Form 497K J.P. Morgan Exchange-Tra
Summary Prospectus October 28, 2021
JPMorgan Income ETF
Ticker: JPIE
Before you invest, you may want to review the Fund’s Prospectus,
which contains more information about the Fund and its risks. You can find the Fund’s Prospectus and other information about the Fund, including the
Statement of Additional Information, online at www.jpmorganfunds.com/funddocuments. You can also get this information at no cost by calling 1-844-457-6383 or by sending an e-mail request to [email protected] or by asking any
financial intermediary that offers shares of the Fund. The Fund’s Prospectus and Statement of Additional Information, both dated October 28, 2021, as may be
supplemented from time to time are incorporated by reference into this Summary Prospectus.
What is the goal
of the Fund?
The Fund seeks to provide income with a secondary objective of capital appreciation.
Fees and Expenses of the Fund
The following table describes the fees and expenses that 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. “Acquired Fund
Fees and Expenses” are expenses incurred indirectly by the Fund through its ownership of shares in other
investment companies, including affiliated money market funds, other mutual funds, exchange-traded funds and
business development companies. The impact of Acquired Fund Fees and Expenses is included in the total returns
of the Fund. Acquired Fund Fees and Expenses are not direct costs of the Fund, are not used by the Fund to
calculate its net asset value per share and are not included in the calculation of the ratio of expenses to
average net assets shown in the Financial Highlights section of the Fund’s prospectus.
ANNUAL FUND OPERATING EXPENSES (Expenses that you pay each year as a percentage of the value
of your investment) | |
Management Fees |
0.40% |
Other Expenses1
|
None |
Acquired Fund
Fees1 |
0.01 |
Total Annual Fund Operating Expenses2 |
0.41 |
1
“Other Expenses” and “Acquired Fund Fees” are based on estimated amounts for the
current fiscal year.
2
The Fund’s management agreement provides that the adviser will pay substantially all expenses of the
Fund (including expenses of the Trust relating to the Fund), except for the management fees, payments under the
Fund’s 12b-1 plan (if any), interest expenses, dividend and interest expenses related to short sales,
taxes, acquired fund fees and expenses (other than fees for funds advised by the adviser and/or its affiliates), costs of holding shareholder meetings, and litigation and potential litigation and other extraordinary expenses not incurred in the ordinary
course of the Fund’s business. Additionally, the Fund shall be responsible for its non-operating expenses,
including brokerage commissions and fees and expenses associated with the Fund’s securities lending program, if applicable.
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. The Example does not take into account brokerage commissions that
you pay when purchasing or selling Shares of the Fund. The
Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that your investment has a 5% return each year and that the Fund’s
operating expenses remain the same. Your actual costs may be higher or lower.
WHETHER OR NOT YOU SELL YOUR SHARES, YOUR COST WOULD BE: | ||
|
1 Year |
3 Years |
SHARES ($) |
42
|
132 |
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 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. The Fund has not yet commenced
operations as of the date of this prospectus. Therefore, there is no portfolio turnover rate for the Fund to
report at this time.
What are the Fund’s main
investment strategies?
The Fund seeks to achieve its objective by investing
opportunistically among multiple debt markets and sectors that the Fund’s adviser, J.P. Morgan Investment
Management Inc. (JPMIM or the adviser) believes have high potential to produce income and have low correlations
to each other in order to manage risk. The Fund is flexible and not managed to a benchmark. This allows the
Fund to shift its allocations based on changing market conditions, which may result in investing in a single or
multiple markets and sectors. The adviser seeks to manage distributions throughout the year to help reduce
fluctuations in monthly dividends. “Income” in the Fund’s name refers to the Fund’s
strategy of seeking to provide income by investing opportunistically across different markets and sectors. The
capital appreciation sought by the Fund generally arises from decreases in interest rates or improving credit
fundamentals for a particular sector or security.
The Fund has broad flexibility to invest in a wide variety of debt securities and instruments of any
maturity. The Fund may invest in fixed and floating rate debt securities issued in both U.S. and foreign
markets, including countries whose economies are less developed (emerging markets). The Fund has discretion to focus its investments in one or more regions or small groups of countries including both U.S. and foreign markets including
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emerging markets. The Fund invests primarily in U.S. dollar denominated securities, although the Fund may also invest in non-dollar denominated securities. The Fund currently anticipates that it will invest no more than 10% of its total assets in non-dollar denominated securities, although, from
time to time, the Fund may invest a greater percentage of its assets in non-dollar denominated securities to
take advantage of market conditions.
In connection with managing volatility, the Fund seeks to maintain a duration of ten years or less, although,
under certain market conditions such as in periods of significant volatility in interest rates and spreads, the
Fund’s duration may be longer than ten years. Duration is a measure of the price sensitivity of a debt
security or a portfolio of debt securities to relative changes in interest rates. For instance, a duration of three years means that a security’s or portfolio’s price would be expected to decrease by approximately 3% with a 1%
increase in interest rates (assuming a parallel shift in yield curve).
Although the Fund has the flexibility to invest above 65% of its total assets in investments that are rated
below investment grade (also known as junk bonds or high yield securities) or the unrated equivalent to take
advantage of market opportunities, under normal market conditions the Fund invests at least 35% of its total
assets in investments that, at the time of purchase, are rated investment grade or the unrated equivalent.
Below investment grade securities may include so-called “distressed debt.” Distressed debt includes securities of issuers experiencing financial or operating
difficulties, securities where the issuer has defaulted in the payment of interest or principal or in the
performance of its covenants or agreements, securities of issuers that may be involved in bankruptcy proceedings,
reorganizations or financial restructurings or securities of issuers operating in troubled
industries.
A significant portion of the Fund’s assets may be invested
in asset-backed securities, mortgage-related securities and mortgage-backed securities. Such securities may be
structured as collateralized mortgage obligations (CMOs) and stripped mortgage-backed securities, including
those structured such that payments consist of interest-only (IO), principal-only (PO) or principal and
interest. The Fund also may invest in inverse floaters and inverse IOs, which are debt securities with interest rates that reset in the opposite direction from the market rate to which the security is indexed. The Fund may also invest in
structured investments and adjustable rate mortgage loans (ARMs). The Fund may invest a significant amount of
its assets in sub-prime mortgage-related securities.
The Fund may invest in securities issued by the U.S. government and its agencies and instrumentalities
including U.S. Treasury securities, treasury receipts and obligations and securities issued by the Government
National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac).
The Fund may also invest in mortgage pass-through securities including securities eligible to be sold on the
“to-be-announced” or TBA market (mortgage TBAs). The Fund may enter into dollar rolls, in which the
Fund sells mortgage-backed securities including mortgage TBAs and at the same time contracts to buy back very
similar securities on a future date. The Fund may also sell mortgage TBAs short.
The Fund may invest in inflation-linked debt securities including fixed and floating rate debt securities of varying maturities issued by the U.S. government, its agencies and
instrumentalities, such as Treasury Inflation Protected Securities (TIPS). The Fund may also invest in
inflation-linked debt securities issued by other entities such as corporations, foreign governments and foreign
issuers. The Fund may invest in loan participations and assignments (Loans) and commitments to purchase Loans
(Unfunded Commitments). Loans will typically consist of senior floating rate loans (Senior Loans), but may also
include secured and unsecured loans, second lien loans or more junior (Junior Loans) and bridge
loans.
The Fund may also invest in convertible securities and preferred
stock that the adviser believes will produce income or generate return. The Fund also may use bank obligations,
commercial paper, corporate debt securities, custodial receipts, inverse floating rate instruments, municipal
securities, private placements, restricted securities and other unregistered securities, real estate investment
trusts (REITs), short-term funding agreements, when-issued securities, delayed delivery securities and forward
commitments, and zero-coupon, pay-in-kind and deferred payment securities. The securities in which the Fund
invests may include debt securities issued by governments and their agencies, supranational organizations,
corporations, and banks.
The Fund has flexibility to utilize derivatives and at times, use of such derivatives may be a principal
strategy. Derivatives are instruments that have a value based on another instrument, exchange rate or index.
Derivatives will be used primarily for hedging, including duration hedging, but may also be used as substitutes
for securities in which the Fund can invest. Such derivatives may include futures contracts, options, swaps including interest rate and credit default swaps, and forward contracts. The Fund may also use derivatives for other hedging purposes (e.g., decreasing or increasing exposure to certain securities), to increase income and gain to the Fund, as part
of its risk management process by establishing or adjusting exposure to particular securities, markets or
currencies and/or to manage cash flows.
As part of its principal investment strategy and for temporary defensive purposes, any portion of the
Fund’s assets may be invested in cash and cash equivalents.
In buying and selling investments for the Fund, the adviser uses a flexible, opportunistic approach that
combines strategy and sector rotation (asset allocation). Strategy rotation refers to the shifting of
investments among the multiple debt markets in which the Fund may invest. Sector rotation refers to the shifting
of investments from one or more sectors (for example, high yield) into one or more other sectors (for example,
emerging markets). For each strategy/sector, dedicated specialists provide security research and
recommendations to the lead portfolio managers. Buy and sell decisions are based on fundamental, quantitative
and technical analysis, including the expected potential to generate income. As part of its risk management
strategy, the adviser typically will invest in multiple strategies/sectors, but, as part of the Fund’s
opportunistic strategy, the adviser has flexibility to invest in a single or small number of strategies/sectors
from time to time. Due to the Fund’s flexible asset allocation approach, the Fund’s risk exposure may vary and a risk associated with an individual strategy or type of investment may become more pronounced when the Fund
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utilizes a single strategy or type of investment or only a few strategies or types of investments. Generally, the adviser will sell a security when, based on fundamental, quantitative and
technical analysis and the considerations described above, the adviser believes the issuer’s credit
quality will deteriorate materially or when the adviser believes that there is better relative value available
in the market in securities of comparable quality. As part of its investment process, the adviser also
considers certain environmental, social and governance factors that it believes could have a material negative
or positive impact on the risk profiles of certain securities or countries in which the Fund may invest. These
determinations may not be conclusive and securities or countries that may be negatively impacted by such
factors may be purchased and retained by the Fund while the Fund may divest or not invest in securities of
issuers that may be positively impacted by such factors.
The Fund’s Main Investment Risks
The Fund is subject to management risk and may not achieve its objective if the adviser’s expectations
regarding particular instruments or markets are not met.
An investment in this Fund or any other fund may not provide a complete investment program. The
suitability of an investment in the Fund should be considered based on the investment objective, strategies and
risks described in this prospectus, considered in light of all of the other investments in your portfolio, as
well as your risk tolerance, financial goals and time horizons. You may want to consult with a financial
advisor to determine if this Fund is suitable for you.
The Fund is subject to the main risks noted below, any of which may adversely affect the Fund’s net
asset value (NAV), market price, performance and ability to meet its investment objective.
Interest Rate Risk. The Fund’s investments in bonds and other debt securities will change in value based on changes in interest rates. If rates increase, the value of these investments generally declines. Securities with greater interest rate
sensitivity and longer maturities generally are subject to greater fluctuations in value. The Fund may invest
in variable and floating rate Loans and other variable and floating rate securities. Although these instruments
are generally less sensitive to interest rate changes than fixed rate instruments, the value of variable and floating rate Loans and other securities may decline if their interest rates do not rise as quickly, or as much, as general interest
rates. The Fund may face a heightened level of interest rate risk due to certain changes in monetary policy.
During periods when interest rates are low or there are negative interest rates, the Fund’s yield (and
total return) also may be low or the Fund may be unable to maintain positive returns.
General Market Risk. Economies and financial markets throughout the world are becoming increasingly interconnected, which increases the likelihood that events or conditions in
one country or region will adversely impact markets or issuers in other countries or regions. Securities in the
Fund’s portfolio may underperform in comparison to securities in general financial markets, a particular
financial market or other asset classes due to a number of factors, including inflation (or expectations for
inflation), deflation (or expectations for deflation), interest rates, global demand for particular products or
resources, market instability, debt crises and downgrades, embargoes,
tariffs, sanctions and other trade barriers, regulatory events, other governmental trade or market control programs and related geopolitical events. In addition, the value of the
Fund’s investments may be negatively affected by the occurrence of global events such as war, terrorism,
environmental disasters, natural disasters or events, country instability, and infectious disease epidemics or
pandemics.
For example, the outbreak of COVID-19, a novel coronavirus disease, has negatively affected economies, markets and individual companies throughout the world, including those in
which the Fund invests. The effects of this pandemic to public health and business and market conditions,
including exchange trading suspensions and closures, may continue to have a significant negative impact on the
performance of the Fund’s investments, increase the Fund’s volatility, negatively impact the
Fund’s arbitrage and pricing mechanisms, exacerbate pre-existing political, social and economic risks to
the Fund, and negatively impact broad segments of businesses and populations. The Fund’s operations may
be interrupted as a result, which may contribute to the negative impact on investment performance. In addition,
governments, their regulatory agencies, or self-regulatory organizations may take actions in response to the
pandemic that affect the instruments in which the Fund invests, or the issuers of such instruments, in ways
that could have a significant negative impact on the Fund’s investment performance. The full impact of
the COVID-19 pandemic, or other future epidemics or pandemics, is currently unknown.
Credit Risk. The Fund’s investments are subject to the risk that issuers and/or counterparties will fail to make payments when
due or default completely. Prices of the Fund’s investments may be adversely affected if any of the
issuers or counterparties it is invested in are subject to an actual or perceived deterioration in their credit
quality. Credit spreads may increase, which may reduce the market values of the Fund’s securities. Credit spread risk is the risk that economic and market conditions or any actual or perceived credit deterioration may lead to an increase
in the credit spreads (i.e., the difference in yield between two securities of similar maturity but different
credit quality) and a decline in price of the issuer’s securities.
Distribution Risk. The Fund is not designed to provide a predictable level of dividend income. The income payable on debt securities in general and the availability of investment opportunities varies based on market conditions. In addition, the Fund may not be effective in identifying income producing
securities and managing distributions; as a result, the level of dividend income will fluctuate. The
Fund’s investments are subject to various risks including the risk that the counterparty will not pay
income when due which may adversely impact the level and volatility of dividend income paid by the Fund. The
Fund does not guarantee that distributions will always be paid or that such dividends will not
fluctuate.
High Yield Securities and Loan Risk. The Fund invests in instruments including junk bonds, Loans and instruments that may be issued by companies that are highly leveraged, less creditworthy or financially distressed. These investments are considered to be speculative and may be subject to greater risk of loss, greater sensitivity to economic changes, valuation
difficulties and potential illiquidity. Such investments may be subject to additional risks including
subordination to other creditors, no collateral or limited rights in collateral, lack of a
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regular trading market, extended
settlement periods, liquidity risks, prepayment risks, potentially less protection under the federal securities
laws and lack of publicly available information. The Fund will not have direct recourse against the issuer of a
loan participation.
In recent years, there has been a broad trend of weaker or less restrictive covenant protections in both the
Loan and high yield markets. Among other things, under such weaker or less restrictive covenants, borrowers
might be able to exercise more flexibility with respect to certain activities than borrowers who are subject to
stronger or more protective covenants. For example, borrowers might be able to incur more debt, including secured
debt, return more capital to shareholders, remove or reduce assets that are designated as collateral securing
Loans or high yield securities, increase the claims against assets that are permitted against collateral
securing Loans or high yield securities or otherwise manage their business in ways that could impact creditors
negatively. In addition, certain privately held borrowers might be permitted to file less frequent, less detailed
or less timely financial reporting or other information, which could negatively impact the value of the Loans
or high yield securities issued by such borrowers. Each of these factors might negatively impact the Loans and
high yield instruments held by the Fund.
No active trading market may exist for some Loans and other instruments and certain investments may be subject to restrictions on resale. In addition, the settlement period for Loans
is uncertain as there is no standardized settlement schedule applicable to such investments. Loans that are
deemed to be liquid at the time of purchase may become illiquid. Certain Loans may take more than seven days to
settle. The inability to dispose of the Fund’s securities and other investments in a timely fashion could
result in losses to the Fund. Because some instruments may have a more limited secondary market, liquidity and
valuation risk is more pronounced for the Fund than for funds that invest primarily in other types of fixed income instruments or equity securities. When Loans and other instruments are prepaid, the Fund may have to reinvest in instruments with
a lower yield or fail to recover additional amounts (i.e., premiums) paid for these instruments, resulting in
an unexpected capital loss and/or a decrease in the amount of dividends and yield. Certain Loans may not be
considered securities under the federal securities laws and, therefore, investments in such Loans may not be
subject to certain protections under those laws. In addition, the adviser may not have access to material
non-public information to which other investors may have access.
Covenant Lite Loan Risk. The Fund may invest in, or obtain exposure to, Loans that are “covenant lite.” Covenants contained in loan documentation are intended to protect
lenders by imposing certain restrictions and other limitations on a borrower’s operations or assets and
by providing certain information and consent rights to lenders. Covenant lite loans may lack financial
maintenance covenants that in certain situations can allow lenders to claim a default on the loan to seek to protect the interests of the lenders. The absence of financial maintenance covenants in a covenant lite loan might result in a
lower recovery in the event of a default by the borrower. Covenant lite loans have become much more prevalent
in recent years.
Foreign Securities and Emerging Markets Risk. U.S. dollar-denominated securities of foreign issuers or U.S. affiliates of foreign issuers may be subject to additional risks not faced by domestic issuers. These risks include political and economic risks, civil conflicts and war, greater volatility,
expropriation and nationalization risks, sanctions or other measures by the United States or other governments,
and regulatory issues facing issuers in such countries. The Fund may also invest in non-dollar denominated
securities. Investments in non-dollar denominated securities are subject to risks in addition to those summarized
above including currency fluctuations, higher transaction costs, delayed settlement, possible foreign controls
on investment, liquidity risks, and less stringent investor protection and disclosure standards of foreign
markets. In certain markets where securities and other instruments are not traded “delivery versus
payment,” the Fund may not receive timely payment for securities or other instruments it has delivered or receive delivery of securities paid for and may be subject to increased risk that the counterparty will fail to make payments or
delivery when due or default completely.
Events and evolving conditions in certain economies or markets may alter the risks associated with
investments tied to countries or regions that historically were perceived as comparatively stable becoming
riskier and more volatile. These risks are magnified in “emerging markets.” Emerging market countries
typically have less-established market economies than developed countries and may face greater social,
economic, regulatory and political uncertainties. In addition, emerging markets typically present greater
illiquidity and price volatility concerns due to smaller or limited local capital markets and greater
difficulty in determining market valuations of securities due to limited public information on issuers. Certain emerging market countries may be subject to less stringent requirements regarding accounting, auditing, financial reporting and
record keeping and therefore, material information related to an investment may not be available or reliable.
In addition, the Fund is limited in its ability to exercise its legal rights or enforce a counterparty’s
legal obligations in certain jurisdictions outside of the United States, in particular, in emerging markets
countries.
Geographic Focus Risk. The Fund may focus its investments in one or more regions or small groups of countries. As a result, the Fund’s performance may be subject to greater
volatility than a more geographically diversified fund.
Sovereign Debt Risk. The Fund may invest in securities issued or guaranteed by foreign governmental entities (known as sovereign debt securities). These investments are subject to the
risk of payment delays or defaults, due, for example, to cash flow problems, insufficient foreign currency
reserves, political considerations, large debt positions relative to the country’s economy or failure to
implement economic reforms. There is no legal or bankruptcy process for collecting sovereign debt.
European Market Risk. The Fund’s performance will be affected by political, social and economic conditions in Europe, such as growth of the economic output (the gross national product), the rate of inflation, the rate at which capital is reinvested
into European economies, the success of governmental actions to reduce budget deficits, the resource
self-sufficiency of European countries and interest and monetary exchange rates between European countries.
European financial markets may experience volatility due to concerns about high government debt levels,
4
credit rating downgrades, rising
unemployment, the future of the euro as a common currency, possible restructuring of government debt and other
government measures responding to those concerns, and fiscal and monetary controls imposed on member countries
of the European Union. The risk of investing in Europe may be heightened due to steps taken by the United
Kingdom to exit the European Union. On January 31, 2020, the United Kingdom officially withdrew from the
European Union and entered a transition period, which ended on December 31, 2020. On December 30, 2020, the
European Union and the United Kingdom signed the EU-UK Trade and Cooperation Agreement (“TCA”), an
agreement on the terms governing certain aspects of the European Union’s and the United Kingdom’s
relationship following the end of the transition period. Notwithstanding the TCA, following the transition period, there is likely to be considerable uncertainty as to the United Kingdom’s post-transition framework. The impact on the
United Kingdom and European economies and the broader global economy could be significant, resulting in
increased volatility and illiquidity, currency fluctuations, impacts on arrangements for trading and on other
existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise),
and in potentially lower growth for companies in the United Kingdom, Europe and globally, which could have an
adverse effect on the value of the Fund’s investments. In addition, if one or more other countries were
to exit the European Union or abandon the use of the euro as a currency, the value of investments tied to those
countries or the euro could decline significantly and unpredictably.
Government Securities Risk. The Fund invests in securities issued or guaranteed by the U.S. government or its agencies and instrumentalities (such as securities issued by Ginnie Mae,
Fannie Mae, or Freddie Mac). U.S. government securities are subject to market risk, interest rate risk and
credit risk. Securities, such as those issued or guaranteed by Ginnie Mae or the U.S. Treasury, that are backed
by the full faith and credit of the United States are guaranteed only as to the timely payment of interest and
principal when held to maturity and the market prices for such securities will fluctuate. Notwithstanding that
these securities are backed by the full faith and credit of the United States, circumstances could arise that
would prevent the payment of interest or principal. This would result in losses to the Fund. Securities issued
or guaranteed by U.S. government-related organizations, such as Fannie Mae and Freddie Mac, are not backed by
the full faith and credit of the U.S. government and no assurance can be given that the U.S. government will
provide financial support. Therefore, U.S. government-related organizations may not have the funds to meet
their payment obligations in the future.
Asset-Backed, Mortgage-Related and Mortgage-Backed Securities
Risk. The Fund may invest in asset-backed, mortgage-related and mortgage-backed securities including so-called “sub-prime” mortgages that are subject to certain other risks
including prepayment and call risks. When mortgages and other obligations are prepaid and when securities are
called, the Fund may have to reinvest in securities with a lower yield or fail to recover additional amounts
(i.e., premiums) paid for securities with higher interest rates, resulting in an unexpected capital loss and/or
a decrease in the amount of dividends and yield. In periods of either rising or declining interest rates, the Fund may be subject to extension risk, and may receive principal later than expected. As a result, in periods of rising interest
rates, the
Fund may exhibit additional volatility. During periods of difficult or frozen credit markets, significant changes in interest rates, or deteriorating economic conditions, such securities may
decline in value, face valuation difficulties, become more volatile and/or become illiquid. Additionally,
asset-backed, mortgage-related and mortgage-backed securities are subject to risks associated with their
structure and the nature of the assets underlying the securities and the servicing of those assets. Certain asset-backed, mortgage-related and mortgage-backed securities may face valuation difficulties and may be less liquid than other types of asset-backed, mortgage-related and mortgage-backed securities, or debt securities.
Collateralized
mortgage obligations (CMOs) and stripped mortgage-backed securities, including those structured as
interest-only (IOs) and principal-only (POs), are more volatile and may be more sensitive to the rate of
prepayments than other mortgage-related securities. The risk of default, as described under “Credit Risk,” for “sub-prime” mortgages is generally higher than other types of mortgage-backed securities. The structure of some of these securities may be complex
and there may be less available information than other types of debt securities.
The Fund will be exposed to additional risk to the extent that it uses inverse floaters and inverse IOs, which are debt securities with interest rates that reset in the opposite direction
from the market rate to which the security is indexed. These securities are more volatile and more sensitive to
interest rate changes than other types of debt securities. If interest rates move in a manner not anticipated
by the adviser, the Fund could lose all or substantially all of its investment in inverse IOs.
Prepayment Risk. The issuer of certain securities may repay principal in advance, especially when yields fall. Changes in the rate at which prepayments occur can affect the return on investment of these securities. When debt obligations are prepaid
or when securities are called, the Fund may have to reinvest in securities with a lower yield. The Fund also
may fail to recover additional amounts (i.e., premiums) paid for securities with higher coupons, resulting in
an unexpected capital loss.
Inflation-Linked Security
Risk. Inflation-linked debt securities are subject to the effects of changes in market interest rates caused
by factors other than inflation (real interest rates). In general, the price of an inflation-linked security
tends to decline when real interest rates increase. Unlike conventional bonds, the principal and interest
payments of inflation-linked securities such as TIPS are adjusted periodically to a specified rate of inflation
(e.g., Non-Seasonally Adjusted Consumer Price Index for all Urban Consumers (CPI-U)). There can be no assurance
that the inflation index used will accurately measure the real rate of inflation. These securities may lose
value in the event that the actual rate of inflation is different than the rate of the inflation
index.
Equity Market Risk. The Fund’s investments in preferred shares and convertible securities are subject to equity market risk. The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial
condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting
individual companies, sectors or industries selected for the Fund’s portfolio or the securities market as
a whole, such as changes in economic or political conditions. When the value of the Fund’s securities goes down, your investment in the Fund decreases in value.
5
Convertible Securities Risk. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
Municipal Securities Risk. The risk of a municipal security generally depends on the financial and credit status of the issuer. Changes in a municipality’s financial health may make it difficult for the municipality to make interest and principal
payments when due. This could decrease the Fund’s income or hurt the ability to preserve capital and
liquidity. Under some circumstances, municipal securities might not pay interest unless the state legislature
or municipality authorizes money for that purpose.
Mortgage Dollar Roll Risk. The Fund may enter into mortgage dollar rolls involving mortgage pass-through securities including mortgage TBAs and other mortgage-backed securities. During
the period between the sale and repurchase in a mortgage dollar roll transaction, the Fund will not be entitled
to receive interest and principal payments on the securities sold. Losses may arise due to changes in the value
of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty
files for bankruptcy or becomes insolvent, the Fund’s right to repurchase or sell securities may be
limited. Short sales of mortgage TBAs and engaging in mortgage dollar rolls may be subject to leverage risks as
described under “Derivatives Risk.” In addition, mortgage dollar rolls may increase interest rate
risk and result in an increased portfolio turnover rate which increases costs and may increase taxable
gains.
Zero-Coupon, Pay-In-Kind and Deferred Payment
Securities Risk. The market value of a zero-coupon, pay-in-kind or deferred payment security is generally more volatile than the market value of, and is more likely to respond to a greater degree to changes
in interest rates than, other fixed income securities with similar maturities and credit quality that pay
interest periodically. In addition, federal income tax law requires that the holder of a zero-coupon security
accrue a portion of the discount at which the security was purchased as taxable income each year. The Fund may
consequently have to dispose of portfolio securities under disadvantageous circumstances to generate cash to
satisfy its requirement as a regulated investment company to distribute all of its net income (including
non-cash income attributable to zero-coupon securities). These actions may reduce the assets to which the
Fund’s expenses could otherwise be allocated and may reduce the Fund’s rate of return.
Preferred Stock Risk. Preferred stock generally has a preference as to dividends and liquidation over an issuer’s common stock but ranks junior to debt securities in an issuer’s capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred
stock also may be subject to optional or mandatory redemption provisions.
Privately Placed Securities Risk. Privately placed securities generally are less liquid than publicly traded securities and the Fund may not always be able to sell such securities
without experiencing delays in finding buyers or reducing the sale price for such securities. The disposition
of some of the securities held by the Fund may be restricted under federal securities laws. As a result, the
Fund may not be able to dispose of such
investments at a time when, or at a price at which, it desires to do so and may have to bear expenses of
registering these securities, if necessary. These securities may also be difficult to value.
REITs Risk. The Fund’s investments in real estate securities, including REITs, are subject to the same risks as direct
investments in real estate and mortgages, and their value will depend on the value of the underlying real
estate interests. These risks include default, prepayments, changes in value resulting from changes in interest
rates and demand for real and rental property, and the management skill and creditworthiness of REIT issuers.
The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT
in which it invests in addition to the expenses of the Fund.
Derivatives Risk. Derivatives, including futures contracts, options, swaps including interest rate and credit default swaps and forward contracts, may be riskier than other types of investments and may increase the volatility of the Fund.
Derivatives may be particularly sensitive to changes in economic and market conditions and may create leverage,
which could result in losses that significantly exceed the Fund’s original investment. Certain
derivatives also expose the Fund to counterparty risk, which is the risk that the derivative counterparty will not fulfill its contractual obligations (and includes credit risk associated with the counterparty). Certain derivatives are
synthetic instruments that attempt to replicate the performance of certain reference assets. With regard to
such derivatives, the Fund does not have a claim on the reference assets and is subject to enhanced
counterparty risk. Derivatives may not perform as expected, so the Fund may not realize the intended benefits.
When used for hedging, the change in value of a derivative may not correlate as expected with the currency,
security or other risk being hedged. In addition, given their complexity, derivatives expose the Fund to risks
of mispricing or improper valuation. Certain of the Fund’s transactions in derivatives could also affect
the amount, timing and character of distributions to shareholders which may result in the Fund realizing more
short-term capital gain and ordinary income subject to tax at ordinary income tax rates than it would if it did not engage in such transactions, which may adversely impact the Fund’s after-tax returns.
Industry and Sector Focus Risk. At times the Fund may increase the relative emphasis of its investments in a particular industry or sector. The prices of securities of issuers in a particular industry or sector may be more susceptible to fluctuations
due to changes in economic or business conditions, government regulations, availability of basic resources or
supplies, or other events that affect that industry or sector more than securities of issuers in other
industries and sectors. To the extent that the Fund increases the relative emphasis of its investments in a
particular industry or sector, the Fund’s Share values may fluctuate in response to events affecting that
industry or sector.
LIBOR Discontinuance or Unavailability
Risk. The London Interbank Offering Rate (“LIBOR”) is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) publicly announced that (i) immediately after
December 31, 2021, publication of the 1-week and 2-month U.S. Dollar LIBOR settings will permanently cease;
(ii) immediately after June 30, 2023, publication of the overnight and 12-month
6
U.S. Dollar LIBOR settings will
permanently cease; and (iii) immediately after June 30, 2023, the 1-month, 3-month and 6-month U.S. Dollar
LIBOR settings will cease to be provided or, subject to the FCA’s consideration of the case, be provided on a synthetic basis and no longer be representative of the underlying market and economic reality they are intended to measure
and that representativeness will not be restored. There is no assurance that the dates announced by the FCA
will not change or that the administrator of LIBOR and/or regulators will not take further action that could
impact the availability, composition or characteristics of LIBOR or the currencies and/or tenors for which
LIBOR is published, and we recommend that you consult your advisors to stay informed of any such developments.
Public and private sector industry initiatives are currently underway to implement new or alternative reference
rates to be used in place of LIBOR. There is no assurance that any such alternative reference rate will be
similar to or produce the same value or economic equivalence as LIBOR or that it will have the same volume or
liquidity as did LIBOR prior to its discontinuance or unavailability, which may affect the value or liquidity
or return on certain of the Fund’s loans, notes, derivatives and other instruments or investments comprising some or all of the Fund’s investments and result in costs incurred in connection with closing out positions and entering into
new trades.
Transactions Risk. The Fund could experience a loss and its liquidity may be negatively impacted when selling securities to meet redemption requests. The risk of loss increases if the redemption requests are unusually large or frequent or occur in
times of overall market turmoil or declining prices. Similarly, large purchases of Fund shares may adversely
affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is
required to maintain a larger cash position than it ordinarily would.
ETF Shares Trading Risk. Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and are bought and sold in the secondary market at market prices. The market
prices of Shares are expected to fluctuate, in some cases materially, in response to changes in the
Fund’s NAV, the intraday value of the Fund’s holdings and supply and demand for Shares. The adviser cannot predict whether Shares will trade above, below or at their NAV. Disruptions to creations and redemptions, the existence of
significant market volatility or potential lack of an active trading market for the Shares (including through a
trading halt), as well as other factors, may result in the Shares trading significantly above (at a premium) or
below (at a discount) to NAV or to the intraday value of the Fund’s holdings. During such periods, you
may incur significant losses if you sell your Shares.
The securities held by the Fund may be traded in markets that close at a different time than the Exchange.
Liquidity in those securities may be reduced after the applicable closing times. Accordingly, during the time
when the Exchange is open but after the applicable market closing, fixing or settlement times, bid-ask spreads
on the Exchange and the corresponding premium or discount to the Shares’ NAV may widen.
Authorized Participant Concentration Risk. Only an authorized participant may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of intermediaries that act as authorized participants and none of
these authorized participants is or will be obligated to engage in creation or redemption transactions. To the
extent that these intermediaries exit the business or are unable to or choose not
to proceed with creation and/or redemption orders with respect to the Fund and no other authorized participant creates or redeems, Shares may trade at a discount to NAV and possibly
face trading halts and/or delisting.
Investments in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any
bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government
agency.
You could lose money investing in the
Fund.
The Fund’s Past Performance
The Fund has not commenced operations as of the date of this prospectus and therefore, has no reportable performance history. Once the Fund has operated for at least one calendar year, a bar chart and performance table will be included in the prospectus to show the performance of the Fund. When such information is included, this section will provide some indication
of the risks of investing in the Fund by showing changes in the Fund’s performance history from year to
year and showing how the Fund’s average annual total returns compare with those of a broad measure of
market performance.Although past performance of the Fund is no guarantee of how it will perform in the future, historical performance may give you some indication of the risks of investing in the Fund.
Management
J.P. Morgan Investment Management Inc. (the adviser)
Portfolio Manager |
Managed the Fund Since |
Primary Title with
Investment Adviser |
J.
Andrew Norelli |
2021
|
Managing Director |
Andrew Headley |
2021
|
Managing Director |
Thomas Hauser |
2021
|
Managing Director |
Purchase and Sale of Shares
Individual Shares of the Fund may only be purchased and sold in secondary market transactions through brokers
or financial intermediaries. Shares of the Fund are listed for trading on the Exchange, and because Shares
trade at market prices rather than NAV, Shares of the Fund may trade at a price greater than NAV (premium) or
less than NAV (discount). Certain affiliates of the Fund and the adviser may purchase and resell Shares
pursuant to this prospectus.
An investor may incur costs attributable to the difference between the highest price a buyer is willing to
pay to purchase Shares of the Fund (bid) and the lowest price a seller is willing to accept for Shares (ask)
when buying or selling Shares in the secondary market (the “bid-ask spread”).
Recent information, including information about the Fund’s NAV, market price, premiums and discounts, and bid-ask spreads (when available), is included on the Fund’s website at
jpmorganfunds.com.
7
Tax
Information
To the extent the Fund makes distributions, those distributions
will be taxed as ordinary income or capital gains, except when your investment is in an IRA, 401(k) plan or
other tax-advantaged investment plan, in which case you may be subject to federal income tax upon withdrawal
from the tax-advantaged investment plan.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the adviser and its related companies may pay the financial intermediary for
the
sale of
Shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or
financial intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
8
SPRO-INC-ETF-1021
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