UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-23738
Capital Group Core Plus Income ETF
(Exact Name of Registrant as Specified in Charter)
6455 Irvine Center Drive
Irvine, California 92618
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (949) 975-5000
Date of fiscal year end: December 31
Date of reporting period: June 30, 2022
Troy S. Tanner
Capital Group Core Plus Income ETF
6455 Irvine Center Drive
Irvine, California 92618
(Name and Address of Agent for Service)
ITEM 1 – Reports to Stockholders
| Capital Group Core Plus Income ETFSM |  |
| First report for the period ended June 30, 2022 |
Fixed income
for a variety of
investor goals
Capital Group Core Plus Income ETF seeks to provide current income and maximum total return, consistent with preservation of capital.
For over 90 years, Capital Group has invested with a long-term focus based on thorough research and attention to risk.
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com. Market price returns are determined using the official closing price of the fund’s shares and do not represent the returns you would receive if you traded shares at other times.
Here are the cumulative total returns on a $1,000 investment for periods ended June 30, 2022:
| Since fund inception (2/22/22) | 30-day SEC yield as of 6/30/22 | Expense ratio | ||||||||||
| Capital Group Core Plus Income ETF | 3.56 | % | 0.34 | % | ||||||||
| Net asset value | –7.55 | % | ||||||||||
| Market price | –7.20 | |||||||||||
| Bloomberg U.S. Aggregate Index | –6.85 | |||||||||||
Capital Group exchange-traded funds (ETFs) are actively managed and do not seek to replicate a specific index. ETFs are bought and sold through an exchange at the then current market price, not net asset value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV when traded on an exchange. Brokerage commissions will reduce returns. There can be no guarantee that an active market for ETFs will develop or be maintained, or that the ETF’s listing will continue or remain unchanged.
ETF market price returns since inception are calculated using NAV for the period until market price became available (generally a few days after inception).
As nondiversified funds, Capital Group ETFs have the ability to invest a larger percentage of assets in securities of individual issuers than a diversified fund. As a result, a single issuer could adversely affect a fund’s results more than if the fund invested a smaller percentage of assets in securities of that issuer. See the applicable prospectus for details.
The expense ratio is as of the fund’s prospectus available at the time of publication. The expense ratio is estimated.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Fellow investors:
Results for Capital Group Core Plus Income ETF for the period ended June 30, 2022, are shown in the inside front cover, as well as results of the fund’s benchmark.
For additional information about the fund, its investment results, holdings and portfolio managers, visit https://www.capitalgroup.com/advisor/investments/exchange-traded-funds/details/cgcp. You can also access information about Capital Group’s exchange-traded funds and read our insights about the markets, retirement, saving for college, investing fundamentals and more at capitalgroup.com.
Contents
| 2 | Investment portfolio | |
| 11 | Financial statements | |
| 14 | Notes to financial statements | |
| 25 | Financial highlights |
| Capital Group Core Plus Income ETF | 1 |
| Investment portfolio June 30, 2022 | unaudited |
| Portfolio by type of security | Percent of net assets |
| Portfolio quality summary* | Percent of net assets | |||
| U.S. Treasury and agency† | 31.70 | % | ||
| AAA/Aaa | 29.36 | |||
| AA/Aa | 4.50 | |||
| A/A | 6.97 | |||
| BBB/Baa | 12.98 | |||
| Below investment grade | 14.19 | |||
| Short-term securities & other assets less liabilities | .30 | |||
| * | Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor’s, Moody’s and/or Fitch as an indication of an issuer’s creditworthiness. In assigning a credit rating to a security, the fund looks specifically to the ratings assigned to the issuer of the security by Standard & Poor’s, Moody’s and/or Fitch. If agency ratings differ, the security will be considered to have received the highest of those ratings, consistent with the fund’s investment policies. |
| † | These securities are guaranteed by the full faith and credit of the U.S. government. |
| Bonds, notes & other debt instruments 99.70% | Principal amount (000) | Value (000) | ||||||
| Mortgage-backed obligations 34.58% | ||||||||
| Federal agency mortgage-backed obligations 28.28% | ||||||||
| Government National Mortgage Assn. 3.50% 20521 | USD | 5,435 | $ | 5,275 | ||||
| Uniform Mortgage-Backed Security 3.00% 20521,2 | 14,400 | 13,401 | ||||||
| Uniform Mortgage-Backed Security 3.00% 20521,2 | 1,195 | 1,113 | ||||||
| Uniform Mortgage-Backed Security 3.50% 20521,2 | 8,980 | 8,628 | ||||||
| Uniform Mortgage-Backed Security 4.00% 20521,2 | 23,009 | 22,619 | ||||||
| Uniform Mortgage-Backed Security 4.00% 20521,2 | 756 | 744 | ||||||
| Uniform Mortgage-Backed Security 4.50% 20521,2 | 9,734 | 9,753 | ||||||
| Uniform Mortgage-Backed Security 4.50% 20521,2 | 666 | 666 | ||||||
| Uniform Mortgage-Backed Security 5.00% 20521,2 | 11,160 | 11,363 | ||||||
| 73,562 | ||||||||
| Commercial mortgage-backed securities 3.82% | ||||||||
| Bank Commercial Mortgage Trust, Series 2019-BN19, Class B, 3.647% 20611 | 1,000 | 916 | ||||||
| Bank Commercial Mortgage Trust, Series 2022-BNK40, Class B, 3.507% 20641,3 | 273 | 238 | ||||||
| Bank Commercial Mortgage Trust, Series 2022-BNK40, Class AS, 3.507% 20641,3 | 250 | 222 | ||||||
| Benchmark Mortgage Trust, Series 2020-B21, Class AS, 2.2543% 20531 | 250 | 206 | ||||||
| Benchmark Mortgage Trust, Series 2022-B35, Class C, 4.594% 20551,3 | 2,500 | 2,205 | ||||||
| Boca Commercial Mortgage Trust, Series 2022-BOCA, Class A, (1-month USD CME Term SOFR + 1.7696%) % 20391,3,4 | 623 | 612 | ||||||
| Boca Commercial Mortgage Trust, Series 2022-BOCA, Class B, (1-month USD CME Term SOFR + 2.3191%) % 20391,3,4 | 317 | 312 | ||||||
| BX Trust, Series 2022-CSMO, Class A, (1-month USD CME Term SOFR + 2.11%) 2.865% 20271,3,4 | 716 | 709 | ||||||
| BX Trust, Series 2021-SDMF, Class D, (1-month USD-LIBOR + 1.387%) 2.711% 20341,3,4 | 500 | 470 | ||||||
| BX Trust, Series 2022-IND, Class D, (1-month USD CME Term SOFR + 2.839%) 4.173% 20371,3,4 | 157 | 150 | ||||||
| BXSC Commercial Mortgage Trust, Series 2022-WSS, Class D, (1-month USD CME Term SOFR + 3.188%) 4.467% 20351,3,4 | 249 | 240 | ||||||
| Citigroup Commercial Mortgage Trust, Series 2015-GC27, Class C, 4.570% 20481,3 | 448 | 424 | ||||||
| 2 | Capital Group Core Plus Income ETF |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Mortgage-backed obligations (continued) | ||||||||
| Commercial mortgage-backed securities (continued) | ||||||||
| Extended Stay America Trust, Series 2021-ESH, Class D, (1-month USD-LIBOR + 2.25%) 3.575% 20381,3,4 | USD | 497 | $ | 481 | ||||
| Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C20, Class B, 4.16% 20481 | 2,000 | 1,948 | ||||||
| Morgan Stanley Capital I Trust, Series 2019-L3, Class B, 3.781% 20521,3 | 750 | 684 | ||||||
| Wells Fargo Commercial Mortgage Trust, Series 2015-LC22, Class C, 4.706% 20581,3 | 130 | 122 | ||||||
| 9,939 | ||||||||
| Collateralized mortgage-backed obligations (privately originated) 2.48% | ||||||||
| Cascade Funding Mortgage Trust, Series 2020-HB4, Class M3, 2.720% 20301,3,4 | 500 | 479 | ||||||
| Connecticut Avenue Securities, Series 2022-R04, Class 1M1, (30-day Average USD-SOFR + 2.00%) 2.926% 20421,3,4 | 264 | 259 | ||||||
| Connecticut Avenue Securities, Series 2022-R03, Class 1M1, (30-day Average USD-SOFR + 2.10%) 3.026% 20421,3,4 | 329 | 326 | ||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2021-DNA6, Class M2, (30-day Average USD-SOFR + 1.50%) 2.426% 20411,3,4 | 793 | 726 | ||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2022-DNA3, Class M1A, (30-day Average USD-SOFR + 2.00%) 2.926% 20421,3,4 | 610 | 601 | ||||||
| Freddie Mac Structured Agency Credit Risk Debt Notes, Series 2020-DNA3, Class B1, (1-month USD-LIBOR + 5.10%) 6.724% 20501,3,4 | 1,225 | 1,250 | ||||||
| Legacy Mortgage Asset Trust, Series 2022-GS1, Class A1, 4.00% 2061 (7.00% on 4/25/2025)1,4,5,6 | 1,974 | 1,904 | ||||||
| Progress Residential Trust, Series 2021-SFR4, Class F, 3.407% 20381,4 | 1,000 | 905 | ||||||
| 6,450 | ||||||||
| Total mortgage-backed obligations | 89,951 | |||||||
| U.S. Treasury bonds & notes 31.70% | ||||||||
| U.S. Treasury 15.97% | ||||||||
| U.S. Treasury 2.625% 2025 | 510 | 505 | ||||||
| U.S. Treasury 2.75% 2025 | 7,220 | 7,166 | ||||||
| U.S. Treasury 2.875% 2025 | 900 | 897 | ||||||
| U.S. Treasury 2.625% 2027 | 4,500 | 4,414 | ||||||
| U.S. Treasury 2.75% 2027 | 700 | 690 | ||||||
| U.S. Treasury 2.375% 2029 | 2,172 | 2,078 | ||||||
| U.S. Treasury 2.875% 2029 | 8,538 | 8,434 | ||||||
| U.S. Treasury 1.75% 2032 | 2,260 | 2,045 | ||||||
| U.S. Treasury 2.875% 2032 | 1,360 | 1,344 | ||||||
| U.S. Treasury 2.375% 2042 | 3,450 | 2,913 | ||||||
| U.S. Treasury 3.25% 20427 | 3,870 | 3,761 | ||||||
| U.S. Treasury 2.25% 2052 | 4,491 | 3,680 | ||||||
| U.S. Treasury 2.875% 20527 | 3,830 | 3,601 | ||||||
| 41,528 | ||||||||
| U.S. Treasury inflation-protected securities 15.73% | ||||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20248 | 4,796 | 4,845 | ||||||
| U.S. Treasury Inflation-Protected Security 0.625% 20248 | 8,114 | 8,247 | ||||||
| U.S. Treasury Inflation-Protected Security 0.25% 20258 | 1,867 | 1,879 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20278 | 15,346 | 15,098 | ||||||
| U.S. Treasury Inflation-Protected Security 0.125% 20328 | 11,464 | 10,847 | ||||||
| 40,916 | ||||||||
| Total U.S. Treasury bonds & notes | 82,444 | |||||||
| Corporate bonds, notes & loans 25.43% | ||||||||
| Financials 4.72% | ||||||||
| Advisor Group Holdings, LLC 6.25% 20284 | 175 | 153 | ||||||
| AerCap Ireland Capital, Ltd. / AerCap Global Aviation Trust 3.30% 2032 | 1,100 | 882 | ||||||
| American Express Co. 2.55% 2027 | 150 | 140 | ||||||
| American Express Co. 4.05% 2029 | 450 | 442 | ||||||
| American International Group, Inc. 4.375% 2050 | 100 | 89 | ||||||
| Bank of America Corp. 2.972% 2033 (USD-SOFR + 1.33% on 2/4/2032)6 | 450 | 384 | ||||||
| Bank of America Corp. 4.571% 2033 (USD-SOFR + 1.83% on 4/27/2032)6 | 650 | 633 | ||||||
| Bank of Montreal 2.65% 2027 | 350 | 324 | ||||||
| Bank of Nova Scotia 2.45% 2032 | 125 | 104 | ||||||
| Berkshire Hathaway, Inc. 3.85% 2052 | 400 | 343 | ||||||
| BNP Paribas 2.591% 2028 (USD-SOFR + 1.228% on 1/20/2027)4,6 | 200 | 180 | ||||||
| Charles Schwab Corp. 2.45% 2027 | 100 | 93 | ||||||
| Capital Group Core Plus Income ETF | 3 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Corporate bonds, notes & loans (continued) | ||||||||
| Financials (continued) | ||||||||
| Citigroup, Inc. 3.057% 2033 (USD-SOFR + 1.351% on 1/25/2032)6 | USD | 115 | $ | 98 | ||||
| Citigroup, Inc. 4.91% 2033 (USD-SOFR + 2.086% on 5/24/2032)6 | 106 | 105 | ||||||
| CME Group, Inc. 2.65% 2032 | 150 | 133 | ||||||
| Coinbase Global, Inc. 3.625% 20314 | 350 | 198 | ||||||
| Compass Diversified Holdings 5.00% 20324 | 295 | 229 | ||||||
| Corebridge Financial, Inc. 3.85% 20294 | 299 | 277 | ||||||
| Corebridge Financial, Inc. 3.90% 20324 | 361 | 324 | ||||||
| Corebridge Financial, Inc. 4.35% 20424 | 98 | 84 | ||||||
| Corebridge Financial, Inc. 4.40% 20524 | 622 | 520 | ||||||
| Danske Bank AS 4.298% 2028 (1-year UST Yield Curve Rate T Note Constant Maturity + 1.75% on 4/1/2027)4,6 | 275 | 261 | ||||||
| Goldman Sachs Group, Inc. 1.757% 2025 (USD-SOFR + 0.73% on 1/24/2024)6 | 40 | 38 | ||||||
| Goldman Sachs Group, Inc. 3.102% 2033 (USD-SOFR + 1.41% on 2/24/2032)6 | 255 | 218 | ||||||
| Goldman Sachs Group, Inc. 3.436% 2043 (USD-SOFR + 1.632% on 2/24/2042)6 | 185 | 145 | ||||||
| ING Groep NV 4.017% 2028 (USD-SOFR + 1.83% on 3/28/2027)6 | 375 | 357 | ||||||
| ING Groep NV 4.252% 2033 (USD-SOFR + 2.07% on 3/28/2032)6 | 249 | 233 | ||||||
| Intercontinental Exchange, Inc. 4.35% 2029 | 500 | 494 | ||||||
| Intercontinental Exchange, Inc. 4.60% 2033 | 178 | 177 | ||||||
| Intercontinental Exchange, Inc. 4.95% 2052 | 57 | 56 | ||||||
| Iron Mountain Information Management Services, Inc. 5.00% 20324 | 250 | 202 | ||||||
| JPMorgan Chase & Co. 4.323% 2028 (USD-SOFR + 1.56% on 4/26/2027)6 | 800 | 788 | ||||||
| JPMorgan Chase & Co. 2.963% 2033 (USD-SOFR + 1.26% on 1/25/2032)6 | 190 | 163 | ||||||
| JPMorgan Chase & Co. 4.586% 2033 (USD-SOFR + 1.80% on 4/26/2032)6 | 72 | 71 | ||||||
| Marsh & McLennan Companies, Inc. 2.375% 2031 | 100 | 84 | ||||||
| Morgan Stanley 4.21% 2028 (USD-SOFR + 1.61% on 4/20/2027)6 | 371 | 363 | ||||||
| Morgan Stanley 2.943% 2033 (USD-SOFR + 1.29% on 1/21/2032)6 | 195 | 167 | ||||||
| Morgan Stanley 5.297% 2037 (USD-SOFR + 2.62% on 4/20/2032)6 | 269 | 261 | ||||||
| MSCI, Inc. 3.25% 20334 | 200 | 160 | ||||||
| Navient Corp. 6.125% 2024 | 82 | 78 | ||||||
| Navient Corp. 5.50% 2029 | 500 | 386 | ||||||
| Navient Corp. 5.625% 2033 | 850 | 591 | ||||||
| New York Life Global Funding 0.85% 20264 | 125 | 113 | ||||||
| Progressive Corp. 3.00% 2032 | 350 | 314 | ||||||
| Synchrony Financial 3.95% 2027 | 25 | 23 | ||||||
| Toronto-Dominion Bank 2.00% 2031 | 90 | 73 | ||||||
| Wells Fargo & Company 3.908% 2026 (USD-SOFR + 1.32% on 4/25/2025)6 | 469 | 462 | ||||||
| Wells Fargo & Company 3.35% 2033 (USD-SOFR + 1.50% on 3/2/2032)6 | 30 | 27 | ||||||
| Wells Fargo & Company 4.611% 2053 (USD-SOFR + 2.13% on 4/25/2052)6 | 241 | 223 | ||||||
| 12,263 | ||||||||
| Energy 4.19% | ||||||||
| Ascent Resources - Utica, LLC 7.00% 20264 | 150 | 140 | ||||||
| BP Capital Markets America, Inc. 2.721% 2032 | 100 | 86 | ||||||
| Cheniere Energy Partners LP 4.00% 2031 | 75 | 64 | ||||||
| Cheniere Energy, Inc. 4.625% 2028 | 175 | 158 | ||||||
| Chesapeake Energy Corp. 6.75% 20294 | 311 | 302 | ||||||
| Chevron Corp. 1.995% 2027 | 250 | 230 | ||||||
| CNX Resources Corp. 7.25% 20274 | 175 | 172 | ||||||
| ConocoPhillips 3.80% 2052 | 250 | 214 | ||||||
| Continental Resources, Inc. 2.875% 20324 | 75 | 59 | ||||||
| Diamondback Energy, Inc. 4.25% 2052 | 538 | 447 | ||||||
| Energy Transfer Operating LP 3.75% 2030 | 150 | 135 | ||||||
| Energy Transfer Operating LP 5.00% 2050 | 50 | 43 | ||||||
| Energy Transfer Partners LP 6.25% 2049 | 75 | 73 | ||||||
| Enterprise Products Operating, LLC 3.30% 2053 | 60 | 44 | ||||||
| EQM Midstream Partners LP 6.00% 20254 | 330 | 317 | ||||||
| EQM Midstream Partners LP 4.75% 20314 | 525 | 420 | ||||||
| EQT Corp. 3.90% 2027 | 75 | 70 | ||||||
| Exxon Mobil Corp. 3.452% 2051 | 125 | 102 | ||||||
| Genesis Energy, LP 8.00% 2027 | 425 | 377 | ||||||
| Harvest Midstream I, LP 7.50% 20284 | 75 | 71 | ||||||
| Hilcorp Energy I, LP 6.00% 20304 | 135 | 118 | ||||||
| Hilcorp Energy I, LP 6.25% 20324 | 225 | 198 | ||||||
| Kinder Morgan, Inc. 3.60% 2051 | 150 | 111 | ||||||
| MPLX LP 2.65% 2030 | 75 | 63 | ||||||
| MPLX LP 5.50% 2049 | 75 | 70 | ||||||
| MV24 Capital BV 6.748% 2034 | 356 | 319 | ||||||
| 4 | Capital Group Core Plus Income ETF |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Corporate bonds, notes & loans (continued) | ||||||||
| Energy (continued) | ||||||||
| New Fortress Energy, Inc. 6.50% 20264 | USD | 200 | $ | 181 | ||||
| NGL Energy Operating, LLC 7.50% 20264 | 1,160 | 1,048 | ||||||
| Oasis Petroleum, Inc. 6.375% 20264 | 710 | 658 | ||||||
| Occidental Petroleum Corp. 6.125% 2031 | 100 | 102 | ||||||
| ONEOK, Inc. 4.00% 2027 | 50 | 48 | ||||||
| ONEOK, Inc. 6.35% 2031 | 40 | 42 | ||||||
| ONEOK, Inc. 4.50% 2050 | 75 | 60 | ||||||
| ONEOK, Inc. 7.15% 2051 | 150 | 159 | ||||||
| Petrobras Global Finance Co. 5.60% 2031 | 611 | 569 | ||||||
| Petróleos Mexicanos 6.49% 2027 | 1,275 | 1,107 | ||||||
| Petróleos Mexicanos 8.75% 20294 | 754 | 684 | ||||||
| Petróleos Mexicanos 6.70% 2032 | 1,054 | 806 | ||||||
| Qatar Petroleum 2.25% 20314 | 275 | 235 | ||||||
| Shell International Finance BV 2.75% 2030 | 75 | 68 | ||||||
| Southwestern Energy Co. 4.75% 2032 | 325 | 278 | ||||||
| Sunoco LP 4.50% 20304 | 150 | 121 | ||||||
| Venture Global Calcasieu Pass, LLC 4.125% 20314 | 100 | 86 | ||||||
| Weatherford International, Ltd. 6.50% 20284 | 100 | 90 | ||||||
| Weatherford International, Ltd. 8.625% 20304 | 125 | 104 | ||||||
| Williams Companies, Inc. 2.60% 2031 | 55 | 46 | ||||||
| 10,895 | ||||||||
| Consumer discretionary 2.96% | ||||||||
| Amazon.com, Inc. 2.10% 2031 | 100 | 86 | ||||||
| Amazon.com, Inc. 3.60% 2032 | 600 | 578 | ||||||
| Amazon.com, Inc. 3.95% 2052 | 400 | 370 | ||||||
| AutoNation, Inc. 3.85% 2032 | 300 | 259 | ||||||
| Bayerische Motoren Werke AG 3.45% 20274 | 200 | 195 | ||||||
| Bayerische Motoren Werke AG 1.95% 20314 | 50 | 41 | ||||||
| Bayerische Motoren Werke AG 3.70% 20324 | 125 | 118 | ||||||
| Carnival Corp. 7.625% 20264 | 325 | 252 | ||||||
| Carvana Co. 5.50% 20274 | 50 | 32 | ||||||
| Carvana Co. 5.875% 20284 | 286 | 182 | ||||||
| Daimler Trucks Finance North America, LLC 3.65% 20274 | 350 | 336 | ||||||
| Daimler Trucks Finance North America, LLC 2.50% 20314 | 150 | 122 | ||||||
| Fertitta Entertainment, Inc. 4.625% 20294 | 350 | 299 | ||||||
| Fertitta Entertainment, Inc. 6.75% 20304 | 125 | 96 | ||||||
| Ford Motor Co. 2.30% 2025 | 350 | 315 | ||||||
| Ford Motor Co. 3.25% 2032 | 100 | 75 | ||||||
| Ford Motor Credit Company, LLC 5.125% 2025 | 375 | 359 | ||||||
| Ford Motor Credit Company, LLC 4.95% 2027 | 570 | 531 | ||||||
| General Motors Financial Co. 2.35% 2027 | 75 | 66 | ||||||
| Hanesbrands, Inc. 4.625% 20244 | 172 | 169 | ||||||
| Home Depot, Inc. 1.375% 2031 | 125 | 101 | ||||||
| Hyundai Capital America 1.65% 20264 | 100 | 88 | ||||||
| International Game Technology PLC 5.25% 20294 | 200 | 182 | ||||||
| Lowe’s Companies, Inc. 3.75% 2032 | 431 | 400 | ||||||
| Lowe’s Companies, Inc. 4.25% 2052 | 81 | 70 | ||||||
| Macy’s Retail Holdings, LLC 5.875% 20304 | 50 | 42 | ||||||
| Marriott International, Inc. 2.75% 2033 | 100 | 79 | ||||||
| Party City Holdings, Inc. 8.75% 20264 | 461 | 311 | ||||||
| Royal Caribbean Cruises, Ltd. 5.375% 20274 | 200 | 146 | ||||||
| Scientific Games Holdings LP 6.625% 20304 | 775 | 660 | ||||||
| Sonic Automotive, Inc. 4.875% 20314 | 200 | 151 | ||||||
| Stellantis Finance US, Inc. 1.711% 20274 | 600 | 522 | ||||||
| VICI Properties LP / VICI Note Co., Inc. 3.875% 20294 | 75 | 65 | ||||||
| VICI Properties LP / VICI Note Co., Inc. 4.125% 20304 | 250 | 216 | ||||||
| Wheel Pros, Inc. 6.50% 20294 | 275 | 195 | ||||||
| 7,709 | ||||||||
| Communication services 2.95% | ||||||||
| AT&T, Inc. 2.55% 2033 | 100 | 81 | ||||||
| AT&T, Inc. 3.50% 2053 | 150 | 114 | ||||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 4.75% 20304 | 450 | 386 | ||||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 4.75% 20324 | 714 | 586 | ||||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 4.40% 2033 | 200 | 179 | ||||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 4.50% 20334 | 200 | 158 | ||||||
| Capital Group Core Plus Income ETF | 5 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Corporate bonds, notes & loans (continued) | ||||||||
| Communication services (continued) | ||||||||
| CCO Holdings, LLC and CCO Holdings Capital Corp. 4.25% 20344 | USD | 100 | $ | 78 | ||||
| Comcast Corp. 1.50% 2031 | 100 | 80 | ||||||
| Frontier Communications Corp. 5.00% 20284 | 380 | 324 | ||||||
| Gray Escrow II, Inc. 5.375% 20314 | 75 | 60 | ||||||
| Magallanes, Inc. 4.279% 20324 | 691 | 618 | ||||||
| Magallanes, Inc. 5.05% 20424 | 440 | 375 | ||||||
| Magallanes, Inc. 5.141% 20524 | 297 | 250 | ||||||
| Midas OpCo Holdings, LLC 5.625% 20294 | 100 | 81 | ||||||
| Netflix, Inc. 4.875% 2028 | 624 | 589 | ||||||
| Netflix, Inc. 4.875% 20304 | 750 | 688 | ||||||
| News Corp. 5.125% 20324 | 180 | 160 | ||||||
| Sirius XM Radio, Inc. 4.00% 20284 | 280 | 243 | ||||||
| Sprint Corp. 6.875% 2028 | 200 | 211 | ||||||
| Sprint Corp. 8.75% 2032 | 600 | 724 | ||||||
| T-Mobile US, Inc. 2.55% 2031 | 100 | 84 | ||||||
| Twitter, Inc. 5.00% 20304 | 450 | 428 | ||||||
| Univision Communications, Inc. 4.50% 20294 | 850 | 714 | ||||||
| Verizon Communications, Inc. 1.75% 2031 | 200 | 161 | ||||||
| Verizon Communications, Inc. 3.875% 2052 | 150 | 126 | ||||||
| VZ Secured Financing BV 5.00% 20324 | 200 | 166 | ||||||
| 7,664 | ||||||||
| Health care 2.28% | ||||||||
| AmerisourceBergen Corp. 2.70% 2031 | 125 | 107 | ||||||
| Anthem, Inc. 4.10% 2032 | 423 | 412 | ||||||
| Anthem, Inc. 4.55% 2052 | 203 | 191 | ||||||
| Bausch Health Companies, Inc. 6.125% 20274 | 75 | 64 | ||||||
| Bausch Health Companies, Inc. 5.25% 20314 | 110 | 57 | ||||||
| Baxter International, Inc. 2.539% 2032 | 70 | 59 | ||||||
| Centene Corp. 2.45% 2028 | 655 | 548 | ||||||
| Centene Corp. 2.625% 2031 | 450 | 359 | ||||||
| Community Health Systems, Inc. 5.25% 20304 | 75 | 57 | ||||||
| CVS Health Corp. 1.875% 2031 | 50 | 40 | ||||||
| HCA, Inc. 3.625% 20324 | 79 | 67 | ||||||
| HCA, Inc. 4.625% 20524 | 122 | 98 | ||||||
| Humana, Inc. 3.70% 2029 | 152 | 144 | ||||||
| Merck & Co., Inc. 1.70% 2027 | 50 | 45 | ||||||
| Merck & Co., Inc. 2.15% 2031 | 75 | 65 | ||||||
| Molina Healthcare, Inc. 3.875% 20324 | 200 | 168 | ||||||
| Mozart Debt Merger Sub, Inc. 5.25% 20294 | 75 | 62 | ||||||
| Owens & Minor, Inc. 6.25% 20304 | 415 | 380 | ||||||
| Roche Holdings, Inc. 2.076% 20314 | 200 | 171 | ||||||
| Tenet Healthcare Corp. 4.875% 20264 | 300 | 277 | ||||||
| Tenet Healthcare Corp. 4.375% 20304 | 325 | 276 | ||||||
| Teva Pharmaceutical Finance Co. BV 3.15% 2026 | 1,370 | 1,128 | ||||||
| Teva Pharmaceutical Finance Co. BV 5.125% 2029 | 950 | 785 | ||||||
| UnitedHealth Group, Inc. 2.30% 2031 | 50 | 43 | ||||||
| UnitedHealth Group, Inc. 4.20% 2032 | 230 | 230 | ||||||
| UnitedHealth Group, Inc. 4.75% 2052 | 105 | 105 | ||||||
| 5,938 | ||||||||
| Utilities 1.91% | ||||||||
| AES Panama Generation Holdings SRL 4.375% 20304 | 200 | 171 | ||||||
| Alliant Energy Finance, LLC 3.60% 20324 | 50 | 45 | ||||||
| Consumers Energy Co. 2.65% 2052 | 55 | 39 | ||||||
| FirstEnergy Corp. 2.65% 2030 | 905 | 748 | ||||||
| Florida Power & Light Company 2.875% 2051 | 150 | 112 | ||||||
| MidAmerican Energy Holdings Co. 2.70% 2052 | 50 | 36 | ||||||
| Northern States Power Co. 2.60% 2051 | 50 | 35 | ||||||
| Northern States Power Co. 4.50% 2052 | 350 | 346 | ||||||
| Oncor Electric Delivery Company, LLC 2.70% 2051 | 75 | 55 | ||||||
| Pacific Gas and Electric Co. 3.15% 2026 | 40 | 37 | ||||||
| Pacific Gas and Electric Co. 4.65% 2028 | 100 | 93 | ||||||
| Pacific Gas and Electric Co. 4.55% 2030 | 755 | 671 | ||||||
| Pacific Gas and Electric Co. 3.50% 2050 | 75 | 50 | ||||||
| PG&E Corp. 5.25% 2030 | 550 | 453 | ||||||
| Southern California Edison Co. 2.75% 2032 | 1,065 | 901 | ||||||
| 6 | Capital Group Core Plus Income ETF |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Corporate bonds, notes & loans (continued) | ||||||||
| Utilities (continued) | ||||||||
| Southern California Edison Co. 3.45% 2052 | USD | 415 | $ | 310 | ||||
| Union Electric Co. 3.90% 2052 | 275 | 243 | ||||||
| Virginia Electric and Power Co. 2.40% 2032 | 50 | 43 | ||||||
| Virginia Electric and Power Co. 2.95% 2051 | 75 | 56 | ||||||
| Xcel Energy, Inc. 2.35% 2031 | 40 | 33 | ||||||
| Xcel Energy, Inc. 4.60% 2032 | 500 | 496 | ||||||
| 4,973 | ||||||||
| Materials 1.63% | ||||||||
| Anglo American Capital PLC 2.25% 20284 | 200 | 173 | ||||||
| Anglo American Capital PLC 4.75% 20524 | 200 | 172 | ||||||
| Cleveland-Cliffs, Inc. 4.875% 20314 | 300 | 265 | ||||||
| Dow Chemical Co. 3.60% 2050 | 40 | 31 | ||||||
| First Quantum Minerals, Ltd. 6.875% 20274 | 850 | 761 | ||||||
| FXI Holdings, Inc. 12.25% 20264 | 700 | 624 | ||||||
| Glencore Funding, LLC 2.625% 20314 | 200 | 161 | ||||||
| International Flavors & Fragrances, Inc. 2.30% 20304 | 230 | 189 | ||||||
| Labl, Inc. 5.875% 20284 | 75 | 61 | ||||||
| LSB Industries, Inc. 6.25% 20284 | 100 | 88 | ||||||
| LYB International Finance III, LLC 3.625% 2051 | 75 | 56 | ||||||
| Nova Chemicals Corp. 4.25% 20294 | 1,225 | 959 | ||||||
| SCIH Salt Holdings, Inc. 4.875% 20284 | 450 | 375 | ||||||
| Sherwin-Williams Company 2.90% 2052 | 60 | 41 | ||||||
| South32 Treasury (USA), Ltd. 4.35% 20324 | 299 | 280 | ||||||
| 4,236 | ||||||||
| Industrials 1.61% | ||||||||
| AerCap Ireland Capital, Ltd. / AerCap Global Aviation Trust 1.75% 2026 | 150 | 131 | ||||||
| Boeing Company 2.75% 2026 | 115 | 107 | ||||||
| Boeing Company 5.15% 2030 | 855 | 821 | ||||||
| Boeing Company 3.625% 2031 | 900 | 778 | ||||||
| Boeing Company 5.805% 2050 | 30 | 28 | ||||||
| Bombardier, Inc. 7.125% 20264 | 250 | 207 | ||||||
| Bombardier, Inc. 7.875% 20274 | 550 | 459 | ||||||
| Canadian Pacific Railway, Ltd. 3.10% 2051 | 50 | 37 | ||||||
| Carrier Global Corp. 2.722% 2030 | 100 | 87 | ||||||
| CoreLogic, Inc. 4.50% 20284 | 300 | 232 | ||||||
| Maxar Technologies, Inc. 7.75% 20274 | 475 | 471 | ||||||
| Raytheon Technologies Corp. 2.375% 2032 | 80 | 68 | ||||||
| TransDigm, Inc. 4.625% 2029 | 400 | 323 | ||||||
| Union Pacific Corp. 3.50% 2053 | 375 | 306 | ||||||
| United Airlines Holdings, Inc. 6.50% 20274 | 60 | 59 | ||||||
| United Airlines, Inc. 4.625% 20294 | 100 | 85 | ||||||
| 4,199 | ||||||||
| Real estate 1.20% | ||||||||
| American Campus Communities, Inc. 3.625% 2027 | 50 | 49 | ||||||
| American Tower Corp. 2.30% 2031 | 80 | 63 | ||||||
| American Tower Corp. 4.05% 2032 | 229 | 209 | ||||||
| Equinix, Inc. 2.15% 2030 | 200 | 162 | ||||||
| Equinix, Inc. 2.50% 2031 | 250 | 203 | ||||||
| Equinix, Inc. 3.40% 2052 | 260 | 193 | ||||||
| Howard Hughes Corp. 4.375% 20314 | 225 | 167 | ||||||
| Iron Mountain, Inc. 4.50% 20314 | 300 | 246 | ||||||
| Kennedy-Wilson Holdings, Inc. 4.75% 2029 | 275 | 223 | ||||||
| Kennedy-Wilson Holdings, Inc. 4.75% 2030 | 300 | 235 | ||||||
| Sun Communities Operating LP 2.70% 2031 | 40 | 32 | ||||||
| Sun Communities Operating LP 4.20% 2032 | 649 | 591 | ||||||
| VICI Properties LP 5.125% 2032 | 799 | 755 | ||||||
| 3,128 | ||||||||
| Consumer staples 1.08% | ||||||||
| 7-Eleven, Inc. 1.80% 20314 | 575 | 449 | ||||||
| Altria Group, Inc. 3.40% 2030 | 100 | 85 | ||||||
| Altria Group, Inc. 3.70% 2051 | 140 | 90 | ||||||
| Anheuser-Busch InBev NV 4.50% 2050 | 70 | 63 | ||||||
| British American Tobacco PLC 2.259% 2028 | 100 | 84 | ||||||
| Capital Group Core Plus Income ETF | 7 |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Corporate bonds, notes & loans (continued) | ||||||||
| Consumer staples (continued) | ||||||||
| British American Tobacco PLC 4.742% 2032 | USD | 250 | $ | 222 | ||||
| British American Tobacco PLC 4.758% 2049 | 187 | 141 | ||||||
| British American Tobacco PLC 3.984% 2050 | 175 | 121 | ||||||
| British American Tobacco PLC 5.65% 2052 | 604 | 522 | ||||||
| Constellation Brands, Inc. 4.35% 2027 | 326 | 324 | ||||||
| Constellation Brands, Inc. 4.75% 2032 | 173 | 172 | ||||||
| Keurig Dr Pepper, Inc. 3.20% 2030 | 40 | 36 | ||||||
| Kraft Heinz Company 5.50% 2050 | 75 | 72 | ||||||
| Kronos Acquisition Holdings, Inc. 5.00% 20264 | 100 | 86 | ||||||
| PepsiCo, Inc. 1.95% 2031 | 50 | 43 | ||||||
| Post Holdings, Inc. 4.50% 20314 | 325 | 267 | ||||||
| TreeHouse Foods, Inc. 4.00% 2028 | 50 | 41 | ||||||
| 2,818 | ||||||||
| Information technology 0.90% | ||||||||
| Analog Devices, Inc. 1.70% 2028 | 25 | 22 | ||||||
| Apple, Inc. 2.70% 2051 | 85 | 64 | ||||||
| Broadcom, Inc. 4.00% 20294 | 91 | 84 | ||||||
| Broadcom, Inc. 4.15% 20324 | 758 | 685 | ||||||
| Broadcom, Inc. 2.60% 20334 | 200 | 154 | ||||||
| Broadcom, Inc. 3.469% 20344 | 250 | 204 | ||||||
| Broadcom, Inc. 3.187% 20364 | 450 | 343 | ||||||
| Entegris Escrow Corp. 4.75% 20294 | 445 | 415 | ||||||
| Mastercard, Inc. 2.00% 2031 | 80 | 68 | ||||||
| Oracle Corp. 2.875% 2031 | 260 | 214 | ||||||
| ServiceNow, Inc. 1.40% 2030 | 100 | 78 | ||||||
| 2,331 | ||||||||
| Total corporate bonds, notes & loans | 66,154 | |||||||
| Asset-backed obligations 6.08% | ||||||||
| AGL CLO, Ltd., Series 2022-18A, Class B, (3-month USD CME Term SOFR + 2.00%) 3.118% 20311,3,4 | 1,500 | 1,481 | ||||||
| ALM Loan Funding, Series 2020-1A, Class A2, (3-month USD-LIBOR + 1.85%) 2.894% 20291,3,4 | 500 | 486 | ||||||
| American Credit Acceptance Receivables Trust, Series 2022-2, Class F, 7.74% 20291,4 | 1,647 | 1,596 | ||||||
| Brex Commercial Charge Card Master Trust, Series 2022-1, Class A, 4.63% 20251,4 | 1,000 | 982 | ||||||
| CF Hippolyta, LLC, Series 2020-1, Class B1, 2.28% 20601,4 | 497 | 447 | ||||||
| CFG Investments, Ltd., Series 2021-1, Class B, 5.82% 20321,4 | 750 | 720 | ||||||
| CPS Auto Receivables Trust, Series 2022-B, Class A, 2.88% 20261,4 | 633 | 626 | ||||||
| CPS Auto Receivables Trust, Series 2022-B, Class D, 5.19% 20281,4 | 1,250 | 1,227 | ||||||
| Credit Acceptance Auto Loan Trust, Series 2022-1A, Class C, 5.70% 20321,4 | 1,000 | 997 | ||||||
| Credit Acceptance Auto Loan Trust, Series 2022-1A, Class D, 6.63% 20321,4 | 1,000 | 998 | ||||||
| Exeter Automobile Receivables Trust, Series 2022-2A, Class A3, 2.80% 20251 | 268 | 265 | ||||||
| Exeter Automobile Receivables Trust, Series 2022-2A, Class D, 4.56% 20281 | 117 | 111 | ||||||
| Exeter Automobile Receivables Trust, Series 2022-2A, Class E, 6.34% 20291,4 | 1,443 | 1,386 | ||||||
| Exeter Automobile Receivables Trust, Series 2022-3A, Class E, 8.17% 20301,4 | 2,000 | 2,032 | ||||||
| FirstKey Homes Trust, Series 2022-SFR2, Class S, 5.197% 20271,4 | 456 | 446 | ||||||
| Hertz Vehicle Financing III, LLC, Series 2022-2A, Class C, 2.95% 20281,4 | 300 | 266 | ||||||
| SMB Private Education Loan Trust, Series 2022-A, Class D, 4.75% 20541,4 | 208 | 198 | ||||||
| Westlake Automobile Receivables Trust, Series 2022-2A, Class D, 5.48% 20271,4 | 1,562 | 1,559 | ||||||
| 15,823 | ||||||||
| Bonds & notes of governments & government agencies outside the U.S. 1.91% | ||||||||
| Abu Dhabi (Emirate of) 1.70% 20314 | 300 | 252 | ||||||
| Angola (Republic of) 8.75% 20324 | 600 | 482 | ||||||
| Argentine Republic 0.50% 2030 (0.75% on 7/9/2023)6 | 1,100 | 261 | ||||||
| Chile (Republic of) 2.45% 2031 | 400 | 342 | ||||||
| Chile (Republic of) 4.34% 2042 | 200 | 178 | ||||||
| Dominican Republic 4.50% 20304 | 300 | 242 | ||||||
| Egypt (Arab Republic of) 8.75% 2051 | 1,139 | 689 | ||||||
| Export-Import Bank of India 2.25% 20314 | 250 | 197 | ||||||
| Ghana (Republic of) 8.125% 2032 | 800 | 389 | ||||||
| 8 | Capital Group Core Plus Income ETF |
| Bonds, notes & other debt instruments (continued) | Principal amount (000) | Value (000) | ||||||
| Bonds & notes of governments & government agencies outside the U.S. (continued) | ||||||||
| Panama (Republic of) 2.252% 2032 | USD | 800 | $ | 626 | ||||
| South Africa (Republic of) 5.875% 2032 | 1,003 | 859 | ||||||
| United Mexican States 4.50% 2029 | 450 | 438 | ||||||
| 4,955 | ||||||||
| Total bonds, notes & other debt instruments (cost: $267,988,000) | 259,327 | |||||||
| Short-term securities 29.91% | Shares | |||||||
| Money market investments 29.91% | ||||||||
| Capital Group Central Cash Fund 1.38%9,10 | 778,130 | 77,797 | ||||||
| Total short-term securities (cost: $77,806,000) | 77,797 | |||||||
| Total investment securities 129.61% (cost: $345,794,000) | 337,124 | |||||||
| Other assets less liabilities (29.61)% | (77,021 | ) | ||||||
| Net assets 100.00% | $ | 260,103 | ||||||
Futures contracts
| Contracts | Type | Number of contracts | Expiration | Notional amount (000) | Value and unrealized appreciation at 6/30/2022 (000) | |||||||||
| 2 Year U.S. Treasury Note Futures | Short | 80 | September 2022 | USD | (16,801 | ) | $ | (26 | ) | |||||
| 5 Year U.S. Treasury Note Futures | Long | 91 | September 2022 | 10,215 | 135 | |||||||||
| 10 Year U.S. Treasury Note Futures | Short | 3 | September 2022 | (355 | ) | 5 | ||||||||
| 10 Year Ultra U.S. Treasury Note Futures | Short | 146 | September 2022 | (18,597 | ) | (199 | ) | |||||||
| 20 Year U.S. Treasury Bond Futures | Long | 47 | September 2022 | 6,515 | 111 | |||||||||
| 30 Day Federal Funds Futures | Long | 314 | August 2022 | 127,880 | 44 | |||||||||
| 30 Year Ultra U.S. Treasury Bond Futures | Long | 38 | September 2022 | 5,865 | (129 | ) | ||||||||
| $ | (59 | ) | ||||||||||||
Forward currency contracts
| Contract amount | Unrealized appreciation (depreciation) | |||||||||||
| Currency purchased (000) | Currency sold (000) | Counterparty | Settlement date | at 6/30/2022 (000) | ||||||||
| JPY | 41,300 | USD | 303 | Bank of America | 7/11/2022 | $ | 2 | |||||
| JPY | 35,000 | USD | 264 | HSBC Bank | 7/11/2022 | (6 | ) | |||||
| JPY | 45,400 | USD | 344 | Standard Chartered Bank | 7/11/2022 | (9 | ) | |||||
| JPY | 566,900 | USD | 4,389 | BNP Paribas | 7/11/2022 | (210 | ) | |||||
| $ | (223 | ) | ||||||||||
Swap contracts
Interest rate swaps
Centrally cleared interest rate swaps
| Receive | Pay | Notional | Value at | Upfront premium | Unrealized appreciation | |||||||||||||||||||
| Rate | Payment frequency | Rate | Payment frequency | Expiration date | amount (000) | 6/30/2022 (000) | received (000) | at 6/30/2022 (000) | ||||||||||||||||
| SOFR | Annual | 2.121% | Annual | 3/28/2024 | USD | 5,700 | $ | 88 | $ | — | $ | 88 | ||||||||||||
| Capital Group Core Plus Income ETF | 9 |
Investments in affiliates10
| Value of affiliate at 2/22/2022 (000) | 11 | Additions (000) | Reductions (000) | Net realized loss (000) | Net unrealized depreciation (000) | Value of affiliate at 6/30/2022 (000) | Dividend income (000) | |||||||||||||||||||||
| Short-term securities 29.91% | ||||||||||||||||||||||||||||
| Money market investments 29.91% | ||||||||||||||||||||||||||||
| Capital Group Central Cash Fund 1.38%9 | $ | — | $ | 123,780 | $ | 45,971 | $ | (3 | ) | $ | (9 | ) | $ | 77,797 | $ | 138 | ||||||||||||
| 1 | Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date. |
| 2 | Purchased on a TBA basis. |
| 3 | Coupon rate may change periodically. Reference rate and spread are as of the most recent information available. Some coupon rates are determined by the issuer or agent based on current market conditions; therefore, the reference rate and spread are not available. |
| 4 | Acquired in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $54,098,000, which represented 20.80% of the net assets of the fund. |
| 5 | Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $1,904,000, which represented 0.73% of the net assets of the fund. |
| 6 | Step bond; coupon rate may change at a later date. |
| 7 | All or a portion of this security was pledged as collateral. The total value of pledged collateral was $1,701,000, which represented .65% of the net assets of the fund. |
| 8 | Index-linked bond whose principal amount moves with a government price index. |
| 9 | Rate represents the seven-day yield at June 30, 2022. |
| 10 | Part of the same “group of investment companies” as the fund as defined under the Investment Company Act of 1940, as amended. |
| 11 | Commencement of operations. |
Key to abbreviations
CLO = Collateralized Loan Obligations
CME = CME Group
JPY = Japanese yen
LIBOR = London Interbank Offered Rate
SOFR = Secured Overnight Financing Rate
TBA = To-be-announced
USD = U.S. dollars
Refer to the notes to financial statements.
| 10 | Capital Group Core Plus Income ETF |
Financial statements
| Statement of assets and liabilities | unaudited |
| at June 30, 2022 | (dollars and shares in thousands, except per-share amount) |
| Assets: | ||||||||
| Investment securities, at value: | ||||||||
| Unaffiliated issuers (cost: $267,988) | $ | 259,327 | ||||||
| Affiliated issuers (cost: $77,806) | 77,797 | $ | 337,124 | |||||
| Cash | 76 | |||||||
| Cash denominated in currencies other than U.S. dollars (cost: $—*) | — | * | ||||||
| Unrealized appreciation on open forward currency contracts | 2 | |||||||
| Receivables for: | ||||||||
| Sales of investments | 68,038 | |||||||
| Dividends and interest | 1,625 | |||||||
| Variation margin on futures contracts | 10 | |||||||
| Variation margin on centrally cleared swap contracts | 70 | 69,743 | ||||||
| 406,945 | ||||||||
| Liabilities: | ||||||||
| Unrealized depreciation on open forward currency contracts | 225 | |||||||
| Payables for: | ||||||||
| Purchases of investments | 145,838 | |||||||
| Dividends on fund’s shares | 630 | |||||||
| Investment advisory services | 66 | |||||||
| Variation margin on centrally cleared swap contracts | 83 | 146,617 | ||||||
| 146,842 | ||||||||
| Net assets at June 30, 2022 | $ | 260,103 | ||||||
| Net assets consist of: | ||||||||
| Capital paid in on shares of beneficial interest | $ | 275,061 | ||||||
| Total accumulated loss | (14,958 | ) | ||||||
| Net assets at June 30, 2022 | $ | 260,103 | ||||||
| Shares of beneficial interest issued and outstanding (no stated par value) — unlimited shares authorized | ||||||||
| Net assets | $ | 260,103 | ||||||
| Shares outstanding | 11,224 | |||||||
| Net asset value per share | $ | 23.17 | ||||||
| * | Amount less than one thousand. |
Refer to the notes to financial statements.
| Capital Group Core Plus Income ETF | 11 |
Financial statements (continued)
| Statement of operations | unaudited |
| for the period February 22, 2022, commencement of operations, to June 30, 2022 | (dollars in thousands) |
| Investment income: | ||||||||
| Income: | ||||||||
| Interest from unaffiliated issuers (net of non-U.S. taxes of $—*) | $ | 2,225 | ||||||
| Dividends from affiliated issuers | 138 | $ | 2,363 | |||||
| Fees and expenses: | ||||||||
| Investment advisory services | 198 | |||||||
| Net investment income | 2,165 | |||||||
| Net realized loss and unrealized depreciation: | ||||||||
| Net realized (loss) gain on: | ||||||||
| Investments in: | ||||||||
| Unaffiliated issuers | (6,172 | ) | ||||||
| Affiliated issuers | (3 | ) | ||||||
| Futures contracts | (176 | ) | ||||||
| Swap contracts | (32 | ) | ||||||
| Currency transactions | 24 | (6,359 | ) | |||||
| Net unrealized (depreciation) appreciation on: | ||||||||
| Investments in: | ||||||||
| Unaffiliated issuers | (8,661 | ) | ||||||
| Affiliated issuers | (9 | ) | ||||||
| Futures contracts | (59 | ) | ||||||
| Forward currency contracts | (223 | ) | ||||||
| Swap contracts | 88 | |||||||
| Currency translations | — | * | (8,864 | ) | ||||
| Net realized loss and unrealized depreciation | (15,223 | ) | ||||||
| Net decrease in net assets resulting from operations | $ | (13,058 | ) |
| * | Amount less than one thousand. |
Refer to the notes to financial statements.
| 12 | Capital Group Core Plus Income ETF |
Financial statements (continued)
| Statements of changes in net assets | unaudited |
| (dollars in thousands) |
| Period ended June 30, 2022* | ||||
| Operations: | ||||
| Net investment income | $ | 2,165 | ||
| Net realized loss | (6,359 | ) | ||
| Net unrealized depreciation | (8,864 | ) | ||
| Total decrease in net assets resulting from operations: | (13,058 | ) | ||
| Distributions paid or accrued to shareholders | (1,900 | ) | ||
| Net capital share transactions | 275,061 | |||
| Net assets: | ||||
| Beginning of period | — | |||
| End of period | $ | 260,103 | ||
| * | For the period February 22, 2022, commencement of operations, to June 30, 2022. |
Refer to the notes to financial statements.
| Capital Group Core Plus Income ETF | 13 |
| Notes to financial statements | unaudited |
1. Organization
Capital Group Core Plus Income ETF (the “fund”) was organized on January 12, 2021 as a Delaware statutory trust. The fund’s fiscal year ends on December 31st. The fund, operating as an exchange-traded fund, is registered under the Investment Company Act of 1940, as amended, as an open-end, nondiversified management investment company. The fund seeks to provide current income and maximum total return, consistent with preservation of capital.
2. Significant accounting policies
The fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The fund’s financial statements have been prepared to comply with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles require the fund’s investment adviser to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Subsequent events, if any, have been evaluated through the date of issuance in the preparation of the financial statements. The fund follows the significant accounting policies described in this section, as well as the valuation policies described in the next section on valuation.
Security transactions and related investment income — Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Distributions paid or accrued to shareholders — Income dividends are declared daily after the determination of the fund’s net investment income and are paid to shareholders monthly. Capital gain distributions are recorded on the ex-dividend date.
Currency translation — Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates supplied by one or more pricing vendors on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. The effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments in the fund’s statement of operations. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.
3. Valuation
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by U.S. GAAP. The net asset value per share is calculated once daily as of the close of regular trading on the New York Stock Exchange, normally 4 p.m. New York time, each day the New York Stock Exchange is open.
Methods and inputs — The fund’s investment adviser uses the following methods and inputs to establish the fair value of the fund’s assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.
Equity securities are generally valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market on which the security trades.
Fixed-income securities, including short-term securities, are generally valued at prices obtained from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.
| 14 | Capital Group Core Plus Income ETF |
| Fixed-income class | Examples of standard inputs | |
| All | Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”) | |
| Corporate bonds, notes & loans; convertible securities | Standard inputs and underlying equity of the issuer | |
| Bonds & notes of governments & government agencies | Standard inputs and interest rate volatilities | |
| Mortgage-backed; asset-backed obligations | Standard inputs and cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information |
When the fund’s investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or deemed to be not representative), fixed-income securities will be valued in good faith at the mean quoted bid and ask prices that are reasonably and timely available (or bid prices, if ask prices are not available) or at prices for securities of comparable maturity, quality and type. Some securities may be valued based on their effective maturity or average life, which may be shorter than the stated maturity.
Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are generally valued in the manner described for either equity or fixed-income securities, depending on which method is deemed most appropriate by the fund’s investment adviser. The Capital Group Central Cash Fund (“CCF”), a fund within the Capital Group Central Fund Series (“Central Funds”), is valued based upon a floating net asset value, which fluctuates with changes in the value of CCF’s portfolio securities. The underlying securities are valued based on the policies and procedures in CCF’s statement of additional information. Exchange-traded futures are generally valued at the official settlement price of the exchange or market on which such instruments are traded, as of the close of business on the day the futures are being valued. Forward currency contracts are valued based on the spot and forward exchange rates obtained from one or more pricing vendors. Interest rate swaps are generally valued by pricing vendors based on market inputs that include the index and term of index, reset frequency, payer/receiver, currency and pay frequency.
Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the fund’s investment adviser are fair valued as determined in good faith under fair valuation guidelines adopted by authority of the fund’s board of trustees as further described. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission rules and guidance, to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of each share class of the fund is determined. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.
Processes and structure — The fund’s board of trustees has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”) to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues. The Fair Valuation Committee reports any changes to the fair valuation guidelines to the board of trustees. The fund’s board and audit committee also regularly review reports that describe fair value determinations and methods.
The fund’s investment adviser has also established a Fixed-Income Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors. This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security valuation are also subject to additional internal reviews facilitated by the investment adviser’s global risk management group.
| Capital Group Core Plus Income ETF | 15 |
Classifications — The fund’s investment adviser classifies the fund’s assets and liabilities into three levels based on the inputs used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. Level 3 values are based on significant unobservable inputs that reflect the investment adviser’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following tables present the fund’s valuation levels as of June 30, 2022 (dollars in thousands):
| Investment securities | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Bonds, notes & other debt instruments: | ||||||||||||||||
| Mortgage-backed obligations | $ | — | $ | 89,951 | $ | — | $ | 89,951 | ||||||||
| U.S. Treasury bonds & notes | — | 82,444 | — | 82,444 | ||||||||||||
| Corporate bonds, notes & loans | — | 66,154 | — | 66,154 | ||||||||||||
| Asset-backed obligations | — | 15,823 | — | 15,823 | ||||||||||||
| Bonds & notes of governments & government agencies outside the U.S. | — | 4,955 | — | 4,955 | ||||||||||||
| Short-term securities | 77,797 | — | — | 77,797 | ||||||||||||
| Total | $ | 77,797 | $ | 259,327 | $ | — | $ | 337,124 | ||||||||
| Other investments* | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Unrealized appreciation on futures contracts | $ | 295 | $ | — | $ | — | $ | 295 | ||||||||
| Unrealized appreciation on open forward currency contracts | — | 2 | — | 2 | ||||||||||||
| Unrealized appreciation on centrally cleared interest rate swaps | — | 88 | — | 88 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Unrealized depreciation on futures contracts | (354 | ) | — | — | (354 | ) | ||||||||||
| Unrealized depreciation on open forward currency contracts | — | (225 | ) | — | (225 | ) | ||||||||||
| Total | $ | (59 | ) | $ | (135 | ) | $ | — | $ | (194 | ) | |||||
| * | Futures contracts, forward currency contracts and interest rate swaps are not included in the fund’s investment portfolio. |
4. Risk factors
Investing in the fund may involve certain risks including, but not limited to, those described below.
Market conditions — The prices of, and the income generated by, the securities held by the fund may decline — sometimes rapidly or unpredictably — due to various factors, including events or conditions affecting the general economy or particular industries; overall market changes; local, regional or global political, social or economic instability; governmental, governmental agency or central bank responses to economic conditions; and currency exchange rate, interest rate and commodity price fluctuations.
Economies and financial markets throughout the world are highly interconnected. Economic, financial or political events, trading and tariff arrangements, wars, terrorism, cybersecurity events, natural disasters, public health emergencies (such as the spread of infectious disease) and other circumstances in one country or region, including actions taken by governmental or quasi-governmental authorities in response to any of the foregoing, could have impacts on global economies or markets. As a result, whether or not the fund invests in securities of issuers located in or with significant exposure to the countries affected, the value and liquidity of the fund’s investments may be negatively affected by developments in other countries and regions.
Issuer risks — The prices of, and the income generated by, securities held by the fund may decline in response to various factors directly related to the issuers of such securities, including reduced demand for an issuer’s goods or services, poor management performance, major litigation, investigations or other controversies related to the issuer, changes in government regulations affecting the issuer or its competitive environment and strategic initiatives such as mergers, acquisitions or dispositions and the market response to any such initiatives.
| 16 | Capital Group Core Plus Income ETF |
Investing in debt instruments — The prices of, and the income generated by, bonds and other debt securities held by the fund may be affected by factors such as the interest rates, maturities and credit ratings of these securities.
Rising interest rates will generally cause the prices of bonds and other debt securities to fall. A general rise in interest rates may cause investors to sell debt securities on a large scale, which could also adversely affect the price and liquidity of debt securities and could also result in increased redemptions from the fund. Falling interest rates may cause an issuer to redeem, call or refinance a debt security before its stated maturity, which may result in the fund failing to recoup the full amount of its initial investment and having to reinvest the proceeds in lower yielding securities. Longer maturity debt securities generally have greater sensitivity to changes in interest rates and may be subject to greater price fluctuations than shorter maturity debt securities.
Bonds and other debt securities are also subject to credit risk, which is the possibility that the credit strength of an issuer or guarantor will weaken or be perceived to be weaker, and/or an issuer of a debt security will fail to make timely payments of principal or interest and the security will go into default. A downgrade or default affecting any of the fund’s securities could cause the value of the fund’s shares to decrease. Lower quality debt securities generally have higher rates of interest and may be subject to greater price fluctuations than higher quality debt securities. Credit risk is gauged, in part, by the credit ratings of the debt securities in which the fund invests. However, ratings are only the opinions of the rating agencies issuing them and are not guarantees as to credit quality or an evaluation of market risk. The fund’s investment adviser relies on its own credit analysts to research issuers and issues in seeking to assess credit and default risks.
Investing in lower rated debt instruments — Lower rated bonds and other lower rated debt securities generally have higher rates of interest and involve greater risk of default or price declines due to changes in the issuer’s creditworthiness than those of higher quality debt securities. The market prices of these securities may fluctuate more than the prices of higher quality debt securities and may decline significantly in periods of general economic difficulty. These risks may be increased with respect to investments in junk bonds.
Investing in mortgage-related and other asset-backed securities — Mortgage-related securities, such as mortgage-backed securities, and other asset-backed securities, include debt obligations that represent interests in pools of mortgages or other income-bearing assets, such as consumer loans or receivables. While such securities are subject to the risks associated with investments in debt instruments generally (for example, credit, extension and interest rate risks), they are also subject to other and different risks. Mortgage-backed and other asset-backed securities are subject to changes in the payment patterns of borrowers of the underlying debt, potentially increasing the volatility of the securities and the fund’s net asset value. When interest rates fall, borrowers are more likely to refinance or prepay their debt before its stated maturity. This may result in the fund having to reinvest the proceeds in lower yielding securities, effectively reducing the fund’s income. Conversely, if interest rates rise and borrowers repay their debt more slowly than expected, the time in which the mortgage-backed and other asset-backed securities are paid off could be extended, reducing the fund’s cash available for reinvestment in higher yielding securities. Mortgage-backed securities are also subject to the risk that underlying borrowers will be unable to meet their obligations and the value of property that secures the mortgages may decline in value and be insufficient, upon foreclosure, to repay the associated loans. Investments in asset-backed securities are subject to similar risks.
Investing in securities backed by the U.S. government — Securities backed by the U.S. Treasury or the full faith and credit of the U.S. government are guaranteed only as to the timely payment of interest and principal when held to maturity. Accordingly, the current market values for these securities will fluctuate with changes in interest rates and the credit rating of the U.S. government. Securities issued by government-sponsored entities and federal agencies and instrumentalities that are not backed by the full faith and credit of the U.S. government are neither issued nor guaranteed by the U.S. government.
Investing in inflation-linked bonds — The values of inflation-linked bonds generally fluctuate in response to changes in real interest rates — i.e., rates of interest after factoring in inflation. A rise in real interest rates may cause the prices of inflation-linked securities to fall, while a decline in real interest rates may cause the prices to increase. Inflation-linked bonds may experience greater losses than other debt securities with similar durations when real interest rates rise faster than nominal interest rates. There can be no assurance that the value of an inflation-linked security will be directly correlated to changes in interest rates; for example, if interest rates rise for reasons other than inflation, the increase may not be reflected in the security’s inflation measure.
Investing in inflation-linked bonds may also reduce the fund’s distributable income during periods of deflation. If prices for goods and services decline throughout the economy, the principal and income on inflation-linked securities may decline and result in losses to the fund.
| Capital Group Core Plus Income ETF | 17 |
Interest rate risk — The values and liquidity of the securities held by the fund may be affected by changing interest rates. For example, the values of these securities may decline when interest rates rise and increase when interest rates fall. Longer maturity debt securities generally have greater sensitivity to changes in interest rates and may be subject to greater price fluctuations than shorter maturity debt securities. The fund may invest in variable and floating rate securities. When the fund holds variable or floating rate securities, a decrease in market interest rates will adversely affect the income received from such securities and the net asset value of the fund’s shares. Although the values of such securities are generally less sensitive to interest rate changes than those of other debt securities, the value of variable and floating rate securities may decline if their interest rates do not rise as quickly, or as much, as market interest rates. Conversely, floating rate securities will not generally increase in value if interest rates decline. During periods of extremely low short-term interest rates, the fund may not be able to maintain a positive yield and, given the current low interest rate environment, risks associated with rising rates are currently heightened.
Investing in future delivery contracts — The fund may enter into contracts, such as to-be-announced contracts and mortgage dollar rolls, that involve the fund selling mortgage-related securities and simultaneously contracting to repurchase similar securities for delivery at a future date at a predetermined price. This can increase the fund’s market exposure, and the market price of the securities that the fund contracts to repurchase could drop below their purchase price. While the fund can preserve and generate capital through the use of such contracts by, for example, realizing the difference between the sale price and the future purchase price, the income generated by the fund may be reduced by engaging in such transactions. In addition, these transactions increase the turnover rate of the fund.
Investing outside the U.S. — Securities of issuers domiciled outside the U.S., or with significant operations or revenues outside the U.S., may lose value because of adverse political, social, economic or market developments (including social instability, regional conflicts, terrorism and war) in the countries or regions in which the issuers operate or generate revenue. These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Issuers of these securities may be more susceptible to actions of foreign governments, such as nationalization, currency blockage or the imposition of price controls or punitive taxes, each of which could adversely impact the value of these securities. Securities markets in certain countries may be more volatile and/or less liquid than those in the U.S. Investments outside the U.S. may also be subject to different accounting and auditing practices and standards and different regulatory, legal and reporting requirements, and may be more difficult to value, than those in the U.S. In addition, the value of investments outside the U.S. may be reduced by foreign taxes, including foreign withholding taxes on interest and dividends. Further, there may be increased risks of delayed settlement of securities purchased or sold by the fund. The risks of investing outside the U.S. may be heightened in connection with investments in emerging markets.
Investing in derivatives — The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional securities, such as stocks and bonds. Changes in the value of a derivative may not correlate perfectly with, and may be more sensitive to market events than, the underlying asset, rate or index, and a derivative instrument may expose the fund to losses in excess of its initial investment. Derivatives may be difficult to value, difficult for the fund to buy or sell at an opportune time or price and difficult, or even impossible, to terminate or otherwise offset. The fund’s use of derivatives may result in losses to the fund, and investing in derivatives may reduce the fund’s returns and increase the fund’s price volatility. The fund’s counterparty to a derivative transaction (including, if applicable, the fund’s clearing broker, the derivatives exchange or the clearinghouse) may be unable or unwilling to honor its financial obligations in respect of the transaction. In certain cases, the fund may be hindered or delayed in exercising remedies against or closing out derivative instruments with a counterparty, which may result in additional losses.
Investing in emerging markets — Investing in emerging markets may involve risks in addition to and greater than those generally associated with investing in the securities markets of developed countries. For instance, emerging market countries tend to have less developed political, economic and legal systems and accounting and auditing practices and standards than those in developed countries. Accordingly, the governments of these countries may be less stable and more likely to intervene in the market economy in a manner that could adversely affect the prices of securities. Information regarding issuers in emerging markets may be limited, incomplete or inaccurate, and there may be fewer rights and remedies available to the fund and its shareholders. In addition, the economies of these countries may be dependent on relatively few industries, may have limited access to capital and may be more susceptible to changes in local and global trade conditions and downturns in the world economy. Securities markets in these countries can also be relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid, and may be more difficult to value, than securities issued in countries with more developed economies and/or markets. Less certainty with respect to security valuations may lead to additional challenges and risks in calculating the fund’s net asset value. Additionally, emerging markets are more likely to experience problems with the clearing and settling of trades and the holding of securities by banks, agents and depositories that are less established than those in developed countries.
Currency — The prices of, and the income generated by, many debt securities held by the fund may also be affected by changes in relative currency values. If the U.S. dollar appreciates against foreign currencies, the value in U.S. dollars of the fund’s securities denominated in such currencies would generally fall and vice versa.
| 18 | Capital Group Core Plus Income ETF |
Portfolio turnover — The fund may engage in frequent and active trading of its portfolio securities. Higher portfolio turnover may involve correspondingly greater transaction costs in the form of dealer spreads, brokerage commissions and other transaction costs on the sale of securities and on reinvestment in other securities. The sale of portfolio securities may also result in the realization of net capital gains, which are taxable when distributed to shareholders, unless the shareholder is exempt from taxation or his or her account is tax-favored. These costs and tax effects may adversely affect the fund’s returns to shareholders. The fund’s portfolio turnover rate may vary from year to year, as well as within a year.
Market trading — The fund shares are listed for trading on an exchange and are bought and sold on the secondary market at market prices. The market prices of fund shares are expected to fluctuate, in some cases materially, in response to changes in the fund’s net asset value (“NAV”), the intraday value of the fund’s holdings, and supply and demand for the fund shares. The existence of significant market volatility, disruptions to creations and redemptions, or potential lack of an active trading market for fund shares (including through a trading halt), among other factors, may result in the shares trading (at a discount) to NAV. Buying fund shares when their market price is at a premium or selling fund shares when their market price is at a discount, may result in paying more than, or receiving less than, NAV, respectively.
Foreign securities held by the fund may be traded in markets that close at a different time than the exchange on which the fund’s shares are listed. Liquidity in those securities may be reduced after the applicable closing times. Accordingly, during the time when the fund’s exchange is open but after the applicable market closing, fixing or settlement times, bid-ask spreads on the fund’s exchange and the corresponding premium or discount to the fund’s NAV may widen.
Authorized participant concentration — Only authorized participants may engage in creation or redemption transactions directly with the fund, and none of them is obligated to do so. The fund has a limited number of institutions that may act as authorized participants. If authorized participants exit the business or are unable to or elect not to engage in creation or redemption transactions, and no other authorized participant engages in such function, fund shares may trade at a premium or discount to NAV and/or at wider intraday bid-ask spreads and possibly face trading halts or delisting.
Nondiversification — As a nondiversified fund, the fund has the ability to invest a larger percentage of its assets in the securities of a smaller number of issuers than a diversified fund. As a result, poor performance by a single issuer could adversely affect fund performance more than if the fund were invested in a larger number of issuers. The fund’s share price can be expected to fluctuate more than might be the case if the fund were more broadly diversified.
Cash transactions — The fund currently expects to effect at least part of its creations and redemptions for cash rather than in-kind securities. When the fund effects redemptions partly or wholly for cash, rather than in-kind, the fund may have to sell portfolio securities at inopportune times in order to obtain the cash needed to meet redemption orders. If the fund realizes gains on these sales, the fund generally will be required to recognize a gain it might not otherwise have recognized, or to recognize such gain sooner than would otherwise be required if it were to distribute portfolio securities in-kind. This strategy may cause shareholders to be subject to tax from distributions to which they would not otherwise be subject. The use of cash creations and redemptions may also cause the fund’s shares to trade in the market at wider bid-ask spreads or greater premiums or discounts to the fund’s NAV. As a result of such cash transactions, the fund could incur brokerage costs which, to the extent not offset by transaction fees that are payable by an authorized participant, may reduce the fund’s NAV.
Management — The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses, including models, tools and data, employed by the investment adviser in this process may be flawed or incorrect and may not produce the desired results. This could cause the fund to lose value or its investment results to lag relevant benchmarks or other funds with similar objectives.
5. Certain investment techniques
Index-linked bonds — The fund has invested in index-linked bonds, which are fixed-income securities whose principal value is periodically adjusted to a government price index. Over the life of an index-linked bond, interest is paid on the adjusted principal value. Increases or decreases in the principal value of index-linked bonds are recorded as interest income in the fund’s statement of operations.
Mortgage dollar rolls — The fund has entered into mortgage dollar roll transactions in which the fund sells a mortgage-backed security a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Mortgage dollar rolls are accounted for as purchase and sale transactions. Portfolio turnover rates excluding and including mortgage dollar rolls are presented at the end of the fund’s financial highlights table.
| Capital Group Core Plus Income ETF | 19 |
Futures contracts — The fund has entered into futures contracts, which provide for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument for a specified price, date, time and place designated at the time the contract is made. Futures contracts are used to strategically manage the fund’s interest rate sensitivity by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio.
Upon entering into futures contracts, and to maintain the fund’s open positions in futures contracts, the fund is required to deposit with a futures broker, known as a futures commission merchant (“FCM”), in a segregated account in the name of the FCM an amount of cash, U.S. government securities or other liquid securities, known as initial margin. The margin required for a particular futures contract is set by the exchange on which the contract is traded to serve as collateral, and may be significantly modified from time to time by the exchange during the term of the contract.
On a daily basis, the fund pays or receives variation margin based on the increase or decrease in the value of the futures contracts and records variation margin on futures contracts in the statement of assets and liabilities. Futures contracts may involve a risk of loss in excess of the variation margin shown on the fund’s statement of assets and liabilities. The fund records realized gains or losses at the time the futures contract is closed or expires. Net realized gains or losses and net unrealized appreciation or depreciation from futures contracts are recorded in the fund’s statement of operations. The average month-end notional amount of futures contracts while held was $77,199,000.
Forward currency contracts — The fund has entered into forward currency contracts, which represent agreements to exchange currencies on specific future dates at predetermined rates. The fund’s investment adviser uses forward currency contracts to manage the fund’s exposure to changes in exchange rates. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from possible movements in exchange rates.
On a daily basis, the fund’s investment adviser values forward currency contracts and records unrealized appreciation or depreciation for open forward currency contracts in the fund’s statement of assets and liabilities. Realized gains or losses are recorded at the time the forward currency contract is closed or offset by another contract with the same broker for the same settlement date and currency.
Closed forward currency contracts that have not reached their settlement date are included in the respective receivables or payables for closed forward currency contracts in the fund’s statement of assets and liabilities. Net realized gains or losses from closed forward currency contracts and net unrealized appreciation or depreciation from open forward currency contracts are recorded in the fund’s statement of operations. The average month-end notional amount of open forward currency contracts while held was $283,327,000.
Swap contracts — The fund has entered into swap agreements, which are two-party contracts entered into primarily by institutional investors for a specified time period. In a typical swap transaction, two parties agree to exchange the returns earned or realized from one or more underlying assets or rates of return. Swap agreements can be traded on a swap execution facility (SEF) and cleared through a central clearinghouse (cleared), traded over-the-counter (OTC) and cleared, or traded bilaterally and not cleared. Because clearing interposes a central clearinghouse as the ultimate counterparty to each participant’s swap, and margin is required to be exchanged under the rules of the clearinghouse, central clearing is intended to decrease (but not eliminate) counterparty risk relative to uncleared bilateral swaps. To the extent the fund enters into bilaterally negotiated swap transactions, the fund will enter into swap agreements only with counterparties that meet certain credit standards and subject to agreed collateralized procedures. The term of a swap can be days, months or years and certain swaps may be less liquid than others.
Upon entering into a centrally cleared swap contract, the fund is required to deposit cash, U.S. government securities or other liquid securities, which is known as initial margin. Generally, the initial margin required for a particular swap is set and held as collateral by the clearinghouse on which the contract is cleared. The amount of initial margin required may be significantly modified from time to time by the clearinghouse during the term of the contract.
On a daily basis, interest accruals related to the exchange of future payments are recorded as a receivable and payable in the fund’s statement of assets and liabilities for centrally cleared swaps and as unrealized appreciation or depreciation in the fund’s statement of assets and liabilities for bilateral swaps. For centrally cleared swaps, the fund also pays or receives a variation margin based on the increase or decrease in the value of the swaps, including accrued interest as applicable, and records variation margin in the statement of assets and liabilities. The fund records realized gains and losses on both the net accrued interest and any gain or loss recognized at the time the swap is closed or expires. Net realized gains or losses, as well as any net unrealized appreciation or depreciation, from swaps are recorded in the fund’s statement of operations. Swap agreements can take different forms. The fund has entered into the following types of swap agreements:
| 20 | Capital Group Core Plus Income ETF |
Interest rate swaps — The fund has entered into interest rate swaps, which seek to manage the interest rate sensitivity of the fund by increasing or decreasing the duration of the fund or a portion of the fund’s portfolio. An interest rate swap is an agreement between two parties to exchange or swap payments based on changes in an interest rate or rates. Typically, one interest rate is fixed and the other is variable based on a designated short-term interest rate such as the Secured Overnight Financing Rate (SOFR), prime rate or other benchmark. In other types of interest rate swaps, known as basis swaps, the parties agree to swap variable interest rates based on different designated short-term interest rates. Interest rate swaps generally do not involve the delivery of securities or other principal amounts. Rather, cash payments are exchanged by the parties based on the application of the designated interest rates to a notional amount, which is the predetermined dollar principal of the trade upon which payment obligations are computed. Accordingly, the fund’s current obligation or right under the swap agreement is generally equal to the net amount to be paid or received under the swap agreement based on the relative value of the position held by each party. The average month-end notional amount of interest rate swaps while held was $5,700,000.
The following tables identify the location and fair value amounts on the fund’s statement of assets and liabilities and the effect on the fund’s statement of operations resulting from the fund’s use of futures contracts, forward currency contracts and interest rate swaps as of, or for the period ended, June 30, 2022 (dollars in thousands):
| Assets | Liabilities | |||||||||||||
| Contracts | Risk type | Location on statement of assets and liabilities | Value | Location on statement of assets and liabilities | Value | |||||||||
| Futures | Interest | Unrealized appreciation* | $ | 295 | Unrealized depreciation* | $ | (354 | ) | ||||||
| Forward currency | Currency | Unrealized appreciation on open forward currency contracts | 2 | Unrealized depreciation on open forward currency contracts | (225 | ) | ||||||||
| Swap | Interest | Unrealized appreciation* | 88 | Unrealized depreciation* | — | |||||||||
| $ | 385 | $ | (579 | ) | ||||||||||
| Net realized (loss) gain | Net unrealized (depreciation) appreciation | |||||||||||||
| Contracts | Risk type | Location on statement of operations | Value | Location on statement of operations | Value | |||||||||
| Futures | Interest | Net realized loss on futures contracts | $ | (176 | ) | Net unrealized depreciation on futures contracts | $ | (59 | ) | |||||
| Forward currency | Currency | Net realized gain on forward currency contracts | — | Net unrealized depreciation on forward currency contracts | (223 | ) | ||||||||
| Swap | Interest | Net realized loss on swap contracts | (32 | ) | Net unrealized appreciation on swap contracts | 88 | ||||||||
| $ | (208 | ) | $ | (194 | ) | |||||||||
| * | Includes cumulative appreciation/depreciation on futures contracts and centrally cleared interest rate swaps as reported in the applicable tables following the fund’s investment portfolio. Only current day’s variation margin is reported within the fund’s statement of assets and liabilities. |
Collateral — The fund receives or pledges highly liquid assets, such as cash or U.S. government securities, as collateral due to its use of futures contracts, forward currency contracts, interest rate swaps and future delivery contracts. For futures contracts and interest rate swaps, the fund pledges collateral for initial and variation margin by contract. For forward currency contracts, the fund either receives or pledges collateral based on the net gain or loss on unsettled contracts by counterparty. For future delivery contracts, the fund either receives or pledges collateral based on the net gain or loss on unsettled contracts by certain counterparties. The purpose of the collateral is to cover potential losses that could occur in the event that either party cannot meet its contractual obligation. Non-cash collateral pledged by the fund, if any, is disclosed in the fund’s investment portfolio, and cash collateral pledged by the fund, if any, is held in a segregated account with the fund’s custodian, which is reflected as pledged cash collateral in the fund’s statement of assets and liabilities.
Rights of offset — The fund has entered into enforceable master netting agreements with certain counterparties for forward currency contracts, where on any date amounts payable by each party to the other (in the same currency with respect to the same transaction) may be closed or offset by each party’s payment obligation. If an early termination date occurs under these agreements following an event of default or termination event, all obligations of each party to its counterparty are settled net through a single payment in a single currency (“close-out netting”). For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to these master netting arrangements in the statement of assets and liabilities.
| Capital Group Core Plus Income ETF | 21 |
The following table presents the fund’s forward currency contracts by counterparty that are subject to master netting agreements but that are not offset in the fund’s statement of assets and liabilities. The net amount column shows the impact of offsetting on the fund’s statement of assets and liabilities as of June 30, 2022, if close-out netting was exercised (dollars in thousands):
| Gross amounts recognized in the | Gross amounts not offset in the statement of assets and liabilities and subject to a master netting agreement | |||||||||||||||||||
| Counterparty | statement of assets and liabilities | Available to offset | Non-cash collateral* | Cash collateral* | Net amount | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Bank of America | $ | 2 | $ | — | $ | — | $ | — | $ | 2 | ||||||||||
| Liabilities: | ||||||||||||||||||||
| BNP Paribas | $ | 210 | $ | — | $ | — | $ | — | $ | 210 | ||||||||||
| HSBC Bank | 6 | — | — | — | 6 | |||||||||||||||
| Standard Chartered Bank | 9 | — | — | — | 9 | |||||||||||||||
| Total | $ | 225 | $ | — | $ | — | $ | — | $ | 225 | ||||||||||
| * | Collateral is shown on a settlement basis. |
6. Taxation and distributions
Federal income taxation — The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.
As of and during the period ended June 30, 2022, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any significant interest or penalties.
The fund’s tax returns are generally not subject to examination by federal, state and, if applicable, non-U.S. tax authorities after the expiration of each jurisdiction’s statute of limitations, which is typically three years after the date of filing but can be extended in certain jurisdictions.
Non-U.S. taxation — Dividend and interest income are recorded net of non-U.S. taxes paid. The fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. These reclaims are recorded when the amount is known and there are no significant uncertainties on collectability. Gains realized by the fund on the sale of securities in certain countries, if any, may be subject to non-U.S. taxes. If applicable, the fund records an estimated deferred tax liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.
Distributions — Distributions determined on a tax basis may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to different treatment for items such as currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; cost of investments sold; paydowns on fixed-income securities; net capital losses and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.
As of June 30, 2022, the tax basis unrealized appreciation (depreciation) and cost of investments were as follows (dollars in thousands):
| Gross unrealized appreciation on investments | $ | 1,425 | ||
| Gross unrealized depreciation on investments | (10,253 | ) | ||
| Net unrealized depreciation on investments | (8,828 | ) | ||
| Cost of investments | 345,759 |
| 22 | Capital Group Core Plus Income ETF |
Distributions paid by the fund during the period February 22, 2022, commencement of operations, to June 30, 2022, were characterized for tax purposes as follows (dollars in thousands):
| Ordinary income | Long-term capital gains | Total distributions paid | ||||||||
| $ | 1,900 | $ | — | $ | 1,900 | |||||
7. Fees and transactions
CRMC, the fund’s investment adviser, is the parent company of American Funds Distributors, Inc.® (“AFD”), the principal underwriter of the fund’s shares. CRMC and AFD are considered related parties to the fund.
Investment advisory services – The fund has an investment advisory and service agreement with CRMC that provides for monthly fees, accrued daily. These fees are based on an annual rate of 0.34% of daily net assets. Under the terms of the agreement, in addition to providing investment advisory services, the investment adviser and its affiliates provide certain administrative services to help assist third parties providing non-distribution services to fund shareholders. These services include providing in-depth information on the fund and market developments that impact fund investments. The agreement provides that the investment adviser will pay all ordinary operating expenses of the fund other than management fees, interest expenses, taxes, acquired fund fees and expenses, costs of holding shareholder meetings, legal fees and expenses relating to arbitration or litigation, payments under the fund’s plan of distribution (if any) and other non-routine or extraordinary expenses. Additionally, the fund will be responsible for its non-operating expenses, including brokerage commissions and fees and expenses associated with the fund’s securities lending program, if applicable.
Transfer agency and administration services – The fund has entered into a transfer agency and service agreement and an administration agreement with State Street Bank and Trust Company (“State Street”). Under the terms of the transfer agency agreement, State Street (or an agent, including an affiliate) acts as transfer agent and dividend disbursing agent for the fund. Under the terms of the administration agreement, State Street provides necessary administrative, legal, tax and accounting, regulatory and financial reporting services for the maintenance and operations of the fund. The investment adviser bears the costs of services under these agreements.
Affiliated officers and trustees – Officers and certain trustees of the fund are or may be considered to be affiliated with CRMC and AFD. No affiliated officers or trustees will receive any compensation directly from any of the funds.
Investment in CCF — The fund holds shares of CCF, an institutional prime money market fund managed by CRMC. CCF invests in high-quality, short-term money market instruments. CCF is used as the primary investment vehicle for the fund’s short-term instruments. CCF shares are only available for purchase by CRMC, its affiliates, and other funds managed by CRMC or its affiliates, and are not available to the public. CRMC does not receive an investment advisory services fee from CCF.
Security transactions with related funds — The fund purchased investment securities from, and sold investment securities to, other funds managed by CRMC (or funds managed by certain affiliates of CRMC) under procedures adopted by the fund’s board of trustees. The funds involved in such transactions are considered related by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers. Each transaction was executed at the current market price of the security and no brokerage commissions or fees were paid in accordance with Rule 17a-7 of the 1940 Act. The fund did not engage in any such purchase or sale transactions with any related funds during the period ended June 30, 2022.
Interfund lending — Pursuant to an exemptive order issued by the SEC, the fund, along with other CRMC-managed funds (or funds managed by certain affiliates of CRMC), may participate in an interfund lending program. The program provides an alternate credit facility that permits the funds to lend or borrow cash for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. The fund did not lend or borrow cash through the interfund lending program at any time during the period ended June 30, 2022.
8. Indemnifications
The fund’s organizational documents provide board members and officers with indemnification against certain liabilities or expenses in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown since it is dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote. Insurance policies are also available to the fund’s board members and officers.
| Capital Group Core Plus Income ETF | 23 |
9. Capital share transactions
The fund issues and redeems shares at NAV only with certain authorized participants in large increments known as creation units. Purchases of creation units are made by tendering a basket of designated securities and cash to the fund, and redemption proceeds are paid with a basket of securities from the fund’s portfolio with a balancing cash component to equate the market value of the basket of securities delivered or redeemed to the NAV per creation unit on the transaction date. The fund may issue creation units to authorized participants in advance of the delivery and settlement of all or a portion of the designated securities. When this occurs, the authorized participant provides cash collateral in an amount equal to 105% of the daily market to market value of the securities that have not yet been delivered to the fund. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery. Realized gains or losses resulting from redemptions of shares in-kind are reflected separately in the fund’s statement of operations.
The fund’s shares are available in smaller increments to investors in the secondary market at market prices and may be subject to commissions. Authorized participants pay a transaction fee to the shareholder servicing agent when purchasing and redeeming creation units of the fund. The transaction fee is used to defray the costs associated with the issuance and redemption of creation units. In addition, for cash creation unit transactions, a variable fee for creation transactions and redemption transactions may be charged to the authorized participant to cover certain brokerage, tax, foreign exchange, execution, market impact and other costs and expenses related to the execution of trades. Variable fees, if any, are included in capital share transactions in the fund’s statement of changes in net assets.
Capital share transactions in the fund were as follows (dollars and shares in thousands):
| Sales | Reinvestments of distributions | Repurchases | Net increase | |||||||||||||||||||||||||||||
| Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | |||||||||||||||||||||||||
| For the period February 22, 2022*, through June 30, 2022 | ||||||||||||||||||||||||||||||||
| $ | 275,061 | 11,224 | $ | — | — | $ | — | — | $ | 275,061 | 11,224 | |||||||||||||||||||||
| * | Commencement of operations. |
10. Investment transactions
The fund engaged in purchases and sales of investment securities, excluding in-kind transactions, short-term securities and U.S. government obligations, if any, of $57,740,000 and $3,657,000, respectively, during the period February 22, 2022, commencement of operations, to June 30, 2022.
The fund received securities in-kind of $199,574,000 from the authorized participants to support creation transactions during the period February 22, 2022, commencement of operations, to June 30, 2022. The fund did not deliver any securities to support redemption transactions.
| 24 | Capital Group Core Plus Income ETF |
Financial highlights
| Loss from investment operations1 | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||
| Period ended | Net asset value, beginning of period | Net investment income | Net losses on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Distributions (from capital gains) | Total dividends and distributions | Net asset value, end of period | Total return2 | Net assets, end of period (in millions) | Ratio of expenses to average net assets2,3 | Ratio of net income to average net assets2 | ||||||||||||||||||||||||||||||||||||
| 6/30/20224,5,6 | $ | 25.30 | $ | .31 | $ | (2.21 | ) | $ | (1.90 | ) | $ | (.23 | ) | $ | — | $ | (.23 | ) | $ | 23.17 | (7.55 | )% | $ | 260 | .12 | % | 1.31 | % | ||||||||||||||||||||
| Portfolio turnover rate7,8 | Period ended June 30, 20222,4,5,6 | |
| Excluding mortgage dollar roll transactions | 121% | |
| Including mortgage dollar roll transactions | 213% |
| 1 | Based on average shares outstanding. | |
| 2 | Not annualized. | |
| 3 | Ratios do not include expenses of any Central Funds. The fund indirectly bears its proportionate share of the expenses of any Central Funds. | |
| 4 | Based on operations for a period that is less than a full year. | |
| 5 | For the period February 22, 2022, commencement of operations, through June 30, 2022. | |
| 6 | Unaudited. | |
| 7 | Rates do not include each fund’s portfolio activity with respect to any Central Funds. | |
| 8 | Refer to Note 5 for more information on mortgage dollar rolls. |
Refer to the notes to financial statements.
| Capital Group Core Plus Income ETF | 25 |
| Expense example | unaudited |
As a fund shareholder, you incur ongoing costs, including investment advisory services fees and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period.
Actual expenses:
The first line in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled “Expenses paid during period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes:
The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Notes:
Note that the expenses shown in the tables on the following pages are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the tables is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning account value | Ending account value 6/30/2022 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
| Actual return | $ | 1,000.00 | $ | 924.50 | $ | 1.15 | .34 | % | ||||||||
| Assumed 5% return | 1,000.00 | 1,023.11 | 1.71 | .34 | ||||||||||||
| * | The period for the “annualized expense ratio” and “actual return” line is based on the number of days from February 22, 2022, commencement of operations, through June 30, 2022, and accordingly, is not representative of a full period. The “assumed 5% return” line is based on 181 days. |
| 26 | Capital Group Core Plus Income ETF |
Approval of Investment Advisory and Service Agreement
The fund’s board, including a majority of its independent board members, has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an initial term through July 31, 2023. The board determined in the exercise of their business judgment that the fund’s contractual fee rate was fair and reasonable in relation to the services provided, and that approving the agreement was in the best interests of the fund and its shareholders.
In reaching this decision, the board members took into account information prepared specifically in connection with their review of the agreement and information otherwise provided in the meeting material, as well as information previously provided to them in their capacity as board members of other investment companies managed by CRMC, and they were advised by their independent counsel with respect to the matters considered. They considered the following factors, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor, and each board member did not necessarily attribute the same weight to each factor.
1. Nature, extent and quality of services
The board considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of CRMC and the Capital Group organization; the resources and systems CRMC devotes to investment management (the manner in which the fund’s assets will be managed, including liquidity management), financial, investment operations, compliance, trading, proxy voting, and other services; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board also considered the nature, extent and quality of administrative services to be provided by CRMC to the fund under the agreement and other agreements. The board considered the risks assumed by CRMC in providing services to the fund, including operational, business, financial, reputational, regulatory and litigation risks. The board concluded that the nature, extent and quality of the services to be provided by CRMC should benefit the fund and its shareholders.
2. Investment results
The board considered the manner in which CRMC proposed to manage the fund in light of its objective and strategy. They also considered the proposed investment policies and restrictions on the fund, and CRMC’s experience in managing similar strategies. On the basis of this evaluation and the board’s plan to undertake ongoing review of investment operations and results, the board concluded that CRMC’s management should benefit the fund and its shareholders. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results and related benchmarks.
3. Advisory fees and total expenses
The board reviewed the proposed unitary fee structure and considered that CRMC would be, with certain exceptions, responsible for the operating expenses of the fund. The board considered the contractual fee rate that will be paid by the fund to CRMC and compared the estimated expense ratio of the fund to the expense ratios of other relevant funds. The board concluded that the proposed contractual fee rate was fair and reasonable in relation to the services that CRMC proposed to provide, as well as in relation to the risks assumed by the adviser in sponsoring and managing the fund, and that the fund’s shareholders would likely receive reasonable value in return for the fees paid to CRMC by the fund.
| Capital Group Core Plus Income ETF | 27 |
4. Ancillary benefits
The board considered a variety of other benefits that CRMC and its affiliates could receive as a result of CRMC’s proposed relationship with the fund and other funds it sponsors, including fees for administrative services and possible ancillary benefits to CRMC and its institutional management affiliates in managing other investment vehicles. The board considered CRMC’s portfolio trading practices, noting that, since 2019, CRMC has borne the cost of third-party research. The board also noted that CRMC benefited from the use of commissions from portfolio transactions made on behalf of the fund to facilitate payments to certain broker-dealers for research to comply with regulatory requirements, with all such amounts reimbursed to the fund by CRMC. The board took these ancillary benefits into account in evaluating the reasonableness of the fees payable to CRMC by the fund under the agreement.
5. Adviser financial information
The board considered CRMC’s commitment to providing to the Fund the necessary resources, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. The board noted the competitiveness and cyclicality of both the registered fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. The board further considered that shareholders would benefit from the unitary fee structure because expenses would be limited even when the fund was new and not achieving economies of scale. The board also considered the fact that increases in assets would not lead to fee decreases, even if economies of scale are achieved, because the unitary fee structure does not contain breakpoints, and that they would have the opportunity to further review the appropriateness of the fees payable to CRMC under the agreement experienced in the future. The board concluded that the fund’s proposed contractual fee rate reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.
| 28 | Capital Group Core Plus Income ETF |
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| Capital Group Core Plus Income ETF | 29 |
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| 30 | Capital Group Core Plus Income ETF |
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| Capital Group Core Plus Income ETF | 31 |
Office of the fund
6455 Irvine Center Drive
Irvine, CA 92618-4518
Investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
Transfer agent for shareholder accounts
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111-2900
Custodian of assets
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111-2900
Counsel
Dechert LLP
One Bush Street, Suite 1600
San Francisco, CA 94104-4446
Independent registered public accounting firm
PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017-3874
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
| 32 | Capital Group Core Plus Income ETF |
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at (800) 421-4225 or visit the Capital Group website at capitalgroup.com.
“Proxy Voting Procedures and Principles” — which describes our procedures and principles for voting portfolio securities — is available on our American Funds website or upon request by calling AFS. Each fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on our website.
Capital Group Core Plus Income ETF
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Past results are not predictive of results in future periods.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. The expense ratio is as of the fund’s prospectus available at the time of publication. The expense ratio is estimated.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional cash securities, such as stocks and bonds. Higher yielding, higher risk bonds can fluctuate in price more than investment-grade bonds, so investors should maintain a long-term perspective.
ETF market price returns since inception are calculated using NAV for the period until market price became available (generally a few days after inception).
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
American Funds Distributors, Inc., member FINRA.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
ITEM 2 – Code of Ethics
Not applicable for filing of semi-annual reports to shareholders.
ITEM 3 – Audit Committee Financial Expert
Not applicable for filing of semi-annual reports to shareholders.
ITEM 4 – Principal Accountant Fees and Services
Not applicable for filing of semi-annual reports to shareholders.
ITEM 5 – Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 – Schedule of Investments
Not applicable, insofar as the schedule is included as part of the report to shareholders filed under Item 1 of this Form.
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 – Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of trustees since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of trustees. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating and governance committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating and governance committee.
ITEM 11 – Controls and Procedures
| (a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
| (b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s semi-annual period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
|
ITEM 12 – Exhibits
| (a)(1) | Not applicable for filing of semi-annual reports to shareholders. |
| (a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CAPITAL GROUP CORE PLUS INCOME ETF | |
| By __/s/ Walter R. Burkley____________________ | |
Walter R. Burkley, Principal Executive Officer | |
| Date: August 31, 2022 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By __/s/ Walter R. Burkley_________________ |
Walter R. Burkley, Principal Executive Officer |
| Date: August 31, 2022 |
| By ___/s/ Troy S. Tanner __________ |
Troy S. Tanner, Treasurer and Principal Financial Officer |
| Date: August 31, 2022 |