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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0.45%
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Other Expenses(1)
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0.07%
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Total Annual Fund Operating Expenses
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0.52%
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Fee Waivers and Expense Reimbursement(2)
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0.07%
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Total Annual Operating Expenses After Fee Waivers and Expense Reimbursement
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0.45%
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(1)
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Other expenses are based on estimated amounts for the Fund’s fiscal year ending May 31, 2014.
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(2)
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Effective as of the date of this Prospectus, the Adviser has contractually agreed through March 25, 2014 to waive fees and/or reimburse the Fund’s expenses in order to limit
the Fund’s net annual operating expenses to 0.45% 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”). The impact of the Expense Cap is that, in accordance with and as required thereunder, the Adviser will reimburse the Fund for 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”). The Expense Cap will remain in effect until at least March 25, 2014 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.
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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:
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.
Principal Investment Strategies
The Underlying Index is designed to track the price movements in shares of companies whose main business operations are in the regulated utilities sector. A company is considered to be in the regulated utilities
sector if its ancillary, non-utility businesses
and/or unregulated utilities business does not represent more than 25% of the company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) in any year of the
previous three years (though this period may not apply to companies which have sold or purchased non-utility or unregulated utility businesses during that time). The Underlying Index contains securities of issuers of large, medium or small market
capitalization in the U.S. or other developed markets (with the exception of Japan) which meet certain market capitalization and liquidity requirements. As of March 31, 2013, the Underlying Index consisted of 61 securities with an average
market capitalization of approximately $9.0 billion and a minimum market capitalization of approximately $933.5 million and contained issuers from the following seven developed market countries: Australia, Belgium, Canada, Italy, Spain, the United
Kingdom and the United States. The Underlying Index is a total return index, which tracks capital gains and assumes that any cash distributions are reinvested back into the Underlying Index.
The Fund, using a “passive” or indexing investment approach, attempts to approximate the investment performance of the Underlying Index. The Adviser and/or Sub-Adviser expect that, over time, the
correlation between the Fund’s performance and that of
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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 expect to use a “replication” strategy, in which the Fund will hold all of the securities in the Underlying Index. However, if the Adviser and/or Sub-Adviser deem it
necessary or advisable, they may instead 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. In such a case, the securities selected would be 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 will invest at least 80% of its total assets (but typically far more) in instruments that comprise the Underlying Index. The Fund may also invest in depositary receipts in respect of equity securities that
comprise the applicable Underlying Index to seek performance that corresponds to the Fund’s Underlying Index. Investments in such depositary receipts will count towards the
Fund’s 80% investment policy discussed above.
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 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”).
Utilities Sector Risk.
Issuers in the utilities sector are subject to a variety of
factors that may adversely affect their business or operations, including high interest costs associated with capital construction and improvement programs; difficulty in raising adequate capital on reasonable terms in periods of high inflation and
unsettled capital markets; governmental regulation of rates the issuer can charge to customers; costs associated with compliance,
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and adjusting to changes to, environmental and other regulations; effects of economic slowdowns and surplus capacity; increased competition from other providers of utility services; inexperience
with, and potential losses resulting from, a developing deregulatory environment; costs associated with the reduced availability of certain types of fuel, occasionally reduced availability and high costs of natural gas for resale, and the effects of
energy conservation policies; effects of a national energy policy and lengthy delays, and greatly increased costs and other problems, associated with the design, construction, licensing, regulation and operation of nuclear facilities for electric
generation, including, among other considerations, the problems associated with the use of radioactive materials and the disposal of radioactive wastes; technological innovations that may render existing plants, equipment or products obsolete;
difficulty in obtaining regulatory approval of new technologies; lack of compatibility of telecommunications equipment; and potential impact of terrorist activities on the utility industry and its customers and the impact of natural or man-made
disasters. The nuclear power plant catastrophe in Japan in March 2011 may have short-term and long-term effects on the nuclear energy industry throughout the world, the extent of which are unknown. Issuers in the utilities sector also may be subject
to regulation by various governmental authorities and may
be affected by the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards.
Energy Sector Risk.
Changes in worldwide energy prices, exploration and production spending may adversely affect companies in the energy sector. Changes in government regulation, world events and
economic conditions also affect these companies. In addition, these companies are at risk of civil liability from accidents resulting in injury, loss of life or property, pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources, development of alternative energy sources, technological developments and labor relations
also could adversely affect companies in this sector.
Equity Risk.
Equity risk is the risk that the value of the securities the Fund
holds will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities the Fund holds participate or factors relating to specific companies in which the Fund invests. For example, an
adverse event, such as an unfavorable earnings report, may depress the value of securities the Fund holds; the price of securities
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may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the securities the Fund holds. In addition,
securities of an issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition.
Non-U.S. Securities Risk.
Investments in the securities of non-U.S. issuers involve risks beyond those associated with investments in
U.S. securities. These additional risks include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity, political
instability and various administrative difficulties, such as delays in clearing and settling portfolio transactions. 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. In addition, the European financial
markets have recently experienced volatility and have been adversely affected by concerns about economic downturns, credit rating downgrades, rising government debt levels and possible default on
or restructuring of government debt in several European countries, including Greece, Ireland, Italy, Portugal and Spain. A default or debt restructuring by any European country would adversely impact holders of that country’s debt, and sellers
of credit default swaps linked to that country’s creditworthiness (which may be located in countries other than those listed in the previous sentence). Finally, the value of the currency of the country in which the Fund has invested could
decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors. The Fund will not enter into transactions to hedge against declines in the value of the Fund’s assets that are denominated in a
foreign currency.
Non-Correlation Risk.
The Fund’s return may not match the return of the Underlying Index for a number of reasons.
For example, the Fund incurs operating expenses not applicable to the Underlying Index, and incurs costs in buying and selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of the
Underlying Index. In addition, the performance of the Fund and the Underlying Index may vary due to asset valuation differences and
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differences between the Fund’s portfolio and the Underlying Index resulting from legal restrictions, cost or liquidity constraints.
Index Risk.
Unlike many investment companies, the Fund does not utilize an investing strategy that seeks returns in excess of the Underlying Index. Therefore, it would not necessarily buy or sell a
security unless that security is added or removed, respectively, from the Underlying Index, even if that security generally is underperforming.
Market Risk.
Securities in the Underlying Index are subject to market fluctuations. You should anticipate that the value of the Shares will decline,
more or less, in correlation with any decline in value of the securities in the Underlying Index.
Small and Medium Capitalization Company Risk.
Investing in securities of small and medium capitalization companies involves greater risk than customarily is associated with investing in larger, more established companies. These companies’ securities may be more volatile and less
liquid than those of more established companies. These securities may have returns that vary, sometimes significantly, from the overall securities market. Often small and medium capitalization companies and the industries in which they focus are
still evolving and, as a result, they may be more sensitive to changing market conditions.
Issuer-Specific Changes.
The value of an individual security or particular type of security may be more
volatile than the market as a whole and may perform differently from the value of the market as a whole.
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.
Performance Information
As of the date of the Prospectus, the Fund has not yet commenced operations and therefore does not report its performance information. Once available, the Fund’s performance information
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will be accessible on the Fund’s website at www.dbxus.com and will provide some indication of 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.
RREEF America L.L.C.
Portfolio Managers.
John F. Robertson, John W. Vojticek, Francis Greywitt and Manoj H. Patel, 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.
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 61 of the Prospectus.
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