market as a
whole.
Operational
and cybersecurity risk.
Cybersecurity breaches may allow an unauthorized party to gain access to fund
assets, customer data, or proprietary
information, or cause a fund or its service providers to suffer data corruption
or lose operational functionality. Similar incidents affecting issuers of
a fund’s securities may negatively impact performance. Operational risk may
arise from human error, error by third parties, communication errors, or
technology failures, among other causes.
Premium/discount
risk. The NAV of
the fund and the value of your investment may 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. 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. Given the nature
of the relevant markets for
certain of the fund’s
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.
Quantitative
modeling risk.
Quantitative models may not accurately predict future market movements or
characteristics, which may negatively impact
performance. Models also may perform differently than expected due to
implementation problems, technological malfunction, or programming or data
inaccuracies, among other possible issues.
Small
and mid-sized company risk. Small and
mid-sized companies are generally less established and may be more volatile than
larger companies. Small
and/or mid-capitalization securities may underperform the market as a
whole.
Tracking
error risk. The fund’s
portfolio composition and performance may vary substantially from that of the
Index due to factors such as the fees and
expenses of the fund, transaction costs, differences in accrual of dividends,
delays in the fund’s implementation of changes to the Index, pricing
differences
in the treatment of corporate actions, or the need to meet new or existing
regulatory requirements (including in local markets). Tracking error risk
may be heightened in volatile markets or under other unusual market
conditions.
Trading
issues risk. Trading in
shares on NYSE Arca, Inc. (NYSE Arca) may be halted in certain circumstances.
There can be no assurance that the requirements
of NYSE Arca necessary to maintain the listing of the fund will continue to be
met.
Value
investment style risk. Value
securities, as a category, may underperform other segments of the market or the
market as a whole and following a
value-oriented investment strategy may cause the fund, at times, to underperform
equity funds that employ a different investment
style.
Past
performance
The
following information illustrates the variability of the fund’s returns and
provides some indication of the risks of investing in the fund by showing
changes in
the fund’s performance from year to year and by showing how the fund’s average
annual returns compared with the Index and a broad-based
market index. Past
performance (before and after taxes) does not indicate future
results. All
figures assume dividend reinvestment. Performance
information is updated daily, monthly, and quarterly and may be obtained at our
website, jhinvestments.com, or by
calling 888-972-8696 between
8:30 A.M. and 5:00
P.M., Eastern
time, on most Business Days (as defined
herein).
Please note
that after-tax returns reflect the highest individual federal marginal
income-tax rate in effect as of the date provided and do not reflect any
state or
local taxes. Your actual
after-tax returns may be different. After-tax returns are not relevant to shares
held in an IRA, 401(k), or other tax-advantaged
investment plan.
Calendar
year total returns (%)
Year-to-date
total return. The fund’s
total return for the six months ended June 30,
2022, was
-18.77%.
Best
quarter:2020,
Q4,
15.61%
Worst
quarter:2020,
Q1,
-23.30%
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Average
annual total returns (%)—as of 12/31/21
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Since
inception
(12/15/16) |
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before
tax |
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after
tax on distributions |
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after
tax on distributions, with sale |
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John
Hancock Dimensional Developed International Index (reflects no deduction
for fees, expenses, or taxes) |
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MSCI
EAFE Index (reflects no deduction for fees, expenses, or taxes, except
foreign withholding taxes on dividends) |
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Investment
management
Investment
advisor John
Hancock Investment Management LLC
Subadvisor
Dimensional Fund Advisors LP
Portfolio
management
The
following individuals are jointly and primarily responsible for the day-to-day
management of the fund’s portfolio.
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Casey
Baum
Portfolio
Manager
Managed
the fund since 2022 |
Rita
Chen
Vice
President and Portfolio Manager
Managed
the fund since 2022 |
Joseph
Hohn
Vice
President and Senior Portfolio Manager
Managed
the fund since 2018 |
Andres
Torres
Vice
President and Portfolio Manager
Managed
the fund since 2021 |
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.
Principal
investment strategies
Investment
Objective: The fund
seeks to provide investment results that
closely correspond, before fees and expenses, to the performance of the
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.
The fund
normally invests at least 80% of its net assets (plus any borrowings
for investment purposes) in securities included in the fund’s Index, in
depositary receipts representing securities included in the fund’s
Index and in underlying stocks in respect of depositary receipts included in
the fund’s Index. The manager anticipates that, generally, the fund will
hold all of the securities that compose the Index in proportion to their
weightings in the Index. However, under various circumstances, it may not be
possible or practicable to purchase all of those securities in those
weightings. In these circumstances, the fund may purchase a sample of
securities in the Index. There also may be instances in which the manager
may choose to underweight or overweight a security in the Index,
purchase securities not in the Index that the manager believes are appropriate
to substitute for certain securities in the Index or utilize various
combinations of other available investment techniques. The fund may sell
securities that are represented in the Index in anticipation of their
removal from the Index or purchase securities not represented in the Index
in anticipation of their addition to the Index. The fund may also, in order to
comply with the tax diversification requirements of the Internal
Revenue Code of 1986, as amended (Code), temporarily invest in
securities not included in the Index that are expected to be correlated
with the
securities included in the Index.
Given the
fund’s investment objective of attempting to track the Index, the fund
does not follow traditional methods of active investment management,
which may involve buying and selling securities based upon
analysis of economic and market factors. Also, unlike many investment
companies, the fund does not attempt to outperform the Index that
it tracks and does not seek temporary defensive positions when
markets decline or appear overvalued. 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.
The fund
may concentrate its investments in a particular industry or group of
industries to the extent that the Index concentrates in an industry or
group of industries.
Additional
investment strategies
Derivatives
and other investments
The fund
may also invest up to 20% of its assets in securities and other instruments
not included in the Index but that the manager believes are correlated
to the Index, as well as in, among other instruments, futures, options on
futures, and other derivatives to obtain efficient market exposure,
and cash, cash equivalents, and money market instruments. 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 exchange-traded funds (ETFs).
Securities
lending
The fund
may lend its securities so long as such loans do not represent more than
33⅓% of the fund’s total assets. The borrower will provide collateral
to the lending portfolio so that the value of the loaned security will be
fully collateralized. The collateral may consist of cash, cash equivalents,
or securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities. The borrower must also agree to increase
the collateral if the value of the loaned securities increases. As with other
extensions of credit, there are risks of delay in recovery or even loss
of rights in the collateral should the borrower of the securities fail
financially. The fund could also lose money if investments made with
cash
collateral decline in value.
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.
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 financial markets and 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. The authorized participant
concentration risk may be heightened because authorized participants
may be required to post collateral, which only certain authorized
participants may be able to do. To the extent that authorized participants
exit the business or are unable to process creations or redemptions
or similar activities, this may result in a significantly diminished
trading market for fund shares.
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;
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.
Beginning
in March 2022, the Fed began increasing interest rates and has
signaled the potential for further increases. As a result, risks associated
with rising interest rates are currently heightened. It is difficult
to accurately predict the pace at which the Fed will increase interest
rates any further, or the timing, frequency or magnitude of any such
increases, and the evaluation of macro-economic and other conditions
could cause a change in approach in the future.
In
addition, any
decision by the Fed to adjust the target Fed funds
rate, 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. In recent
years, the U.S.
renegotiated many of
its global trade relationships and imposed or
threatened
to impose significant import tariffs. These actions could lead to price
volatility and overall declines in U.S. and global investment markets.
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 or the EU dissolves, the world’s securities
markets likely will be significantly disrupted. On January 31, 2020, the
United Kingdom (UK) left the EU, commonly referred to as “Brexit,”
and the UK ceased to be a member of the EU. Following a transition
period during which the EU and the UK Government engaged in a series
of negotiations regarding the terms of the UK’s future relationship
with the EU, the EU and the
UK
Government signed an agreement
on December 30, 2020 regarding the economic relationship between the
UK and the EU. This agreement became effective on a provisional
basis on January 1, 2021 and
formally entered into force on May 1,
2021. While the full impact of Brexit is unknown, Brexit has already
resulted in volatility in European and global markets. There
remains
significant market uncertainty regarding Brexit’s ramifications, and the
range and potential implications of possible political, regulatory, economic,
and market outcomes are difficult to predict. This uncertainty may affect
other countries in the EU and elsewhere, and may cause volatility
within the EU, triggering prolonged economic downturns in certain
countries within the EU. Despite the
influence of the lockdowns, and the
economic bounce back, Brexit has had a material impact on the UK’s
economy. Additionally, trade between the UK and the EU did not benefit
from the global rebound in trade in 2021, and remained at the
very low
levels experienced at the start of the
coronavirus (COVID-19) pandemic
in 2020,
highlighting Brexit’s potential long-term effects on the UK
economy.
In
addition, Brexit may create additional and substantial economic stresses
for the UK, including a contraction of the UK economy and price volatility
in UK stocks, decreased trade, capital outflows, devaluation of the British
pound, wider corporate bond spreads due to uncertainty and declines in
business and consumer spending as well as foreign direct investment.
Brexit may also adversely affect UK-based financial firms that have
counterparties in the EU or participate in market infrastructure (trading
venues, clearing houses, settlement facilities) based in the EU. Additionally,
the spread of the coronavirus (COVID-19) pandemic is likely to continue
to stretch the resources and deficits of many countries in the EU and
throughout the world, increasing the possibility that countries may be
unable to make timely payments on their sovereign debt. These events and
the resulting market volatility may have an adverse effect on the
performance of the fund.
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.
The United
States responded
to the coronavirus
(COVID-19) pandemic and
resulting economic distress with fiscal and monetary stimulus packages.
In late March 2020, the government passed the Coronavirus Aid,
Relief, and Economic Security Act, a stimulus package providing for over $2.2
trillion in resources to small businesses, state and local governments,
and individuals adversely
impacted by the coronavirus
(COVID-19)
pandemic. In late December 2020, the government also passed a
spending bill that included $900 billion in stimulus relief for the
coronavirus
(COVID-19) pandemic.
Further, in March 2021, the government
passed the American Rescue Plan Act of 2021, a $1.9 trillion
stimulus bill to accelerate the United States’ recovery from the economic
and health effects of the coronavirus
(COVID-19) pandemic.
In addition,
in mid-March 2020 the Fed cut interest rates to historically low levels and
promised unlimited and open-ended quantitative easing, including
purchases of corporate and municipal government bonds. The Fed also
enacted various programs to support liquidity operations and funding in
the financial markets, including expanding its reverse repurchase
agreement operations, adding $1.5 trillion of liquidity to the banking
system, establishing swap lines with other major central banks to provide
dollar funding, establishing a program to support money market
funds, easing various bank capital buffers, providing funding backstops
for businesses to provide bridging loans for up to four years, and
providing funding to help credit flow in asset-backed securities
markets.
The Fed also extended credit to
small- and medium-sized businesses.
When the
Fed “tapers” or reduces the amount of securities it purchases pursuant to
quantitative easing, and/or raises the federal funds rate, there is a
risk that interest rates will rise, which could expose fixed-income
and related markets to heightened volatility 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.
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.
Equity
securities risk
Common and
preferred stocks represent equity ownership in a company. Stock
markets are volatile. The price of equity securities will fluctuate,
and can
decline and reduce the value of a fund investing in equities. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic conditions. The value of
equity securities purchased by a fund could decline if the financial
condition of the companies in which the fund is invested declines,
or if overall market and economic conditions deteriorate. An issuer’s
financial condition could decline as a result of poor management decisions,
competitive pressures, technological obsolescence, undue reliance on
suppliers, labor issues, shortages, corporate restructurings, fraudulent
disclosures, irregular and/or unexpected trading activity among
retail investors, or other factors. Changes in the financial condition
of a single issuer can impact the market as a whole.
Even a fund
that invests in high-quality, or blue chip, equity securities, or securities
of established companies with large market capitalizations (which
generally have strong financial characteristics), can be negatively impacted by
poor overall market and economic conditions. Companies with large
market capitalizations may also have less growth potential than
smaller companies and may be less able to react quickly to changes in
the marketplace.
The fund
generally does not attempt to time the market. Because of its exposure to
equities, the possibility that stock market prices in general will
decline over short or extended periods subjects the fund to unpredictable
declines in the value of its investments, as well as periods of poor
performance.
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.
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.
If
applicable, depositary receipts are subject to most of the risks associated
with investing in foreign securities directly because the value of a
depositary receipt is dependent upon the market price of the underlying
foreign equity security. Depositary receipts are also subject to
liquidity risk.
Additionally, the Holding Foreign Companies Accountable
Act (HFCAA) could cause securities of foreign companies, including
American depositary receipts, to be delisted from U.S. stock exchanges
if the companies do not allow the U.S. government to oversee the
auditing of their financial information. Although the requirements of
the HFCAA
apply to securities of all foreign issuers, the SEC has thus far limited its
enforcement efforts to securities of Chinese companies. If securities
are delisted, a fund’s ability to transact in such securities will be
impaired, and the liquidity and market price of the securities may decline.
The fund may also need to seek other markets in which to transact in
such securities, which could increase the fund’s costs.
| |
Currency
risk.
Currency risk is 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
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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,
intervention (or the failure to intervene) by U.S. or foreign governments
or central banks, or currency controls or political developments
in the United States 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. Certain funds may also take active currency
positions and may cross-hedge currency exposure represented
by their 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. |
Index
risk
The fund
will be negatively affected by general declines in the securities and asset
classes represented in the Index. In addition, because the fund is not
“actively” managed, unless a specific security is removed from the
Index, the fund generally would not sell a security because the security’s
issuer was in financial trouble. Market disruptions and regulatory
restrictions could have an adverse effect on the fund’s ability to adjust
its exposure to the required levels in order to track the Index. The fund
also does not attempt to take defensive positions under any market
conditions, including declining markets. Therefore, the fund’s performance
could be lower than funds that may actively shift their portfolio
assets to take advantage of market opportunities or to lessen the impact
of a market decline or a decline in the value of one or more issuers.
While the index provider provides descriptions of what the Index is designed
to achieve, neither the index provider nor its agents provide any
warranty or accept any liability in relation to the quality, accuracy or
completeness
of the Index or its related data, and they do not guarantee that the
Index will be in line with the index provider’s methodology. The fund’s
mandate as described in this Prospectus is to provide investment results
that closely correspond with the performance of the Index provided by
the index provider. The advisor does not provide any warranty or
guarantee against the index provider’s or any agent’s errors. The Index
is constructed and maintained using third party data that is believed to
be reliable, but there is no guarantee of the accuracy or availability
of such third party data. In addition, the market value of the Index is
calculated by a third party, and there is no guarantee that such calculation
will be accurate. Errors in respect of the quality, accuracy
and
completeness of the data used to compile the Index may occur from time to
time. Any such errors may not be identified and corrected for some period
of time. These errors and corrections may have an adverse impact on
the fund and its shareholders, including in the form of increased
costs and/or tracking error. During a period where the Index contains
incorrect constituents, the fund would have market exposure to such
constituents and would be underexposed to the Index’s other constituents.
In addition, neither the fund, the index provider, nor the advisor can
guarantee the availability or timeliness of the production of the
Index.
Unusual
market conditions may cause the Index provider to postpone a scheduled
rebalance, which could cause the Index to vary from its normal or
expected composition. The postponement of a scheduled rebalance
in a time of market volatility could mean that constituents that would
otherwise be removed at rebalance due to changes in market capitalizations
or other reasons may remain, causing the performance and
constituents of the Index to vary from those expected under normal conditions
and potentially increasing transaction costs to the fund. Apart from
scheduled rebalances, the index provider or its agents may carry out
additional ad hoc rebalances to the Index in order, for example, to correct an
error in the selection of Index constituents. When the Index is rebalanced
and the fund in turn rebalances its portfolio to attempt to increase
the correlation between the fund’s portfolio and the Index, any transaction
costs and market exposure arising from such portfolio rebalancing
may be borne directly by the fund and its shareholders. Therefore,
errors and additional ad hoc rebalances carried out by the index
provider or its agents to the Index may increase the costs to, and the
tracking error risk of, the fund.
Industry
or sector investing risk
When a
fund’s investments are focused in a particular industry or sector of the
economy, they are less broadly invested across industries or sectors
than other funds. This means that concentrated 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 a particular
industry or sector is particularly susceptible to the impact of market,
economic, political, regulatory, and other conditions and risks affecting
that industry or sector. From time to time, a small number of companies
may represent a large portion of a single industry or sector or a group of
related industries or sectors as a whole.
Investing
in developed countries risk
Investment
in a developed country issuer may subject the fund to regulatory,
political, currency, security, economic and other risks associated
with developed countries. Developed countries generally tend to
rely on services sectors (e.g., the financial services sector) as the
primary
means of economic growth. A prolonged slowdown in services sectors is
likely to have a negative impact on economies of certain developed
countries, although individual developed country economies can be
impacted by slowdowns in other sectors. In the past, certain developed
countries have been targets of terrorism. Acts of terrorism in developed
countries or against their interests may cause uncertainty in the
financial markets and adversely affect the performance of the issuers to
which the fund has exposure. Heavy regulation of certain markets,
including labor and product markets, may have an adverse effect on
certain issuers. Such regulations may negatively affect economic
growth or cause prolonged periods of recession. Many
developed
countries are heavily indebted and face rising healthcare and retirement
expenses. In addition, price fluctuations of certain commodities
and regulations impacting the import of commodities may negatively
affect developed country economies.
Large
company risk
Larger,
more established companies may be unable to respond quickly to new
competitive challenges such as changes in technology and consumer
tastes. Many larger companies also may not be able to attain the high
growth rate of successful smaller companies, especially during extended
periods of economic expansion. For purposes of the fund’s investment
policies, the market capitalization of a company is based on its
capitalization at the time the fund purchases the company’s securities.
Market capitalizations of companies change over time. The fund is not
obligated to sell a company’s security simply because, subsequent
to its purchase, the company’s market capitalization has changed to
be outside the capitalization range, if any, in effect for the fund.
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 (such as the coronavirus
(COVID-19) pandemic),
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 Index
trading individually or in the aggregate at any point in time. Given
the nature
of the relevant markets for certain of the fund’s 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. Given that the fund
invests in foreign securities, shares may trade at a larger premium or discount
to the NAV than shares of other ETFs.
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.
Quantitative
modeling risk
Use of
quantitative models carries the risk that the fund may underperform
funds that do not utilize such models. The use of quantitative
models may affect the fund’s exposure to certain sectors or types of
investments and may impact the fund’s relative investment performance
depending on whether such sectors or investments are in or out of
favor in the market. Successful application of a quantitative model is
dependent on the manager’s skill in building and implementing the model.
For example, human judgment plays a role in building, utilizing,
testing, modifying, and implementing the financial algorithms and
formulas used in these models. Quantitative models are subject to technical
issues including programming and data inaccuracies, are based on
assumptions, and rely on data that is subject to limitations (e.g.,
inaccuracies, staleness), any of which could adversely affect their effectiveness
or predictive value. Quantitative models may not accurately
predict future market movements or characteristics due to the fact
that market performance can be affected by non-quantitative factors
that are not easily integrated into quantitative analysis, among other
factors.
Small
and mid-sized company risk
Market risk
and liquidity risk may be pronounced for securities of companies
with medium-sized market capitalizations and are particularly
pronounced for securities of companies with smaller market capitalizations.
These companies may have limited product lines, markets, or
financial resources, or they may depend on a few key employees.
The securities of companies with medium and smaller market
capitalizations may trade less frequently and in lesser volume than more
widely held securities, and their value may fluctuate more sharply
than those securities. They may also trade in the OTC market or on a
regional exchange, or may otherwise have limited liquidity. Investments
in less-seasoned companies with medium and smaller market
capitalizations may present
greater opportunities for growth and capital
appreciation, but also involve greater risks than are customarily associated
with more established companies with larger market capitalizations.
These risks apply to all funds that invest in the securities of
companies with smaller- or medium-sized market capitalizations. For purposes of
the fund’s investment policies, the market capitalization of a company is
based on its capitalization at the time the fund purchases the
company’s securities. Market capitalizations of companies change over time.
The fund is not obligated to sell a company’s security simply because,
subsequent to its purchase, the company’s market capitalization
has changed to be outside the capitalization range, if any, in effect
for the fund.
Tracking
error risk
Tracking
error is the divergence of the fund’s performance from that of the Index.
The fund’s portfolio composition and performance may not match, and
may vary substantially from, that of the Index for any period of time, in
part because there may be a delay in the fund’s implementation
of any changes to the composition of the Index. Tracking error may
also occur because of pricing differences, transaction costs, differences
in accrual of dividends, differences in the treatment of corporate
actions, or the need to meet new or existing regulatory requirements
(including in local markets) or NYSE Arca listing standards.
Unlike the fund, the returns of the Index are not reduced by investment
and other operating expenses, including the trading costs
associated
with implementing changes to its portfolio of investments. Tracking
error risk may be heightened during times of market volatility or other
unusual market conditions. Because the Index is not subject to the tax
diversification requirements to which the fund must adhere, the fund may be
required to deviate its investments from the securities and relative
weightings of the Index. For tax efficiency purposes, the fund may sell
certain securities to realize losses, which will result in a deviation
from the Index.
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.
Value
investment style risk
Value
securities, as a category, may underperform other segments of the market or
the market as a whole and following a value-oriented investment
strategy may cause the fund, at times, to underperform equity
funds that employ a different investment style.
Additional
risks of investing
Derivatives
and other strategic transactions risk
The fund
may, to a limited extent, invest in derivatives and other strategic
transactions. The ability of a fund to utilize 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 strategic
transactions are different from those needed to select a fund’s securities.
Even if the manager only uses strategic transactions in a fund primarily
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 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 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,
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.
In
addition, 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, effective August 19, 2022 (the “Compliance Date”),
Rule 18f-4 under the 1940 Act (the “Derivatives Rule”) replaced the asset
segregation regime of Investment Company Act Release No. 10666
(“Release 10666”) with a new framework for the use of derivatives
by registered funds. As of the Compliance Date, the SEC rescinded
Release 10666 and withdrew no-action letters and similar guidance
addressing a fund’s use of derivatives and began requiring funds to
satisfy the requirements of the Derivatives Rule. As a result, on or after
the Compliance Date, the funds will no longer engage in “segregation”
or “coverage” techniques with respect to derivatives transactions
and will instead comply with the applicable requirements of the
Derivatives Rule.
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 1940 Act. 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 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.
| |
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. |
| |
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. |
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
18 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.
Tax-advantaged
product structure
Unlike
conventional mutual funds that are only bought and sold at closing
NAVs, the shares of the fund have been designed to be created and
redeemed principally in-kind in creation units at each day’s market close at
the fund’s NAV and to be tradable in a secondary market on an intra-day
basis. These in-kind arrangements are designed to mitigate adverse
effects on the fund’s portfolio that could arise from frequent cash
purchase and redemption transactions that affect the NAV of the fund.
Moreover, in contrast to conventional mutual funds, where frequent
redemptions can have an adverse tax impact on taxable
shareholders
because of the need to sell portfolio securities that, in turn, may
generate taxable gain, the in-kind redemption mechanism of the fund, to
the extent used, generally is not expected to lead to a tax event for
shareholders whose shares are not being redeemed. However, the fund may
still realize gains related to either cash redemptions or re-balancing
transactions which may need to be distributed.
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
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, 2022, the
advisor had total assets under management
of approximately $146.7
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 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 |
0.35% |
During its
most recent fiscal year, the fund paid the advisor a management
fee equal to 0.32% 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 semiannual shareholder
report 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.
As may be
described in “Fund summary - Fees and expenses” on page 1 of this
prospectus, the advisor has contractually agreed to waive a portion of
its management fee and/or reimburse expenses for certain funds of
the John Hancock funds complex, including the fund (the participating
portfolios). The waiver equals, on an annualized basis, 0.0100% of
that portion of the aggregate net assets of all the participating
portfolios that exceeds $75 billion but is less than or equal to $125
billion; 0.0125% of that portion of the aggregate net assets of all the
participating portfolios that exceeds $125 billion but is less than or equal to
$150 billion; 0.0150% of that portion of the aggregate net assets of
all the participating portfolios that exceeds $150 billion but is
less than
or equal to $175 billion; 0.0175% of that portion of the aggregate
net assets of all the participating portfolios that exceeds $175
billion but is less than or equal to $200 billion; 0.0200% of that portion of
the aggregate net assets of all the participating portfolios that exceeds
$200 billion but is less than or equal to $225 billion; and 0.0225% of
that portion of the aggregate net assets of all the participating
portfolios that exceeds $225 billion. The amount of the reimbursement
is calculated daily and allocated among all the participating
portfolios in proportion to the daily net assets of each participating
portfolio. This agreement expires on July 31, 2024, unless
renewed by
mutual agreement of the fund and the advisor based upon a determination
that this is appropriate under the circumstances at that time.
Subadvisor
The
subadvisor handles the fund’s portfolio management activities, subject to
oversight by the advisor.
Dimensional
Fund Advisors LP (Dimensional)
6300 Bee
Cave Road, Building One
Austin,
Texas 78746
Dimensional
was organized in 1981 as Dimensional Fund Advisors, Inc., a Delaware
corporation, and in 2006, it converted its legal name and organizational
form to Dimensional Fund Advisors LP, a Delaware limited partnership.
Dimensional is engaged in the business of providing investment
management services. Since its organization, Dimensional has
provided investment management services primarily to institutional investors
and mutual funds. As of June 30, 2022,
Dimensional and its advisory
affiliates managed approximately $575 billion in
assets under management.
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 Dimensional. 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.
Casey
Baum
|
• |
Managed
the fund since 2022 |
|
• |
Portfolio
Manager for Dimensional (since 2020) |
|
• |
Joined
Dimensional in 2018 |
Rita
Chen
|
• |
Vice
President and Portfolio Manager |
|
• |
Managed
the fund since 2022 |
|
• |
Portfolio
Manager for Dimensional (since 2020) |
|
• |
Joined
Dimensional in 2016 |
Joseph
Hohn
|
• |
Vice
President and Senior Portfolio Manager |
|
• |
Managed
the fund since 2018 |
|
• |
Portfolio
Manager for Dimensional (since 2015) |
|
• |
Joined
Dimensional in 2012 |
Andres
Torres
|
• |
Vice
President and Portfolio Manager |
|
• |
Managed
the fund since 2021 |
|
• |
Portfolio
Manager for Dimensional (since 2018) |
|
• |
Joined
Dimensional in 2015 |
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
State
Street Financial Center
One
Lincoln Street
Boston,
MA 02111
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
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
State
Street Financial Center
One
Lincoln Street
Boston,
MA 02111
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.
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, 2022, 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 annual report for the fiscal period ended
April 30,
2022, has been
incorporated by reference into the SAI. Copies of the fund’s most recent annual
report are available upon request.
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Multifactor
Developed International ETF |
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Per
share operating performance |
Period
ended |
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Net
asset value, beginning of period |
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Net
investment income1
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Net
realized and unrealized gain (loss) on investments |
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Total
from investment operations |
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Less
distributions |
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From
net investment income |
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Net
asset value, end of period |
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Total
return (%)2
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Ratios
and supplemental data |
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Net
assets, end of period (in millions) |
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Ratios
(as a percentage of average net assets): |
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Expenses
before reductions |
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Expenses
including reductions |
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Net
investment income |
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Portfolio
turnover (%)3
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1 |
Based
on average daily shares outstanding. |
|
2 |
Total
returns would have been lower had certain expenses not been reduced during
the applicable periods. |
|
3 |
Portfolio
turnover rate excludes securities received or delivered from in-kind
transactions. |
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. 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 set forth in an SEC
exemptive order covering the Trust (until such exemptive order is rescinded
by the SEC) or pursuant to or an exemptive rule adopted by the
SEC.
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 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, 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
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. 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 advisor. The
advisor
is assisted
in
its
responsibility to fair value securities by the advisor’s Pricing
Committee,
and the actual calculation of a security’s fair value may be made by the
Pricing Committee acting pursuant to the procedures established
by the advisor and
adopted by the Board of Trustees.
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 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 Multifactor Developed
International ETF |
Semiannually |
Semiannually |
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 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. Given
the fund’s
investment strategies, it is not anticipated that a significant portion of
the fund’s dividends will be eligible for the corporate dividends-received
deduction.
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. Rather than deducting
these taxes, if the fund invests more than 50% of its assets in the stock
or securities of foreign corporations or foreign governments at the end of
its taxable year, the fund may make an election to treat a proportionate
amount of eligible foreign taxes as constituting a taxable distribution
to each shareholder, which would, subject to certain limitations,
generally allow the shareholder to either (i) credit that proportionate
amount of taxes against U.S. federal income tax liability as a
foreign tax credit or (ii) to take that amount as an itemized deduction.
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.”
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 new 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.
Legislation
passed by Congress requires reporting to you and the IRS 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.
Index,
index provider, and calculation agent
The Index
is created and sponsored by an affiliated person of the fund. The Index
was developed, and the methodology underlying the construction
of the Index is maintained, by Dimensional, which also serves as
subadvisor to the fund. Dimensional has entered into a Calculation
Agent Agreement with S&P Opco, LLC (a subsidiary of S&P Dow Jones
Indices LLC) to retain S&P Opco, LLC (Calculation Agent) to calculate
and disseminate information about the market value of the Index.
The Index
is governed by a published rule-based methodology. Changes to the
methodology will be publicly disclosed prior to implementation.
The fund is
entitled to use the Index pursuant to a sublicensing arrangement
with John Hancock Investment Management LLC, investment
advisor to the fund, which in turn has a licensing agreement with
Dimensional.
The Index
provider may delay or change a scheduled rebalancing or reconstitution
of the Index or the implementation of certain rules at its sole
discretion.
Disclaimers
Neither
John Hancock Investment Management LLC nor Dimensional Fund
Advisors LP guarantee the accuracy and/or the completeness of the
Index or any data included therein, and neither John Hancock Investment
Management LLC nor Dimensional Fund Advisors LP shall have
any liability for any errors, omissions or interruptions therein.
Neither
John Hancock Investment Management LLC nor Dimensional Fund
Advisors LP make any warranty, express or implied, as to results to
be
obtained by the fund, owners of the shares of the fund or any other
person
or entity from the use of the Index, trading based on the Index, or
any
data included therein, either in connection with the fund or for any
other
use. Neither John Hancock Investment Management LLC nor Dimensional
Fund Advisors LP makes any express or implied warranties, and
expressly disclaim all warranties of merchantability or fitness for a
particular
purpose or use with respect to the Index or any data included therein.
Without limiting any of the foregoing, in no event shall either John
Hancock Investment Management LLC or Dimensional Fund Advisors
LP have any liability for any special, punitive, direct, indirect or
consequential
damages (including lost profits) arising out of matters relating
to the use of the Index, even if notified of the possibility of such
damages.
S&P
The Index
is the property of Dimensional Fund Advisors LP, which has contracted
with S&P Opco, LLC to calculate and maintain the Index. The Index is
not sponsored by S&P Dow Jones Indices LLC or its affiliates or its third
party licensors, including Standard & Poor’s Financial Services LLC and Dow
Jones Trademark Holdings LLC (collectively, “S&P Dow Jones
Indices”). S&P Dow Jones Indices will not be liable for any errors
or
omissions in calculating the Index. “Calculated by S&P Dow Jones
Indices”
and the related stylized mark(s) are service marks of S&P Dow Jones
Indices and have been licensed for use by Dimensional Fund Advisors
LP. S&P® is a
registered trademark of Standard & Poor’s Financial
Services LLC, and Dow Jones® is a
registered trademark of
Dow Jones
Trademark Holdings LLC. The funds based on the Index are not
sponsored, endorsed, sold or promoted by S&P Dow Jones Indices. S&P Dow
Jones Indices does not make any representation or warranty, express or
implied, to the owners of the fund or any member of the public
regarding the advisability of investing in securities generally or in
the fund
particularly or the ability of the Index to track general market performance.
S&P Dow Jones Indices’ only relationship to Dimensional Fund
Advisors LP with respect to the Index is the licensing of certain trademarks,
service marks and trade names of S&P Dow Jones Indices, and the
provision of the calculation services related to the Index. S&P Dow Jones
Indices is not responsible for and has not participated in the determination
of the prices and amount of the fund or the timing of the issuance or
sale of the fund or in the determination or calculation of the equation by
which the fund may converted into cash or other redemption mechanics.
S&P Dow Jones Indices has no obligation or liability in connection
with the administration, marketing or trading of the fund. S&P Dow
Jones Indices LLC is not an investment advisor. Inclusion of a security
within the Index is not a recommendation by S&P Dow Jones Indices to
buy, sell, or hold such security, nor is it investment advice.
S&P DOW
JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY,
TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA
RELATED THERETO OR ANY COMMUNICATION WITH RESPECT
THERETO, INCLUDING, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS.
S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO
ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS,
OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY DIMENSIONAL
FUND ADVISORS LP, OWNERS OF THE FUND, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO
ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE
LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE,
OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO,
LOSS OF PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL,
EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
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.
For more
information
The
following documents
are or will be available that offer further information on the
fund:
Annual/semiannual
reports to shareholders
Additional
information about the fund’s investments is available in the fund’s annual and
semiannual reports to shareholders. 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.
As of
January 1, 2021, paper copies of the fund’s shareholder reports are no longer
sent by mail. Instead, the reports are made available on jhinvestments.com/etf,
and you will be notified and provided with a link each time a report is posted
to the website. You may request to receive paper reports from the
fund or from your financial intermediary, free of charge, at any time. You may
also request to receive documents through eDelivery.
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, 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
You can
also view or obtain copies of these documents through the SEC:
Online:
sec.gov
By email
(duplicating fee required):
publicinfo@sec.gov
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©
2022 John Hancock Exchange-Traded Fund Trust
200
Berkeley Street Boston, MA 02116
800-225-6020,
jhinvestments.com
Manulife,
Manulife Investment Management, Stylized M Design, and Manulife Investment
Management & Stylized M Design are trademarks of The Manufacturers
Life Insurance
Company and are used by its affiliates under license. |
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SEC
file number: 811-22733
8900PN
9/1/22 |
