Davis
Select U.S. Equity ETF (DUSA)
Davis
Select International ETF (DINT)
Davis
Select Worldwide ETF (DWLD)
Davis
Select Financial ETF (DFNL)
PROSPECTUS
February
29, 2024
Portfolios of Davis
Fundamental ETF Trust are Actively Managed Exchange-Traded Funds
Principal U.S. Listing Exchange for each ETF: Cboe
Global Markets, Inc.
The
Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Prospectus |
Davis Fundamental ETF Trust | 1
Contents
Davis Select U.S.
Equity ETF Summary | Ticker: DUSA |
3 |
Davis Select
International ETF Summary | Ticker: DINT |
7 |
Davis Select
Worldwide ETF Summary | Ticker: DWLD |
12 |
Davis Select
Financial ETF Summary | Ticker: DFNL |
17 |
Additional
Information About Investment Objectives, Principal Strategies and
Principal Risks |
22 |
Non-Principal
Investment Strategies and Related Risks |
27 |
Management and
Organization |
27 |
Shareholder
Information |
29 |
Buying and Selling
Shares |
29 |
How Your Shares Are
Valued |
30 |
Portfolio
Holdings |
31 |
How the Funds Pay
Earnings |
31 |
Federal Income
Taxes |
31 |
Fees Paid to
Dealers and Other Financial Intermediaries |
34 |
Frequent Purchases
and Redemptions of Fund Shares |
34 |
Financial
Highlights |
37 |
|
|
This
prospectus contains important information. Please read it carefully before
investing and keep it for future reference.
No
financial adviser, dealer, salesperson or any other person has been authorized
to give any information or to make any representations, other than those
contained in this prospectus, in connection with the offer contained in this
prospectus and, if given or made, such other information or representations must
not be relied on as having been authorized by the Funds, the Funds’ investment
adviser or the Funds’ distributor.
This
prospectus does not constitute an offer by the Funds or by the Funds’
distributor to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful for the
Funds to make such an offer.
Prospectus |
Davis Fundamental ETF Trust | 2
Davis Select U.S. Equity ETF Summary | Ticker:
DUSA
The Fund seeks long-term
capital growth and capital preservation.
Fees
and Expenses of the Fund
These
tables describe the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
Annual Fund Operating Expenses
(expenses that you pay
each year as a percentage of the value of your investment) |
|
Management Fees |
0.55% |
Other Expenses |
0.xx% |
Total Annual Operating Expenses |
0.xx% |
Less Fee Waiver or Expense Reimbursement* |
0.00% |
Net Expenses |
0.xx% |
|
* |
The Adviser is contractually committed to
waive fees and/or reimburse the Fund’s expenses to the extent necessary to
cap total annual fund operating expenses at 0.65%. The Adviser is
obligated to continue the expense cap through March 1, 2025. The expense
cap cannot be modified prior to this date without the consent of the Board
of Trustees. After that date, there is no assurance that the Adviser will
continue to cap expenses. The Adviser may not recoup any of the operating
expenses it has reimbursed to the Fund. |
Example. This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds. This Example does not take into account brokerage commissions that
you may pay when purchasing or selling shares. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem 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:
1 Year |
3 Years |
5 Years |
10 Years |
$xx |
$xx |
$xx |
$xx |
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 xx%
of
the average value of its portfolio.
Principal
Investment Strategies
The
Fund is an actively managed exchange-traded fund (“ETF”). Davis Selected
Advisers, L.P. (“Davis Advisors” or the “Adviser”), the Fund’s investment
adviser, uses the Davis Investment Discipline to invest the Fund’s portfolio
principally in common stocks issued by large companies with market
capitalizations of at least $10 billion. Under normal market conditions, the
Fund will invest at least 80% of the Fund’s net assets plus any borrowings for
investment purposes in equity securities issued by U.S. companies. The Fund is
non-diversified and, therefore, is allowed to focus its investments in fewer
companies than a fund that is required to diversify its portfolio. The Fund’s
portfolio generally contains between 15 and 35 companies, although the precise
number of its investments will vary over time. The Fund may invest a portion of
its assets in financial services companies. The Fund may also invest in mid- and
small-capitalization companies, which the Fund considers to be those companies
with less than $10 billion in market capitalization. The Fund may invest up to
20% of net assets in non-U.S. companies. These non-U.S. company investments may
include American Depositary Receipts (“ADRs”) and Global Depositary Receipts
(“GDRs” and together “Depositary Receipts”). Depositary Receipts are receipts
that represent ownership of shares of a non-U.S. issuer held in trust by a bank
or similar financial institution.
Davis Investment
Discipline. Davis Advisors manages equity funds using the Davis
Investment Discipline. Davis Advisors conducts extensive research to try to
identify businesses that possess characteristics that Davis Advisors believes
foster the creation of long-term value, such as proven management, a durable
franchise and business model, and sustainable competitive advantages. Davis
Advisors aims to invest in such businesses when they are trading at discounts to
their intrinsic worth. Davis Advisors emphasizes individual stock selection and
believes that the ability to evaluate management is critical. Davis Advisors
routinely visits managers at their places of business in order to gain insight
into the relative value of different businesses. Such research, however
rigorous, involves predictions and forecasts that are inherently uncertain.
After determining which
Prospectus |
Davis Fundamental ETF Trust | 3
companies Davis Advisors
believes the Fund should own, Davis Advisors then turns its analysis to
determining the intrinsic value of those companies’ equity securities. Davis
Advisors seeks companies whose equity securities can be purchased at a discount
from Davis Advisors’ estimate of the company’s intrinsic value based upon
fundamental analysis of cash flows, assets and liabilities, and other criteria
that Davis Advisors deems to be material on a company-by-company basis. Davis
Advisors’ goal is to invest in companies for the long term (ideally, five years
or longer, although this goal may not be met). Davis Advisors considers selling
a company’s equity securities if the securities’ market price exceeds Davis
Advisors’ estimates of intrinsic value, if the ratio of the risks and rewards of
continuing to own the company’s equity securities is no longer attractive, to
raise cash to purchase a more attractive investment opportunity, to satisfy net
redemptions, or for other purposes.
Principal
Risks of Investing in Davis Select U.S. Equity ETF
You
may lose money by investing in Davis Select U.S. Equity ETF and the Fund’s
performance could trail that of other investments. Investors in the Fund should
have a long-term perspective and be able to tolerate potentially sharp declines
in value.
The principal risks of
investing in the Fund are:
Stock Market Risk. Stock
markets tend to move in cycles, with periods of rising prices and periods of
falling prices, including the possibility of sharp declines.
Common Stock Risk. Common
stock represents an ownership position in a company. An adverse event may have a
negative impact on a company and could result in a decline in the price of its
common stock. Common stock is generally subordinate to an issuer’s other
securities, including preferred, convertible and debt securities.
Market Trading Risk. The Fund is subject to a number of market
trading risks, which include the possibility of an inactive market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruptions in the creation/redemption process. ONE OR MORE OF THESE FACTORS, AMONG OTHERS, COULD LEAD
TO THE FUND’S SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV. The Fund’s
market price may vary from the value of the Fund’s underlying portfolio
holdings, particularly in times of market stress. This difference may be
reflected as a spread between the bid and ask prices for the Fund shares during
the day or a premium or discount in the closing market price of the Fund when
compared to the NAV. An investor may pay significantly more or receive
significantly less than the underlying value of the Fund shares bought or
sold.
Exchange-Traded Fund
Risk. The Fund is an actively
managed exchange-traded fund and trades like common stock on an exchange. The
Fund is subject to the risks of owning the underlying securities, as well as the
risks of owning an exchange-traded fund generally. The management fees of an
actively managed exchange-traded fund are generally higher and can increase the
Fund’s expenses. The market for the Fund’s shares may become less liquid in
response to the deteriorating liquidity in the market for the Fund’s underlying
portfolio holdings. A loss of liquidity for Fund shares could lead to
differences between the market price of the Fund shares and the underlying value
of the Fund shares.
Focused Portfolio Risk.
Funds that invest in a limited number of companies may have more risk because
changes in the value of a single security may have a more significant effect,
either negative or positive, on the value of the Fund’s total portfolio.
Financial Services
Risk. Risks of investing in
the financial services sector include: (1) systemic risk: factors outside the
control of a particular financial institution may adversely affect the ability
of the financial institution to operate normally or may impair its financial
condition; (2) regulatory actions: financial services companies may suffer
setbacks if regulators change the rules under which they operate; (3) changes in
interest rates: unstable and/or rising interest rates may have a
disproportionate effect on companies in the financial services sector; (4)
non-diversified loan portfolios: financial services companies may have
concentrated portfolios that makes them vulnerable to economic conditions that
affect an industry; (5) credit: financial services companies may have exposure
to investments or agreements that may lead to losses; and (6) competition: the
financial services sector has become increasingly competitive.
Foreign Country Risk. Securities of foreign companies
(including Depositary Receipts) may be subject to greater risk, as foreign
economies may not be as strong or diversified, foreign political systems may not
be as stable and foreign financial reporting standards may not be as rigorous as
they are in the United States. There may also be less information publicly
available regarding the non-U.S. issuers and their securities. These securities
may be less liquid (and, in some cases, may be illiquid) and could be harder to
value than more liquid securities.
Headline Risk. The Fund may
invest in a company when the company becomes the center of controversy after
receiving adverse media attention concerning its operations, long-term
prospects, management or for other reasons. While Davis Advisors researches
companies subject to such contingencies, it cannot be correct every time and the
company’s stock may never recover or may become worthless.
Large-Capitalization Companies
Risk. Companies with $10 billion or more in market capitalization are
considered by the Adviser to be large-capitalization companies.
Large-capitalization companies generally experience slower rates of growth in
earnings per share than do mid- and small-capitalization companies.
Prospectus |
Davis Fundamental ETF Trust | 4
Manager Risk. Poor security
selection or focus on securities in a particular sector, category or group of
companies may cause the Fund to underperform relevant benchmarks or other funds
with a similar investment objective. Even if the Adviser implements the intended
investment strategies, the implementation of the strategies may be unsuccessful
in achieving the Fund’s investment objective.
Authorized Participant
Concentration Risk. Only an
Authorized Participant (“AP”) (as defined in the “Creations and Redemptions” section of the
Fund’s prospectus) may engage in creation and/or redemption transactions
directly with the Fund. The Fund has a limited number of financial
intermediaries that act as APs. To the extent that these intermediaries exit the
business or are unable or unwilling to proceed with creation and/or redemption
orders with respect to the Fund and no other AP is able to step forward to
create or redeem Creation Units, Fund shares may trade at a discount to net
asset value (“NAV”) and could face delisting. There are a limited number of
financial institutions that may act as APs that post collateral for certain
trades on an agency basis (i.e., on behalf of other market participants). To the
extent that those APs exit the business or are unable to process creation and/or
redemption orders and no other AP is able to step forward to do so, there may be
a significantly diminished trading market for the ETF’s shares. In addition,
please note that this could in turn lead to differences between the market price
of the ETF’s shares and the underlying value of those shares.
Cybersecurity Risk. A
cybersecurity breach may disrupt the business operations of the Fund or its
service providers. A breach may allow an unauthorized party to gain access to
Fund assets, customer data or proprietary information, or cause the Fund and/or
its service providers to suffer data corruption or lose operational
functionality.
Depositary Receipts Risk.
American Depositary Receipts, European Depositary Receipts, and Global
Depositary Receipts (“Depositary Receipts”) are certificates evidencing
ownership of shares of a foreign issuer. Depositary Receipts are subject to many
of the risks associated with investing directly in foreign securities.
Depositary Receipts may trade at a discount or a premium to the underlying
security and may be less liquid than the underlying securities listed on an
exchange.
Fees and Expenses Risk. The
Fund may not earn enough through income and capital appreciation to offset the
operating expenses of the Fund. All mutual funds incur operating fees and
expenses. Fees and expenses reduce the return that a shareholder may earn by
investing in a fund, even when a fund has favorable performance. A low-return
environment, or a bear market, increases the risk that a shareholder may lose
money.
Foreign Currency Risk. The change in value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar value of
securities denominated in that foreign currency. For example, when the Fund
holds a security that is denominated in a foreign currency, a decline of that
foreign currency against the U.S. dollar would generally cause the value of the
Fund’s shares to decline.
Mid- and Small-Capitalization
Companies Risk. Companies with less than $10 billion in market
capitalization are considered by the Adviser to be mid- or small-capitalization
companies. Mid- and small-capitalization companies typically have more limited
product lines, markets and financial resources than larger companies, and their
securities may trade less frequently and in more limited volume than those of
larger, more mature companies.
Shareholder Concentration
Risk. From time to time, a relatively large percentage (over 20%) of the
Fund’s shares may be held by related shareholders. A large redemption by one or
more of such shareholders may reduce the Fund’s liquidity, may increase the
Fund’s transactions and transaction costs, may result in substantial capital
gains distributions for shareholders, and may increase the Fund’s ongoing
operating expenses, which could negatively impact the remaining shareholders of
the Fund.
Your
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency, entity
or person.
Performance
Results
The bar chart below
provides some indication of the risks of investing in the Fund by showing how
the Fund’s investment results have varied from year to year. The following table
shows how the Fund’s average annual total returns, for the periods indicated,
compare with those of the S&P 500 Index, a broad-based securities market
index. The Fund’s past performance (before and after taxes) is not necessarily
an indication of how the Fund will perform in the future. Updated information on
the Fund’s results can be obtained by visiting www.davisetfs.com or by calling 1‑800‑279‑0279.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes. Actual after-tax
returns depend on an investor’s tax situation and may differ from those shown,
and after-tax returns shown are not relevant to investors who hold their Fund
shares through a tax-deferred arrangement, such as a 401(k) plan or an
individual retirement account.
Prospectus |
Davis Fundamental ETF Trust | 5
Calendar Year Total
Returns |
|
Highest/Lowest quarterly results during the
time period were:
Highest 19.23% (quarter ended
June 30, 2020)xx
Lowest -24.54% (quarter ended
March 31, 2020)xx |
Average Annual Total Returns
(For the periods ended December 31,
2023) |
Past 1 Year |
Past 5 Years |
Since Inception
(1/11/17) |
Return before taxes |
xx% |
xx% |
xx% |
Return after taxes on
distributions |
xx% |
xx% |
xx% |
Return after taxes on distributions and
sale of shares |
xx% |
xx% |
xx% |
S&P 500 Index reflects no deduction for fees, expenses or
taxes |
xx% |
xx% |
xx% |
Management
Investment Adviser. Davis
Selected Advisers, L.P. serves as the Fund’s investment adviser.
Sub-Adviser. Davis Selected
Advisers–NY, Inc., a wholly owned subsidiary of the Adviser, serves as the
Fund’s sub-adviser.
Portfolio Managers. As of
the date of this prospectus, the Portfolio Managers listed below are jointly and
primarily responsible for the day-to-day management of the Fund’s
portfolio.
Portfolio Managers |
Experience with this Fund |
Primary Title with Investment Adviser or
Sub-Adviser |
Christopher Davis |
Since January 2017 |
Chairman, Davis Selected Advisers, L.P. |
Danton Goei |
Since January 2017 |
Vice President, Davis Selected Advisers–NY,
Inc. |
Purchase
and Sale of Fund Shares
The Fund is an actively
managed ETF. Individual shares of the Fund are listed on a national securities
exchange. Individual shares may only be bought and sold in the secondary market
through a broker or dealer at a market price. As the price of Fund shares is
based on the market price, and because ETF shares trade at a market price rather
than at NAV, shares may trade at a price greater than NAV (a premium) or less
than NAV (a discount). An investor may incur costs attributable to the
difference between the highest price a buyer is willing to pay to purchase
shares of a Fund (the bid) and the lowest price a seller is willing to accept
for shares of a Fund (the ask) when buying or selling shares in the secondary
market (the bid-ask spread). The Fund will only issue or redeem shares that have
been aggregated into blocks of 50,000 shares or multiples thereof (“Creation
Units”) to APs who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creations Units in return for a designated
portfolio of securities (and an amount of cash) the Fund specifies each day
(“Creation Basket”). Current information regarding the net asset value, market
price, premium and/or discount, and bid-ask spreads on a Fund can be obtained at
www.davisetfs.com.
For important information
about the purchase and sale of Fund shares and tax information, please see the
“Buying and Selling Shares” section of
the Fund’s prospectus.
Tax
Information
If
the Fund earns income or realizes capital gains, it intends to make
distributions that may be taxed as ordinary income, qualified dividend income or
capital gains by federal, state and local authorities.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the Davis Select U.S. Equity ETF through
a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies
may pay the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your individual financial adviser to recommend the
Fund over another
investment. Ask your individual financial adviser or visit your financial
intermediary’s website for more information.
Prospectus |
Davis Fundamental ETF Trust | 6
Davis Select International ETF Summary | Ticker:
DINT
Investment
Objective
The Fund seeks long-term
growth of capital.
Fees
and Expenses of the Fund
These
tables describe the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
Annual Fund Operating Expenses
(expenses that you pay
each year as a percentage of the value of your investment) |
|
Management Fees |
0.55% |
Other Expenses |
0.xx% |
Total Annual Operating Expenses |
0.xx% |
Less Fee Waiver or Expense Reimbursement* |
0.00% |
Net Expenses |
0.xx% |
|
* |
The Adviser is contractually committed to
waive fees and/or reimburse the Fund’s expenses to the extent necessary to
cap total annual fund operating expenses at 0.65%. The Adviser is
obligated to continue the expense cap through March 1, 2025. The expense
cap cannot be modified prior to this date without the consent of the Board
of Trustees. After that date, there is no assurance that the Adviser will
continue to cap expenses. The Adviser may not recoup any of the operating
expenses it has reimbursed to the Fund. |
Example. This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds. This Example does not take into account brokerage commissions that
you may pay when purchasing or selling shares. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem 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:
1 Year |
3 Years |
5 Years |
10 Years |
$xx |
$xx |
$xx |
$xx |
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 xx% of the average value of its
portfolio.
Principal
Investment Strategies
This Fund is an actively
managed exchange-traded fund (“ETF”). Davis Selected Advisers, L.P. (“Davis
Advisors” or the “Adviser”), the Fund’s investment adviser, uses the Davis
Investment Discipline to invest the Fund’s portfolio principally in common
stocks (including indirect holdings of common stock through depositary receipts)
issued by foreign companies, including countries with developed or emerging
markets. The Fund may invest in large, medium or small companies without regard
to market capitalization. The Fund will invest significantly (at least 40% of
total assets under normal market conditions and at least 30% of total assets if
market conditions are not deemed favorable) in issuers (1) organized or located
outside of the U.S.; (2) whose primary trading market is located outside the
U.S.; or (3) doing a substantial amount of business outside the U.S., which the
Fund considers to be a company that derives at least 50% of its revenue from
business outside the U.S. or has at least 50% of its assets outside the U.S.
Under normal market conditions, the Fund will invest in issuers representing at
least three different countries. These non-U.S. company investments may include
American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs” and
together “Depositary Receipts”). Depositary Receipts are receipts that represent
ownership of shares of a non-U.S. issuer held in trust by a bank or similar
financial institution.
Davis Investment
Discipline. Davis Advisors manages equity funds using the Davis
Investment Discipline. Davis Advisors conducts extensive research to try to
identify businesses that possess characteristics that Davis Advisors believes
foster the creation of long-term value, such as proven management, a durable
franchise and business model, and sustainable competitive advantages. Davis
Advisors aims to invest in such businesses when they are trading at discounts to
their intrinsic worth. Davis Advisors emphasizes individual stock selection and
believes that the ability to evaluate management is critical. Davis Advisors
routinely visits managers at their places of business in order to gain insight
into the relative value of different businesses. Such research, however
rigorous, involves predictions and forecasts that are inherently uncertain.
After determining which
Prospectus |
Davis Fundamental ETF Trust | 7
companies Davis Advisors
believes the Fund should own, Davis Advisors then turns its analysis to
determining the intrinsic value of those companies’ equity securities. Davis
Advisors seeks companies whose equity securities can be purchased at a discount
from Davis Advisors’ estimate of the company’s intrinsic value based upon
fundamental analysis of cash flows, assets and liabilities, and other criteria
that Davis Advisors deems to be material on a company-by-company basis. Davis
Advisors’ goal is to invest in companies for the long term (ideally, five years
or longer, although this goal may not be met). Davis Advisors considers selling
a company’s equity securities if the securities’ market price exceeds Davis
Advisors’ estimates of intrinsic value, if the ratio of the risks and rewards of
continuing to own the company’s equity securities is no longer attractive, to
raise cash to purchase a more attractive investment opportunity, to satisfy net
redemptions or for other purposes.
Principal
Risks of Investing in Davis Select International ETF
You
may lose money by investing in Davis Select International ETF and the Fund’s
performance could trail that of other investments. Investors in the Fund should
have a long-term perspective and be able to tolerate potentially sharp declines
in value.
The principal risks of
investing in the Fund are:
Stock Market Risk. Stock
markets tend to move in cycles, with periods of rising prices and periods of
falling prices, including the possibility of sharp declines.
Common Stock Risk. Common
stock represents an ownership position in a company. An adverse event may have a
negative impact on a company and could result in a decline in the price of its
common stock. Common stock is generally subordinate to an issuer’s other
securities, including preferred, convertible and debt securities.
Market Trading Risk. The
Fund is subject to a number of market trading risks, which include the
possibility of an inactive market for Fund shares, losses from trading in
secondary markets, periods of high volatility and disruptions in the
creation/redemption process. ONE OR MORE OF
THESE FACTORS, AMONG OTHERS, COULD LEAD TO THE FUND’S SHARES TRADING AT A
PREMIUM OR DISCOUNT TO NAV. The Fund’s market price may vary from the
value of the Fund’s underlying portfolio holdings, particularly in times of
market stress. This difference may be reflected as a spread between the bid and
ask prices for the Fund shares during the day or a premium or discount in the
closing market price of the Fund when compared to the NAV. An investor may pay
significantly more or receive significantly less than the underlying value of
the Fund shares bought or sold.
Exchange-Traded Fund
Risk. The Fund is an actively
managed exchange-traded fund and trades like common stock on an exchange. The
Fund is subject to the risks of owning the underlying securities, as well as the
risks of owning an exchange-traded fund generally. The management fees of an
actively managed exchange-traded fund are generally higher and can increase the
Fund’s expenses. The market for the Fund’s shares may become less liquid in
response to the deteriorating liquidity in the market for the Fund’s underlying
portfolio holdings. A loss of liquidity for Fund shares could lead to
differences between the market price of the Fund shares and the underlying value
of the Fund shares.
Foreign Country Risk.
Securities of foreign companies (including Depositary Receipts) may be subject
to greater risk, as foreign economies may not be as strong or diversified,
foreign political systems may not be as stable and foreign financial reporting
standards may not be as rigorous as they are in the United States. There may
also be less information publicly available regarding the non-U.S. issuers and
their securities. These securities may be less liquid (and, in some cases, may
be illiquid) and could be harder to value than more liquid securities.
Exposure to Industry or Sector
Risk. Subject to the Fund’s investment limitations, the Fund may have
significant exposure to a particular industry or sector. Such exposure may cause
the Fund to be more impacted by risks relating to and developments affecting the
industry or sector, and thus its net asset value may be more volatile than a
fund without such levels of exposure. For example, if the Fund has significant
exposure in a particular industry, then economic, regulatory, or other issues
that negatively affect that industry may have a greater impact on the Fund than
on a fund that is more diversified.
China Risk – Generally.
Investment in Chinese securities may subject the Fund to risks that are specific
to China. China may be subject to significant amounts of instability, including,
but not limited to, economic, political, and social instability. China’s economy
may differ from the U.S. economy in certain respects, including, but not limited
to, general development, level of government involvement, wealth distribution,
and structure.
The Fund may invest in
securities issued by variable interest entities (“VIEs”), which are subject to
the investment risks associated with the underlying Chinese operating company. A
VIE enters into service contracts and other contracts with the Chinese operating
company, which provide the VIE with exposure to the company. Although the VIE
has no equity ownership of the Chinese operating company, the contractual
arrangements permit the VIE to consolidate the Chinese operating company into
its financial statements. Intervention by the Chinese government with respect to
VIEs could significantly affect the Chinese operating company’s performance and
the enforceability of the VIE’s contractual arrangements with the Chinese
company.
Headline Risk. The Fund may
invest in a company when the company becomes the center of controversy after
receiving adverse media attention concerning its operations, long-term
prospects, management or for other reasons. While Davis Advisors
Prospectus |
Davis Fundamental ETF Trust | 8
researches companies
subject to such contingencies, it cannot be correct every time and the company’s
stock may never recover or may become worthless.
Foreign Market Risk.
Because certain foreign holdings of the Fund may trade in a market that
is closed when the market in which the Fund’s shares are listed is open, there
may be changes between the last quote of the foreign holding from its closed
foreign market and the value of such security during the Fund’s domestic trading
day. This in turn could lead to differences between the market price of the
Fund’s shares and the underlying value of those shares.
Large-Capitalization Companies
Risk. Companies with $10 billion or more in market capitalization are
considered by the Adviser to be large-capitalization companies.
Large-capitalization companies generally experience slower rates of growth in
earnings per share than do mid- and small-capitalization companies.
Manager Risk. Poor security
selection or focus on securities in a particular sector, category or group of
companies may cause the Fund to underperform relevant benchmarks or other funds
with a similar investment objective. Even if the Adviser implements the intended
investment strategies, the implementation of the strategies may be unsuccessful
in achieving the Fund’s investment objective.
Authorized Participant
Concentration Risk. Only an
Authorized Participant (“AP”) (as defined in the “Creations and Redemptions” section of the
Fund’s prospectus) may engage in creation and/or redemption transactions
directly with the Fund. The Fund has a limited number of financial
intermediaries that act as APs. To the extent that these intermediaries exit the
business or are unable or unwilling to proceed with creation and/or redemption
orders with respect to the Fund and no other AP is able to step forward to
create or redeem Creation Units, Fund shares may trade at a discount to net
asset value (“NAV”) and could face delisting. There are a limited number of
financial institutions that may act as APs that post collateral for certain
trades on an agency basis (i.e., on behalf of other market participants). To the
extent that those APs exit the business or are unable to process creation and/or
redemption orders and no other AP is able to step forward to do so, there may be
a significantly diminished trading market for the ETF’s shares. In addition,
please note that this could in turn lead to differences between the market price
of the ETF’s shares and the underlying value of those shares.
Cybersecurity Risk. A
cybersecurity breach may disrupt the business operations of the Fund or its
service providers. A breach may allow an unauthorized party to gain access to
Fund assets, customer data or proprietary information, or cause the Fund and/or
its service providers to suffer data corruption or lose operational
functionality.
Emerging Market Risk.
Securities of issuers in emerging and developing markets may offer special
investment opportunities, but present risks relating to political, economic or
regulatory conditions not found in more mature markets, such as government
controls on foreign investments, government restrictions on the transfer of
securities and less developed trading markets, exchanges, reporting standards
and legal and accounting systems.
Depositary Receipts Risk.
American Depositary Receipts, European Depositary Receipts, and Global
Depositary Receipts (“Depositary Receipts”) are certificates evidencing
ownership of shares of a foreign issuer. Depositary Receipts are subject to many
of the risks associated with investing directly in foreign securities.
Depositary Receipts may trade at a discount or a premium to the underlying
security and may be less liquid than the underlying securities listed on an
exchange.
Fees and Expenses Risk. The
Fund may not earn enough through income and capital appreciation to offset the
operating expenses of the Fund. All mutual funds incur operating fees and
expenses. Fees and expenses reduce the return that a shareholder may earn by
investing in a fund, even when a fund has favorable performance. A low-return
environment, or a bear market, increases the risk that a shareholder may lose
money.
Foreign Currency Risk. The
change in value of a foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of securities denominated in that foreign
currency. For example, when the Fund holds a security that is denominated in a
foreign currency, a decline of that foreign currency against the U.S. dollar
would generally cause the value of the Fund’s shares to decline.
Mid- and Small-Capitalization
Companies Risk. Companies with less than $10 billion in market
capitalization are considered by the Adviser to be mid- or small-capitalization
companies. Mid- and small-capitalization companies typically have more limited
product lines, markets and financial resources than larger companies, and their
securities may trade less frequently and in more limited volume than those of
larger, more mature companies.
Shareholder Concentration
Risk. From time to time, a relatively large percentage (over 20%) of the
Fund’s shares may be held by related shareholders. A large redemption by one or
more of such shareholders may reduce the Fund’s liquidity, may increase the
Fund’s transactions and transaction costs, may result in substantial capital
gains distributions for shareholders, and may increase the Fund’s ongoing
operating expenses, which could negatively impact the remaining shareholders of
the Fund.
Your
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency, entity
or person.
Prospectus |
Davis Fundamental ETF Trust | 9
Performance
Results
The bar chart below
provides some indication of the risks of investing in the Fund by showing how
the Fund’s investment results have varied from year to year. The following table
shows how the Fund’s average annual total returns, for the periods indicated,
compare with those of the MSCI ACWI (All Country World Index) Ex. USA, a
broad-based securities market index. The Fund’s past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. Updated information on the Fund’s results can be obtained by
visiting www.davisetfs.com or by calling
1‑800‑279‑0279.
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes. Actual after-tax returns depend on
an investor’s tax situation and may differ from those shown, and after-tax
returns shown are not relevant to investors who hold their Fund shares through a
tax-deferred arrangement, such as a 401(k) plan or an individual retirement
account.
Calendar Year Total
Returns |
|
Highest/Lowest quarterly results during the
time period were:
Highest 22.38% (quarter ended
June 30, 2020)xx
Lowest -21.52% (quarter ended
March 31, 2020)xx |
Average Annual Total Returns
(For the periods ended December 31,
2023) |
Past 1 Year |
Since
Inception (3/1/2018) |
Return before taxes |
xx% |
xx% |
Return after taxes on
distributions |
xx% |
xx% |
Return after taxes on distributions and
sale of shares |
xx% |
xx% |
MSCI ACWI (All Country World Index)
Ex. USA reflects no deduction
for fees, expenses or taxes |
xx% |
xx% |
Management
Investment Adviser. Davis
Selected Advisers, L.P. serves as the Fund’s investment adviser.
Sub-Adviser. Davis Selected
Advisers–NY, Inc., a wholly owned subsidiary of the Adviser, serves as the
Fund’s sub-adviser.
Portfolio Manager. As of
the date of this prospectus, the Portfolio Manager listed below is primarily
responsible for the day-to-day management of the Fund’s portfolio.
Portfolio
Manager |
Experience with this
Fund |
Primary Title with
Investment Adviser or Sub-Adviser |
Danton Goei |
Since March 2018 |
Vice President, Davis Selected
Advisers–NY, Inc. |
Purchase
and Sale of Fund Shares
The Fund is an actively
managed ETF. Individual shares of the Fund are listed on a national securities
exchange. Individual shares may only be bought and sold in the secondary market
through a broker or dealer at a market price. As the price of Fund shares is
based on the market price, and because ETF shares trade at a market price rather
than at NAV, shares may trade at a price greater than NAV (a premium) or less
than NAV (a discount). An investor may incur costs attributable to the
difference between the highest price a buyer is willing to pay to purchase
shares of a Fund (the bid) and the lowest price a seller is willing to accept
for shares of a Fund (the ask) when buying or selling shares in the secondary
market (the bid-ask spread). The Fund will only issue or redeem shares that have
been aggregated into blocks of 50,000 shares or multiples thereof (“Creation
Units”) to APs who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creations Units in return for a designated
portfolio of securities (and an amount of cash) the Fund specifies each day
(“Creation Basket”). Current information regarding the net asset value, market
price, premium and/or discount, and bid-ask spreads on a Fund can be obtained at
www.davisetfs.com.
For important information
about the purchase and sale of Fund shares and tax information, please see the
“Buying and Selling Shares” section of
the Fund’s prospectus.
Prospectus |
Davis Fundamental ETF Trust | 10
Tax
Information
If the Fund earns income or
realizes capital gains, it intends to make distributions that may be taxed as
ordinary income, qualified dividend income or capital gains by federal, state
and local authorities.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the Davis Select International ETF
through a broker-dealer or other financial intermediary (such as a bank), the
Fund and its related companies may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your individual
financial adviser to recommend the Fund over another investment. Ask your
individual financial adviser or visit your financial intermediary’s website for
more information.
Prospectus |
Davis Fundamental ETF Trust | 11
Davis Select Worldwide ETF Summary | Ticker: DWLD
Investment
Objective
The Fund seeks long-term
growth of capital.
Fees
and Expenses of the Fund
These
tables describe the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
Annual Fund Operating
Expenses (expenses that you pay each
year as a percentage of the value of your investment) |
|
Management Fees |
0.55% |
Other Expenses |
0.xx% |
Total Annual Operating Expenses |
0.xx% |
Less Fee Waiver or Expense Reimbursement* |
0.00% |
Net Expenses |
0.xx% |
|
* |
The Adviser is contractually committed to
waive fees and/or reimburse the Fund’s expenses to the extent necessary to
cap total annual fund operating expenses at 0.65%. The Adviser is
obligated to continue the expense cap through March 1, 2025. The expense
cap cannot be modified prior to this date without the consent of the Board
of Trustees. After that date, there is no assurance that the Adviser will
continue to cap expenses. The Adviser may not recoup any of the operating
expenses it has reimbursed to the Fund. |
Example. This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds. This Example does not take into account brokerage commissions that
you may pay when purchasing or selling shares. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem 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:
1 Year |
3 Years |
5 Years |
10 Years |
$xx |
$xx |
$xx |
$xx |
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 xx% of the average value of its
portfolio.
Principal
Investment Strategies
The Fund is an actively
managed exchange-traded fund (“ETF”). Davis Selected Advisers, L.P. (“Davis
Advisors” or the “Adviser”), the Fund’s investment adviser, uses the Davis
Investment Discipline to invest the Fund’s portfolio principally in common
stocks (including indirect holdings of common stock through depositary receipts)
issued by both United States and foreign companies, including countries with
developed or emerging markets. The Fund may invest in large, medium or small
companies without regard to market capitalization. The Fund will invest
significantly (at least 40% of total assets under normal market conditions and
at least 30% of total assets if market conditions are not deemed favorable) in
issuers (1) organized or located outside of the U.S.; (2) whose primary trading
market is located outside the U.S.; or (3) doing a substantial amount of
business outside the U.S., which the Fund considers to be a company that derives
at least 50% of its revenue from business outside the U.S. or has at least 50%
of its assets outside the U.S. Under normal market conditions, the Fund will
invest in issuers representing at least three different countries. These
non-U.S. company investments may include American Depositary Receipts (“ADRs”)
and Global Depositary Receipts (“GDRs” and together “Depositary Receipts”).
Depositary Receipts are receipts that represent ownership of shares of a
non-U.S. issuer held in trust by a bank or similar financial institution.
Davis Investment
Discipline. Davis Advisors manages equity funds using the Davis
Investment Discipline. Davis Advisors conducts extensive research to try to
identify businesses that possess characteristics that Davis Advisors believes
foster the creation of long-term value, such as proven management, a durable
franchise and business model, and sustainable competitive advantages. Davis
Advisors aims to invest in such businesses when they are trading at discounts to
their intrinsic worth. Davis Advisors emphasizes individual stock selection and
believes that the ability to evaluate management is critical. Davis Advisors
routinely visits managers at their places of business in order to gain insight
into the relative value of different businesses. Such research, however
rigorous, involves predictions and forecasts that are inherently uncertain.
After determining which
Prospectus |
Davis Fundamental ETF Trust | 12
companies Davis Advisors
believes the Fund should own, Davis Advisors then turns its analysis to
determining the intrinsic value of those companies’ equity securities. Davis
Advisors seeks companies whose equity securities can be purchased at a discount
from Davis Advisors’ estimate of the company’s intrinsic value based upon
fundamental analysis of cash flows, assets and liabilities, and other criteria
that Davis Advisors deems to be material on a company-by-company basis. Davis
Advisors’ goal is to invest in companies for the long term (ideally, five years
or longer, although this goal may not be met). Davis Advisors considers selling
a company’s equity securities if the securities’ market price exceeds Davis
Advisors’ estimates of intrinsic value, if the ratio of the risks and rewards of
continuing to own the company’s equity securities is no longer attractive, to
raise cash to purchase a more attractive investment opportunity, to satisfy net
redemptions or for other purposes.
Principal
Risks of Investing in Davis Select Worldwide ETF
You
may lose money by investing in Davis Select Worldwide ETF and the Fund’s
performance could trail that of other investments. Investors in the Fund should
have a long-term perspective and be able to tolerate potentially sharp declines
in value.
The principal risks of
investing in the Fund are:
Stock Market Risk. Stock
markets tend to move in cycles, with periods of rising prices and periods of
falling prices, including the possibility of sharp declines.
Common Stock Risk. Common
stock represents an ownership position in a company. An adverse event may have a
negative impact on a company and could result in a decline in the price of its
common stock. Common stock is generally subordinate to an issuer’s other
securities, including preferred, convertible and debt securities.
Market Trading Risk. The
Fund is subject to a number of market trading risks, which include the
possibility of an inactive market for Fund shares, losses from trading in
secondary markets, periods of high volatility and disruptions in the
creation/redemption process. ONE OR MORE OF
THESE FACTORS, AMONG OTHERS, COULD LEAD TO THE FUND’S SHARES TRADING AT A
PREMIUM OR DISCOUNT TO NAV. The Fund’s market price may vary from the
value of the Fund’s underlying portfolio holdings, particularly in times of
market stress. This difference may be reflected as a spread between the bid and
ask prices for the Fund shares during the day or a premium or discount in the
closing market price of the Fund when compared to the NAV. An investor may pay
significantly more or receive significantly less than the underlying value of
the Fund shares bought or sold.
Exchange-Traded Fund
Risk. The Fund is an actively
managed exchange-traded fund and trades like common stock on an exchange. The
Fund is subject to the risks of owning the underlying securities, as well as the
risks of owning an exchange-traded fund generally. The management fees of an
actively managed exchange-traded fund are generally higher and can increase the
Fund’s expenses. The market for the Fund’s shares may become less liquid in
response to the deteriorating liquidity in the market for the Fund’s underlying
portfolio holdings. A loss of liquidity for Fund shares could lead to
differences between the market price of the Fund shares and the underlying value
of the Fund shares.
Foreign Country Risk.
Securities of foreign companies (including Depositary Receipts) may be subject
to greater risk, as foreign economies may not be as strong or diversified,
foreign political systems may not be as stable and foreign financial reporting
standards may not be as rigorous as they are in the United States. There may
also be less information publicly available regarding the non-U.S. issuers and
their securities. These securities may be less liquid (and, in some cases, may
be illiquid) and could be harder to value than more liquid securities.
Exposure to Industry or Sector
Risk. Subject to the Fund’s investment limitations, the Fund may have
significant exposure to a particular industry or sector. Such exposure may cause
the Fund to be more impacted by risks relating to and developments affecting the
industry or sector, and thus its net asset value may be more volatile than a
fund without such levels of exposure. For example, if the Fund has significant
exposure in a particular industry, then economic, regulatory, or other issues
that negatively affect that industry may have a greater impact on the Fund than
on a fund that is more diversified.
China Risk – Generally.
Investment in Chinese securities may subject the Fund to risks that are specific
to China. China may be subject to significant amounts of instability, including,
but not limited to, economic, political, and social instability. China’s economy
may differ from the U.S. economy in certain respects, including, but not limited
to, general development, level of government involvement, wealth distribution,
and structure.
The Fund may invest in
securities issued by variable interest entities (“VIEs”), which are subject to
the investment risks associated with the underlying Chinese operating company. A
VIE enters into service contracts and other contracts with the Chinese operating
company, which provide the VIE with exposure to the company. Although the VIE
has no equity ownership of the Chinese operating company, the contractual
arrangements permit the VIE to consolidate the Chinese operating company into
its financial statements. Intervention by the Chinese government with respect to
VIEs could significantly affect the Chinese operating company’s performance and
the enforceability of the VIE’s contractual arrangements with the Chinese
company.
Headline Risk. The Fund may
invest in a company when the company becomes the center of controversy after
receiving adverse media attention concerning its operations, long-term
prospects, management or for other reasons. While Davis Advisors
Prospectus |
Davis Fundamental ETF Trust | 13
researches companies
subject to such contingencies, it cannot be correct every time and the company’s
stock may never recover or may become worthless.
Foreign Market Risk.
Because certain foreign holdings of the Fund may trade in a market that
is closed when the market in which the Fund’s shares are listed is open, there
may be changes between the last quote of the foreign holding from its closed
foreign market and the value of such security during the Fund’s domestic trading
day. This in turn could lead to differences between the market price of the
Fund’s shares and the underlying value of those shares.
Large-Capitalization Companies
Risk. Companies with $10 billion or more in market capitalization are
considered by the Adviser to be large-capitalization companies.
Large-capitalization companies generally experience slower rates of growth in
earnings per share than do mid- and small-capitalization companies.
Manager Risk. Poor security
selection or focus on securities in a particular sector, category or group of
companies may cause the Fund to underperform relevant benchmarks or other funds
with a similar investment objective. Even if the Adviser implements the intended
investment strategies, the implementation of the strategies may be unsuccessful
in achieving the Fund’s investment objective.
Authorized Participant
Concentration Risk. Only an
Authorized Participant (“AP”) (as defined in the “Creations and Redemptions” section of the
Fund’s prospectus) may engage in creation and/or redemption transactions
directly with the Fund. The Fund has a limited number of financial
intermediaries that act as APs. To the extent that these intermediaries exit the
business or are unable or unwilling to proceed with creation and/or redemption
orders with respect to the Fund and no other AP is able to step forward to
create or redeem Creation Units, Fund shares may trade at a discount to net
asset value (“NAV”) and could face delisting. There are a limited number of
financial institutions that may act as APs that post collateral for certain
trades on an agency basis (i.e., on behalf of other market participants). To the
extent that those APs exit the business or are unable to process creation and/or
redemption orders and no other AP is able to step forward to do so, there may be
a significantly diminished trading market for the ETF’s shares. In addition,
please note that this could in turn lead to differences between the market price
of the ETF’s shares and the underlying value of those shares.
Cybersecurity Risk. A
cybersecurity breach may disrupt the business operations of the Fund or its
service providers. A breach may allow an unauthorized party to gain access to
Fund assets, customer data or proprietary information, or cause the Fund and/or
its service providers to suffer data corruption or lose operational
functionality.
Emerging Market Risk.
Securities of issuers in emerging and developing markets may offer special
investment opportunities, but present risks relating to political, economic or
regulatory conditions not found in more mature markets, such as government
controls on foreign investments, government restrictions on the transfer of
securities and less developed trading markets, exchanges, reporting standards
and legal and accounting systems.
Depositary Receipts Risk.
American Depositary Receipts, European Depositary Receipts, and Global
Depositary Receipts (“Depositary Receipts”) are certificates evidencing
ownership of shares of a foreign issuer. Depositary Receipts are subject to many
of the risks associated with investing directly in foreign securities.
Depositary Receipts may trade at a discount or a premium to the underlying
security and may be less liquid than the underlying securities listed on an
exchange.
Fees and Expenses Risk. The
Fund may not earn enough through income and capital appreciation to offset the
operating expenses of the Fund. All mutual funds incur operating fees and
expenses. Fees and expenses reduce the return that a shareholder may earn by
investing in a fund, even when a fund has favorable performance. A low-return
environment, or a bear market, increases the risk that a shareholder may lose
money.
Foreign Currency Risk. The
change in value of a foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of securities denominated in that foreign
currency. For example, when the Fund holds a security that is denominated in a
foreign currency, a decline of that foreign currency against the U.S. dollar
would generally cause the value of the Fund’s shares to decline.
Mid- and Small-Capitalization
Companies Risk. Companies with less than $10 billion in market
capitalization are considered by the Adviser to be mid- or small-capitalization
companies. Mid- and small-capitalization companies typically have more limited
product lines, markets and financial resources than larger companies, and their
securities may trade less frequently and in more limited volume than those of
larger, more mature companies.
Shareholder Concentration
Risk. From time to time, a relatively large percentage (over 20%) of the
Fund’s shares may be held by related shareholders. A large redemption by one or
more of such shareholders may reduce the Fund’s liquidity, may increase the
Fund’s transactions and transaction costs, may result in substantial capital
gains distributions for shareholders, and may increase the Fund’s ongoing
operating expenses, which could negatively impact the remaining shareholders of
the Fund.
Your
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency, entity
or person.
Performance
Results
Prospectus |
Davis Fundamental ETF Trust | 14
The bar chart below
provides some indication of the risks of investing in the Fund by showing how
the Fund’s investment results have varied from year to year. The following table
shows how the Fund’s average annual total returns, for the periods indicated,
compare with those of the MSCI ACWI (All Country World Index), a broad-based
securities market index. The Fund’s past performance (before and after taxes) is
not necessarily an indication of how the Fund will perform in the future.
Updated information on the Fund’s results can be obtained by visiting www.davisetfs.com or by calling 1‑800‑279‑0279.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes. Actual after-tax
returns depend on an investor’s tax situation and may differ from those shown,
and after-tax returns shown are not relevant to investors who hold their Fund
shares through a tax-deferred arrangement, such as a 401(k) plan or an
individual retirement account.
Calendar Year Total
Returns |
|
Highest/Lowest quarterly results during the
time period were:
Highest 22.31% (quarter ended
June 30, 2020)xx
Lowest -23.04% (quarter ended
March 31, 2020)xx |
Average Annual Total
Returns (For the periods ended
December 31, 2023) |
Past 1 Year |
Past 5 Years |
Since
Inception (1/11/17) |
Return before taxes |
xx% |
xx% |
xx% |
Return after taxes on
distributions |
xx% |
xx% |
xx% |
Return after taxes on distributions and
sale of shares |
xx% |
xx% |
xx% |
MSCI ACWI (All Country World
Index) reflects no deduction
for fees, expenses or taxes |
xx% |
xx% |
xx% |
Management
Investment Adviser. Davis
Selected Advisers, L.P. serves as the Fund’s investment adviser.
Sub-Adviser. Davis Selected
Advisers–NY, Inc., a wholly owned subsidiary of the Adviser, serves as the
Fund’s sub-adviser.
Portfolio Manager. As of
the date of this prospectus, the Portfolio Manager listed below is primarily
responsible for the day-to-day management of the Fund’s portfolio.
Portfolio Manager |
Experience with this Fund |
Primary Title with Investment Adviser or
Sub-Adviser |
Danton Goei |
Since January 2017 |
Vice President, Davis Selected Advisers–NY,
Inc. |
Purchase
and Sale of Fund Shares
The Fund is an actively
managed ETF. Individual shares of the Fund are listed on a national securities
exchange. Individual shares may only be bought and sold in the secondary market
through a broker or dealer at a market price. As the price of Fund shares is
based on the market price, and because ETF shares trade at a market price rather
than at NAV, shares may trade at a price greater than NAV (a premium) or less
than NAV (a discount). An investor may incur costs attributable to the
difference between the highest price a buyer is willing to pay to purchase
shares of a Fund (the bid) and the lowest price a seller is willing to accept
for shares of a Fund (the ask) when buying or selling shares in the secondary
market (the bid-ask spread). The Fund will only issue or redeem shares that have
been aggregated into blocks of 50,000 shares or multiples thereof (“Creation
Units”) to APs who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creations Units in return for a designated
portfolio of securities (and an amount of cash) the Fund specifies each day
(“Creation Basket”). Current information regarding the net asset value, market
price, premium and/or discount, and bid-ask spreads on a Fund can be obtained at
www.davisetfs.com.
For important information
about the purchase and sale of Fund shares and tax information, please see the
“Buying and Selling Shares” section of
the Fund’s prospectus.
Prospectus |
Davis Fundamental ETF Trust | 15
Tax
Information
If the Fund earns income or
realizes capital gains, it intends to make distributions that may be taxed as
ordinary income, qualified dividend income or capital gains by federal, state
and local authorities.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the Davis
Select Worldwide ETF through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your individual financial adviser to recommend the Fund over another investment.
Ask your individual financial adviser or visit your financial intermediary’s
website for more information.
Prospectus |
Davis Fundamental ETF Trust | 16
Davis Select Financial ETF
Summary | Ticker: DFNL
Investment
Objective
The Fund seeks long-term
growth of capital.
Fees
and Expenses of the Fund
These
tables describe the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
Annual Fund Operating
Expenses (expenses that you pay
each year as a percentage of the value of your investment) |
|
Management Fees |
0.55% |
Other Expenses |
0.xx% |
Total Annual Operating Expenses |
0.xx% |
Less Fee Waiver or Expense Reimbursement* |
0.00% |
Net Expenses |
0.xx% |
|
* |
The Adviser is contractually committed to
waive fees and/or reimburse the Fund’s expenses to the extent necessary to
cap total annual fund operating expenses at 0.65%. The Adviser is
obligated to continue the expense cap through March 1, 2025. The expense
cap cannot be modified prior to this date without the consent of the Board
of Trustees. After that date, there is no assurance that the Adviser will
continue to cap expenses. The Adviser may not recoup any of the operating
expenses it has reimbursed to the Fund. |
Example. This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds. This Example does not take into account brokerage commissions that
you may pay when purchasing or selling shares. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem 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:
1 Year |
3 Years |
5 Years |
10 Years |
$xx |
$xx |
$xx |
$xx |
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 xx% of the average value of its
portfolio.
Principal
Investment Strategies
The Fund is an actively
managed exchange-traded fund (“ETF”). Davis Selected Advisers, L.P. (“Davis
Advisors” or the “Adviser”), the Fund’s investment adviser, uses the Davis
Investment Discipline to invest, under normal market conditions, at least 80% of
the Fund’s net assets plus any borrowings for investment purposes in securities
issued by companies principally engaged in the financial services sector. The
Fund is non-diversified and, therefore, is allowed to focus its investments in
fewer companies than a fund that is required to diversify its portfolio. The
Fund’s portfolio generally contains between 15 and 35 companies, although the
precise number of its investments will vary over time. The Fund invests,
principally, in common stocks (including indirect holdings of common stock
through depositary receipts). The Fund may invest in large, medium or small
companies without regard to market capitalization and may invest in issuers in
foreign countries, including countries with developed or emerging markets. These
non-U.S. company investments may include American Depositary Receipts (“ADRs”)
and Global Depositary Receipts (“GDRs” and together “Depositary Receipts”).
Depositary Receipts are receipts that represent ownership of shares of a
non-U.S. issuer held in trust by a bank or similar financial institution.
A company is principally
engaged in financial services if it owns financial services-related assets that
constitute at least 50% of the value of all of its assets, or if it derives at
least 50% of its revenues from providing financial services. Companies are
classified by GICS based on their principal business activity. Revenue is a key
factor in determining a firm’s principal business activity. Companies with their
principal business activity in one of the following areas are considered
financial services firms: banks, thrifts and mortgage, specialized finance,
consumer finance, asset management, custody, investment banking, brokerage,
insurance, financial exchanges and data, and mortgage REITs.
Prospectus |
Davis Fundamental ETF Trust | 17
Davis Investment
Discipline. Davis Advisors manages equity funds using the Davis
Investment Discipline. Davis Advisors conducts extensive research to try to
identify businesses that possess characteristics that Davis Advisors believes
foster the creation of long-term value, such as proven management, a durable
franchise and business model, and sustainable competitive advantages. Davis
Advisors aims to invest in such businesses when they are trading at discounts to
their intrinsic worth. Davis Advisors emphasizes individual stock selection and
believes that the ability to evaluate management is critical. Davis Advisors
routinely visits managers at their places of business in order to gain insight
into the relative value of different businesses. Such research, however
rigorous, involves predictions and forecasts that are inherently uncertain.
After determining which companies Davis Advisors believes the Fund should own,
Davis Advisors then turns its analysis to determining the intrinsic value of
those companies’ equity securities. Davis Advisors seeks companies whose equity
securities can be purchased at a discount from Davis Advisors’ estimate of the
company’s intrinsic value based upon fundamental analysis of cash flows, assets
and liabilities, and other criteria that Davis Advisors deems to be material on
a company-by-company basis. Davis Advisors’ goal is to invest in companies for
the long term (ideally, five years or longer, although this goal may not be
met). Davis Advisors considers selling a company’s equity securities if the
securities’ market price exceeds Davis Advisors’ estimates of intrinsic value,
if the ratio of the risks and rewards of continuing to own the company’s equity
securities is no longer attractive, to raise cash to purchase a more attractive
investment opportunity, to satisfy net redemptions or for other purposes.
Principal
Risks of Investing in Davis Select Financial ETF
You
may lose money by investing in Davis Select Financial ETF and the Fund’s
performance could trail that of other investments. Investors in the Fund should
have a long-term perspective and be able to tolerate potentially sharp declines
in value.
The principal risks of
investing in the Fund are:
Stock Market Risk. Stock
markets tend to move in cycles, with periods of rising prices and periods of
falling prices, including the possibility of sharp declines.
Common Stock Risk. Common
stock represents an ownership position in a company. An adverse event may have a
negative impact on a company and could result in a decline in the price of its
common stock. Common stock is generally subordinate to an issuer’s other
securities, including preferred, convertible and debt securities.
Market Trading Risk. The Fund is subject to a number of market
trading risks, which include the possibility of an inactive market for Fund
shares, losses from trading in secondary markets, periods of high volatility and
disruptions in the creation/redemption process. ONE OR MORE OF THESE FACTORS, AMONG OTHERS, COULD LEAD
TO THE FUND’S SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV. The Fund’s
market price may vary from the value of the Fund’s underlying portfolio
holdings, particularly in times of market stress. This difference may be
reflected as a spread between the bid and ask prices for the Fund shares during
the day or a premium or discount in the closing market price of the Fund when
compared to the NAV. An investor may pay significantly more or receive
significantly less than the underlying value of the Fund shares bought or
sold.
Exchange-Traded Fund
Risk. The Fund is an actively
managed exchange-traded fund and trades like common stock on an exchange. The
Fund is subject to the risks of owning the underlying securities, as well as the
risks of owning an exchange-traded fund generally. The management fees of an
actively managed exchange-traded fund are generally higher and can increase the
Fund’s expenses. The market for the Fund’s shares may become less liquid in
response to the deteriorating liquidity in the market for the Fund’s underlying
portfolio holdings. A loss of liquidity for Fund shares could lead to
differences between the market price of the Fund shares and the underlying value
of the Fund shares.
Financial Services
Risk. Risks of investing in
the financial services sector include: (1) systemic risk: factors outside the
control of a particular financial institution may adversely affect the ability
of the financial institution to operate normally or may impair its financial
condition; (2) regulatory actions: financial services companies may suffer
setbacks if regulators change the rules under which they operate; (3) changes in
interest rates: unstable and/or rising interest rates may have a
disproportionate effect on companies in the financial services sector; (4)
non-diversified loan portfolios: financial services companies may have
concentrated portfolios that makes them vulnerable to economic conditions that
affect an industry; (5) credit: financial services companies may have exposure
to investments or agreements that may lead to losses; and (6) competition: the
financial services sector has become increasingly competitive.
Credit Risk. Financial institutions are often highly
leveraged and may not be able to make timely payments of interest and
principal.
Interest Rate Sensitivity
Risk. Interest rates may have
a powerful influence on the earnings of financial institutions.
Focused Portfolio Risk.
Funds that invest in a limited number of companies may have more risk because
changes in the value of a single security may have a more significant effect,
either negative or positive, on the value of the Fund’s total portfolio.
Headline Risk. The Fund may
invest in a company when the company becomes the center of controversy after
receiving adverse media attention concerning its operations, long-term
prospects, management or for other reasons. While Davis Advisors
Prospectus |
Davis Fundamental ETF Trust | 18
researches companies
subject to such contingencies, it cannot be correct every time and the company’s
stock may never recover or may become worthless.
Foreign Country Risk. Securities of foreign companies
(including Depositary Receipts) may be subject to greater risk, as foreign
economies may not be as strong or diversified, foreign political systems may not
be as stable and foreign financial reporting standards may not be as rigorous as
they are in the United States. There may also be less information publicly
available regarding the non-U.S. issuers and their securities. These securities
may be less liquid (and, in some cases, may be illiquid) and could be harder to
value than more liquid securities.
Large-Capitalization Companies
Risk. Companies with $10 billion or more in market capitalization are
considered by the Adviser to be large-capitalization companies.
Large-capitalization companies generally experience slower rates of growth in
earnings per share than do mid- and small-capitalization companies.
Manager Risk. Poor security
selection or focus on securities in a particular sector, category or group of
companies may cause the Fund to underperform relevant benchmarks or other funds
with a similar investment objective. Even if the Adviser implements the intended
investment strategies, the implementation of the strategies may be unsuccessful
in achieving the Fund’s investment objective.
Authorized Participant
Concentration Risk. Only an
Authorized Participant (“AP”) (as defined in the “Creations and Redemptions” section of the
Fund’s prospectus) may engage in creation and/or redemption transactions
directly with the Fund. The Fund has a limited number of financial
intermediaries that act as APs. To the extent that these intermediaries exit the
business or are unable or unwilling to proceed with creation and/or redemption
orders with respect to the Fund and no other AP is able to step forward to
create or redeem Creation Units, Fund shares may trade at a discount to net
asset value (“NAV”) and could face delisting. There are a limited number of
financial institutions that may act as APs that post collateral for certain
trades on an agency basis (i.e., on behalf of other market participants). To the
extent that those APs exit the business or are unable to process creation and/or
redemption orders and no other AP is able to step forward to do so, there may be
a significantly diminished trading market for the ETF’s shares. In addition,
please note that this could in turn lead to differences between the market price
of the ETF’s shares and the underlying value of those shares.
Cybersecurity Risk. A
cybersecurity breach may disrupt the business operations of the Fund or its
service providers. A breach may allow an unauthorized party to gain access to
Fund assets, customer data or proprietary information, or cause the Fund and/or
its service providers to suffer data corruption or lose operational
functionality.
Depositary Receipts Risk.
American Depositary Receipts, European Depositary Receipts and Global Depositary
Receipts (“Depositary Receipts”) are certificates evidencing ownership of shares
of a foreign issuer. Depositary Receipts are subject to many of the risks
associated with investing directly in foreign securities. Depositary Receipts
may trade at a discount or a premium to the underlying security and may be less
liquid than the underlying securities listed on an exchange.
Fees and Expenses Risk. The
Fund may not earn enough through income and capital appreciation to offset the
operating expenses of the Fund. All mutual funds incur operating fees and
expenses. Fees and expenses reduce the return that a shareholder may earn by
investing in a fund, even when a fund has favorable performance. A low-return
environment, or a bear market, increases the risk that a shareholder may lose
money.
Foreign Currency Risk. The change in value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar value of
securities denominated in that foreign currency. For example, when the Fund
holds a security that is denominated in a foreign currency, a decline of that
foreign currency against the U.S. dollar would generally cause the value of the
Fund’s shares to decline.
Emerging Market Risk.
Securities of issuers in emerging and developing markets may offer special
investment opportunities, but present risks relating to political, economic or
regulatory conditions not found in more mature markets, such as government
controls on foreign investments, government restrictions on the transfer of
securities and less developed trading markets, exchanges, reporting standards
and legal and accounting systems.
Mid- and Small-Capitalization
Companies Risk. Companies with less than $10 billion in market
capitalization are considered by the Adviser to be mid- or small-capitalization
companies. Mid- and small-capitalization companies typically have more limited
product lines, markets and financial resources than larger companies, and their
securities may trade less frequently and in more limited volume than those of
larger, more mature companies.
Shareholder Concentration
Risk. From time to time, a relatively large percentage (over 20%) of the
Fund’s shares may be held by related shareholders. A large redemption by one or
more of such shareholders may reduce the Fund’s liquidity, may increase the
Fund’s transactions and transaction costs, may result in substantial capital
gains distributions for shareholders, and may increase the Fund’s ongoing
operating expenses, which could negatively impact the remaining shareholders of
the Fund.
Your
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency, entity
or person.
Prospectus |
Davis Fundamental ETF Trust | 19
Performance
Results
The bar chart below
provides some indication of the risks of investing in the Fund by showing how
the Fund’s investment results have varied from year to year. The following table
shows how the Fund’s average annual total returns, for the periods indicated,
compare with those of the S&P 500®
Index, a broad-based securities market index, and the S&P 500®
Financials Index. The Fund’s past performance (before and after taxes) is not
necessarily an indication of how the Fund will perform in the future. Updated
information on the Fund’s results can be obtained by visiting www.davisetfs.com or by calling 1‑800‑279‑0279.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes. Actual after-tax
returns depend on an investor’s tax situation and may differ from those shown,
and after-tax returns shown are not relevant to investors who hold their Fund
shares through a tax-deferred arrangement, such as a 401(k) plan or an
individual retirement account.
Calendar Year Total
Returns |
|
Highest/Lowest quarterly results during the
time period were:
Highest 27.23% (quarter ended
December 31, 2020)xx
Lowest -34.28% (quarter ended
March 31, 2020)xx |
Average Annual Total Returns
(For the periods ended December 31,
2023) |
Past 1 Year |
Past 5 Years |
Since
Inception (1/11/17) |
Return before taxes |
xx% |
xx% |
xx% |
Return after taxes on
distributions |
xx% |
xx% |
xx% |
Return after taxes on distributions and
sale of shares |
xx% |
xx% |
xx% |
S&P 500 Index reflects no deduction for fees, expenses or
taxes |
xx% |
xx% |
xx% |
S&P 500 Financials
Index reflects no deduction
for fees, expenses or taxes |
xx% |
xx% |
xx% |
Management
Investment Adviser. Davis
Selected Advisers, L.P. serves as the Fund’s investment adviser.
Sub-Adviser. Davis Selected
Advisers–NY, Inc., a wholly owned subsidiary of the Adviser, serves as the
Fund’s sub-adviser.
Portfolio Managers. As of
the date of this prospectus, the Portfolio Managers listed below are jointly and
primarily responsible for the day-to-day management of the Fund’s
portfolio.
Portfolio Managers |
Experience with this Fund |
Primary Title with Investment Adviser or
Sub-Adviser |
Christopher Davis |
Since January 2017 |
Chairman, Davis Selected Advisers, L.P. |
Pierce Crosbie |
Since December 2018 |
Vice President, Davis Selected Advisers–NY,
Inc. |
Purchase
and Sale of Fund Shares
The Fund is an actively
managed ETF. Individual shares of the Fund are listed on a national securities
exchange. Individual shares may only be bought and sold in the secondary market
through a broker or dealer at a market price. As the price of Fund shares is
based on the market price, and because ETF shares trade at a market price rather
than at NAV, shares may trade at a price greater than NAV (a premium) or less
than NAV (a discount). An investor may incur costs attributable to the
difference between the highest price a buyer is willing to pay to purchase
shares of a Fund (the bid) and the lowest price a seller is willing to accept
for shares of a Fund (the ask) when buying or selling shares in the secondary
market (the bid-ask spread). The Fund will only issue or redeem shares that have
been aggregated into blocks of 50,000 shares or multiples thereof (“Creation
Units”) to APs who have entered into agreements with the Fund’s distributor. The
Fund generally will issue or redeem Creations Units in return for a designated
portfolio of securities (and an amount of cash) the Fund specifies each day
(“Creation Basket”). Current information regarding the net asset value, market
price, premium and/or discount, and bid-ask spreads on a Fund can be obtained at
www.davisetfs.com.
Prospectus |
Davis Fundamental ETF Trust | 20
For important information
about the purchase and sale of Fund shares and tax information, please see the
“Buying and Selling Shares” section of
the Fund’s prospectus.
Tax
Information
If the Fund earns income or
realizes capital gains, it intends to make distributions that may be taxed as
ordinary income, qualified dividend income or capital gains by federal, state
and local authorities.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the Davis
Select Financial ETF through a broker-dealer or other
financial intermediary (such as a bank), the Fund and its related companies may
pay the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your individual financial adviser to recommend the Fund
over another investment. Ask your individual financial adviser or visit your
financial intermediary’s website for more information.
Prospectus |
Davis Fundamental ETF Trust | 21
Additional Information About Investment Objectives,
Principal Strategies and Principal Risks
This prospectus contains important information
about investing in the Funds. Please read this prospectus carefully before you
make any investment decisions. Additional information regarding the Funds is
available at www.davisetfs.com.
Shares of each Fund are
listed for trading on Cboe Global Markets, Inc. The Fund’s shares trade under
the trading symbols “DUSA” (Davis Select U.S. Equity ETF), “DINT” (Davis Select
International ETF), “DWLD” (Davis Select Worldwide ETF) and “DFNL” (Davis Select
Financial ETF).
Investment
Objective
Each Fund’s investment
objective is non-fundamental and may be changed by the Board of Trustees (the
“Board”) of Davis Fundamental ETF Trust (the “Trust”) without shareholder
approval. There is no assurance that a Fund will meet its investment
objective.
Principal
Investment Strategies
The principal risks, but
not the only risks, for each Fund are summarized in the summary section of this
Prospectus for each Fund as well as in each Fund’s Summary Prospectus. More
details on some of the principal investment strategies and risks are described
above and below. DUSA, DFNL, DINT and DWLD would provide Fund shareholders with
at least 60 days’ prior notice before changing its name policy. The statement of
additional information (“SAI”) includes a “Name
Policy” section, which contains additional information.
The risks described below
are a principal risk of each Fund, unless otherwise noted. The prospectus and
SAI contain a number of investment strategies and risks that may be important to
consider even though they are not principal investment strategies or principal
risks for a Fund. The prospectus also contains disclosure that describes Davis
Advisors’ process for determining when a Fund may pursue a non-principal
investment strategy.
Principal
Risks of Investing in the Funds
If you buy shares of a
Fund, you may lose some or all of the money that you invest. The investment
return and principal value of an investment in a Fund will fluctuate so that an
investor’s shares, when redeemed, may be worth more or less than their original
cost. The likelihood of loss may be greater if you invest for a shorter period
of time. This section describes the principal risks (but not the only risks)
that could cause the value of your investment in a Fund to decline, and which
could prevent it from achieving its stated investment objective.
The principal risks of
investing in the Funds, listed alphabetically, include:
China Risk – Generally (DWLD and
DINT only). Investment in Chinese securities may subject the Fund to
risks that are specific to China. China may be subject to significant amounts of
instability, including, but not limited to, economic, political, and social
instability. China’s economy may differ from the U.S. economy in certain
respects, including, but not limited to, general development, level of
government involvement, wealth distribution, and structure. The government of
China has historically demonstrated its control over almost every sector of the
Chinese economy through state ownership and/or administrative regulation. As an
example, the Chinese government has taken certain actions that influence prices
of goods and encouraged companies to invest in and has induced mergers in
certain industries, and may take such actions or similar actions now or in the
future. In addition, the Chinese government has taken actions which could
materially impact the business operations of certain industries, which could
impact underlying holdings. U.S. and Chinese regulators have, and may in the
future, impact the ability of Chinese companies to gain access to U.S. capital
markets.
As of January 31, 2024,
Davis Select International ETF and Davis Select Worldwide ETF had significant
exposure to shell companies with contractual arrangements with Variable Interest
Entities (“VIEs”), as defined below. For purposes of raising capital offshore on
exchanges outside of China, including on U.S. exchanges, many Chinese-based
operating companies are structured as VIEs. In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the government restricts foreign ownership to
raise capital from foreign investors. While the shell company has no equity
ownership of the VIE, these contractual arrangements permit the shell company to
consolidate the VIE’s financial statements with its own for accounting purposes
and provide for economic exposure to the performance of the underlying Chinese
operating company. Therefore, an investor in the listed shell company, such as
the Fund, will have exposure to the Chinese-based operating company only through
contractual arrangements and has no ownership in the Chinese-based operating
company. Furthermore, because the shell company only has specific rights
provided for in these service agreements with the VIE, its abilities to control
the activities at the Chinese-based operating company are limited and the
operating company may engage in activities that negatively impact investment
value.
Prospectus |
Davis Fundamental ETF Trust | 22
While the VIE structure has
been widely adopted, it is not formally recognized under Chinese law and
therefore there is a risk that the Chinese government could prohibit the
existence of such structures or negatively impact the VIE’s contractual
arrangements with the listed shell company by making them invalid. If these
contracts were found to be unenforceable under Chinese law, investors in the
listed shell company, such as the Fund, may suffer significant losses with
little or no recourse available. If the Chinese government determines that the
agreements establishing the VIE structures do not comply with Chinese law and
regulations, including those related to restrictions on foreign ownership, it
could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
government will not place similar restrictions on other industries.
Chinese law prohibits
investments by foreign investors in certain companies in certain industries.
Certain industries that impact minors may be at a higher risk of regulatory
action. The Chinese government placed new regulations on the companies related
to after-school tutoring and private educational services, one of which is
mandating that it must now be registered as a non-profit organization.
Common Stock Risk. Common stock represents ownership
positions in companies. The prices of common stock fluctuate based on changes in
the financial condition of their issuers and on market and economic conditions.
Events that have a negative impact on a business probably will be reflected in a
decline in the price of its common stock. Furthermore, when the total value of
the stock market declines, most common stocks, even those issued by strong
companies, likely will decline in value. Common stock is generally subordinate
to an issuer’s other securities, including preferred, convertible and debt
securities.
Cybersecurity Risk.
Intentional cybersecurity breaches include: (1) unauthorized access to
systems, networks or devices (such as through “hacking” activity); (2) infection
from computer viruses or other malicious software code; and (3) attacks that
shut down, disable, slow or otherwise disrupt operations, business processes,
website access or functionality. In addition, unintentional incidents can occur,
such as the inadvertent release of confidential information (possibly resulting
in the violation of applicable privacy laws).
A cybersecurity breach
could result in the loss or theft of customer data or funds, the inability to
access electronic systems (“denial of services”), loss or theft of proprietary
information or corporate data, physical damage to a computer or network system,
or costs associated with system repairs. Such incidents could cause the Fund,
the Fund’s adviser or sub-adviser, a financial intermediary, or other service
providers to incur regulatory penalties, reputational damage, additional
compliance costs or financial loss. In addition, such incidents could affect
issuers in which the Fund invests, and thereby cause the Fund’s investments to
lose value. Please see the SAI for additional cybersecurity risk
discussion.
Depositary Receipts Risk.
Securities of a foreign company may involve investing in Depositary
Receipts, which include American Depositary Receipts, European Depositary
Receipts, and Global Depositary Receipts, which are certificates evidencing
ownership of shares of a foreign issuer. These certificates, which may be
sponsored or unsponsored, are issued by depositary banks and, generally, trade
on an established market in the United States or elsewhere. The underlying
shares are held in trust by a custodian bank or similar financial institution in
the issuer's home country. The depositary bank may not have physical custody of
the underlying securities at all times and may charge fees for various services,
including forwarding dividends, interest, and corporate actions. Depositary
Receipts are alternatives to directly purchasing the underlying foreign
securities in their national markets and currencies. However, Depositary
Receipts continue to be subject to many of the risks associated with investing
directly in foreign securities. These risks include foreign exchange risk as
well as the political and economic risks of the underlying issuer's country.
Depositary Receipts may trade at a discount or a premium to the underlying
security and may be less liquid than the underlying securities listed on an
exchange.
Emerging Market Risk (DWLD, DINT,
and DFNL only). Securities of issuers in emerging and developing markets
may offer special investment opportunities, but present risks not found in more
mature markets. Those securities may be more difficult to sell at an acceptable
price and their prices may be more volatile than securities of issuers in more
developed markets. For example, Chinese securities may be subject to increased
volatility and pricing anomalies resulting from governmental influence, a lack
of publicly available information and/or political and social instability.
Settlements of trades may be subject to greater delays so that the Fund might
not receive the proceeds of a sale of a security on a timely basis. In unusual
situations, it may not be possible to repatriate sales proceeds in a timely
fashion. These investments may be very speculative.
Emerging markets might have
less developed trading markets and exchanges. These countries may have less
developed legal and accounting systems and investments may be subject to greater
risks of government restrictions on withdrawing the sale proceeds of securities
from the country. Companies operating in emerging markets may not be subject to
U.S. prohibitions against doing business with countries that are state sponsors
of terrorism. Economies of developing countries may be more
Prospectus |
Davis Fundamental ETF Trust | 23
dependent on relatively few
industries that may be highly vulnerable to local and global changes.
Governments may be more unstable and present greater risks of nationalization,
expropriation or restrictions on foreign ownership of stocks of local
companies.
Exposure to Industry or Sector
Risk. (DWLD and DINT only) Subject to a Fund’s investment limitations, a
Fund may have significant exposure to a particular industry or sector. Such
exposure may cause that Fund to be more impacted by risks relating to and
developments affecting the industry or sector, and thus its net asset value may
be more volatile than a fund without such levels of exposure. For example, if
the Fund has significant exposure in a particular industry, then economic,
regulatory, or other issues that negatively affect that industry may have a
greater impact on the Fund than on a fund that is more diversified. The SAI
contains additional discussion of the risks of exposure to certain industries or
sectors. An industry weighting breakdown for each Fund can be found in the most
recent annual or semi-annual report.
Financial Services Risk (DUSA and
DFNL only). A company is “principally engaged” in financial services if
it owns financial services related assets constituting at least 50% of the total
value of its assets, or if at least 50% of its revenues are derived from its
provision of financial services. The financial services sector consists of
several different industries that behave differently in different economic and
market environments, including, for example, banking, insurance, and securities
brokerage houses. Companies in the financial services sector include: commercial
banks, industrial banks, savings institutions, finance companies, diversified
financial services companies, investment banking firms, securities brokerage
houses, investment advisory companies, leasing companies, insurance companies
and companies providing similar services. Due to the wide variety of companies
in the financial services sector, they may react in different ways to changes in
economic and market conditions.
Risks of investing in the
financial services sector include: (1) systemic risk: factors outside the
control of a particular financial institution–like the failure of another,
significant financial institution or material disruptions to the credit
markets–may adversely affect the ability of the financial institution to operate
normally or may impair its financial condition; (2) regulatory actions:
financial services companies may suffer setbacks if regulators change the rules
under which they operate; (3) changes in interest rates: unstable and/or rising
interest rates may have a disproportionate effect on companies in the financial
services sector; (4) non-diversified loan portfolios: financial services
companies, whose securities the Fund purchases, may themselves have concentrated
portfolios, such as a high level of loans to real estate developers, which makes
them vulnerable to economic conditions that affect that industry; (5) credit:
financial services companies may have exposure to investments or agreements,
which under certain circumstances may lead to losses, for example, sub-prime
loans; and (6) competition: the financial services sector has become
increasingly competitive.
Banking. Commercial banks (including “money
center” regional and community banks), savings and loan associations and holding
companies of the foregoing are especially subject to adverse effects of volatile
interest rates, concentrations of loans in particular industries or
classifications (such as real estate, energy or sub-prime mortgages), and
significant competition. The profitability of these businesses is, to a
significant degree, dependent on the availability and cost of capital funds.
Economic conditions in the real estate market may have a particularly strong
effect on certain banks and savings associations. Commercial banks and savings
associations are subject to extensive federal and, in many instances, state
regulation. Neither such extensive regulation nor the federal insurance of
deposits ensures the solvency or profitability of companies in this industry,
and there is no assurance against losses in securities issued by such
companies.
Insurance. Insurance companies are
particularly subject to government regulation and rate setting, potential
anti-trust and tax law changes, and industry-wide pricing and competition
cycles. Property and casualty insurance companies also may be affected by
weather, terrorism, long-term climate changes and other catastrophes. Life and
health insurance companies may be affected by mortality and morbidity rates,
including the effects of epidemics. Individual insurance companies may be
exposed to reserve inadequacies, problems in investment portfolios (for example,
real estate or “junk” bond holdings) and failures of reinsurance carriers.
Other Financial Services Companies. Many of
the investment considerations discussed in connection with banks and insurance
companies also apply to other financial services companies. These companies are
subject to extensive regulation, rapid business changes, and volatile
performance dependent on the availability and cost of capital and prevailing
interest rates and significant competition. General economic conditions
significantly affect these companies. Credit and other losses resulting from the
financial difficulty of borrowers or other third parties have a potentially
adverse effect on companies in this industry. Investment banking, securities
brokerage and investment advisory companies are particularly subject to
government regulation and the risks inherent in securities trading and
underwriting activities.
Other Regulatory Limitations. Regulations of
the Securities and Exchange Commission (“SEC”) impose limits on: (1) investments
in the securities of companies that derive more than 15% of their gross revenues
from the securities or investment management business (although there are
exceptions, the Fund is prohibited from investing more than 5% of its total
assets in a single company that derives more than 15% of its gross revenues from
the securities or investment management business); and (2) investments in
insurance companies. The Fund is generally prohibited from owning more than 10%
of the outstanding voting securities of an insurance company.
Prospectus |
Davis Fundamental ETF Trust | 24
Focused Portfolio Risk (DUSA and
DFNL only). Funds that invest
in a limited number of companies may have more risk because changes in the value
of a single security may have a more significant effect, either negative or
positive, on the value of the Fund’s total portfolio.
A fund may be classified as
a “non-diversified” fund under the 1940 Act, which means that it is permitted to
invest its assets in a more limited number of issuers than “diversified”
investment companies. A diversified investment company may not, with respect to
75% of its total assets, invest more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government securities and
securities of other investment companies) and may not own more than 10% of the
outstanding voting securities of any one issuer. While a fund may be a
non-diversified investment company, and therefore not subject to the statutory
diversification requirements discussed above, the Fund may still intend to
diversify its assets to the extent necessary to qualify for tax treatment as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the “Internal Revenue Code”).
At any given point in time,
a diversified fund may not meet the diversification test outlined above due to
appreciation in its portfolio holdings. In such case, the Fund is not required
to sell portfolio holdings to meet the diversification test.
Despite being
non-diversified for 1940 Act purposes the diversification standards under the
Internal Revenue Code require that a fund diversify its holdings so that, at the
end of each fiscal quarter, (1) at least 50% of the market value of a fund’s
assets are represented by cash, U.S. Government securities, securities of other
regulated investment companies and other securities limited with respect to any
one issuer to an amount not greater than 5% of a fund’s assets and 10% of the
outstanding voting securities of such issuer; and (2) not more than 25% of the
value of a fund’s assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other regulated investment
companies), or of two or more issuers which a fund controls (i.e., owns,
directly or indirectly, 20% of the voting stock) and which are determined to be
engaged in the same or similar trades or businesses or related trades or
businesses.
Foreign Country Risk. Foreign companies may issue both equity
and fixed income securities. A company may be classified as either “domestic” or
“foreign” depending upon which factors the Adviser considers most important for
a given company. Factors that the Adviser considers in classifying a company as
domestic or foreign include: (1) whether the company is organized under the laws
of the United States or a foreign country; (2) whether the company’s securities
principally trade in securities markets outside of the United States; (3) the
source of the majority of the company’s revenues or profits; and (4) the
location of the majority of the company’s assets. The Adviser generally follows
the country classification indicated by a third-party service provider, but may
use a different country classification if the Adviser’s analysis of the four
factors provided above, or other factors that the Adviser deems relevant,
indicate that a different country classification is more appropriate. Foreign
country risk can be more focused on factors concerning specific countries or
geographic areas when a Fund’s holdings are more focused in these countries or
geographic areas. The additional risk from certain countries or geographies is
described in more detail in the SAI. See the schedule of investments in the most
current shareholder report for the country classification of each holding.
The Funds invest a
significant portion of their assets in securities issued by companies operating,
incorporated or principally traded in foreign countries. Investing in foreign
countries involves risks that may cause the Funds’ performance to be more
volatile than it would be if the Funds invested solely in the United States.
Foreign economies may not be as strong or as diversified, foreign political
systems may not be as stable and foreign financial reporting standards may not
be as rigorous as they are in the United States. In addition, foreign capital
markets may not be as well developed, so securities may be less liquid,
transaction costs may be higher and investments may be subject to more
government regulation. When the Funds invest in foreign securities, the Funds’
operating expenses are likely to be higher than those of an investment company
investing exclusively in U.S. securities, since the custodial and certain other
expenses associated with foreign investments are expected to be higher.
Foreign Currency Risk. Securities issued by foreign companies in
foreign markets are frequently denominated in foreign currencies. The change in
value of a foreign currency against the U.S. dollar will result in a change in
the U.S. dollar value of securities denominated in that foreign currency. For
example, when the Fund holds a security that is denominated in a foreign
currency, a decline of that foreign currency against the U.S. dollar would
generally cause the value of the Fund’s shares to decline. A Fund may, but
generally, does not, hedge its currency risk.
Foreign Market Risk (DWLD and DINT
only). Because certain foreign holdings of the Fund may trade in a market
that is closed when the market in which the Fund’s shares are listed is open,
there may be changes between the last quote of the foreign holding from its
closed foreign market and the value of such security during the Fund’s domestic
trading day. This in turn could lead to differences between the market price of
the Fund’s shares and the underlying value of those shares.
Headline Risk. Davis Advisors seeks to acquire companies
with durable business models that can be purchased at attractive valuations
relative to what Davis Advisors believes to be the companies’ intrinsic values.
Davis Advisors may make such investments when a company becomes the center of
controversy after receiving adverse media attention. The company may be involved
in litigation, the company’s financial reports or corporate governance may be
challenged, the company’s public filings may disclose a weakness in internal
controls, greater government regulation may be contemplated or other adverse
events may
Prospectus |
Davis Fundamental ETF Trust | 25
threaten the company’s
future. While Davis Advisors researches companies subject to such contingencies,
Davis Advisors cannot be correct every time, and the company’s stock may never
recover or may become worthless.
Market Trading Risk. Each
Fund faces numerous market trading risks, including disruptions to the creation
and redemption processes of a Fund, losses from trading in secondary markets,
the existence of extreme market volatility or potential lack of an active
trading market for shares. These risks may result in shares trading at a
significant premium or discount to NAV. The NAV of shares will fluctuate with
changes in the market value of a Fund’s securities holdings. The market prices
of shares will fluctuate in accordance with changes in their NAV and supply and
demand. The Adviser cannot predict whether shares will trade below, at or above
their NAV. Price differences may be due, in large part, to the fact that supply
and demand forces for shares, at work in the secondary trading market, will be
closely related, but not identical to the same forces influencing the prices of
the securities in a Fund’s portfolio, trading individually or in the aggregate
at any point in time. The shareholder may sustain losses if a shareholder
purchases shares at a time when the market price is at a premium to the NAV or
sells shares at a time when the market price is at a discount to the NAV. Any of these factors, discussed above and further
below, among others, may lead to shares trading at a premium or discount to a
Fund’s NAV.
Absence of Prior Active Market. While each
Fund’s shares are expected to be listed on the Exchange, there can be no
assurance that an active trading market for shares will develop or be
maintained. The Distributor does not maintain a secondary market in
shares.
Trading Issues. Trading in shares on the
Exchange may be halted due to market conditions or for reasons that, in the view
of the Exchange, make trading in shares inadvisable. In addition, trading in
shares on the Exchange is subject to trading halts caused by extraordinary
market volatility pursuant to the Exchange’s “circuit breaker” rules. There can
be no assurance that the requirements of the Exchange necessary to maintain the
listing of shares of a Fund will continue to be met.
Trading Costs. Buying or selling Fund shares
on an Exchange involves two types of costs that apply to all securities
transactions. When buying or selling shares of a Fund through a broker, you will
likely incur a brokerage commission and other charges. In addition, you may
incur the cost of the “spread,” which is the difference between what investors
are willing to pay for Fund shares (the “bid” price) and the price at which they
are willing to sell Fund shares (the “ask” price). There may also be regulatory
and other charges that are incurred as a result of trading activity. Because of
the costs inherent in buying or selling Fund shares, frequent trading may
detract significantly from investment results and an investment in Fund shares
may not be advisable for investors who anticipate regularly making small
investments through a brokerage account.
Mid- and Small-Capitalization
Companies Risk. Companies with less than $10 billion in market
capitalization are considered by the Adviser to be mid- or small-capitalization
companies. Investing in mid- and small-capitalization companies may be more
risky than investing in large-capitalization companies. Smaller companies
typically have more limited product lines, markets and financial resources than
larger companies, and their securities may trade less frequently and in more
limited volume than those of larger, more mature companies. Securities of these
companies may be subject to volatility in their prices. They may have a limited
trading market, which may adversely affect the Fund’s ability to dispose of them
and can reduce the price the Fund might be able to obtain for them. Other
investors that own a security issued by a mid- or small-capitalization company
for whom there is limited liquidity might trade the security when the Fund is
attempting to dispose of its holdings in that security. In that case, the Fund
might receive a lower price for its holdings than otherwise might be obtained.
Mid- and small-capitalization companies also may be unseasoned. These include
companies that have been in operation for less than three years, including the
operations of any predecessors.
Shareholder
Concentration Risk.
From time to time, a relatively large percentage (over 20%) of the Fund’s shares
may be held by related shareholders. A large redemption by one or more of such
shareholders may reduce the Fund’s liquidity, may increase the Fund’s
transactions and transaction costs, may result in substantial capital gains
distributions for shareholders, and may increase the Fund’s ongoing operating
expenses, which could negatively impact the remaining shareholders of the
Fund.
Stock Market Risk. Stock
markets tend to move in cycles, with periods of rising prices and periods of
falling prices, including the possibility of sharp declines. As an example, U.S.
and international markets have experienced volatility in recent months and years
due to a number of economic, political and global macro factors including the
impact of the coronavirus (COVID-19) as a global pandemic, uncertainties
regarding interest rates, rising inflation, trade tensions and the threat of
tariffs imposed by the U.S. and other countries. While COVID-19 is no longer a
global pandemic as of 2023, the recovery from COVID-19 may last for a prolonged
period of time. In addition, as a result of continuing political tensions and
armed conflicts, including the war between Ukraine and Russia, the U.S. and the
European Union imposed sanctions on certain Russian individuals and companies,
including certain financial institutions, and have limited certain exports and
imports to and from Russia. The war may continue to contribute market
volatility. The Israel-Hamas war may lead to overall economic uncertainty and
negative impacts on the global economy and major financial markets. These
developments as well as other events could result in further market volatility
and negatively affect financial asset prices, the liquidity of certain
securities and the normal operations of securities exchanges and other markets.
Continuing market volatility as a result of recent market conditions or other
events may have an adverse effect on the performance of the Funds.
The Funds’ shares are not deposits or
obligations of any bank, are not guaranteed by any bank, are not insured by the
FDIC or any other agency, and involve investment risks, including possible loss
of the principal amount invested.
Prospectus |
Davis Fundamental ETF Trust | 26
Information
Concerning After-Tax Returns
As of the date of this
prospectus, the tax rates are 37% for ordinary income, 20% for qualified income
and 20% for long-term capital gains. An additional 3.8% tax imposed by the
Affordable Care Act is included on all investment income as part of the highest
marginal rate used in all after-tax performance calculations.
Non-Principal Investment
Strategies and Risks
Each Fund may implement
investment strategies that are not principal investment strategies if, in the
Adviser’s professional judgment, the strategies are appropriate. A strategy
includes any policy, practice, or technique used by the Funds to achieve its
investment objectives. Whether a particular strategy, including a strategy to
invest in a particular type of security, is a principal investment strategy
depends on the strategy’s anticipated importance in achieving the Funds’
investment objectives and how the strategy affects the Funds’ potential risks
and returns. In determining what is a principal investment strategy, the Adviser
considers, among other things, the amount of the Funds’ assets expected to be
committed to the strategy, the amount of the Funds’ assets expected to be placed
at risk by the strategy and the likelihood of the Fund losing some or all of
those assets from implementing the strategy. Non-principal investment strategies
are generally those investments that constitute less than 5% to 10% of the
Funds’ assets, depending upon their potential impact on the investment
performance of the Fund. There are exceptions to the 5% to 10% of assets test,
including, but not limited to, the percentage of the Funds’ assets invested in a
single industry or in a single country.
While the Adviser expects
to pursue each Fund’s investment objective by implementing the principal
investment strategies described in the Funds’ prospectus, a Fund may employ
non-principal investment strategies or securities if, in Davis Advisors’
professional judgment, the securities, trading or investment strategies are
appropriate. Factors that Davis Advisors considers in pursuing these other
strategies include whether the strategy (1) is likely to be consistent with
shareholders’ reasonable expectations; (2) is likely to assist the Adviser in
pursuing a Fund’s investment objective; (3) is consistent with a Fund’s
investment objective; (4) will not cause a Fund to violate any of its
fundamental or non-fundamental investment restrictions; and (5) will not
materially change a Fund’s risk profile from the risk profile that results from
following the principal investment strategies, as described in this prospectus
and further explained in the Funds’ SAI, as amended from time to time.
Depositary Receipts (DFNL
Only). As non-principal investment strategies, the Fund may invest no
more than 20% of its assets in Depositary Receipts (including sponsored ADRs and
GDRs).
Repurchase Agreements. The
Funds may enter into repurchase agreements. A repurchase agreement is an
agreement to purchase a security and to sell that security back to the original
owner at an agreed-on price. The resale price reflects the purchase price plus
an agreed-on incremental amount, which is unrelated to the coupon rate or
maturity of the purchased security. The repurchase obligation of the seller is,
in effect, secured by the underlying securities. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Funds could experience
both delays in liquidating the underlying securities and losses, including: (1)
possible decline in the value of the collateral during the period while the
Funds seek to enforce its rights thereto; (2) possible loss of all or a part of
the income during this period; and (3) expenses of enforcing its rights.
The Funds will enter into
repurchase agreements only when the seller agrees that the value of the
underlying securities, including accrued interest (if any), will at all times be
equal to or exceed the value of the repurchase agreement. The Funds may enter
into tri-party repurchase agreements in which a third-party custodian bank
ensures the timely and accurate exchange of cash and collateral. The majority of
these transactions run from day to day and delivery pursuant to the resale
typically occurs within one to seven days of the purchase. The Funds normally
will not enter into repurchase agreements maturing in more than seven
days.
Short-Term Investments.
Each Fund uses short-term investments, such as treasury bills and repurchase
agreements, to maintain flexibility while evaluating long-term
opportunities.
Temporary Defensive
Investments. A Fund may, but is not required to, use short-term
investments for temporary defensive purposes. In the event that the Portfolio
Managers anticipate a decline in the market values of the companies in which a
Fund invests (due to economic, political or other factors), they may reduce its
risk by investing in short-term securities until market conditions improve.
While a Fund is invested in short-term investments, it will not be pursuing its
long-term growth of capital investment objective. Unlike equity securities,
these investments will not appreciate in value when the market advances and will
not contribute to long-term capital growth.
For more details concerning
current investments and market outlook, please see the Funds’ most recent
shareholder report.
Management and
Organization
Davis Selected Advisers,
L.P. serves as the investment adviser for each of the Funds. Davis Advisors’
offices are located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756.
Davis Advisors provides investment advice to each of the Funds, manages their
business affairs and provides day-to-day administrative services. Davis Advisors
also serves as investment
Prospectus |
Davis Fundamental ETF Trust | 27
adviser for other mutual
funds and institutional and individual clients. Pursuant to the Investment
Advisory Agreement between Davis Advisors and the Trust, each Fund pays the
Adviser a monthly fee at an annual rate of 0.55% (stated as a percentage of the
average daily net assets of the Fund). A discussion regarding the basis for the
approval of the Funds’ Investment Advisory and service agreements by the Funds’
Trustees will be contained in the Funds’ most recent semi-annual report to
shareholders.
Davis Selected Advisers–NY,
Inc. serves as the sub-adviser for the Funds. Davis Selected Advisers–NY, Inc.’s
offices are located at 620 Fifth Avenue, 3rd Floor, New York, New York 10020.
Davis Selected Advisers–NY, Inc. provides investment management and research
services for each Fund and other institutional clients and is a wholly owned
subsidiary of Davis Advisors. Davis Selected Advisers–NY, Inc.’s fee is paid by
Davis Advisors, not the Funds.
Execution of Portfolio
Transactions. Davis Advisors places orders with broker-dealers for each
Fund’s portfolio transactions. Davis Advisors seeks to place portfolio
transactions with brokers or dealers who will execute transactions as
efficiently as possible and at the most favorable net price. In placing
executions and paying brokerage commissions or dealer markups, Davis Advisors
considers price, commission, timing, competent block trading coverage, capital
strength and stability, research resources and other factors. Subject to best
price and execution, Davis Advisors may place orders for a Fund’s portfolio
transactions with broker-dealers who have sold shares of that Fund. However,
when Davis Advisors places orders for its portfolio transactions, it does not
give any consideration to whether a broker-dealer has sold shares of a Fund. In
placing orders for a Fund’s portfolio transactions, the Adviser does not commit
to any specific amount of business with any particular broker-dealer.
Over the last three fiscal
years, each ending October 31, the Funds paid the following brokerage
commissions:
|
2023 |
2022 |
2021 |
DUSA |
|
|
|
Brokerage Commissions Paid |
$xx |
$39,656 |
$128,419 |
Brokerage as a Percentage of Average Net Assets |
xx% |
0.01% |
0.04% |
|
|
|
|
DINT |
|
|
|
Brokerage Commissions Paid |
$xx |
$52,300 |
$144,819 |
Brokerage as a Percentage of Average Net Assets |
xx% |
0.03% |
0.05% |
|
|
|
|
DWLD |
|
|
|
Brokerage Commissions Paid |
$xx |
$64,612 |
$222,954 |
Brokerage as a Percentage of Average Net Assets |
xx% |
0.02% |
0.06% |
|
|
|
|
DFNL |
|
|
|
Brokerage Commissions Paid |
$xx |
$9,055 |
$14,017 |
Brokerage as a Percentage of Average Net Assets |
xx% |
0.01% |
0.01% |
|
|
|
|
Portfolio
Managers
Christopher Davis has served as a Portfolio Manager of the
Davis Select U.S. Equity ETF and Davis Select Financial ETF since January 2017
and also manages other equity funds advised by Davis Advisors. Mr. Davis has
served as an Analyst and Portfolio Manager for Davis Advisors since 1989.
Danton Goei has served as a Portfolio Manager of the
Davis Select U.S. Equity ETF and Davis Select Worldwide ETF since January 2017,
of the Davis Select International ETF since March 2018, and also manages other
equity funds advised by Davis Advisors. Mr. Goei started with Davis Advisors as
a Research Analyst in 1998.
Pierce Crosbie has served
as a Portfolio Manager of the Davis Select Financial ETF since December 2018 and
also serves as a research analyst for other equity funds advised by Davis
Advisors. Mr. Crosbie joined Davis Advisors in 2008.
Mr. Davis and Mr. Goei are
jointly and primarily responsible for the day-to-day management of the Davis
Select U.S. Equity ETF portfolio. Mr. Davis and Mr. Crosbie are jointly and
primarily responsible for the day-to-day management of the Davis Select
Financial ETF portfolio. Mr. Goei is primarily responsible for the day-to-day
management of the Davis Select Worldwide ETF and the Davis Select International
ETF portfolios. A limited portion of each Fund’s assets may be managed by Davis
Advisors’ Research Analysts, subject to review by the Fund’s Portfolio
Managers.
The SAI provides additional
information about the Portfolio Managers’ compensation, other accounts managed
by the Portfolio Managers and the Portfolio Managers’ investments in the
Funds.
Prospectus |
Davis Fundamental ETF Trust | 28
Certain Portfolio Managers
may serve on the board(s) of public companies where they, from time to time, may
have access to material, non-public information (“MNPI”). Davis Advisors has
instituted policies and procedures to ensure that these Portfolio Managers will
not be able to utilize MNPI for their own benefit or for any of the accounts
they manage.
Administrator,
Custodian and Transfer Agent
State Street Bank and Trust Company (“State
Street”) is the administrator, custodian and transfer agent for each Fund.
Additional
shareholder information, including how to buy and sell shares of the Funds, is
available, free of charge, by calling toll-free: 1‑800‑279‑0279 or visiting our website at www.davisetfs.com.
Procedures and
Shareholder Rights are Described by Current Prospectus and Other Disclosure
Documents
Investors should look to the most recent prospectus and
SAI, as amended or supplemented from time to time, for information concerning
the Funds, including information on how to purchase and redeem Fund shares and
how to contact the Funds. The most recent prospectus and SAI (including any
supplements or amendments thereto) will be on file with the Securities and
Exchange Commission as part of the Funds’ registration statement. Please also
see the back cover of this prospectus for information on other ways to obtain
information about the Funds.
Buying and Selling Shares
The shares of each Fund
have been approved for primary listing on Cboe Global Markets, Inc. Shares of
each Fund are available for trading during the trading day. Shares can be bought
and sold throughout the trading day like shares of other publicly traded
companies. The Funds do not impose any minimum investment for shares of a Fund
purchased on an exchange or otherwise in the secondary market. The Funds’ shares
trade under the trading symbols “DUSA” (Davis Select U.S. Equity ETF), “DINT”
(Davis Select International ETF), “DWLD” (Davis Select Worldwide ETF) and “DFNL”
(Davis Select Financial ETF).
If you buy or sell shares
in the secondary market, you will incur customary brokerage commissions and
other charges on your purchase and sale transactions. The commission is
frequently a fixed amount and may be a significant proportional cost for
investors seeking to buy or sell small amounts of shares.
In addition, you may incur
the cost of the “spread,” that is, any difference between the bid price and the
ask price in the secondary market on each leg of a round trip (purchase and
sale) transaction. The spread varies over time for shares of a Fund based on its
trading volume and market liquidity. In times of severe market disruption or low
trading volume in a Fund’s shares, this spread can increase significantly.
It is anticipated that
shares will trade in the secondary market at prices that differ to varying
degrees from the NAV of shares (see the section “How Your Shares are Valued” for more
information). During periods of disruptions to creations and redemptions or the
existence of extreme market volatility, the market prices of shares are more
likely to differ significantly from the shares’ NAV. Generally, the spread is
lower if a Fund has high trading volume and market liquidity, and higher if a
Fund has little trading volume and market liquidity (which is often the case for
funds that are newly launched or small in size). A Fund’s spread may also be
impacted by the liquidity of the underlying securities it holds, particularly
for newly launched or smaller funds or in instances of significant volatility of
the underlying securities.
The Depository Trust
Company (“DTC”) serves as securities depository for each Fund’s shares. The
shares may be held only in book-entry form; stock certificates will not be
issued. DTC, or its nominee, is the record or registered owner of all
outstanding shares. Beneficial ownership of shares will be shown on the records
of DTC or its participants. Beneficial owners of shares are not considered the
registered holder thereof and are subject to the same restrictions and
procedures as any beneficial owner of stocks held in book-entry or “street name”
form. DTC, or its nominee, is the record owner of all outstanding shares of the
Funds and is recognized as the owner of all shares for all purposes. For more
information on book-entry form, see the section in the Funds’ SAI that describes
it in further detail.
The Exchange is open for
trading Monday through Friday and is closed on weekends and the following
holidays: New Year’s Day, Martin Luther King Jr. Day, Washington’s Birthday,
Good Friday, Memorial Day, Juneteenth National Independence Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Because non-U.S. exchanges
may be open on days when the Exchange is not open, the value of the securities
in a Fund’s portfolio may change on days when shareholders will not be able to
purchase or sell the Funds’ shares.
Shares of a Fund may be acquired or redeemed directly
from a Fund only in Creation Units or multiples thereof, as discussed in the
“Creations and Redemptions” section of
this prospectus. Only an AP (as defined in the
“Creations and Redemptions” section below) may
engage in creation or redemption transactions directly with a Fund. Once
created, shares of a Fund generally trade in the secondary market in amounts
less than a Creation Unit.
Section 12(d)(1) of the
1940 Act restricts investments by investment companies in the securities of
other investment companies. Registered investment companies are permitted to
invest in each Fund beyond the limits set forth in Section 12(d)(1),
subject
Prospectus |
Davis Fundamental ETF Trust | 29
to certain terms and
conditions set forth in SEC rules or in an SEC exemptive order issued to the
Trust. In order for a registered investment company to invest in shares of a
Fund beyond the limitations of Section 12(d)(1) pursuant to the exemptive relief
obtained by the Trust, the registered investment company must enter into an
agreement with the Trust.
How Your Shares Are Valued
The NAV of a Fund’s shares
is determined by taking the market value of the Fund’s total assets, subtracting
the Fund’s liabilities and then dividing the result (net assets) by the number
of the Fund’s shares outstanding. The NAV of each Fund is determined each
business day as of the close of trading (ordinarily 4:00 p.m., Eastern time) on
the New York Stock Exchange, generally, based on prices at the time of closing,
provided that Fund assets or liabilities denominated in foreign currencies are
converted into U.S. dollars at the current market rates on the date of valuation
as quoted by one or more sources. A business day is generally each day that the
NYSE is open for trading. Expenses and fees, including the Management Fee, are
accrued daily and taken into account for purposes of determining NAV.
The value of the securities
and other assets and liabilities held by a Fund is determined pursuant to
valuation policies and procedures. Each Fund’s assets and liabilities are valued
on the basis of market quotations, when readily available.
Valuation
of Portfolio Securities
The Board of Trustees of
the Davis Fundamental ETF Trust has delegated the determination of fair value of
securities to Davis Selected Advisers, L.P. The Adviser has implemented policies
and procedures that govern the pricing of securities for the Funds, as discussed
below:
Each Fund values securities
for which market quotations are readily available at current market value.
Short-term securities are valued at amortized cost. Securities listed on the
NYSE and Cboe Global Markets, Inc. (and other national exchanges) are valued at
the last reported sales price on the day of valuation. Securities traded in the
OTC market and listed securities for which no sale was reported on that date are
valued at the last quoted bid price. Securities traded on foreign exchanges are
valued based upon the last sales price on the principal exchange on which the
security is traded, prior to the time when the Fund’s assets are valued.
Securities (including
illiquid securities) for which market quotations are not readily available are
valued at their fair value. Securities whose values have been materially
affected by a significant event occurring before a Fund’s assets are valued but
after the close of their respective exchanges, will be fair valued. Fair value
is determined in good faith using consistently applied procedures. Fair
valuation is based on subjective factors and, as a result, the fair value price
of a security may differ from the security’s market price and may not be the
price at which the security may be sold. Fair valuation could result in a
different NAV than an NAV determined by using market quotations. The Trustees
review and discuss with management a summary of fair valued securities in
quarterly board meetings.
In general, foreign
securities are more likely to require a fair value determination than domestic
securities because circumstances may arise between the close of the market on
which the securities trade and the time when a Fund values its portfolio
securities, which may affect the value of such securities. Securities
denominated in foreign currencies and traded in foreign markets will have their
values converted into U.S. dollar equivalents at the prevailing exchange rates,
as computed by State Street Bank and Trust Company. Fluctuation in the values of
foreign currencies in relation to the U.S. dollar may affect the net asset value
of a Fund’s shares even if there has not been any change in the foreign currency
prices of that Fund’s investments.
Securities of smaller
companies are also generally more likely to require a fair value determination
because they may be thinly traded and less liquid than traditional securities of
larger companies.
The Funds may occasionally
be entitled to receive award proceeds from litigation relating to an investment
security. The Funds generally do not recognize a gain on contingencies until
such payment is certain, which in most cases is when a Fund receives
payment.
To the extent that a Fund’s
portfolio investments trade in markets on days when the Fund is not open for
business, the Fund’s NAV may vary on those days. In addition, trading in certain
portfolio investments may not occur on days the Fund is open for business
because markets or exchanges other than the NYSE may be closed. If the exchange
or market on which the Fund’s underlying investments are primarily traded closes
early, the NAV may be calculated prior to its normal market calculation time.
For example, the primary trading markets for a Fund may close early on the day
before certain holidays and the day after Thanksgiving.
Fixed income securities may
be valued at prices supplied by a Fund’s pricing agent based on broker or dealer
supplied valuations or matrix pricing, a method of valuing securities by
reference to the value of other securities with similar characteristics, such as
rating, interest rate and maturity. Government bonds, corporate bonds,
asset-backed bonds, convertible securities and high-yield or junk bonds are
normally valued on the basis of prices provided by independent pricing
services.
Prospectus |
Davis Fundamental ETF Trust | 30
Prices provided by the
pricing services may be determined without exclusive reliance on quoted prices
and may reflect appropriate factors such as institutional trading in similar
groups of securities, developments related to special securities, dividend rate,
maturity and other market data. Prices for fixed income securities received from
pricing services sometimes represent best estimates. In addition, if the prices
provided by the pricing service and independent quoted prices are unreliable,
the Adviser will arrive at their own fair valuation using its fair value
procedures.
Premium
and Discount Information
Davis ETF’s website, which
is publicly accessible at no charge, contains, on a per share basis, the prior
business day’s NAV and market closing price or bid/ask price of the shares, a
calculation of the premium or discount of the market closing price or bid/ask
price against such NAV, and other relevant information about premiums and
discounts.
A description of the Funds’
policies and procedures, with respect to the disclosure of their portfolio
holdings, is available in the SAI.
Each
business day, before the commencement of trading in Fund shares on the Exchange,
the Trust publicly disseminates each Fund’s full portfolio holdings as of the
close of the previous day through its website at
www.davisetfs.com.
In addition, the Funds file
their complete schedule of investments with the SEC on Form N-CSR (as of the end
of the second and fourth quarters) and on Form N-PORT Part F (as of the end of
the first and third quarters). The Funds’ Forms N-CSR (Annual and Semi-Annual
Reports) and N-PORT Part F are available without charge, upon request, by
calling 1-800-279-0279, on the Funds’ website at www.davisetfs.com, and on the
SEC’s website at www.sec.gov.
How the Funds Pay Earnings
There are two ways you can
receive payments from a Fund:
◾ |
Dividends. Dividends are distributions to
shareholders of net investment income and short-term capital gains on
investments. |
◾ |
Capital Gains. Capital gains are profits received
by a Fund from the sale of securities held for the long term, which are
then distributed to shareholders. |
No dividend reinvestment
service is provided by the Funds. Broker-dealers may make available the DTC
book-entry dividend reinvestment service for the use of beneficial owners of a
Fund for reinvestment of their dividend distributions. Beneficial owners should
contact their broker to determine the availability and costs of the service and
the details of participation therein. Brokers may require beneficial owners to
adhere to specific procedures and timetables. If this service is available and
exercised, dividend distributions of both income and realized gains will be
automatically reinvested in additional whole shares of the same Fund purchased
in the secondary market.
Dividends
and Distributions
◾ |
Each Fund ordinarily distributes dividends and
capital gains, if any, at least annually but a Fund may make distributions
on a more frequent basis. Each Fund reserves the right to declare special
distributions if, in its reasonable discretion, such action is necessary
or advisable to preserve its status as a regulated investment company or
to avoid imposition of income or excise taxes on undistributed income or
realized gains. |
◾ |
When a dividend or
capital gain is distributed, the NAV per share is reduced by the amount of
the payment. |
◾ |
Dividend payments are
made through DTC participants and indirect participants to beneficial
owners, then of record, with proceeds received from a Fund. Your broker is
responsible for distributing any dividends and capital gain distributions
to you. |
The following discussion is
very general. Because each shareholder’s circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in a Fund. As with any investment, you should consider how your investment in
shares of a Fund will be taxed.
You will generally have to
pay federal income taxes, as well as any other state and local taxes, on any
distributions that may be received from a Fund. If you sell Fund shares, it is
generally considered a taxable event. The following table summarizes the tax
status to you of certain transactions related to a Fund:
Prospectus |
Davis Fundamental ETF Trust | 31
Transaction |
Federal Tax Status |
Sell of shares |
Usually capital gain or loss; long term, only if shares owned more
than one year |
Distributions of net capital gain (excess of net long-term capital gain over net
short-term capital loss) |
Long-term capital gain |
Ordinary dividends (including
distributions of net short-term capital gain) |
Ordinary income; certain dividends potentially taxable at long-term
capital gain rates |
Distributions
of net long-term capital gains (net long-term capital gains in excess of net
short-term capital losses), if any, are taxable to you as long-term capital
gains, regardless of how long you have owned your shares. Certain dividends may
be treated as “qualified dividend income,” which for non-corporate shareholders
is taxed at reduced rates. “Qualified dividend income” generally is income
derived from dividends paid by U.S. corporations or certain foreign corporations
that are either incorporated in a U.S. possession or eligible for tax benefits
under certain U.S. income tax treaties. In addition, dividends received from
foreign corporations may be treated as qualified dividend income, if the stock,
with respect to which the dividends are paid, is readily tradable on an
established U.S. securities market. A portion of the dividends received from a
Fund (but none of its capital gain distributions) may qualify for the
dividends-received deduction for corporate shareholders.
You may want to avoid
buying shares when a Fund is about to declare a dividend or distribution because
it will be taxable to you even though it may effectively be a return of a
portion of your investment. Similarly, shareholders that are investing through a
taxable account should consider the embedded gains or losses of a Fund. For
example, a new shareholder could be subject to taxes on a distribution received
from a Fund that was earned when not a shareholder. It is important to note that
investors are only taxed on their own economic income over the life of the
investment. The embedded gains or losses for each Fund are disclosed in the most
recent annual and semi-annual report.
The Funds’ dividends and
other distributions are generally treated as received by shareholders when they
are paid. However, if any dividend or distribution is declared by a Fund in
October, November or December of any calendar year and payable to shareholders
of record on a specified date in such a month, but is actually paid during the
following January, such dividend or distribution will be treated as received by
each shareholder on December 31 of the year in which it was declared.
To the extent a Fund
invests in foreign securities, it may be subject to foreign withholding taxes
with respect to dividends or interest the Fund received from sources in foreign
countries. If more than 50% of the total assets of a Fund consists of foreign
securities, such Fund will be eligible to elect to treat some of those taxes as
a distribution to shareholders, which would allow shareholders to offset some of
their U.S. federal income tax. A Fund (or its administrative agent) will notify
you if it makes such an election and provide you with the information necessary
to reflect foreign taxes paid on your income tax return.
Tax Status of Share
Transactions. Each sale of Fund shares or redemption of Creation Units
will generally be a taxable event. Any capital gain or loss realized upon a sale
of Fund shares is generally treated as a long-term gain or loss if the shares
have been held for more than twelve months. Any capital gain or loss realized
upon a sale of Fund shares held for twelve months or less is generally treated
as short-term gain or loss. Any capital loss on the sale of Fund shares held for
six months or less is treated as long-term capital loss to the extent
distributions of net capital gain were paid (or treated as paid) with respect to
such Fund shares. Any loss realized on a sale will be disallowed to the extent
Fund shares of the applicable Fund are acquired, including through reinvestment
of dividends, within a 61-day period beginning 30 days before and ending 30 days
after the sale of Fund shares. For tax purposes, an exchange of Fund shares of
one ETF for Fund shares of a different ETF is the same as a sale.
A person who exchanges
securities for Creation Units, generally, will recognize gain or loss from the
exchange. The gain or loss will be equal to the difference between the market
value of the Creation Units at the time of the exchange and the exchanger’s
aggregate basis in the securities surrendered plus any cash paid for the
Creation Units. A person who exchanges Creation Units for securities will
generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the Creation Units and the aggregate market value of the
securities and the amount of cash received.
Non-U.S. Investors. If you
are a nonresident alien individual or a foreign corporation, trust or estate,
(1) a Fund’s ordinary income dividends will generally be subject to a 30% U.S.
withholding tax, unless a lower treaty rate applies or unless such income is
effectively connected with a U.S. trade or business; but (2) gains from the sale
or other disposition of shares of a Fund, generally, are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. A Fund may, under certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if you are a foreign
shareholder entitled to claim the benefits of a tax treaty.
The foregoing discussion
summarizes some of the consequences under current federal tax law of an
investment in a Fund. It is not a substitute for personal tax advice. Consult
your personal tax advisor about the potential tax consequences of an investment
in a Fund under all applicable tax laws.
Prospectus |
Davis Fundamental ETF Trust | 32
Creations
and Redemptions
Prior to trading in the
secondary market, shares of a Fund are “created” at NAV by market makers, large
investors and institutions only in block-size Creation Units of 50,000 shares or
multiples thereof. Each “creator” or AP has entered into an agreement with the
Distributor, Foreside Fund Services, LLC.
A creation transaction,
which is subject to acceptance by the Distributor, generally, takes place when
an AP deposits into a Fund a designated portfolio of securities (including any
portion of such securities for which cash may be substituted) and a specified
amount of cash, approximating the holdings of that Fund, in exchange for a
specified number of Creation Units. To the extent practicable, the composition
of such portfolio generally corresponds pro rata to the holdings of a Fund.
However, creation and redemption baskets may differ and the Trust reserves the
right to permit or require the substitution of cash or other securities, also
known as a custom order.
Similarly, shares can be
redeemed only in Creation Units, generally, for a designated portfolio of
securities (including any portion of such securities for which cash may be
substituted) held by a Fund and a specified amount of cash. Except when
aggregated in Creation Units, shares are not redeemable by a Fund.
The prices at which
creations and redemptions occur are based on the next calculation of NAV after a
creation or redemption order is received in an acceptable form under the AP
Agreement.
Only an AP may create or
redeem Creation Units directly with a Fund.
In the event of a system
failure or other interruption, including disruptions at market makers or APs,
orders to purchase or redeem Creation Units either may not be executed according
to a Fund’s instructions or may not be executed at all, or a Fund may not be
able to place or change orders.
To the extent a Fund
engages in in-kind transactions, it intends to comply with the U.S. federal
securities laws in accepting securities for deposit and satisfying redemptions
with redemption securities by, among other means, assuring that any securities
accepted for deposit and any securities used to satisfy redemption requests will
be sold in transactions that would be exempt from registration under the
Securities Act of 1933, as amended (the “1933 Act”). Further, an AP that is not
a “qualified institutional buyer,” as such term is defined under Rule 144A of
the 1933 Act, will not be able to receive restricted securities eligible for
resale under Rule 144A.
Creations and redemptions
must be made through a firm that is either a member of the Continuous Net
Settlement System of the National Securities Clearing Corporation or a DTC
participant that has executed an agreement with the Distributor with respect to
creations and redemptions of Creation Unit aggregations. Information about the
procedures regarding creation and redemption of Creation Units (including the
cut-off times for receipt of creation and redemption orders) is included in the
Funds’ SAI.
Because new shares may be
created and issued on an ongoing basis, a “distribution,” as such term is used
in the 1933 Act, may be occurring at any point during the life of a Fund.
Broker-dealers and other persons are cautioned that some activities on their
part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner that could render them statutory
underwriters subject to the prospectus delivery and liability provisions of the
1933 Act. Any determination of whether one is an underwriter must take into
account all the relevant facts and circumstances of each particular case.
Broker-dealers should also
note that dealers who are not “underwriters,” but are participating in a
distribution (as contrasted to ordinary secondary transactions), and thus
dealing with shares that are part of an “unsold allotment” within the meaning of
Section 4(a)(3)(C) of the 1933 Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the 1933 Act. For
delivery of prospectuses to exchange members, the prospectus delivery mechanism
of Rule 153 under the 1933 Act is available only with respect to transactions on
a national securities exchange.
Costs
Associated with Creations and Redemptions
APs are charged standard
creation and redemption transaction fees to offset transfer and other
transaction costs associated with the issuance and redemption of Creation Units.
The standard creation and redemption transaction fees are set forth in the table
below. The standard creation transaction fee is charged to the AP on the day
such AP creates a Creation Unit and is the same regardless of the number of
Creation Units purchased by the AP on the applicable business day. Similarly,
the standard redemption transaction fee is charged to the AP on the day such AP
redeems a Creation Unit and is the same regardless of the number of Creation
Units redeemed by the AP on the applicable business day. Creations and
redemptions for cash (when cash creations and redemptions, in whole or in part,
are available or specified) are also subject to an additional charge as a
percentage of NAV (up to the maximum amounts shown in the table below). This
charge is intended to compensate for brokerage, tax, foreign exchange,
execution, price movement and other costs and expenses related to cash
transactions. Investors who use the services of a broker or other financial
intermediary to acquire or dispose of Fund shares may pay fees for such
services. The following table shows, as of January 31, 2024, the approximate
value of one Creation Unit, standard fees and maximum additional charges for
creations and redemptions, as described above:
Prospectus |
Davis Fundamental ETF Trust | 33
|
Approximate Value of a
Creation Unit |
Creation Unit
Size |
Standard Creation and
Redemption Fee: |
Maximum Additional
Charge for Creations |
Maximum Additional
Charge for Redemptions |
DUSA |
$xx |
50,000 |
$400 |
3.0% |
3.0% |
DINT |
$xx |
50,000 |
$400 |
3.0% |
3.0% |
DWLD |
$xx |
50,000 |
$400 |
3.0% |
3.0% |
DFNL |
$xx |
50,000 |
$400 |
3.0% |
3.0% |
Fees Paid to Dealers and
Other Financial Intermediaries
Davis Advisors and its affiliates may make payments to
broker-dealers, banks, registered investment advisers or other intermediaries
(“Qualifying dealers”) related to marketing and educational activities (e.g.,
presentations, training programs, conferences or their making shares of the
Funds available to their customers, including in certain investment programs).
These fees are paid by Davis Advisors or affiliates from their own resources.
Payments of this type are sometimes referred to as revenue-sharing payments. A
financial intermediary may make decisions about which investment options it
recommends or makes available and the level of services provided to its
customers based on the payments it is eligible to receive. Therefore, such
payments to an intermediary create conflicts of interest between the
intermediary and its customers and may cause the intermediary to recommend a
Fund over another investment. More information regarding these payments can be
found in the Funds’ SAI. Investors should consult their financial intermediaries
regarding the details of payments they may receive in connection with the sale
of Fund shares.
In 2023, the Adviser was
charged additional fees by the Qualifying dealer(s) listed below. The Adviser
paid these fees from its own resources. These Qualifying dealers may provide
Davis ETFs enhanced sales and marketing support, and financial advisers employed
by the Qualifying dealers may recommend Davis ETFs rather than other funds.
Qualifying dealers may be added or deleted at any time.
Morgan Stanley Smith Barney
LLC.
In addition, the Adviser
may, from time to time, pay additional cash compensation or other promotional
incentives to authorized dealers or agents who sell shares of Davis ETFs. In
some instances, such cash compensation or other incentives may be offered only
to certain dealers or agents who employ registered representatives who have sold
or may sell significant amounts of shares of Davis ETFs during specified periods
of time.
Although Davis ETFs may use
brokers who sell shares of the Funds to execute portfolio transactions, the
Funds do not consider the sale of Fund shares as a factor when selecting brokers
to execute portfolio transactions.
Due Diligence Meetings. The
Adviser routinely sponsors due diligence meetings for registered
representatives, during which they receive updates on various Davis ETFs and are
afforded the opportunity to speak with the Funds’ Portfolio Managers. Invitation
to these meetings is not conditioned on selling a specific number of shares.
Those who have shown an interest in Davis ETFs, however, are more likely to be
considered. To the extent permitted by their firm’s policies and procedures,
registered representatives’ expenses in attending these meetings may be covered
by the Adviser.
Seminars and Educational
Meetings. The Adviser may defray certain expenses of Qualifying dealers
incurred in connection with seminars and other educational efforts subject to
the Adviser’s policies and procedures governing payments for such seminars. The
Adviser may share expenses with Qualifying dealers for costs incurred in
conducting training and educational meetings about various aspects of the Funds
for the employees of Qualifying dealers. In addition, the Adviser may share
expenses with Qualifying dealers for costs incurred in hosting client seminars
at which the Fund is discussed.
Other Compensation. The
Adviser and affiliates may, from its own resources and not from a Fund’s, pay
additional fees to the extent not prohibited by state or federal laws, the SEC
or any self-regulatory agency, such as the Financial Industry Regulatory
Authority (FINRA).
Frequent Purchases and Redemptions of Fund
Shares
The Board has evaluated the risks of frequent purchases
and redemptions of Fund shares (“market timing”) by a Fund’s shareholders. The
Board has adopted a policy of not monitoring for market timing that appears to
attempt to take advantage of a potential arbitrage opportunity presented by a
lag between a change in the value of a Fund’s portfolio securities after the
close of the primary markets for a Fund’s portfolio securities and the
reflection of that change in its NAV, because it sells and redeems its shares
directly through transactions that are in-kind and/or for cash.
The Board noted that shares
can only be purchased and redeemed directly from a Fund in Creation Units by APs
and that the vast majority of trading in shares occurs on the secondary market.
Because secondary market trades do not involve a Fund directly, it is unlikely
those trades would cause many of the harmful effects of market timing, including
dilution, disruption of portfolio management, increases in a Fund’s trading
costs and the realization of capital gains. With respect to trades directly with
a Fund, to the extent affected in-kind, those trades do not cause any of the
harmful effects (as previously noted) that may
Prospectus |
Davis Fundamental ETF Trust | 34
result from frequent cash
trades. To the extent that a Fund allows or requires trades to be effected in
whole or in part in cash, the Board noted that those trades could result in
dilution to a Fund and increased transaction costs, which could negatively
impact its ability to achieve its investment objective. However, the Board noted
that direct trading by APs is critical to ensuring that shares trade at or close
to NAV. Each Fund also employs fair valuation pricing to minimize potential
dilution from market timing. Each Fund imposes transaction fees on in-kind
purchases and redemptions of shares to cover the custodial and other costs
incurred by a Fund in affecting in-kind trades; these fees increase if an
investor substitutes cash, in part or in whole, for securities, reflecting the
fact that a Fund’s trading costs increase in those circumstances. Given this
structure, the Board determined that it is not necessary to adopt policies and
procedures to detect and deter market timing of shares. The Board has not
adopted a policy of monitoring for other frequent trading activity because
shares of a Fund are listed for trading on a national securities exchange.
Prospectus |
Davis Fundamental ETF Trust | 35
The
financial highlights table is intended to help you understand the Funds’
financial performance for the past 5 years ended October 31, 2023. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a particular Fund, (assuming reinvestment of all
dividends and distributions). This information has been audited by KPMG LLP,
whose report, along with the Funds’ financial statements, are included in the
annual report, which is available upon request.
Prospectus |
Davis Fundamental ETF Trust | 36
DAVIS FUNDAMENTAL ETF
TRUST
The following financial information represents selected data for each share
of capital stock outstanding throughout each period:
Prospectus |
Davis Fundamental ETF Trust | 37
Financial Highlights
Prospectus |
Davis Fundamental ETF Trust | 38
Obtaining
Additional Information
Additional information
about the Funds’ investments is available in the Funds’ annual and semi-annual
reports to shareholders. In the Funds’ annual report, you will find a discussion
of the market conditions and investment strategies that significantly affected
the Funds’ performance during its last fiscal year. The SAI provides more
detailed information about the Davis Fundamental ETF Trust and its management
and operations. The SAI and the Funds’ annual and semi-annual reports are
available, without charge, upon request.
The Funds’ SAI and annual
report have been filed with the Securities and Exchange Commission, are
incorporated into this prospectus by reference, and are legally a part of this
prospectus.
Additional information can
be requested:
By Telephone. Call the
Funds’ toll-free at 1‑800‑279‑0279,
Monday through Friday, from 9 a.m. to 6 p.m. Eastern time. You may also call
this number for account inquiries.
By Mail. Write
to: Davis Fundamental ETF Trust
c/o
Davis Selected Advisers, L.P.
2949
E. Elvira Rd., Ste. 101
Tucson,
AZ 85756
On the Internet. Go
to: www.davisetfs.com
From the SEC. Additional copies of the registration
statement can be obtained, for a duplicating fee, by visiting the Public
Reference Room or writing the
Public Reference
Section of the SEC, Washington, DC 20549-1520, or by sending an
electronic request to
[email protected].
Reports and other information about the Funds are also available on the EDGAR
database on the SEC website (
www.sec.gov). For more information on the
operations of the Public Reference Room, call
1-202-551-8090.
Investment Company Act File
No. 811-23181