Fees and Expenses
The
following table describes the fees and expenses that you will incur if you own shares of the Fund.
You will also incur usual and customary brokerage
commissions when buying or selling shares of the Fund, which are not reflected in the example that follows:
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Annual Fund Operating Expenses
(expenses that you
pay each year as a
percentage of the value of your investment)
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Management
Fee
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Other
Expenses(1)
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Total
Annual
Fund
Operating
Expenses
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Fee Waivers
and Expense
Reimbursement(2)
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Total
Annual Fund
Operating
Expenses
After Fee
Waivers and
Expense
Reimbursement
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0.65%
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0.54%
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1.19%
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0.54%
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0.65%
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(1)
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Pursuant to the Investment Advisory Agreement between DBX Advisors LLC (the “Adviser”) and DBX ETF Trust (the “Trust”), the Adviser is responsible for
substantially all expenses of the Fund, except for the fee payments under the Investment Advisory Agreement, interest expense, taxes, brokerage expenses, future distribution fees or expenses, litigation expenses and other extraordinary expenses. The
Fund also bears the cost of compensation paid to the Trust’s non-interested trustees (the “Independent Trustees”) in respect of the Independent Trustees’ service to the Fund (“Independent Trustee Fees”).
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*
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Prior to January 31, 2013, the Fund’s name was “db-X MSCI Emerging Markets Currency-Hedged Equity Fund.”
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(2)
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Effective as of the date of this prospectus, the Adviser has contractually agreed through September 30, 2013 to waive fees and/or reimburse the Fund’s expenses in order
to limit the Fund’s net annual operating expenses to 0.65% of the Fund’s average daily net assets, except for interest expense, taxes, brokerage expenses, distribution fees or expenses, litigation expenses and other extraordinary expenses
(the “Expense Cap”). In accordance with and as required by the Expense Cap, the Adviser will reimburse the Fund for the Independent Trustee Fees. The Expense Cap will remain in effect until at least September 30, 2013 and may only be
terminated with the consent of the Trust’s Board (and may not be terminated by the Adviser) prior to that time. The fee table reflects the effect of the Expense Cap.
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Example.
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds.
This example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your shares at the end of those periods. The example also assumes that your investment has a 5% return
each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1
Year
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3
Years
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5
Years
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10
Years
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$67
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$327
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$608
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$1,408
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Portfolio Turnover.
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns
over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 19% of the average value of its portfolio.
Principal Investment Strategies
The Underlying Index is designed to provide exposure to equity securities in the global emerging markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and selected
emerging market currencies. As of August 31, 2012, the Underlying Index consisted of issuers from the following 21 emerging market countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, South Korea, Malaysia,
Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. As of August 31, 2012, the MSCI EM US Dollar Hedged Index consisted of 820 securities with an average market capitalization of approximately $4.2 billion
and a minimum market capitalization
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of approximately $300 million. The Underlying Index hedges each foreign currency in the Underlying Index to U.S. dollars by selling the applicable foreign currency forward at the one-month
forward rate published by WM/Reuters.
For U.S. investors, international equity investments include two components of return. The first is the return
attributable to stock prices in the non-U.S. market or markets in which an investment is made. The second is the return attributable to the value of non-U.S. currencies in these markets relative to the U.S. dollar. The Underlying Index and the Fund
seek to track the performance of equity securities in these emerging markets that is attributable solely to stock prices.
The Fund, using a
“passive” or indexing investment approach, attempts to approximate the investment performance of the Underlying Index. The Adviser and/or the Sub-Adviser expect that, over time, the correlation between the Fund’s performance and that
of the Underlying Index before fees and expenses will be 95% or better. A figure of 100% would indicate perfect correlation.
The Adviser and/or
Sub-Adviser use a representative sampling indexing strategy in seeking to achieve the Fund’s investment
objective. “Representative sampling” is an indexing strategy that involves investing in a representative sample of securities that collectively has an investment profile similar to the
Underlying Index. The securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield)
and liquidity measures similar to those of the Underlying Index. The Fund may or may not hold all of the securities in the Underlying Index. The Fund intends to enter into forward currency contracts designed to offset the Fund’s exposure to
non-U.S. currencies. A forward currency contract is a contract between two parties to buy or sell a specific currency in the future at an agreed-upon rate. The amount of forward contracts in the Fund is based on the aggregate exposure of the Fund
and Underlying Index to each non-U.S. currency. While this approach is designed to minimize the impact of currency fluctuations on Fund returns, this does not necessarily eliminate exposure to all currency fluctuations. The return of the forward
currency contracts may not perfectly offset the actual fluctuations of non-U.S. currencies relative to the U.S. dollar.
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The Fund will normally invest at least 80% of its net assets, plus the amount of any borrowings for investment
purposes, in the equity securities of issuers from emerging markets countries and in instruments designed to hedge against the Fund’s exposure to non-U.S. currencies. In addition, the Fund will invest at least 80% of its total assets in
instruments that comprise the Underlying Index. The Fund may also invest in depositary receipts in respect of equity securities that comprise the Underlying Index to seek performance that corresponds to the Underlying Index. Investments in such
depositary receipts will count towards the 80% investment policy discussed above with respect to instruments that comprise the Underlying Index.
Industry Concentration Policy.
The Fund will concentrate its investments (
i.e
., hold 25% or more of its total assets) in a particular industry or
group of industries to the extent that its Underlying Index is concentrated.
Summary of Principal Risks
As with any investment, you could lose all or part of your investment in the Fund, and the Fund’s performance could trail that of other investments. The Fund
is subject to the principal risks noted below, any of which may adversely affect the Fund’s
net asset value (“NAV”), trading price, yield, total return and ability to meet its investment objective, as well as numerous other risks that are described in greater detail in the
section of the Prospectus entitled “Further Discussion of Principal Risks” and in the Statement of Additional Information (“SAI”).
Non-U.S. and Emerging Market Securities Risk.
The Fund’s investments in non-U.S. and emerging markets may be subject to a greater risk of loss
than investments in developed markets. Such risks may include:
(i) greater market volatility, (ii) lower trading volume, (iii) political
and economic instability, (iv) high levels of inflation, deflation or currency devaluation, (v) greater social, political and economic uncertainty, (vi) greater risk of market shut down, (vii) higher transactional and custody
costs (viii) taxation by foreign governments, (ix) decreased market liquidity, (x) various administrative difficulties, such as delays in clearing and settling portfolio transactions, (xi) more governmental limitations on foreign
investments and limitations on repatriation of invested capital than those typically found in a developed market, and (xii) the risk that companies may be held to lower disclosure, corporate governance, auditing and
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financial reporting standards than companies in more developed countries. Because the Fund will invest in securities denominated in foreign currencies and the income received by the Fund will
generally be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return. Each of these factors can make investments in the Fund more volatile and potentially less liquid than other types of investments. In
addition, the Fund may invest in depositary receipts which involve similar risks to those associated with investments in foreign securities.
Currency Risk.
The Fund enters into forward currency contracts to attempt to minimize the impact of changes in the value of the non-U.S. currencies
included in the Underlying Index against the U.S. dollar. These contracts may not be successful. Changes in currency exchange rates and the relative value of non-U.S. currencies may affect the value of the Fund’s investment and the value of
your Fund shares. To the extent the Fund’s forward currency contracts are not successful in hedging against such changes, the U.S. dollar value of your investment in the Fund may go down if the value of the local currency of the non-U.S.
markets in which the Fund invests
depreciates against the U.S. dollar. Furthermore, because no changes in the currency weights in the Underlying Index are made during the month to account for changes in the Underlying Index due
to price movement of securities, corporate events, additions, deletions or any other changes, changes in the value of the non-U.S. currencies included in the Underlying Index against the U.S. dollar during the month may affect the value of the
Fund’s investment. Currency exchange rates can be very volatile and can change quickly and unpredictably. Therefore, the value of an investment in the Fund may also go up or down quickly and unpredictably and investors may lose money.
Forward Currency Contracts Risk.
The Fund invests in forward currency contracts. A forward currency contract is a negotiated agreement
between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Forward
currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. Hedging the Fund’s
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currency risks involves the risk of mismatching the Fund’s objectives under a forward contract with the value of securities denominated in a particular currency. Furthermore, such
transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in
which the Fund’s securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts.
Equity Securities Risk.
An investment in the Fund involves risks similar to those of investing in any fund of equity securities, such as market
fluctuations, changes in interest rates and perceived trends in stock prices. Equity securities are subject to volatile changes in value and their values may be more volatile than other asset classes.
Financial Services Sector Risk.
The Fund invests a significant portion of its assets in securities of issuers in the financial services sector. The
financial services industries are subject to extensive government regulation, can be subject to
relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by availability and cost of capital funds, changes in interest rates,
the rate of corporate and consumer debt defaults, and price competition. In addition, the deterioration of the credit markets since late 2007 generally has caused an adverse impact in a broad range of markets, including U.S. and international credit
and interbank money markets generally, thereby affecting a wide range of financial institutions and markets. In particular, events in the financial sector since late 2008 have resulted, and may continue to result, in an unusually high degree of
volatility in the financial markets, both domestic and foreign. This situation has created instability in the financial markets and caused certain financial services companies to incur large losses. Numerous financial services companies have
experienced substantial declines in the valuations of their assets, taken action to raise capital (such as the issuance of debt or equity securities), or even ceased operations. These actions have caused the securities of many financial services
companies to experience a dramatic decline in value. Moreover, certain financial companies have
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avoided collapse due to intervention by the U.S. or foreign regulatory authorities, but such interventions have often not averted a substantial decline in the value of such companies’ common
stock. Issuers that have exposure to the real estate, mortgage and credit markets have been particularly affected by the foregoing events
and the
general market turmoil, and it is uncertain whether or for how long these conditions will continue.
Market Risk.
The prices of the
securities in the Fund are subject to the risks associated with investing in equity securities, including general economic conditions and sudden and unpredictable drops in value. The Fund’s NAV and market price, like security prices generally,
will fluctuate within a wide range in response to these and other factors.
Passive Investment Risk.
The Fund is managed with a passive
investment strategy, attempting to track the performance of an unmanaged index of securities. This differs from an actively managed fund, which typically seeks to outperform a benchmark index. As a result, the Fund may hold constituent securities of
the Underlying Index regardless of the current or projected performance of a specific security or a particular
industry or market sector. Maintaining investments in securities regardless of market conditions or the performance of individual securities could cause the Fund’s return to be lower than if
the Fund employed an active strategy.
Tracking Error Risk.
The performance of the Fund may diverge from that of its Underlying Index due
to operating expenses, transaction costs, cash flows and operational inefficiencies. In addition, the Fund’s use of a representative sampling approach may cause the Fund to not be as well correlated with the return of the Underlying Index as
would be the case if the Fund purchased all of the securities in the Underlying Index in the proportions represented in the Underlying Index. Because the Fund bears the costs and risks associated with buying and selling securities while such costs
and risks are not factored into the return of the Underlying Index, the Fund’s return may deviate significantly from the return of the Underlying Index.
Cash Redemption Risk.
Because the Fund invests a portion of its assets in foreign currency forward contracts, the Fund may pay out a portion of its redemption proceeds in cash rather than through the
in-kind delivery of portfolio securities.
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The Fund may be required to unwind such contracts or sell portfolio securities in order to obtain the cash needed to distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have incurred if it had made a redemption in-kind. As a result the Fund may pay out higher annual capital gains distributions than if the in-kind redemption process was used.
Valuation Risk.
The value of the securities in the Fund’s portfolio may change on days when shareholders will not be able to purchase or sell
the Fund’s shares.
Non-Diversification Risk.
The Fund is non-diversified and may invest a large percentage of its assets in
securities issued by or representing a small number of issuers. As a result, the Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers than a fund that invests more
widely. This may increase the Fund’s volatility and cause the performance of a relatively smaller number of issuers to have a greater impact on the Fund’s performance.
Concentration Risk.
To the extent that the Fund’s investments are concentrated in
a particular industry, the Fund will be susceptible to loss due to adverse occurrences affecting that industry.
Geographic Investment Risk.
As of August 31, 2012, a significant percentage of the Underlying Index is comprised of securities of issuers from China and South Korea. To the extent the Index is
significantly comprised of securities of issuers from a single country, and thus the Fund invests a significant portion of its assets in the securities of such country (including China and South Korea), the Fund would be more likely to be impacted
by events or conditions affecting those countries. For example, political and economic conditions and changes in regulatory, tax or economic policy in a country could significantly affect the market in that country and in surrounding or related
countries and have a negative impact on the Fund’s performance.
Performance Information
As of the date of the Prospectus, the Fund has been in operation for less than one full calendar year and therefore does not report its performance information.
Once available, the Fund’s performance information will be accessible on the Fund’s website at www.dbxus.com and will provide some indication of
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the risks of investing in the Fund by showing changes in the Fund’s performance and by showing how the Fund’s returns compare with those of a broad measure of market performance.
Management
Investment Adviser.
DBX Advisors LLC.
Sub-Adviser.
TDAM USA Inc.
Portfolio Managers.
Vishal Bhatia and Dino Bourdos, each a Portfolio Manager, are primarily responsible for the day-to-day
management of the Fund. Each Portfolio Manager functions as a member of a portfolio manager team. Messrs. Bhatia and Bourdos have been Portfolio Managers of the Fund since the Fund’s inception.
Payment to Broker-Dealers and Other Financial Intermediaries.
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Adviser or other related companies may pay the
intermediary for marketing activities and presentations, educational training programs, the support of technology platforms and/or reporting systems or other services related to the sale or promotion of the Fund. These payments may create a conflict
of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
For important information about the purchase and sale of Fund shares and tax information, please turn to “Summary Information about Purchases and Sales of
Fund Shares and Taxes” on page 47 of this Prospectus.
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