Prospectus
DIMENSIONAL
ETF TRUST
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Ticker: |
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Exchange: |
Dimensional US Core Equity Market ETF |
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DFAU |
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NYSE Arca, Inc. |
Dimensional US High Profitability ETF |
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DUHP |
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NYSE
Arca, Inc. |
Dimensional US Real Estate ETF |
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DFAR |
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NYSE
Arca, Inc. |
Dimensional US Small Cap Value ETF |
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DFSV |
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NYSE
Arca, Inc. |
Dimensional International Core Equity Market
ETF |
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DFAI |
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NYSE
Arca, Inc. |
Dimensional International Core Equity 2
ETF |
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DFIC |
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Cboe BZX Exchange, Inc. |
Dimensional International Small Cap Value
ETF |
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DISV |
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Cboe
BZX Exchange, Inc. |
Dimensional International Small Cap
ETF |
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DFIS |
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Cboe
BZX Exchange, Inc. |
Dimensional International High Profitability
ETF |
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DIHP |
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Cboe
BZX Exchange, Inc. |
Dimensional Emerging Core Equity Market
ETF |
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DFAE |
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NYSE
Arca, Inc. |
Dimensional Emerging Markets High Profitability
ETF |
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DEHP |
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NYSE
Arca, Inc. |
Dimensional Emerging Markets Value ETF |
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DFEV |
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NYSE
Arca, Inc. |
Dimensional Emerging Markets Core Equity 2
ETF |
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DFEM |
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NYSE
Arca, Inc. |
This
Prospectus describes the shares of the Portfolios which are for long‑term
investors.
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.
Table
of Contents
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v
Dimensional
US Core Equity Market ETF
Investment
Objective
The
investment objective of the Dimensional US Core Equity Market ETF (the “US Core
ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the U.S. Core Equity ETF. You may also
incur usual and customary brokerage commissions when buying or selling shares of
the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
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Management
Fee |
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0.12% |
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Other
Expenses |
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0.00% |
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Total
Annual Fund Operating Expenses |
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0.12% |
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EXAMPLE
This
Example is meant to help you compare the cost of investing in the US Core ETF
with the cost of investing in other funds. The Example assumes that you invest
$10,000 in the Portfolio for the time periods indicated. The Example also
assumes that your investment has a 5% return each year and that the Portfolio’s
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs whether you redeem or hold your
shares would be:
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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$ |
12 |
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$ |
39 |
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$ |
68 |
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$ |
154 |
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PORTFOLIO
TURNOVER
The
US Core ETF pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover may
indicate higher transaction costs and may result in higher taxes when Portfolio
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Portfolio’s
performance. During the period November 17, 2020 to October 31, 2021, the
Portfolio’s portfolio turnover rate was 3% of the average value of its investment
portfolio.
Principal
Investment Strategies
To
achieve the US Core ETF’s investment objective, Dimensional Fund Advisors LP
(the “Advisor”) implements an integrated investment approach that combines
research, portfolio design, portfolio management, and trading functions. As
further described below, the Portfolio’s design emphasizes long-term drivers of
expected returns identified by the Advisor’s research, while balancing risk
through broad diversification across companies and sectors. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
1
The
US Core ETF is designed to purchase a broad and diverse group of readily
marketable securities of U.S. companies that is composed of companies within the
U.S. Universe that meet the Advisor’s investment criteria. The Advisor defines
the “U.S. Universe” as a market capitalization weighted set (e.g., the larger
the company, the greater the proportion of the U.S. Universe it represents) of
U.S. operating companies listed on securities exchanges in the United States
that are deemed appropriate by the Advisor. The Portfolio will invest in
companies of all sizes, with increased exposure to smaller capitalization, lower
relative price, and higher profitability companies as compared to their
representation in the U.S. Universe. The Portfolio’s increased exposure to
smaller capitalization, lower relative price, and higher profitability companies
may be achieved by decreasing the allocation of the Portfolio’s assets to larger
capitalization, higher relative price, or lower profitability companies relative
to their weight in the U.S. Universe. An equity issuer is considered to have a
high relative price (i.e., a growth stock) primarily because it has a high price
in relation to its book value. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to their book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time. As a non‑fundamental
policy, under normal circumstances, the Portfolio will invest at least 80% of
its net assets in equity securities of U.S. companies. For purposes of the 80%
policy, the Advisor considers a U.S. company to be an operating company that is
principally traded on a securities exchange in the United States that is deemed
appropriate by the Advisor.
The
Advisor may also increase or reduce the US Core ETF’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
US Core ETF may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
US Core ETF may lend its portfolio securities to generate additional
income.
The
US Core ETF is an actively managed exchange traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the US Core ETF
will fluctuate, there is the risk that you will lose money.
An
investment in the Portfolio is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The following is a description of principal risks of
investing in the Portfolio.
Equity Market
Risk: Even a long-term investment approach cannot guarantee a
profit. Economic, market, political, and issuer-specific conditions and events
will cause the value of equity securities, and the Portfolio that owns them, to
rise or fall. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
Small and Mid-Cap
Company Risk: Securities of small and mid‑cap companies are often
less liquid than those of large companies and this could make it difficult to
sell a small or mid‑cap company security at a desired time or price. As a
result, small and mid‑cap company stocks may fluctuate relatively more in price.
In general, small and mid‑capitalization companies are also more vulnerable than
larger companies to adverse business or economic developments and they may have
more limited resources.
2
Profitability
Investment Risk: High relative profitability stocks may perform
differently from the market as a whole and an investment strategy purchasing
these securities may cause the Portfolio to at times underperform equity funds
that use other investment
strategies.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Market Trading Risk:
Active trading markets for Portfolio shares may not be developed
or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives Risk:
Derivatives are instruments, such as futures contracts, and
options thereon, whose value is derived from that of other assets, rates or
indices. The use of derivatives for non‑hedging purposes may be considered to
carry more risk than other types of investments. When the Portfolio uses
derivatives, the Portfolio will be directly exposed to the risks of those
derivatives. Derivative instruments are subject to a number of risks including
counterparty, liquidity, interest rate, market, credit and management risks, as
well as the risk of improper valuation. Changes in the value of a derivative may
not correlate perfectly with the underlying asset, rate or index, and the
Portfolio could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational Risk:
Operational risks include human error, changes in personnel,
system changes, faults in communication, and failures in systems, technology, or
processes. Various operational events or circumstances are outside the Advisor’s
control, including instances at third parties. The Portfolio and the Advisor
seek to reduce these operational risks through controls and procedures. However,
these measures do not address every possible risk and may be inadequate to
address these risks.
Cyber Security Risk:
The Portfolio’s and its service providers’ use of internet,
technology and information systems may expose the Portfolio to potential risks
linked to cyber security breaches of those technological or information systems.
Cyber security breaches, amongst other things, could allow an unauthorized party
to gain access to proprietary information, customer data, or fund assets, or
cause the Portfolio and/or its service providers to suffer data corruption or
lose operational functionality.
Large
Shareholder Risk: Certain shareholders,
including other funds or accounts advised by the Advisor, may from time to time
own a substantial amount of the Portfolio’s shares. In addition, a third party
investor, the Advisor, an authorized participant, a lead market maker, or
another entity may invest in the Portfolio and hold its investment for a limited
period of time solely to facilitate commencement of the Portfolio or to
facilitate the Portfolio achieving a specified size or scale. There can be no
assurance that any large shareholder would not redeem its investment,
that the size of the Portfolio would be maintained at such levels or that the
Portfolio would continue to meet applicable listing requirements. Redemptions by
large shareholders could have a
3
significant
negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
The bar chart
and table immediately following illustrate the variability of the US Core ETF’s
returns and are meant to provide some indication of the risks of investing in
the Portfolio. The bar chart shows the changes in the Portfolio’s performance
from year to year. The table illustrates how annualized one year
and since inception returns, both before and after taxes, compare with those of
a broad measure of market performance. The Portfolio’s past performance
(before and after taxes) is not an indication of future results.
Updated performance information for the Portfolio can be obtained by visiting
https://us.dimensional.com/etfs.
The after‑tax returns presented
in the table for the US Core ETF 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 in the table.
In addition, the after‑tax
returns shown are not relevant to investors who hold shares of the Portfolio
through tax‑deferred arrangements, such as 401(k) plans or individual retirement
accounts.
Dimensional
US Core Equity Market ETF—Total Returns
|
|
|
January
2021-December 2021 |
Highest
Quarter |
|
Lowest
Quarter |
9.90% (10/21-12/21) |
|
0.01% (7/21-9/21) |
Annualized
Returns (%)
Periods
ending December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
Since 11/17/20 Inception |
|
|
|
Dimensional US Core
Equity Market ETF |
|
|
|
|
|
|
|
|
|
|
Return
Before Taxes |
|
|
|
26.85 |
% |
|
|
|
29.78 |
% |
Return
After Taxes on Distributions |
|
|
|
26.30 |
% |
|
|
|
29.24 |
% |
Return
After Taxes on Distributions and Sale of Portfolio Shares |
|
|
|
15.87 |
% |
|
|
|
22.53 |
% |
|
|
|
Russell 3000
Index (reflects no deduction
for fees, expenses, or taxes on sales) |
|
|
|
25.66 |
% |
|
|
|
28.72 |
% |
4
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the US Core ETF. The
following individuals are responsible for leading the day‑to‑day management of
the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2020). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2020). |
|
• |
|
Allen Pu, Deputy Head of Portfolio
Management, North America, member of the Investment Committee, Vice
President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since 2022.
|
Purchase
and Sale of Fund Shares
The
US Core ETF will issue (or redeem) shares at NAV only to certain financial
institutions that have entered into agreements with the Portfolio’s distributor
in large aggregated blocks known as “Creation Units.” A Creation Unit of the
Portfolio consists of 50,000 shares. Creation Units are issued (or redeemed)
in‑kind for securities (and an amount of cash) that the Portfolio specifies each
day at the NAV next determined after receipt of an order.
Individual
US Core ETF shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the US Core ETF are taxable and
generally will be taxed as ordinary income, capital gains, or some combination
of both, unless you are investing through a tax‑advantaged arrangement, such as
a 401(k) plan or an individual retirement account, in which case distributions
may be taxed as ordinary income when withdrawn from the plan or account.
Payments
to Financial Intermediaries
If
you purchase the US Core ETF through a broker-dealer or other financial
intermediary (such as a bank), the Portfolio and its related companies may pay
the intermediary for the sale of the Portfolio shares and/or related services.
These payments may create a conflict of interest by influencing the financial
intermediary to recommend the Portfolio over another investment. Ask your
financial advisor or visit your financial intermediary’s website for more
information.
5
Dimensional
US High Profitability ETF
Investment
Objective
The
investment objective of the Dimensional US High Profitability ETF (the “US High
Profitability ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the US High Profitability ETF. You may
also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.19% |
|
Other
Expenses* |
|
|
|
0.05% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.24% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.02% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.22% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty-six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the US High
Profitability ETF with the cost of investing in other funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated. The
Example also assumes that your investment has a 5% return each year and that the
Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
PORTFOLIO
TURNOVER
The
US High Profitability ETF pays transaction costs, such as commissions, when it
buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. Because the Portfolio is new, information about
portfolio turnover rate is not yet available.
6
Principal
Investment Strategies
To
achieve the US High Profitability ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies and sectors. The Advisor’s portfolio management
and trading processes further balance those long-term drivers of expected
returns with shorter-term drivers of expected returns and trading costs.
The
Portfolio is designed to purchase a broad and diverse group of readily
marketable securities of large U.S. companies that the Advisor determines to
have high profitability relative to other U.S. large cap companies at the time
of purchase. An equity issuer is considered to have high profitability because
it has high earnings or profits from operations in relation to its book value or
assets. The Portfolio may emphasize certain stocks, including smaller
capitalization companies, lower relative price stocks, and/or higher
profitability stocks as compared to their representation in the large-cap, high
profitability segment of the U.S. market. The Portfolio’s increased
exposure to such stocks may be achieved by overweighting and/or underweighting
eligible stocks based on their market capitalization, relative price, and/or
profitability characteristics. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to its book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to
time.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in securities of U.S. companies. As of the date
of this Prospectus, for purposes of the Portfolio, the Advisor considers large
cap companies to be companies whose market capitalizations are generally in the
highest 90% of total market capitalization or companies whose market
capitalizations are larger than or equal to the 1,000th largest U.S. company
within the U.S. Universe, whichever results in the higher market capitalization
break. The Advisor generally defines the U.S. Universe as a portfolio of U.S.
operating companies listed on securities exchanges in the United States that are
deemed appropriate by the Advisor. Total market capitalization is based on the
market capitalization of eligible operating companies within the U.S. Universe.
Under the Advisor’s market capitalization guidelines described above, based on
market capitalization data as of December 31, 2021, the market
capitalization of a large cap company would be $10,142 million or above. This
threshold will change due to market
conditions.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum. In addition, the Advisor seeks to reduce trading costs
using a flexible trading approach that looks for opportunities to participate in
the available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
Portfolio may lend its portfolio securities to generate additional
income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the US High
Profitability ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
7
Equity Market
Risk: Even a long-term investment approach cannot guarantee a
profit. Economic, market, political, and issuer-specific conditions and events
will cause the value of equity securities, and the Portfolio that owns them, to
rise or fall. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling
prices.
Profitability
Investment Risk: High relative profitability stocks may
perform differently from the market as a whole and an investment strategy
purchasing these securities may cause the Portfolio to at times underperform
equity funds that use other investment
strategies.
Value Investment
Risk: Value stocks may perform differently from the market as
a whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Market Trading
Risk: Active trading markets for the Portfolio’s shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be
met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts,
and options thereon, whose value is derived from that of other assets, rates or
indices. The use of derivatives for non-hedging purposes may be
considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, liquidity, interest rate, market, credit and management
risks, as well as the risk of improper valuation. Changes in the value of a
derivative may not correlate perfectly with the underlying asset, rate or index,
and the Portfolio could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower
may fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational
Risk: Operational risks include human error, changes in
personnel, system changes, faults in communication, and failures in systems,
technology, or processes. Various operational events or circumstances are
outside the Advisor’s control, including instances at third parties. The
Portfolio and the Advisor seek to reduce these operational risks through
controls and procedures. However, these measures do not address every possible
risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of
internet, technology and information systems may expose the Portfolio to
potential risks linked to cyber security breaches of those technological or
information systems. Cyber security breaches, amongst other things, could allow
an unauthorized party to gain access to proprietary information, customer data,
or fund assets, or cause the Portfolio and/or its service providers to suffer
data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor,
the
8
Advisor,
an authorized participant, a lead market maker, or another entity may invest in
the Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the US High Profitability ETF because it has not yet completed a full calendar
year of operations. Updated performance information for the
Portfolio can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the US High Profitability
ETF. The following individuals are responsible for leading the day-to-day
management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
John A. Hertzer, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Mary T. Phillips, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
Purchase
and Sale of Fund Shares
The
US High Profitability ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 50,000 shares. Creation Units are issued (or
redeemed) in-kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual
Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid-ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
9
Tax
Information
The
dividends and distributions you receive from the US High Profitability ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the US High Profitability ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
10
Dimensional
US Real Estate ETF
Investment
Objective
The
investment objective of the Dimensional US Real Estate ETF (the “US Real Estate
ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the US Real Estate ETF. You may also
incur usual and customary brokerage commissions when buying or selling shares of
the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.17% |
|
Other
Expenses* |
|
|
|
0.05% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.22% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.03% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.19% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty-six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the US Real Estate
ETF with the cost of investing in other funds. The Example assumes that you
invest $10,000 in the Portfolio for the time periods indicated. The Example also
assumes that your investment has a 5% return each year and that the Portfolio’s
operating expenses remain the same. The costs for the Portfolio reflect the net
expenses of the Portfolio that result from the contractual expense waiver in the
first year only. Although your actual costs may be higher or lower, based
on these assumptions, your costs whether you redeem or hold your shares would
be:
PORTFOLIO
TURNOVER
The
US Real Estate ETF pays transaction costs, such as commissions, when it buys and
sells securities (or “turns over” its portfolio). A higher portfolio turnover
may indicate higher transaction costs and may result in higher taxes when
Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. Because the Portfolio is new, information about
portfolio turnover rate is not yet available.
11
Principal
Investment Strategies
To
achieve the US Real Estate ETF’s investment objective, the Advisor implements an
integrated investment approach that combines research, portfolio design,
portfolio management, and trading functions.
The
Portfolio, using a market capitalization weighted approach, will concentrate
investments in readily marketable equity securities of companies whose principal
activities include ownership, management, development, construction, or sale of
residential, commercial or industrial real estate. The Portfolio will
principally invest in equity securities of companies in certain real estate
investment trusts (“REITs”) and companies engaged in residential construction
and firms, except partnerships, whose principal business is to develop
commercial property. A company’s market capitalization is the number of its
shares outstanding times its price per share. Under a market capitalization
weighted approach, companies with higher market capitalizations generally
represent a larger proportion of the Portfolio than companies with relatively
lower market capitalizations. The Advisor may adjust the representation in the
Portfolio of an eligible company, or exclude a company, after considering such
factors as free float, momentum, trading strategies, liquidity, size, relative
price, profitability, and other factors that the Advisor determines to be
appropriate. An equity issuer is considered to have a low relative price (i.e.,
a value stock) primarily because it has a low price in relation to its book
value. In assessing relative price, the Advisor may consider additional factors
such as price to cash flow or price to earnings ratios. An equity issuer is
considered to have high profitability because it has high earnings or profits
from operations in relation to its book value or assets. The criteria the
Advisor uses for assessing relative price and profitability are subject to
change from time to time.
As a non-fundamental policy, under
normal circumstances, at least 80% of the Portfolio’s net assets will be
invested in securities of U.S. companies in the real estate industry. The
Portfolio generally considers a company to be principally engaged in the real
estate industry if the company (i) derives at least 50% of its revenue or
profits from the ownership, management, development, construction, or sale of
residential, commercial, industrial, or other real estate; (ii) has at
least 50% of the value of its assets invested in residential, commercial,
industrial, or other real estate; or (iii) is organized as a REIT or
REIT-like entity. REITs and REIT-like entities are types of real estate
companies that pool investors’ funds for investment primarily in income
producing real estate or real estate related loans or interests. The Portfolio
will make equity investments in securities listed on a securities exchange in
the United States that is deemed appropriate by the
Advisor.
The
Portfolio may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
Portfolio may lend its portfolio securities to generate additional
income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the US Real
Estate ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term investment approach cannot guarantee a
profit. Economic, market, political, and issuer-specific conditions and events
will cause the value of equity securities, and the Portfolio that owns them, to
rise or fall. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
12
Risks of
Concentrating in the Real Estate Industry: The Portfolio is
concentrated in the real estate industry. The exclusive focus by the Portfolio
on the real estate industry will cause the Portfolio to be exposed to the
general risks of direct real estate ownership. The value of securities in the
real estate industry can be affected by changes in real estate values and rental
income, property taxes, and tax and regulatory requirements. Also, the value of
securities in the real estate industry may decline with changes in interest
rates. Investing in REITs and REIT-like entities involves certain unique risks
in addition to those risks associated with investing in the real estate industry
in general. REITs and REIT-like entities are dependent upon management skill,
may not be diversified, and are subject to heavy cash flow dependency and
self-liquidation. REITs and REIT-like entities also are subject to the
possibility of failing to qualify for tax free pass-through of income. Also,
because REITs and REIT-like entities typically are invested in a limited number
of projects or in a particular market segment, these entities are more
susceptible to adverse developments affecting a single project or market segment
than more broadly diversified investments. The performance of Portfolio may be
materially different from the broad equity
market.
Market Trading
Risk: Active trading markets for the Portfolio’s shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be
met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts
and options thereon, whose value is derived from that of other assets, rates or
indices. The use of derivatives for non-hedging purposes may be
considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, liquidity, interest rate, market, credit and management
risks, as well as the risk of improper valuation. Changes in the value of a
derivative may not correlate perfectly with the underlying asset, rate or index,
and the Portfolio could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower
may fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational
Risk: Operational risks include human error, changes in
personnel, system changes, faults in communication, and failures in systems,
technology, or processes. Various operational events or circumstances are
outside the Advisor’s control, including instances at third parties. The
Portfolio and the Advisor seek to reduce these operational risks through
controls and procedures. However, these measures do not address every possible
risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of
internet, technology and information systems may expose the Portfolio to
potential risks linked to cyber security breaches of those technological or
information systems. Cyber security breaches, amongst other things, could allow
an unauthorized party to gain access to proprietary information, customer data,
or fund assets, or cause the Portfolio and/or its service providers to suffer
data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate
the
13
Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the US Real Estate ETF because it has not yet completed a full calendar year of
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the US Real Estate ETF.
The following individuals are responsible for leading the day-to-day management
of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
John A. Hertzer, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Mary T. Phillips, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
Purchase
and Sale of Fund Shares
The
US Real Estate ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 50,000 shares. Creation Units are issued (or
redeemed) in-kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual
Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid-ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the US Real Estate ETF are taxable
and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
14
Payments
to Financial Intermediaries
If
you purchase the US Real Estate ETF through a broker-dealer or other financial
intermediary (such as a bank), the Portfolio and its related companies may pay
the intermediary for the sale of the Portfolio shares and/or related services.
These payments may create a conflict of interest by influencing the financial
intermediary to recommend the Portfolio over another investment. Ask your
financial advisor or visit your financial intermediary’s website for more
information.
15
Dimensional
US Small Cap Value ETF
Investment
Objective
The
investment objective of the Dimensional US Small Cap Value ETF (the “US Small
Cap Value ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the US Small Cap Value ETF. You may
also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.28% |
|
Other
Expenses* |
|
|
|
0.05% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.33% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.02% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.31% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty-six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the US Small Cap
Value ETF with the cost of investing in other funds. The Example assumes that
you invest $10,000 in the Portfolio for the time periods indicated. The Example
also assumes that your investment has a 5% return each year and that the
Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
32 |
|
|
|
$ |
104 |
|
PORTFOLIO
TURNOVER
The
US Small Cap Value ETF pays transaction costs, such as commissions, when it buys
and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. Because the Portfolio is new, information about
portfolio turnover rate is not yet available.
16
Principal
Investment Strategies
To
achieve the US Small Cap Value ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies and sectors. The Advisor’s portfolio management
and trading processes further balance those long-term drivers of expected
returns with shorter-term drivers of expected returns and trading costs.
The
Portfolio, using a market capitalization weighted approach, is designed to
purchase a broad and diverse group of the readily marketable securities of U.S.
small cap companies that the Advisor determines to be value stocks. A company’s
market capitalization is the number of its shares outstanding times its price
per share. Under a market capitalization weighted approach, companies with
higher market capitalizations generally represent a larger proportion of the
Portfolio than companies with relatively lower market capitalizations. The
Portfolio may emphasize certain stocks, including smaller capitalization
companies, lower relative price stocks, and/or higher profitability stocks as
compared to their representation in the small-cap value segment of the U.S.
market. An equity issuer is considered to have a low relative price (i.e., a
value stock) primarily because it has a low price in relation to its book value.
In assessing relative price, the Advisor may consider additional factors such as
price to cash flow or price to earnings ratios. An equity issuer is considered
to have high profitability because it has high earnings or profits from
operations in relation to its book value or assets. The criteria the Advisor
uses for assessing relative price and profitability are subject to change from
time to time.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in securities of small cap U.S. companies. As of
the date of this Prospectus, for purposes of the Portfolio, the Advisor
considers small cap companies to be companies whose market capitalizations are
generally in the lowest 10% of total market capitalization or companies whose
market capitalizations are smaller than the 1,000th largest U.S. company within
the U.S. Universe, whichever results in the higher market capitalization break.
The Advisor generally defines the U.S. Universe as a portfolio of U.S. operating
companies listed on securities exchanges in the United States that are deemed
appropriate by the Advisor. Total market capitalization is based on the market
capitalization of eligible operating companies within the U.S. Universe. Under
the Advisor’s market capitalization guidelines described above, based on market
capitalization data as of December 31, 2021, the market capitalization of a
small cap company would be below $10,142 million. This threshold will
change due to market
conditions.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
Portfolio may lend its portfolio securities to generate additional
income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index funds.
17
Principal
Risks
Because the value of your investment in the US Small Cap
Value ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term investment approach cannot guarantee a
profit. Economic, market, political, and issuer-specific conditions and events
will cause the value of equity securities, and the portfolio that owns them, to
rise or fall. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
Small Company
Risk: Securities of small companies are often less liquid
than those of large companies and this could make it difficult to sell a small
company security at a desired time or price. As a result, small company
stocks may fluctuate relatively more in price. In general, smaller
capitalization companies are also more vulnerable than larger companies to
adverse business or economic developments and they may have more limited
resources.
Value Investment
Risk: Value stocks may perform differently from the market as
a whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of time.
Profitability
Investment Risk: High relative profitability stocks may
perform differently from the market as a whole and an investment strategy
purchasing these securities may cause the Portfolio to at times underperform
equity funds that use other investment strategies.
Market Trading
Risk: Active trading markets for the Portfolio’s shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts
and options thereon, whose value is derived from that of other assets, rates or
indices. The use of derivatives for non-hedging purposes may be
considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, liquidity, interest rate, market, credit and management
risks, as well as the risk of improper valuation. Changes in the value of a
derivative may not correlate perfectly with the underlying asset, rate or index,
and the Portfolio could lose more than the principal amount invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower
may fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
18
Operational
Risk: Operational risks include human error, changes in
personnel, system changes, faults in communication, and failures in systems,
technology, or processes. Various operational events or circumstances are
outside the Advisor’s control, including instances at third parties. The
Portfolio and the Advisor seek to reduce these operational risks through
controls and procedures. However, these measures do not address every possible
risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of
internet, technology and information systems may expose the Portfolio to
potential risks linked to cyber security breaches of those technological or
information systems. Cyber security breaches, amongst other things, could allow
an unauthorized party to gain access to proprietary information, customer data,
or fund assets, or cause the Portfolio and/or its service providers to suffer
data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the US Small Cap Value ETF because it has not yet completed a full calendar year
of operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the US Small Cap Value
ETF. The following individuals are responsible for leading the day-to-day
management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Joel P. Schneider, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
|
• |
|
Marc C. Leblond, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
Purchase
and Sale of Fund Shares
The
US Small Cap Value ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 50,000 shares. Creation Units are issued
(or redeemed) in-kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
19
Individual
Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid-ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the US Small Cap Value ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the US Small Cap Value ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
20
Dimensional
International Core Equity Market ETF
Investment
Objective
The
investment objective of the Dimensional International Core Equity Market ETF
(the “International Core ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the International Core ETF. You may
also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.18% |
|
Other
Expenses |
|
|
|
0.00% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.18% |
|
EXAMPLE
This
Example is meant to help you compare the cost of investing in the International
Core ETF with the cost of investing in other funds. The Example assumes that you
invest $10,000 in the Portfolio for the time periods indicated. The Example also
assumes that your investment has a 5% return each year and that the Portfolio’s
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs whether you redeem or hold your
shares would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
|
$ |
18 |
|
|
|
$ |
58 |
|
|
|
$ |
101 |
|
|
|
$ |
230 |
|
PORTFOLIO
TURNOVER
The
International Core ETF pays transaction costs, such as commissions, when it buys
and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. During the period November 17, 2020 to October 31,
2021, the Portfolio’s portfolio turnover rate was 4% of the average value of its investment
portfolio.
Principal
Investment Strategies
To
achieve the International Core ETF’s investment objective, Dimensional Fund
Advisors LP (the “Advisor”) implements an integrated investment approach that
combines research, portfolio design, portfolio management, and trading
functions. As further described below, the Portfolio’s design emphasizes
long-term drivers of expected returns identified by the Advisor’s research,
while balancing risk through broad diversification across companies, sectors,
and countries. The Advisor’s portfolio management and trading processes further
balance those long-term drivers of expected returns with shorter-term drivers of
expected returns and trading costs.
21
The
International Core ETF is designed to purchase a broad and diverse group of
readily marketable securities of non‑U.S. companies that is composed of
companies within the International Universe that meet the Advisor’s investment
criteria. The Advisor defines the “International Universe” as a market
capitalization weighted set (e.g., the larger the company, the greater the
proportion of the International Universe it represents) of non‑U.S. companies
associated with developed markets that have been designated as Approved Markets
(as identified below) for investment by the Advisor. The Portfolio will invest
in companies of all sizes, with increased exposure to smaller capitalization,
lower relative price, and higher profitability companies as compared to their
representation in the International Universe. The Portfolio’s increased exposure
to smaller capitalization, lower relative price, and higher profitability
companies may be achieved by decreasing the allocation of the Portfolio’s assets
to larger capitalization, higher relative price, or lower profitability
companies relative to their weight in the International Universe. An equity
issuer is considered to have a high relative price (i.e., a growth stock)
primarily because it has a high price in relation to its book value. An equity
issuer is considered to have a low relative price (i.e., a value stock)
primarily because it has a low price in relation to their book value. In
assessing relative price, the Advisor may consider additional factors such as
price to cash flow or price to earnings ratios. An equity issuer is considered
to have high profitability because it has high earnings or profits from
operations in relation to its book value or assets. The criteria the Advisor
uses for assessing relative price and profitability are subject to change from
time to time. As a non‑fundamental policy, under normal circumstances, the
Portfolio will invest at least 80% of its net assets in equity
securities.
The
Advisor may also increase or reduce the International Core ETF’s exposure to an
eligible company, or exclude a company, based on shorter-term considerations,
such as a company’s price momentum and investment characteristics. In assessing
a company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Advisor will seek to set country weights based on the relative market
capitalizations of eligible companies within each Approved Market. As of the
date of this Prospectus, the International Core ETF can invest in the following
countries that have been designated as Approved Markets by the Advisor:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The
countries designated as Approved Markets will change from time to time. In
addition, the countries in which the Portfolio actually holds investments will
change from time to time. For additional information regarding the Portfolio’s
Approved Markets, see the “Additional Information on Investment Objectives and
Policies—Approved Markets” section of the
Prospectus.
The
International Core ETF may gain exposure to companies associated with Approved
Markets by purchasing equity securities in the form of depositary receipts,
which may be listed or traded outside the issuer’s domicile country. The
Portfolio also may purchase or sell futures contracts and options on futures
contracts for foreign or U.S. equity securities and indices to increase or
decrease equity market exposure based on actual or expected cash inflows to or
outflows from the Portfolio. Because many of the Portfolio’s investments may be
denominated in foreign currencies, the Portfolio may enter into foreign currency
exchange transactions, including foreign currency forward contracts, in
connection with the settlement of foreign securities or to transfer cash
balances from one currency to another
currency.
The
International Core ETF may lend its portfolio securities to generate additional
income.
The
International Core ETF is an actively managed exchange traded fund and does not
seek to replicate the performance of a specific index and may have a higher
degree of portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the
International Core ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
22
Equity Market Risk:
Even a long-term investment approach cannot guarantee a profit.
Economic, market, political, and issuer-specific conditions and events will
cause the value of equity securities, and the Portfolio that owns them, to rise
or fall. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices.
Foreign Securities
and Currencies Risk: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities may also be exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the U.S.
dollar or that a foreign government will convert, or be forced to convert, its
currency to another currency, changing its value against the U.S. dollar). The
International Core ETF does not hedge foreign currency
risk.
Depositary
receipts are generally subject to the same risks as the foreign securities
that they evidence or into which they may be converted. In addition, the
underlying issuers of certain depositary receipts, particularly unsponsored
or unregistered depositary receipts, are under no obligation to distribute
shareholder communications to the holders of such receipts, or to pass through
to them any voting rights with respect to the deposited
securities. Depositary receipts that are not sponsored by the issuer
may be less liquid and there may be less readily available public information
about the issuer.
Small and Mid‑Cap
Company Risk: Securities of small and mid‑cap
companies are often less liquid than those of large companies and this could
make it difficult to sell a small or mid‑cap company security at a desired time
or price. As a result, small and mid‑cap company stocks may fluctuate relatively
more in price. In general, small and mid‑capitalization companies are also more
vulnerable than larger companies to adverse business or economic developments
and they may have more limited
resources.
Profitability
Investment Risk: High relative profitability stocks may perform
differently from the market as a whole and an investment strategy purchasing
these securities may cause the Portfolio to at times underperform equity funds
that use other investment
strategies.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Market Trading Risk:
Active trading markets for Portfolio shares may not be developed
or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives Risk:
Derivatives are instruments, such as futures, and options thereon,
and foreign currency forward contracts, whose value is derived from that of
other assets, rates or indices. The use of derivatives for non‑hedging purposes
may be considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, settlement, liquidity, interest rate, market, credit and
management risks, as well as the risk of improper valuation. Changes in the
value of a derivative may not correlate perfectly with the underlying asset,
rate or index, and the Portfolio could lose more than the principal amount
invested.
23
Securities Lending
Risk: Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational Risk:
Operational risks include human error, changes in personnel,
system changes, faults in communication, and failures in systems, technology, or
processes. Various operational events or circumstances are outside the Advisor’s
control, including instances at third parties. The Portfolio and the Advisor
seek to reduce these operational risks through controls and procedures. However,
these measures do not address every possible risk and may be inadequate to
address these risks.
Cyber Security Risk:
The Portfolio’s and its service providers’ use of internet,
technology and information systems may expose the Portfolio to potential risks
linked to cyber security breaches of those technological or information systems.
Cyber security breaches, amongst other things, could allow an unauthorized party
to gain access to proprietary information, customer data, or fund assets, or
cause the Portfolio and/or its service providers to suffer data corruption or
lose operational functionality.
Large
Shareholder Risk: Certain shareholders,
including other funds or accounts advised by the Advisor, may from time to time
own a substantial amount of the Portfolio’s shares. In addition, a third party
investor, the Advisor, an authorized participant, a lead market maker, or
another entity may invest in the Portfolio and hold its investment for a limited
period of time solely to facilitate commencement of the Portfolio or to
facilitate the Portfolio achieving a specified size or scale. There can be no
assurance that any large shareholder would not redeem its investment,
that the size of the Portfolio would be maintained at such levels or that the
Portfolio would continue to meet applicable listing requirements. Redemptions by
large shareholders could have a significant negative impact on the Portfolio. In
addition, transactions by large shareholders may account for a large percentage
of the trading volume on the listing exchange and may, therefore, have a
material upward or downward effect on the market price of the
shares.
Performance
The bar chart
and table immediately following illustrate the variability of the International
Core ETF’s returns and are meant to provide some indication of the risks of
investing in the Portfolio. The bar chart shows the changes in the Portfolio’s
performance from year to year. The table illustrates how
annualized one year and since inception returns, both before and after taxes,
compare with those of a broad measure of market performance. The Portfolio’s past performance
(before and after taxes) is not an indication of future results.
Updated performance information for the Portfolio can be obtained by visiting
https://us.dimensional.com/etfs.
The after‑tax returns presented
in the table for the International Core ETF 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 in the table.
In addition, the after‑tax
returns shown are not relevant to investors who hold shares of the Portfolio
through tax‑deferred arrangements, such as 401(k) plans or individual retirement
accounts.
24
Dimensional
International Core Equity Market ETF—Total Returns
|
|
|
January
2021-December 2021 |
Highest
Quarter |
|
Lowest
Quarter |
5.44% (4/21-6/21) |
|
-0.04% (7/21-9/21) |
Annualized
Returns (%)
Periods
ending December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
Since 11/17/20 Inception |
|
|
|
Dimensional
International Core Equity Market ETF |
|
|
|
|
|
|
|
|
|
|
Return
Before Taxes |
|
|
|
13.75 |
% |
|
|
|
18.17 |
% |
Return
After Taxes on Distributions |
|
|
|
13.33 |
% |
|
|
|
17.75 |
% |
Return
After Taxes on Distributions and Sale of Portfolio Shares |
|
|
|
8.66 |
% |
|
|
|
13.99 |
% |
|
|
|
MSCI
World ex USA IMI Index (net dividends)
(reflects no
deduction for fees, expenses, or taxes on sales) |
|
|
|
12.40 |
% |
|
|
|
17.05 |
% |
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the International Core
ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as the
sub‑advisors for the Portfolio. The following individuals are responsible for
leading the day‑to‑day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2020). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2020). |
|
• |
|
Allen Pu, Deputy Head of Portfolio
Management, North America, member of the Investment Committee, Vice
President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio
since inception (2020). |
25
Purchase
and Sale of Fund Shares
The
International Core ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 100,000 shares. Creation Units are issued (or
redeemed) in‑kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual
International Core ETF shares may only be purchased and sold on NYSE Arca, Inc.,
other national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the International Core ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax‑advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the International Core ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
26
Dimensional
International Core Equity 2 ETF
Investment
Objective
The
investment objective of the Dimensional International Core Equity 2 ETF (the
“International Core Equity 2 ETF” or “Portfolio”) is to achieve long-term
capital appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the International Core Equity 2 ETF. You may also incur usual and customary brokerage
commissions when buying or selling shares of the Portfolio, which are not
reflected in the table or Example that follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.20% |
|
Other
Expenses* |
|
|
|
0.08% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.28% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.05% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.23% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty‑six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the International
Core Equity 2 ETF with the cost of investing in other funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated. The
Example also assumes that your investment has a 5% return each year and that the
Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
PORTFOLIO
TURNOVER
The
International Core Equity 2 ETF pays transaction costs, such as commissions,
when it buys and sells securities (or “turns over” its portfolio). A higher
portfolio turnover may indicate higher transaction costs and may result in
higher taxes when Portfolio shares are held in a taxable account. These costs,
which are not reflected in Annual Fund Operating Expenses or in the Example,
affect the Portfolio’s performance. Because the Portfolio is new, information
about portfolio turnover rate is not yet available.
27
Principal
Investment Strategies
To
achieve the International Core Equity 2 ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase a broad and diverse group of securities of
non‑U.S. companies in developed markets. The Portfolio invests in companies of
all sizes, with increased exposure to smaller capitalization, lower relative
price, and higher profitability companies as compared to their representation in
the International Universe. For purposes of this Portfolio, the Advisor defines
the International Universe as a market capitalization weighted set (e.g., the
larger the company, the greater the proportion of the International Universe it
represents) of non‑U.S. companies in developed markets that have been
authorized as approved markets for investment by the Advisor’s Investment
Committee. The Portfolio’s increased exposure to smaller capitalization, lower
relative price, and higher profitability companies may be achieved by decreasing
the allocation of the Portfolio’s assets to larger capitalization, higher
relative price, or lower profitability companies relative to their weight in the
International Universe. An equity issuer is considered to have a high relative
price (i.e., a growth stock) primarily because it has a high price in relation
to its book value. An equity issuer is considered to have a low relative price
(i.e., a value stock) primarily because it has a low price in relation to its
book value. In assessing relative price, the Advisor may consider additional
factors such as price to cash flow or price to earnings ratios. An equity issuer
is considered to have high profitability because it has high earnings or profits
from operations in relation to its book value or assets. The criteria the
Advisor uses for assessing relative price and profitability are subject to
change from time to time.
The
Portfolio intends to purchase securities of companies associated with developed
market countries that the Advisor has designated as approved markets. As
a non‑fundamental policy, under normal circumstances, the Portfolio will
invest at least 80% of its net assets in equity securities. The Advisor
determines company size on a country or region-specific basis and based
primarily on market capitalization. The percentage allocation of the assets of
the Portfolio to securities of the largest high relative price companies will
generally be reduced from between 5% and 35% of their percentage weight in the
International Universe. As of December 31, 2021, securities of the largest
high relative price companies in the International Universe comprised
approximately 14% of the International Universe and, if the Portfolio had been
in operation, the Advisor would have allocated approximately 7% of the Portfolio
to securities of the largest high relative price companies in the International
Universe. The percentage by which the Portfolio’s allocation to securities of
the largest high relative price companies is reduced will change due to market
movements and other factors.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may gain exposure to companies associated with approved markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio also may purchase or sell futures
contracts and options on futures contracts for foreign or U.S. equity securities
and indices to increase or decrease equity market exposure based on actual or
expected cash inflows to or outflows from the Portfolio. Because many of the
Portfolio’s investments may be denominated in foreign currencies, the Portfolio
may enter into foreign currency exchange transactions, including foreign
currency forward contracts, in connection with the settlement of a foreign
securities or to transfer cash balances from one currency to another
currency.
28
The
Portfolio may lend its portfolio securities to generate additional
income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the
International Core Equity 2 ETF will fluctuate, there is the risk that you will
lose money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term investment
approach cannot guarantee a profit. Economic, market, political, and
issuer-specific conditions and events will cause the value of equity securities,
and the Portfolio that owns them, to rise or fall. Stock markets tend to move in
cycles, with periods of rising prices and periods of falling prices.
Foreign Securities
and Currencies Risk: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities may also be exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the U.S.
dollar or that a foreign government will convert, or be forced to convert, its
currency to another currency, changing its value against the U.S. dollar). The
Portfolio does not hedge foreign currency risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.
Small and Mid‑Cap
Company Risk: Securities of small and mid‑cap companies are often
less liquid than those of large companies and this could make it difficult to
sell a small or mid‑cap company security at a desired time or price. As a
result, small and mid‑cap company stocks may fluctuate relatively more in price.
In general, small and mid‑capitalization companies are also more vulnerable than
larger companies to adverse business or economic developments and they may have
more limited resources.
Profitability
Investment Risk: High relative profitability stocks may perform
differently from the market as a whole and an investment strategy purchasing
these securities may cause the Portfolio to at times underperform equity funds
that use other investment strategies.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of time.
Market Trading
Risk: Active trading markets for Portfolio shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
29
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid‑ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts,
and options thereon, foreign currency forward contracts, and swaps, whose value
is derived from that of other assets, rates or indices. The use of derivatives
for non‑hedging purposes may be considered to carry more risk than other
types of investments. When the Portfolio uses derivatives, the Portfolio will be
directly exposed to the risks of those derivatives. Derivative instruments are
subject to a number of risks including counterparty, settlement, liquidity,
interest rate, market, credit and management risks, as well as the risk of
improper valuation. Changes in the value of a derivative may not correlate
perfectly with the underlying asset, rate or index, and the Portfolio could lose
more than the principal amount
invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational
Risk: Operational risks include human
error, changes in personnel, system changes, faults in communication, and
failures in systems, technology, or processes. Various operational events or
circumstances are outside the Advisor’s control, including instances at third
parties. The Portfolio and the Advisor seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate to address these
risks.
Cyber Security Risk:
The Portfolio’s and its service providers’ use of internet,
technology and information systems may expose the Portfolio to potential risks
linked to cyber security breaches of those technological or information systems.
Cyber security breaches, amongst other things, could allow an unauthorized party
to gain access to proprietary information, customer data, or fund assets, or
cause the Portfolio and/or its service providers to suffer data corruption or
lose operational functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the International Core Equity 2 ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
30
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the International Core
Equity 2 ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as
the sub‑advisors for the Portfolio. The following individuals are responsible
for leading the day‑to‑day management of the Portfolio:
|
• |
|
William B. Collins-Dean, Vice President
and Senior Portfolio Manager of the Advisor, has been a portfolio manager
of the Portfolio since inception (2022). |
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Mary T. Phillips, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
Purchase
and Sale of Fund Shares
The
International Core Equity 2 ETF will issue (or redeem) shares at NAV only to
certain financial institutions that have entered into agreements with the
Portfolio’s distributor in large aggregated blocks known as “Creation Units.” A
Creation Unit of the Portfolio consists of 100,000 shares. Creation Units are
issued (or redeemed) in‑kind for securities (and an amount of cash) that the
Portfolio specifies each day at the NAV next determined after receipt of an
order.
Individual
Portfolio shares may only be purchased and sold on Cboe BZX Exchange, Inc.,
other national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid‑ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the International Core Equity 2 ETF
are taxable and generally will be taxed as ordinary income, capital gains, or
some combination of both, unless you are investing through a tax‑advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the International Core Equity 2 ETF through a broker-dealer or
other financial intermediary (such as a bank), the Portfolio and its related
companies may pay the intermediary for the sale of the Portfolio shares and/or
related services. These payments may create a conflict of interest by
influencing the financial intermediary to recommend the Portfolio over another
investment. Ask your financial advisor or visit your financial intermediary’s
website for more information.
31
Dimensional
International Small Cap Value ETF
Investment
Objective
The
investment objective of the Dimensional International Small Cap Value ETF (the
“International Small Cap Value ETF” or “Portfolio”) is to achieve long-term
capital appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the International Small Cap Value ETF. You may also incur usual and customary brokerage
commissions when buying or selling shares of the Portfolio, which are not
reflected in the table or Example that follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.39% |
|
Other
Expenses* |
|
|
|
0.12% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.51% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.09% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.42% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty‑six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the International
Small Cap Value ETF with the cost of investing in other funds. The Example
assumes that you invest $10,000 in the Portfolio for the time periods indicated.
The Example also assumes that your investment has a 5% return each year and that
the Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
43 |
|
|
|
$ |
154 |
|
PORTFOLIO
TURNOVER
The
International Small Cap Value ETF pays transaction costs, such as commissions,
when it buys and sells securities (or “turns over” its portfolio). A higher
portfolio turnover may indicate higher transaction costs and may result in
higher taxes when Portfolio shares are held in a taxable account. These costs,
which are not reflected in Annual Fund Operating Expenses or in the Example,
affect the Portfolio’s performance. Because the Portfolio is new, information
about portfolio turnover rate is not yet available.
32
Principal
Investment Strategies
To
achieve the International Small Cap Value ETF’s investment objective, the
Advisor implements an integrated investment approach that combines research,
portfolio design, portfolio management, and trading functions. As further
described below, the Portfolio’s design emphasizes long-term drivers of expected
returns identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio, using a market capitalization weighted approach, is designed to
purchase securities of small, non‑U.S. companies in countries with
developed markets that the Advisor determines to be value stocks at the time of
purchase. A company’s market capitalization is the number of its shares
outstanding times its price per share. Under a market capitalization weighted
approach, companies with higher market capitalizations generally represent a
larger proportion of the Portfolio than companies with relatively lower market
capitalizations. The Portfolio may emphasize certain stocks, including smaller
capitalization companies, lower relative price stocks, and/or higher
profitability stocks as compared to their representation in the small‑cap value
segment of developed non‑U.S. markets. An equity issuer is considered to
have a low relative price (i.e., a value stock) primarily because it has a low
price in relation to its book value. In assessing relative price, the Advisor
may consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to
time.
The
Portfolio intends to purchase securities of small value companies associated
with developed market countries that the Advisor has designated as approved
markets. As a non‑fundamental policy, under normal circumstances, the
Portfolio will invest at least 80% of its net assets in securities of small
companies in the particular markets in which it invests. The Advisor determines
the maximum market capitalization of a small company with respect to each
country in which the Portfolio invests. In the countries or regions authorized
for investment, the Advisor first ranks eligible companies listed on selected
exchanges based on the companies’ market capitalizations. The Advisor then
determines the universe of eligible securities by defining the maximum market
capitalization of a small company that may be purchased by the Portfolio with
respect to each country or region. Based on market capitalization data as of
December 31, 2021, for the Portfolio, the market capitalization of a small
company in any country in which the Portfolio invests would be below
$8,603 million. This threshold will vary by country or region. For example,
based on market capitalization data as of December 31, 2021, the Advisor
would consider a small company in Switzerland to have a market capitalization
below $8,603 million, a small company in Norway to have a market
capitalization below $2,152 million, and a small company in Japan to have a
market capitalization below $2,362 million. These thresholds will change
due to market conditions.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may gain exposure to companies associated with approved markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio also may purchase or sell futures
contracts and options on futures contracts for foreign and U.S. equity
securities and indices to increase or decrease equity market exposure based on
actual or expected cash inflows to or outflows from the Portfolio. Because many
of the Portfolio’s investments may be denominated in foreign currencies, the
Portfolio may enter into foreign currency exchange transactions, including
foreign currency forward contracts, in connection with the settlement of a
foreign securities or to transfer cash balances from one currency to another
currency.
The
Portfolio may lend its portfolio securities to generate additional
income.
33
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the
International Small Cap Value ETF will fluctuate, there is the risk that you
will lose money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term investment
approach cannot guarantee a profit. Economic, market, political, and
issuer-specific conditions and events will cause the value of equity securities,
and the Portfolio that owns them, to rise or fall. Stock markets tend to move in
cycles, with periods of rising prices and periods of falling prices.
Small Company
Risk: Securities of small companies are often less liquid
than those of large companies and this could make it difficult to sell a small
company security at a desired time or price. As a result, small company stocks
may fluctuate relatively more in price. In general, smaller capitalization
companies are also more vulnerable than larger companies to adverse business or
economic developments and they may have more limited resources.
Foreign Securities
and Currencies Risk: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities may also be exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the U.S.
dollar or that a foreign government will convert, or be forced to convert, its
currency to another currency, changing its value against the U.S. dollar). The
Portfolio does not hedge foreign currency risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of time.
Profitability
Investment Risk: High relative profitability stocks may
perform differently from the market as a whole and an investment strategy
purchasing these securities may cause the Portfolio to at times underperform
equity funds that use other investment strategies.
Market Trading
Risk: Active trading markets for Portfolio shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid‑ask spreads
34
and
result in shares trading at a significant premium or discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts,
and options thereon, foreign currency forward contracts, and swaps, whose value
is derived from that of other assets, rates or indices. The use of derivatives
for non‑hedging purposes may be considered to carry more risk than
other types of investments. When the Portfolio uses derivatives, the Portfolio
will be directly exposed to the risks of those derivatives. Derivative
instruments are subject to a number of risks including counterparty, settlement,
liquidity, interest rate, market, credit and management risks, as well as the
risk of improper valuation. Changes in the value of a derivative may not
correlate perfectly with the underlying asset, rate or index, and the Portfolio
could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational
Risk: Operational risks include human error, changes in
personnel, system changes, faults in communication, and failures in systems,
technology, or processes. Various operational events or circumstances are
outside the Advisor’s control, including instances at third parties. The
Portfolio and the Advisor seek to reduce these operational risks through
controls and procedures. However, these measures do not address every possible
risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of
internet, technology and information systems may expose the Portfolio to
potential risks linked to cyber security breaches of those technological or
information systems. Cyber security breaches, amongst other things, could allow
an unauthorized party to gain access to proprietary information, customer data,
or fund assets, or cause the Portfolio and/or its service providers to suffer
data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the International Small Cap Value ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
35
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the International Small
Cap Value ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as
the sub‑advisors for the Portfolio. The following individuals are responsible
for leading the day‑to‑day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Arun C. Keswani, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joel P. Schneider, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
Purchase
and Sale of Fund Shares
The
International Small Cap Value ETF will issue (or redeem) shares at NAV only to
certain financial institutions that have entered into agreements with the
Portfolio’s distributor in large aggregated blocks known as “Creation Units.” A
Creation Unit of the Portfolio consists of 50,000 shares. Creation Units are
issued (or redeemed) in‑kind for securities (and an amount of cash) that the
Portfolio specifies each day at the NAV next determined after receipt of an
order.
Individual
Portfolio shares may only be purchased and sold on Cboe BZX Exchange, Inc.,
other national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid‑ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the International Small Cap Value
ETF are taxable and generally will be taxed as ordinary income, capital gains,
or some combination of both, unless you are investing through a tax‑advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the International Small Cap Value ETF through a broker-dealer or
other financial intermediary (such as a bank), the Portfolio and its related
companies may pay the intermediary for the sale of the Portfolio shares and/or
related services. These payments may create a conflict of interest by
influencing the financial intermediary to recommend the Portfolio over another
investment. Ask your financial advisor or visit your financial intermediary’s
website for more information.
36
Dimensional
International Small Cap ETF
Investment
Objective
The
investment objective of the Dimensional International Small Cap ETF (the
“International Small Cap ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the International Small Cap ETF. You
may also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.35% |
|
Other
Expenses* |
|
|
|
0.12% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.47% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.08% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.39% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty‑six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the International
Small Cap ETF with the cost of investing in other funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated. The
Example also assumes that your investment has a 5% return each year and that the
Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
40 |
|
|
|
$ |
143 |
|
PORTFOLIO
TURNOVER
The
International Small Cap ETF pays transaction costs, such as commissions, when it
buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. Because the Portfolio is new, information about
portfolio turnover rate is not yet available.
37
Principal
Investment Strategies
To
achieve the International Small Cap ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio, using a market capitalization weighted approach, is designed to
purchase securities of small, non‑U.S. companies in countries with developed
markets. A company’s market capitalization is the number of its shares
outstanding times its price per share. Under a market capitalization weighted
approach, companies with higher market capitalizations generally represent a
larger proportion of the Portfolio than companies with relatively lower market
capitalizations. The Portfolio may emphasize certain stocks, including smaller
capitalization companies, lower relative price stocks, and/or higher
profitability stocks as compared to their representation in the small‑cap
segment of developed non‑U.S. markets. An equity issuer is considered to
have a low relative price (i.e., a value stock) primarily because it has a low
price in relation to its book value. In assessing relative price, the Advisor
may consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to
time.
The
Portfolio intends to purchase securities of small companies associated with
developed market countries that the Advisor has designated as approved markets.
As a non‑fundamental policy, under normal circumstances, the Portfolio will
invest at least 80% of its net assets in securities of small companies in the
particular markets in which it invests. The Advisor determines the maximum
market capitalization of a small company with respect to each country in which
the Portfolio invests. In the countries or regions authorized for investment,
the Advisor first ranks eligible companies listed on selected exchanges based on
the companies’ market capitalizations. The Advisor then determines the universe
of eligible securities by defining the maximum market capitalization of a small
company that may be purchased by the Portfolio with respect to each country or
region. Based on market capitalization data as of December 31, 2021, for the
Portfolio, the market capitalization of a small company in any country in which
the Portfolio invests would be below $8,603 million.
This threshold will vary by country or region. For example, based on market
capitalization data as of December 31, 2021, the Advisor would consider a small
company in Switzerland to have a market capitalization below $8,603 million,
a small company in Norway to have a market capitalization below
$2,152 million, and a small company in Japan to have a market
capitalization below $2,362 million. These thresholds will change due to
market conditions.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may gain exposure to companies associated with approved markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio also may purchase or sell futures
contracts and options on futures contracts for foreign and U.S. equity
securities and indices to increase or decrease equity market exposure based on
actual or expected cash inflows to or outflows from the Portfolio. Because many
of the Portfolio’s investments may be denominated in foreign currencies, the
Portfolio may enter into foreign currency exchange transactions, including
foreign currency forward contracts, in connection with the settlement of a
foreign securities or to transfer cash balances from one currency to another
currency.
The
Portfolio may lend its portfolio securities to generate additional
income.
38
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the
International Small Cap ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market Risk:
Even a long-term investment approach cannot guarantee a profit.
Economic, market, political, and issuer-specific conditions and events will
cause the value of equity securities, and the Portfolio that owns them, to rise
or fall. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices.
Foreign Securities
and Currencies Risk: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities may also be exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the U.S.
dollar or that a foreign government will convert, or be forced to convert, its
currency to another currency, changing its value against the U.S. dollar). The
Portfolio does not hedge foreign currency risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.
Small Company
Risk: Securities of small companies are often less liquid
than those of large companies and this could make it difficult to sell a small
company security at a desired time or price.
As
a result, small company stocks may fluctuate relatively more in price. In
general, smaller capitalization companies are also more vulnerable than larger
companies to adverse business or economic developments and they may have more
limited resources.
Profitability
Investment Risk: High relative profitability stocks may
perform differently from the market as a whole and an investment strategy
purchasing these securities may cause the Portfolio to at times underperform
equity funds that use other investment strategies.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of time.
Market Trading
Risk: Active trading markets for Portfolio shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence
39
of
extreme market volatility or potential lack of an active trading market for
shares may widen bid‑ask spreads and result in shares trading at a significant
premium or discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts,
and options thereon, foreign currency forward contracts, and swaps, whose value
is derived from that of other assets, rates or indices. The use of derivatives
for non‑hedging purposes may be considered to carry more risk than other
types of investments. When the Portfolio uses derivatives, the Portfolio will be
directly exposed to the risks of those derivatives. Derivative instruments are
subject to a number of risks including counterparty, settlement, liquidity,
interest rate, market, credit and management risks, as well as the risk of
improper valuation. Changes in the value of a derivative may not correlate
perfectly with the underlying asset, rate or index, and the Portfolio could lose
more than the principal amount
invested.
Securities Lending
Risk: Securities lending involves the risk that the borrower
may fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational
Risk: Operational risks include human
error, changes in personnel, system changes, faults in communication, and
failures in systems, technology, or processes. Various operational events or
circumstances are outside the Advisor’s control, including instances at third
parties. The Portfolio and the Advisor seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of
internet, technology and information systems may expose the Portfolio to
potential risks linked to cyber security breaches of those technological or
information systems. Cyber security breaches, amongst other things, could allow
an unauthorized party to gain access to proprietary information, customer data,
or fund assets, or cause the Portfolio and/or its service providers to suffer
data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the International Small Cap ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
40
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the International Small
Cap ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as the
sub‑advisors for the Portfolio. The following individuals are responsible for
leading the day‑to‑day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Arun C. Keswani, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joel P. Schneider, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
Purchase
and Sale of Fund Shares
The
International Small Cap ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 100,000 shares. Creation Units are issued (or
redeemed) in‑kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual
Portfolio shares may only be purchased and sold on Cboe BZX Exchange, Inc.,
other national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid‑ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the International Small Cap ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax‑advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the International Small Cap ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
41
Dimensional
International High Profitability ETF
Investment
Objective
The
investment objective of the Dimensional International High Profitability ETF
(the “International High Profitability ETF” or “Portfolio”) is to achieve
long-term capital appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the International High Profitability ETF. You may also incur usual and customary brokerage
commissions when buying or selling shares of the Portfolio, which are not
reflected in the table or Example that follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.25% |
|
Other
Expenses* |
|
|
|
0.08% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.33% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.04% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.29% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty‑six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the International
High Profitability ETF with the cost of investing in other funds. The Example
assumes that you invest $10,000 in the Portfolio for the time periods indicated.
The Example also assumes that your investment has a 5% return each year and that
the Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
30 |
|
|
|
$ |
102 |
|
PORTFOLIO
TURNOVER
The
International High Profitability ETF pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over” its portfolio).
A higher portfolio turnover may indicate higher transaction costs and may result
in higher taxes when Portfolio shares are held in a taxable account. These
costs, which are not reflected in Annual Fund Operating Expenses or in the
Example, affect the Portfolio’s performance. Because the Portfolio is new,
information about portfolio turnover rate is not yet available.
42
Principal
Investment Strategies
To
achieve the International High Profitability ETF’s investment objective, the
Advisor implements an integrated investment approach that combines research,
portfolio design, portfolio management, and trading functions. As further
described below, the Portfolio’s design emphasizes long-term drivers of expected
returns identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase securities of
large non‑U.S. companies that the Advisor determines to have high
profitability relative to other large capitalization companies in the same
country or region, at the time of purchase. An equity issuer is considered to
have high profitability because it has high earnings or profits from operations
in relation to its book value or assets. The Portfolio may emphasize certain
stocks, including smaller capitalization companies, lower relative price stocks,
and/or higher profitability stocks as compared to their representation in the
large‑cap high profitability segments of developed non‑U.S. markets. The
Portfolio’s increased exposure to such stocks may be achieved by overweighting
and/or underweighting eligible stocks based on their market capitalization,
relative price, and/or profitability characteristics. An equity issuer is
considered to have a low relative price (i.e., a value stock) primarily because
it has a low price in relation to its book value. In assessing relative price,
the Advisor may consider additional factors such as price to cash flow or price
to earnings ratios. The criteria the Advisor uses for assessing relative price
and profitability are subject to change from time to
time.
The
Portfolio intends to purchase securities of large non‑U.S. companies
associated with developed market countries that the Advisor has designated as
approved markets. As a non‑fundamental policy, under normal
circumstances, the Portfolio will invest at least 80% of its net assets in
securities of companies in the particular non‑U.S. markets in which
the Portfolio invests. The Advisor determines the minimum market capitalization
of a large company with respect to each country or region in which the Portfolio
invests. Based on market capitalization data as of December 31, 2021, the
market capitalization of a large company in any country or region in which the
Portfolio invests would be $2,044 million or above. This threshold will
vary by country or region. For example, based on market capitalization data as
of December 31, 2021, the Advisor considered a large company in the
European Economic and Monetary Union (the “EMU“) to have a market capitalization
of at least $7,611 million, a large company in Norway to have a market
capitalization of at least $2,152 million and a large company in
Switzerland to have a market capitalization of at least $8,603 million.
These thresholds will change due to market
conditions.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum. In addition, the Advisor seeks to reduce trading costs
using a flexible trading approach that looks for opportunities to participate in
the available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may gain exposure to companies in an approved market by purchasing
equity securities in the form of depositary receipts, which may be listed or
traded outside the issuer’s domicile country, or by entering into equity
swap agreements. The Portfolio also may purchase or sell futures contracts and
options on futures contracts for foreign and U.S. equity securities and indices
to increase or decrease equity market exposure based on actual or expected cash
inflows to or outflows from the Portfolio. Because many of the Portfolio’s
investments may be denominated in foreign currencies, the Portfolio may enter
into foreign currency exchange transactions, including foreign currency forward
contracts, in connection with the settlement of a foreign securities or to
transfer cash balances from one currency to another
currency.
The
Portfolio may lend its portfolio securities to generate additional
income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index funds.
43
Principal
Risks
Because the value of your investment in the
International High Profitability ETF will fluctuate, there is the risk that you
will lose money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term investment
approach cannot guarantee a profit. Economic, market, political, and
issuer-specific conditions and events will cause the value of equity securities,
and the Portfolio that owns them, to rise or fall. Stock markets tend to move in
cycles, with periods of rising prices and periods of falling prices.
Foreign Securities
and Currencies Risk: Foreign securities prices may
decline or fluctuate because of: (a) economic or political actions of
foreign governments, and/or (b) less regulated or liquid securities
markets. Investors holding these securities may also be exposed to foreign
currency risk (the possibility that foreign currency will fluctuate in value
against the U.S. dollar or that a foreign government will convert, or be forced
to convert, its currency to another currency, changing its value against the
U.S. dollar). The Portfolio does not hedge foreign currency risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.
Profitability
Investment Risk: High relative profitability
stocks may perform differently from the market as a whole and an investment
strategy purchasing these securities may cause the Portfolio to at times
underperform equity funds that use other investment strategies.
Value Investment
Risk: Value stocks
may perform differently from the market as a whole and an investment strategy
purchasing these securities may cause the Portfolio to at times underperform
equity funds that use other investment strategies. Value stocks can react
differently to political, economic, and industry developments than the market as
a whole and other types of stocks. Value stocks also may underperform the market
for long periods of time.
Market Trading
Risk: Active trading markets for Portfolio shares may not be
developed or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid‑ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain losses.
Derivatives
Risk: Derivatives are instruments, such as futures contracts,
and options thereon, foreign currency forward contracts, and swaps, whose value
is derived from that of other assets, rates or indices. The use of derivatives
for non‑hedging purposes may be considered to carry more risk than
other types of investments. When the Portfolio uses derivatives, the Portfolio
will be directly exposed to the risks of those derivatives. Derivative
instruments are subject to a number of risks including counterparty, settlement,
liquidity, interest rate, market, credit and management risks, as well as the
risk of improper valuation. Changes in the value of a derivative may not
correlate perfectly with the underlying asset, rate or index, and the Portfolio
could lose more than the principal amount invested.
44
Securities Lending
Risk: Securities lending involves the
risk that the borrower may fail to return the securities in a timely manner or
at all. As a result, the Portfolio may lose money and there may be a delay in
recovering the loaned securities. The Portfolio could also lose money if it does
not recover the securities and/or the value of the collateral falls, including
the value of investments made with cash collateral. Securities lending also may
have certain adverse tax
consequences.
Operational
Risk: Operational risks include human error, changes in
personnel, system changes, faults in communication, and failures in systems,
technology, or processes. Various operational events or circumstances are
outside the Advisor’s control, including instances at third parties. The
Portfolio and the Advisor seek to reduce these operational risks through
controls and procedures. However, these measures do not address every possible
risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of
internet, technology and information systems may expose the Portfolio to
potential risks linked to cyber security breaches of those technological or
information systems. Cyber security breaches, amongst other things, could allow
an unauthorized party to gain access to proprietary information, customer data,
or fund assets, or cause the Portfolio and/or its service providers to suffer
data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the International High Profitability ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the International High
Profitability ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited
serve as the sub‑advisors for the Portfolio. The following individuals are
responsible for leading the day‑to‑day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Arun C. Keswani, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joel P. Schneider, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
45
Purchase
and Sale of Fund Shares
The
International High Profitability ETF will issue (or redeem) shares at NAV only
to certain financial institutions that have entered into agreements with the
Portfolio’s distributor in large aggregated blocks known as “Creation Units.” A
Creation Unit of the Portfolio consists of 50,000 shares. Creation Units are
issued (or redeemed) in‑kind for securities (and an amount of cash) that the
Portfolio specifies each day at the NAV next determined after receipt of an
order.
Individual
Portfolio shares may only be purchased and sold on Cboe BZX Exchange, Inc.,
other national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid‑ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the International High
Profitability ETF are taxable and generally will be taxed as ordinary income,
capital gains, or some combination of both, unless you are investing through a
tax‑advantaged arrangement, such as a 401(k) plan or an individual retirement
account, in which case distributions may be taxed as ordinary income when
withdrawn from the plan or account.
Payments
to Financial Intermediaries
If
you purchase the International High Profitability ETF through a broker-dealer or
other financial intermediary (such as a bank), the Portfolio and its related
companies may pay the intermediary for the sale of the Portfolio shares and/or
related services. These payments may create a conflict of interest by
influencing the financial intermediary to recommend the Portfolio over another
investment. Ask your financial advisor or visit your financial intermediary’s
website for more information.
46
Dimensional
Emerging Core Equity Market ETF
Investment
Objective
The
investment objective of the Dimensional Emerging Core Equity Market ETF (the
“Emerging Markets Core ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the Emerging Markets Core ETF. You may
also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.35% |
|
Other
Expenses |
|
|
|
0.00% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.35% |
|
EXAMPLE
This
Example is meant to help you compare the cost of investing in the Emerging
Markets Core ETF with the cost of investing in other funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated. The
Example also assumes that your investment has a 5% return each year and that the
Portfolio’s operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
|
$ |
36 |
|
|
|
$ |
113 |
|
|
|
$ |
197 |
|
|
|
$ |
443 |
|
PORTFOLIO
TURNOVER
The
Emerging Markets Core ETF pays transaction costs, such as commissions, when it
buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. During the period December 1, 2020 to October 31, 2021,
the Portfolio’s portfolio turnover rate was 4% of the average value of its investment
portfolio.
Principal
Investment Strategies
To
achieve the Emerging Markets Core ETF’s investment objective, Dimensional Fund
Advisors LP (the “Advisor”) implements an integrated investment approach that
combines research, portfolio design, portfolio management, and trading
functions. As further described below, the Portfolio’s design emphasizes
long-term drivers of expected returns identified by the Advisor’s research,
while balancing risk through broad diversification across companies, sectors,
and countries. The Advisor’s portfolio management and trading processes further
balance those long-term drivers of expected returns with shorter-term drivers of
expected returns and trading costs.
47
The
Emerging Markets Core ETF Portfolio is designed to purchase a broad and diverse
group of readily marketable emerging markets securities that is composed of
companies within the Emerging Markets Universe that meet the Advisor’s
investment criteria. The Advisor defines the “Emerging Markets Universe” as a
market capitalization weighted set (e.g., the larger the company, the greater
the proportion of the Emerging Markets Universe it represents) of non‑U.S.
companies associated with emerging markets, which may include frontier markets
(emerging market countries in an earlier stage of development), that have been
designated as Approved Markets (as identified below) for investment by the
Advisor. The Portfolio will invest in companies of all sizes, with increased
exposure to smaller capitalization, lower relative price, and higher
profitability companies as compared to their representation in the Emerging
Markets Universe. The Portfolio’s increased exposure to smaller capitalization,
lower relative price, and higher profitability companies may be achieved by
decreasing the allocation of the Portfolio’s assets to larger capitalization,
higher relative price, or lower profitability companies relative to their weight
in the Emerging Markets Universe. An equity issuer is considered to have a high
relative price (i.e., a growth stock) primarily because it has a high price in
relation to its book value. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to their book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time. As a non‑fundamental
policy, under normal circumstances, the Portfolio will invest at least 80% of
its net assets in emerging market equity investments that are defined in the
Prospectus as Approved Market
Securities.
The
Advisor may also increase or reduce the Emerging Markets Core ETF’s exposure to
an eligible company, or exclude a company, based on shorter-term considerations,
such as a company’s price momentum and investment characteristics. In assessing
a company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
As
of the date of this Prospectus, the Emerging Markets Core ETF can invest in the
following countries that have been designated as Approved Markets by the
Advisor: Brazil, Chile, China, Colombia,
Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico,
Peru, the Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South
Korea, Taiwan, Thailand, Turkey, and United Arab Emirates. In determining what
countries are eligible markets for the Portfolio, the Advisor may consider
various factors, including without limitation, the data, analysis, and
classification of countries published or disseminated by the International Bank
for Reconstruction and Development (commonly known as the World Bank), the
International Finance Corporation, FTSE International, and MSCI. The countries
designated as Approved Markets will change from time to time. In addition, the
countries in which the Portfolio actually holds investments will change from
time to time. To determine whether a company is related to an emerging market
country, the Advisor will consider various factors, such as where the company is
organized or maintains its principal place of business, the principal trading
market of the company, what government, agency or instrumentality issued or
guaranteed the security, where the company’s revenues or profits are derived,
and whether the company is in the Portfolio’s
benchmark.
The
Emerging Markets Core ETF may gain exposure to companies associated with
Approved Markets by purchasing equity securities in the form of depositary
receipts, which may be listed or traded outside the issuer’s domicile country,
or by entering into equity swap agreements. The Portfolio also may purchase or
sell futures contracts and options on futures contracts for Approved Market or
other equity market securities and indices, including those of the United
States, to increase or decrease equity market exposure based on actual or
expected cash inflows to or outflows from the Portfolio. Because many of the
Portfolio’s investments may be denominated in foreign currencies, the Portfolio
may enter into foreign currency exchange transactions, including foreign
currency forward contracts, in connection with the settlement of foreign
securities or to transfer cash balances from one currency to another
currency.
The
Emerging Markets Core ETF may lend its portfolio securities to generate
additional income.
The
Emerging Markets Core ETF is an actively managed exchange traded fund and does
not seek to replicate the performance of a specific index and may have a higher
degree of portfolio turnover than such index
funds.
48
Principal
Risks
Because the value of your investment in the Emerging
Markets Core ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market Risk:
Even a long-term investment approach cannot guarantee a profit.
Economic, market, political, and issuer-specific conditions and events will
cause the value of equity securities, and the Portfolio that owns them, to rise
or fall. Stock markets tend to move in cycles, with periods of rising prices and
periods of falling prices.
Foreign Securities
and Currencies Risk: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities may also be exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the U.S.
dollar or that a foreign government will convert, or be forced to convert, its
currency to another currency, changing its value against the U.S. dollar). The
Portfolio does not hedge foreign currency risk.
Depositary
receipts are generally subject to the same risks as the foreign securities
that they evidence or into which they may be converted. In addition, the
underlying issuers of certain depositary receipts, particularly unsponsored
or unregistered depositary receipts, are under no obligation to distribute
shareholder communications to the holders of such receipts, or to pass through
to them any voting rights with respect to the deposited
securities. Depositary receipts that are not sponsored by the issuer
may be less liquid and there may be less readily available public information
about the issuer.
Small and Mid‑Cap
Company Risk: Securities of small and mid‑cap
companies are often less liquid than those of large companies and this could
make it difficult to sell a small or mid‑cap company security at a desired time
or price. As a result, small and mid‑cap company stocks may fluctuate relatively
more in price. In general, small and mid‑capitalization companies are also more
vulnerable than larger companies to adverse business or economic developments
and they may have more limited resources.
Emerging Markets
Risk: Numerous emerging market countries have a history of, and
continue to experience serious, and potentially continuing, economic and
political problems. Stock markets in many emerging market countries are
relatively small, expensive to trade in and generally have higher risks than
those in developed markets. Securities in emerging markets also may be less
liquid than those in developed markets and foreigners are often limited in their
ability to invest in, and withdraw assets from, these markets. Additional
restrictions may be imposed under other conditions. Frontier market countries
generally have smaller economies or less developed capital markets and, as a
result, the risks of investing in emerging market countries are magnified in
frontier market countries.
China Investments
Risk: There are special risks associated with investments in China
and Taiwan, which are considered emerging market countries by the Portfolio. The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. But there can
be no assurance that these reforms will continue or that they will be effective.
Despite reforms and privatizations of companies in certain sectors, the Chinese
government still exercises substantial influence over many aspects of the
private sector and may own or control many companies. The Chinese government
continues to maintain a major role in economic policy making and investing in
China involves risks of losses due to expropriation, nationalization,
confiscation of assets and property, and the imposition of restrictions on
foreign investments and on repatriation of capital invested.
A
reduction in spending on Chinese products and services or the institution of
additional tariffs or other trade barriers, including as a result of heightened
trade tensions between China and the United States may also have an adverse
impact on the Chinese economy. In addition, investments in Taiwan could be
adversely affected by its
49
political and economic
relationship with China. Certain securities issued by companies located or
operating in China, such as China A-shares, are also subject to
trading restrictions, quota limitations and less market liquidity, which could
pose risks to the Portfolio. The Portfolio may also invest in special structures
that utilize contractual arrangements to provide exposure to certain Chinese
companies, known as variable interest entities (“VIEs”), that operate in sectors
in which China restricts and/or prohibits foreign investments. The Chinese
government’s acceptance of VIE structure is evolving. It is uncertain whether
Chinese officials and regulators will withdraw their acceptance of the structure
or whether Chinese courts or arbitration bodies would decline to enforce the
contractual rights of foreign investors, each of which would likely have
significant, detrimental, and possibly permanent losses on the value of such
investments.
Profitability
Investment Risk: High relative profitability stocks may perform
differently from the market as a whole and an investment strategy purchasing
these securities may cause the Portfolio to at times underperform equity funds
that use other investment
strategies.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Market Trading Risk:
Active trading markets for Portfolio shares may not be developed
or maintained by market makers or authorized participants. Authorized
participants are not obligated to make a market in the Portfolio’s shares or to
submit purchase or redemption orders for creation units. Trading in shares on an
exchange may be halted in certain circumstances. There can be no assurance that
the requirements of the listing exchange necessary to maintain the listing of
the Portfolio will continue to be met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the value
of your investment may fluctuate. Disruptions to creations and redemptions or
the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives Risk:
Derivatives are instruments, such as futures, and options thereon,
foreign currency forward contracts, and swaps, whose value is derived from that
of other assets, rates or indices. The use of derivatives for non‑hedging
purposes may be considered to carry more risk than other types of investments.
When the Portfolio uses derivatives, the Portfolio will be directly exposed to
the risks of those derivatives. Derivative instruments are subject to a number
of risks including counterparty, settlement, liquidity, interest rate, market,
credit and management risks, as well as the risk of improper valuation. Changes
in the value of a derivative may not correlate perfectly with the underlying
asset, securities, rate, or index, and the Portfolio could lose more than the
principal amount invested. Additional risks are associated with the use of swaps
including counterparty and credit risk (the risk that the other party to a swap
agreement will not fulfill its contractual obligations, whether because of
bankruptcy or other default) and liquidity risk (the possible lack of a
secondary market for the swap agreement). Counterparty risk increases when the
Portfolio is a buyer of swaps. Swaps may be illiquid or difficult to
value.
Securities Lending
Risk: Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Operational Risk:
Operational risks include human error, changes in personnel,
system changes, faults in communication, and failures in systems, technology, or
processes. Various operational events or circumstances are outside the Advisor’s
control, including instances at third parties. The Portfolio and the Advisor
seek to reduce these operational risks through controls and procedures. However,
these measures do not address every possible risk and may be inadequate to
address these risks.
50
Cyber Security Risk:
The Portfolio’s and its service providers’ use of internet,
technology and information systems may expose the Portfolio to potential risks
linked to cyber security breaches of those technological or information systems.
Cyber security breaches, amongst other things, could allow an unauthorized party
to gain access to proprietary information, customer data, or fund assets, or
cause the Portfolio and/or its service providers to suffer data corruption or
lose operational functionality.
Large
Shareholder Risk: Certain shareholders,
including other funds or accounts advised by the Advisor, may from time to time
own a substantial amount of the Portfolio’s shares. In addition, a third party
investor, the Advisor, an authorized participant, a lead market maker, or
another entity may invest in the Portfolio and hold its investment for a limited
period of time solely to facilitate commencement of the Portfolio or to
facilitate the Portfolio achieving a specified size or scale. There can be no
assurance that any large shareholder would not redeem its investment,
that the size of the Portfolio would be maintained at such levels or that the
Portfolio would continue to meet applicable listing requirements. Redemptions by
large shareholders could have a significant negative impact on the Portfolio. In
addition, transactions by large shareholders may account for a large percentage
of the trading volume on the listing exchange and may, therefore, have a
material upward or downward effect on the market price of the
shares.
Performance
The bar chart
and table immediately following illustrate the variability of the Emerging Core
ETF’s returns and are meant to provide some indication of the risks of investing
in the Portfolio. The bar chart shows the changes in the Portfolio’s performance
from year to year. The table illustrates how annualized one year
and since inception returns, both before and after taxes, compare with those of
a broad measure of market performance. The Portfolio’s past performance
(before and after taxes) is not an indication of future results.
Updated performance information for the Portfolio can be obtained by visiting
https://us.dimensional.com/etfs.
The after‑tax returns presented
in the table for the Emerging Core ETF 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 in the table.
In addition, the after‑tax
returns shown are not relevant to investors who hold shares of the Portfolio
through tax‑deferred arrangements, such as 401(k) plans or individual retirement
accounts.
Dimensional
Emerging Core Equity Market ETF—Total Returns
|
|
|
January
2021-December 2021 |
Highest
Quarter |
|
Lowest
Quarter |
6.86% (4/21-6/21) |
|
-6.81% (7/21-9/21) |
51
Annualized
Returns (%)
Periods
ending December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
Since 12/1/20 Inception |
|
|
|
Dimensional
Emerging Core Equity Market ETF |
|
|
|
|
|
|
|
|
|
|
Return
Before Taxes |
|
|
|
3.48 |
% |
|
|
|
8.50 |
% |
Return
After Taxes on Distributions |
|
|
|
3.01 |
% |
|
|
|
8.05 |
% |
Return
After Taxes on Distributions and Sale of Portfolio Shares |
|
|
|
2.27 |
% |
|
|
|
6.42 |
% |
|
|
|
MSCI
Emerging Markets IMI Index (net dividends)
(reflects no
deduction for fees, expenses, or taxes on sales) |
|
|
|
‑0.28 |
% |
|
|
|
5.06 |
% |
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the Emerging Markets Core
ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as the
sub‑advisors for the Portfolio. The following individuals are responsible for
leading the day‑to‑day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2020). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2020). |
|
• |
|
Allen Pu, Deputy Head of Portfolio
Management, North America, member of the Investment Committee, Vice
President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio
since inception (2020). |
Purchase
and Sale of Fund Shares
The
Emerging Markets Core ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 100,000 shares. Creation Units are issued (or
redeemed) in‑kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual
Emerging Markets Core ETF shares may only be purchased and sold on NYSE Arca,
Inc., other national securities exchanges, electronic crossing networks and
other alternative trading systems through your broker-dealer at market prices.
An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid‑ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
52
Tax
Information
The
dividends and distributions you receive from the Emerging Markets Core ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax‑advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the Emerging Markets Core ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
53
Dimensional
Emerging Markets High Profitability ETF
Investment
Objective
The
investment objective of the Dimensional Emerging Markets High Profitability ETF
(the “Emerging Markets High Profitability ETF” or “Portfolio”) is to achieve
long-term capital appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the Emerging Markets High Profitability ETF. You may also incur usual and customary brokerage
commissions when buying or selling shares of the Portfolio, which are not
reflected in the table or Example that follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.35% |
|
Other
Expenses* |
|
|
|
0.11% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.46% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.05% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.41% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty-six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the Emerging
Markets High Profitability ETF with the cost of investing in other funds. The
Example assumes that you invest $10,000 in the Portfolio for the time periods
indicated. The Example also assumes that your investment has a 5% return each
year and that the Portfolio’s operating expenses remain the same. The costs for
the Portfolio reflect the net expenses of the Portfolio that result from the
contractual expense waiver in the first year only. Although your actual
costs may be higher or lower, based on these assumptions, your costs whether you
redeem or hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
42 |
|
|
|
$ |
143 |
|
PORTFOLIO
TURNOVER
The
Emerging Markets High Profitability ETF pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over” its portfolio).
A higher portfolio turnover may indicate higher transaction costs and may result
in higher taxes when Portfolio shares are held in a taxable account. These
costs, which are not reflected in Annual Fund Operating Expenses or in the
Example, affect the Portfolio’s performance. Because the Portfolio is new,
information about portfolio turnover rate is not yet available.
54
Principal
Investment Strategies
To
achieve the Emerging Markets High Profitability ETF’s investment objective, the
Advisor implements an integrated investment approach that combines research,
portfolio design, portfolio management, and trading functions. As further
described below, the Portfolio’s design emphasizes long-term drivers of expected
returns identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase securities of large companies associated with
emerging markets that the Advisor determines to have high profitability relative
to other large companies in the same country or region at the time of
purchase. The Portfolio intends to purchase securities of large companies
that are associated with emerging markets, which may include frontier markets
(emerging market countries in an earlier stage of development), authorized for
investment by the Advisor’s Investment Committee (“Approved Markets”).
An
equity issuer is considered to have high profitability because it has high
earnings or profits from operations in relation to its book value or assets. The
Portfolio may emphasize certain stocks, including smaller capitalization
companies, lower relative price stocks, and/or higher profitability stocks as
compared to their representation in the large-cap high profitability segments of
the Approved Markets in which the Portfolio is authorized to invest. The
Portfolio’s increased exposure to such stocks may be achieved by overweighting
and/or underweighting eligible stocks based on their market capitalization,
relative price, and/or profitability characteristics. An equity issuer is
considered to have a low relative price (i.e., a value stock) primarily because
it has a low price in relation to its book value. In assessing relative price,
the Advisor may consider additional factors such as price to cash flow or price
to earnings ratios. The criteria the Advisor uses for assessing relative price
and profitability are subject to change from time to
time.
The
Advisor’s definition of a large company varies across countries and is based
primarily on market capitalization. A company’s market capitalization is the
number of its shares outstanding times its price per share. In each country
authorized for investment, the Advisor first ranks eligible companies listed on
selected exchanges based on the companies’ market capitalizations. The Advisor
then defines the minimum market capitalization for a large company in that
country. Based on market capitalization data as of December 31, 2021, the
market capitalization of a large cap company in any country or region in which
the Portfolio invests would be $554 million or above. This threshold will
vary by country or region. For example, based on market capitalization data as
of December 31, 2021, the Advisor considered a large company in Mexico to
have a market capitalization of at least $4,573 million, and a large company in
the Czech Republic to have a market capitalization of at least
$2,023 million. These thresholds will change due to market
conditions.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum. In addition, the Advisor seeks to reduce trading costs
using a flexible trading approach that looks for opportunities to participate in
the available market liquidity, while managing turnover and explicit transaction
costs.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in emerging markets investments that are defined
in the prospectus as Approved Market securities. The Portfolio may gain
exposure to companies in an Approved Market by purchasing equity securities in
the form of depositary receipts, which may be listed or traded outside the
issuer’s domicile country, or by entering into equity swap agreements. The
Portfolio also may purchase or sell futures contracts and options on futures
contracts for Approved Market or other equity market securities and indices,
including those of the United States, to increase or decrease market exposure
based on actual or expected cash inflows to or outflows from the Portfolio.
Because many of the Portfolio’s investments may be denominated in foreign
currencies, the Portfolio may enter into foreign currency exchange transactions,
including foreign currency forward contracts, in connection with the settlement
of a foreign securities or to transfer cash balances from one currency to
another currency.
The
Portfolio may lend its portfolio securities to generate additional
income.
55
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the Emerging
Markets High Profitability ETF will fluctuate, there is the risk that you will
lose money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term
investment approach cannot guarantee a profit. Economic, market, political, and
issuer-specific conditions and events will cause the value of equity securities,
and the Portfolio that owns them, to rise or fall. Stock markets tend to move in
cycles, with periods of rising prices and periods of falling prices.
Foreign Securities
and Currencies Risk:
Foreign securities prices may decline or fluctuate because of: (a) economic
or political actions of foreign governments, and/or (b) less regulated or
liquid securities markets. Investors holding these securities may also be
exposed to foreign currency risk (the possibility that foreign currency will
fluctuate in value against the U.S. dollar or that a foreign government will
convert, or be forced to convert, its currency to another currency, changing its
value against the U.S. dollar). The Portfolio does not hedge foreign currency
risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.
Emerging
Markets Risk:
Numerous emerging market countries have a history of, and continue to experience
serious, and potentially continuing, economic and political problems. Stock
markets in many emerging market countries are relatively small, expensive to
trade in and generally have higher risks than those in developed markets.
Securities in emerging markets also may be less liquid than those in developed
markets and foreigners are often limited in their ability to invest in, and
withdraw assets from, these markets. Additional restrictions may be imposed
under other conditions. Frontier market countries generally have smaller
economies or less developed capital markets and, as a result, the risks of
investing in emerging market countries are magnified in frontier market
countries.
China Investments
Risk: There are special risks associated with investments in China
and Taiwan, which are considered emerging market countries by the Portfolio. The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. But there can
be no assurance that these reforms will continue or that they will be effective.
Despite reforms and privatizations of companies in certain sectors, the Chinese
government still exercises substantial influence over many aspects of the
private sector and may own or control many companies. The Chinese government
continues to maintain a major role in economic policy making and investing in
China involves risks of losses due to expropriation, nationalization,
confiscation of assets and property, and the imposition of restrictions on
foreign investments and on repatriation of capital invested.
A
reduction in spending on Chinese products and services or the institution of
additional tariffs or other trade barriers, including as a result of heightened
trade tensions between China and the United States may also have an adverse
impact on the Chinese economy. In addition, investments in Taiwan could be
adversely affected by its political and economic relationship with China.
Certain securities issued by companies located or operating in China, such as
China A-shares, are also subject to trading restrictions, quota limitations and
less market liquidity,
56
which could pose risks to
the Portfolio. The Portfolio may also invest in special structures that utilize
contractual arrangements to provide exposure to certain Chinese companies, known
as variable interest entities (“VIEs”), that operate in sectors in which China
restricts and/or prohibits foreign investments. The Chinese government’s
acceptance of VIE structure is evolving. It is uncertain whether Chinese
officials and regulators will withdraw their acceptance of the structure or
whether Chinese courts or arbitration bodies would decline to enforce the
contractual rights of foreign investors, each of which would likely have
significant, detrimental, and possibly permanent losses on the value of such
investments.
Profitability
Investment Risk: High
relative profitability stocks may perform differently from the market as a whole
and an investment strategy purchasing these securities may cause the Portfolio
to at times underperform equity funds that use other investment
strategies.
Value Investment
Risk: Value stocks may perform differently from the market as
a whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Market Trading
Risk: Active trading markets for the Portfolio’s shares may
not be developed or maintained by market makers or authorized participants.
Authorized participants are not obligated to make a market in the Portfolio’s
shares or to submit purchase or redemption orders for creation units. Trading in
shares on an exchange may be halted in certain circumstances. There can be no
assurance that the requirements of the listing exchange necessary to maintain
the listing of the Portfolio will continue to be
met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the
value of your investment may fluctuate. Disruptions to creations and redemptions
or the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are
instruments, such as futures contracts, and options thereon, foreign currency
forward contracts, and swaps, whose value is derived from that of other assets,
rates or indices. The use of derivatives for non-hedging purposes may be
considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, settlement, liquidity, interest rate, market, credit and
management risks, as well as the risk of improper valuation. Changes in the
value of a derivative may not correlate perfectly with the underlying asset,
rate or index, and the Portfolio could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending
involves the risk that the borrower may fail to return the securities in a
timely manner or at all. As a result, the Portfolio may lose money and there may
be a delay in recovering the loaned securities. The Portfolio could also lose
money if it does not recover the securities and/or the value of the collateral
falls, including the value of investments made with cash collateral. Securities
lending also may have certain adverse tax
consequences.
Operational
Risk: Operational risks
include human error, changes in personnel, system changes, faults in
communication, and failures in systems, technology, or processes. Various
operational events or circumstances are outside the Advisor’s control, including
instances at third parties. The Portfolio and the Advisor seek to reduce these
operational risks through controls and procedures. However, these measures do
not address every possible risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and
its service providers’ use of internet, technology and information systems may
expose the Portfolio to potential risks linked to cyber security breaches of
those technological or information systems. Cyber security breaches, amongst
other things, could allow an unauthorized party to gain access to proprietary
information, customer data, or fund assets, or cause the Portfolio and/or its
service providers to suffer data corruption or lose operational
functionality.
57
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
listing exchange and may, therefore, have a material upward or downward effect
on the market price of the shares.
Performance
Performance information is not available for
the Emerging Markets High Profitability ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the Emerging Markets High
Profitability ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited
serve as the sub-advisors for the Portfolio. The following individuals are
responsible for leading the day-to-day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Allen Pu, Deputy Head of Portfolio
Management, North America, member of the Investment Committee, Vice
President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
|
• |
|
Ethan Wren, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
Purchase
and Sale of Fund Shares
The
Emerging Markets High Profitability ETF will issue (or redeem) shares at NAV
only to certain financial institutions that have entered into agreements with
the Portfolio’s distributor in large aggregated blocks known as “Creation
Units.” A Creation Unit of the Portfolio consists of 50,000 shares. Creation
Units are issued (or redeemed) in-kind for securities (and an amount of cash)
that the Portfolio specifies each day at the NAV next determined after receipt
of an order.
Individual
Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid-ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
58
Tax
Information
The
dividends and distributions you receive from the Emerging Markets High
Profitability ETF are taxable and generally will be taxed as ordinary income,
capital gains, or some combination of both, unless you are investing through a
tax-advantaged arrangement, such as a 401(k) plan or an individual retirement
account, in which case distributions may be taxed as ordinary income when
withdrawn from the plan or account.
Payments
to Financial Intermediaries
If
you purchase the Emerging Markets High Profitability ETF through a broker-dealer
or other financial intermediary (such as a bank), the Portfolio and its related
companies may pay the intermediary for the sale of the Portfolio shares and/or
related services. These payments may create a conflict of interest by
influencing the financial intermediary to recommend the Portfolio over another
investment. Ask your financial advisor or visit your financial intermediary’s
website for more information.
59
Dimensional
Emerging Markets Value ETF
Investment
Objective
The
investment objective of the Dimensional Emerging Markets Value ETF (the
“Emerging Markets Value ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the Emerging Markets Value ETF. You
may also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.38% |
|
Other
Expenses* |
|
|
|
0.13% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.51% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.08% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.43% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty-six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the Emerging
Markets Value ETF with the cost of investing in other funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated. The
Example also assumes that your investment has a 5% return each year and that the
Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
44 |
|
|
|
$ |
155 |
|
PORTFOLIO
TURNOVER
The
Emerging Markets Value ETF pays transaction costs, such as commissions, when it
buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. Because the Portfolio is new, information about
portfolio turnover rate is not yet available.
60
Principal
Investment Strategies
To
achieve the Emerging Markets Value ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase emerging market equity securities that are
deemed by the Advisor to be value stocks at the time of purchase, which may
include frontier markets (emerging market countries in an earlier stage of
development), authorized for investment by the Advisor’s Investment Committee
(“Approved Markets”). An equity issuer is considered to have a low relative
price (i.e., a value stock) primarily because it has a low price in relation to
its book value. In assessing relative price, the Advisor may consider additional
factors such as price to cash flow or price to earnings ratios. The
Portfolio may emphasize certain stocks, including smaller capitalization
companies, lower relative price stocks, and/or higher profitability stocks as
compared to their representation in the value segments of the Approved Markets
in which the Portfolio is authorized to invest. An equity issuer is considered
to have high profitability because it has high earnings or profits from
operations in relation to its book value or assets. The criteria the Advisor
uses for assessing relative price and profitability are subject to change from
time to time.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in emerging markets investments that are defined
in the Prospectus as Approved Markets securities. The Portfolio may purchase
emerging market equity securities across all market capitalizations.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may gain exposure to companies associated with Approved Markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio may purchase or sell futures contracts and
options on futures contracts for Approved Market or other equity market
securities and indices, including those of the United States, to increase or
decrease equity market exposure based on actual or expected cash inflows to or
outflows from the Portfolio. Because many of the Portfolio’s investments may be
denominated in foreign currencies, the Portfolio may enter into foreign currency
exchange transactions, including foreign currency forward contracts, in
connection with the settlement of a foreign securities or to transfer cash
balances from one currency to another currency.
The
Portfolio may lend its portfolio securities to generate additional income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index funds.
Principal
Risks
Because the value of your investment in the Emerging
Markets Value ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
61
Equity Market
Risk: Even a long-term
investment approach cannot guarantee a profit. Economic, market, political, and
issuer-specific conditions and events will cause the value of equity securities,
and the Portfolio that owns them, to rise or fall. Stock markets tend to move in
cycles, with periods of rising prices and periods of falling
prices.
Foreign Securities
and Currencies Risk:
Foreign securities prices may decline or fluctuate because of: (a) economic
or political actions of foreign governments, and/or (b) less regulated or
liquid securities markets. Investors holding these securities may also be
exposed to foreign currency risk (the possibility that foreign currency will
fluctuate in value against the U.S. dollar or that a foreign government will
convert, or be forced to convert, its currency to another currency, changing its
value against the U.S. dollar). The Portfolio does not hedge foreign currency
risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the
issuer.
Emerging
Markets Risk: Numerous emerging market countries have a
history of, and continue to experience serious, and potentially continuing,
economic and political problems. Stock markets in many emerging market countries
are relatively small, expensive to trade in and generally have higher risks than
those in developed markets. Securities in emerging markets also may be less
liquid than those in developed markets and foreigners are often limited in their
ability to invest in, and withdraw assets from, these markets. Additional
restrictions may be imposed under other conditions. Frontier market countries
generally have smaller economies or less developed capital markets and, as a
result, the risks of investing in emerging market countries are magnified in
frontier market countries.
China Investments
Risk: There are special risks associated with investments in China
and Taiwan, which are considered emerging market countries by the Portfolio. The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. But there can
be no assurance that these reforms will continue or that they will be effective.
Despite reforms and privatizations of companies in certain sectors, the Chinese
government still exercises substantial influence over many aspects of the
private sector and may own or control many companies. The Chinese government
continues to maintain a major role in economic policy making and investing in
China involves risks of losses due to expropriation, nationalization,
confiscation of assets and property, and the imposition of restrictions on
foreign investments and on repatriation of capital
invested.
A reduction in spending on
Chinese products and services or the institution of additional tariffs or other
trade barriers, including as a result of heightened trade tensions between China
and the United States may also have an adverse impact on the Chinese economy. In
addition, investments in Taiwan could be adversely affected by its political and
economic relationship with China. Certain securities issued by companies located
or operating in China, such as China A-shares, are also subject to trading
restrictions, quota limitations and less market liquidity, which could pose
risks to the Portfolio. The Portfolio may also invest in special structures that
utilize contractual arrangements to provide exposure to certain Chinese
companies, known as variable interest entities (“VIEs”), that operate in sectors
in which China restricts and/or prohibits foreign investments. The Chinese
government’s acceptance of VIE structure is evolving. It is uncertain whether
Chinese officials and regulators will withdraw their acceptance of the structure
or whether Chinese courts or arbitration bodies would decline to enforce the
contractual rights of foreign investors, each of which would likely have
significant, detrimental, and possibly permanent losses on the value of such
investments.
Small and Mid-Cap
Company Risk: Securities of small and mid-cap companies are often
less liquid than those of large companies and this could make it difficult to
sell a small or mid-cap company security at a desired time or price. As a
result, small and mid-cap company stocks may fluctuate relatively more in price.
In general, small and mid- capitalization companies are also more vulnerable
than larger companies to adverse business or economic developments and they may
have more limited resources.
62
Value Investment
Risk: Value stocks may perform differently from the market as
a whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Profitability
Investment Risk: High
relative profitability stocks may perform differently from the market as a whole
and an investment strategy purchasing these securities may cause the Portfolio
to at times underperform equity funds that use other investment
strategies.
Market Trading
Risk: Active trading markets for the Portfolio’s shares may
not be developed or maintained by market makers or authorized participants.
Authorized participants are not obligated to make a market in the Portfolio’s
shares or to submit purchase or redemption orders for creation units. Trading in
shares on an exchange may be halted in certain circumstances. There can be no
assurance that the requirements of the listing exchange necessary to maintain
the listing of the Portfolio will continue to be
met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the
value of your investment may fluctuate. Disruptions to creations and redemptions
or the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are
instruments, such as futures contracts, and options thereon, foreign currency
forward contracts, and swaps, whose value is derived from that of other assets,
rates or indices. The use of derivatives for non-hedging purposes may be
considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, settlement, liquidity, interest rate, market, credit and
management risks, as well as the risk of improper valuation. Changes in the
value of a derivative may not correlate perfectly with the underlying asset,
rate or index, and the Portfolio could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending
involves the risk that the borrower may fail to return the securities in a
timely manner or at all. As a result, the Portfolio may lose money and there may
be a delay in recovering the loaned securities. The Portfolio could also lose
money if it does not recover the securities and/or the value of the collateral
falls, including the value of investments made with cash collateral. Securities
lending also may have certain adverse tax
consequences.
Operational
Risk: Operational risks
include human error, changes in personnel, system changes, faults in
communication, and failures in systems, technology, or processes. Various
operational events or circumstances are outside the Advisor’s control, including
instances at third parties. The Portfolio and the Advisor seek to reduce these
operational risks through controls and procedures. However, these measures do
not address every possible risk and may be inadequate to address these
risks.
Cyber Security
Risk: The Portfolio’s and
its service providers’ use of internet, technology and information systems may
expose the Portfolio to potential risks linked to cyber security breaches of
those technological or information systems. Cyber security breaches, amongst
other things, could allow an unauthorized party to gain access to proprietary
information, customer data, or fund assets, or cause the Portfolio and/or its
service providers to suffer data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment, that the size of the Portfolio
would be maintained at such levels or that the Portfolio would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Portfolio.
63
In
addition, transactions by large shareholders may account for a large percentage
of the trading volume on the listing exchange and may, therefore, have a
material upward or downward effect on the market price of the
shares.
Performance
Performance information is not available for
the Emerging Markets Value ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the Emerging Markets Value
ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as the
sub-advisors for the Portfolio. The following individuals are responsible for
leading the day-to-day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Allen Pu, Deputy Head of Portfolio
Management, North America, member of the Investment Committee, Vice
President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception (2022).
|
|
• |
|
Ethan Wren, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
Purchase
and Sale of Fund Shares
The
Emerging Markets Value ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 100,000 shares. Creation Units are issued
(or redeemed) in-kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual
Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid-ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the Emerging Markets Value ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
64
Payments
to Financial Intermediaries
If
you purchase the Emerging Markets Value ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
65
Dimensional
Emerging Markets Core Equity 2 ETF
Investment
Objective
The
investment objective of the Dimensional Emerging Markets Core 2 ETF (the
“Emerging Markets Core 2 ETF” or “Portfolio”) is to achieve long-term capital
appreciation.
Fees
and Expenses of the Portfolio
This
table describes the fees and expenses you may pay if you buy, hold or sell
shares of the Emerging Markets Core 2 ETF. You
may also incur usual and customary brokerage commissions when buying or selling
shares of the Portfolio, which are not reflected in the table or Example that
follows.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses (expenses that you pay
each
year
as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fee |
|
|
|
0.33% |
|
Other
Expenses* |
|
|
|
0.17% |
|
Total
Annual Fund Operating Expenses |
|
|
|
0.50% |
|
Fee
Waiver and/or Expense Reimbursement** |
|
|
|
0.11% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
|
0.39% |
|
* |
The Portfolio is a new
portfolio, so the “Other Expenses” shown are based on anticipated fees and
expenses for the first full fiscal
year. |
** |
Dimensional Fund Advisors LP (the
“Advisor”) has agreed to waive certain fees and in certain instances,
assume certain expenses of the Portfolio. The Fee Waiver and Expense
Assumption Agreement for the Portfolio will remain in effect through
February 28,
2023, and may only be terminated by the Fund’s Board of
Trustees prior to that date. The Advisor retains the right to seek
reimbursement for any fees previously waived and/or expenses previously
assumed up to thirty-six months after such fee waiver and/or expense
assumption. |
EXAMPLE
This
Example is meant to help you compare the cost of investing in the Emerging
Markets Core 2 ETF with the cost of investing in other funds. The Example
assumes that you invest $10,000 in the Portfolio for the time periods indicated.
The Example also assumes that your investment has a 5% return each year and that
the Portfolio’s operating expenses remain the same. The costs for the Portfolio
reflect the net expenses of the Portfolio that result from the contractual
expense waiver in the first year only. Although your actual costs may be
higher or lower, based on these assumptions, your costs whether you redeem or
hold your shares would be:
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
$ |
40 |
|
|
|
$ |
149 |
|
PORTFOLIO
TURNOVER
The
Emerging Markets Core 2 ETF pays transaction costs, such as commissions, when it
buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover may indicate higher transaction costs and may result in higher taxes
when Portfolio shares are held in a taxable account. These costs, which are not
reflected in Annual Fund Operating Expenses or in the Example, affect the
Portfolio’s performance. Because the Portfolio is new, information about
portfolio turnover rate is not yet available.
66
Principal
Investment Strategies
To
achieve the Emerging Markets Core 2 ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase a broad and diverse group of securities
associated with emerging markets, which may include frontier markets (emerging
market countries in an earlier stage of development), authorized for investment
by the Advisor Investment Committee (“Approved Markets”). The Portfolio will
invest in companies of all sizes, with increased exposure to smaller
capitalization, lower relative price, and higher profitability companies. The
Portfolio’s increased exposure to smaller capitalization, lower relative price,
and higher profitability companies may be achieved by decreasing the allocation
of the Portfolio’s assets to larger capitalization, higher relative price, or
lower profitability companies. An equity issuer is considered to have a high
relative price (i.e., a growth stock) primarily because it has a high price in
relation to its book value. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to its book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to
time.
The
Advisor defines the “Emerging Markets Universe” as a market capitalization
weighted set (e.g., the larger the company, the greater the proportion of the
Emerging Markets Universe it represents) of non-U.S. companies associated
with Approved Markets. The percentage allocation of the assets of the Portfolio
to securities of the largest high relative price companies will generally be
reduced from between 5% and 35% of their percentage weight in the Emerging
Markets Universe. As of December 31, 2021, securities of the largest high
relative price companies in the Emerging Markets Universe comprised
approximately 15% of the Emerging Markets Universe and, if the Portfolio had
been in operation, the Advisor would have allocated approximately 9% of the
Portfolio to securities of the largest high relative price companies in the
Emerging Markets Universe. The percentage by which the Portfolio’s allocation to
securities of the largest high relative price companies is reduced will change
due to market movements and other
factors.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in emerging markets equity investments that are
defined in the prospectus as Approved Market
securities.
The
Advisor may also increase or reduce the Portfolio’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. In assessing a
company’s investment characteristics, the Advisor considers ratios such as
recent changes in assets divided by total assets. The criteria the Advisor uses
for assessing a company’s investment characteristics are subject to change from
time to time. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
The
Portfolio may gain exposure to companies associated with Approved Markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio may purchase or sell futures contracts and
options on futures contracts for Approved Market or other equity market
securities and indices, including those of the United States, to increase or
decrease equity market exposure based on actual or expected cash inflows to or
outflows from the Portfolio. Because many of the Portfolio’s investments may be
denominated in foreign currencies, the Portfolio may enter into foreign currency
exchange transactions, including foreign currency forward contracts, in
connection with the settlement of a foreign securities or to transfer cash
balances from one currency to another currency.
67
The
Portfolio may lend its portfolio securities to generate additional
income.
The
Portfolio is an actively managed exchange-traded fund and does not seek to
replicate the performance of a specific index and may have a higher degree of
portfolio turnover than such index
funds.
Principal
Risks
Because the value of your investment in the Emerging
Markets Core 2 ETF will fluctuate, there is the risk that you will lose
money. An investment in the Portfolio is
not a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
following is a description of principal risks of investing in the
Portfolio.
Equity Market
Risk: Even a long-term
investment approach cannot guarantee a profit. Economic, market, political, and
issuer-specific conditions and events will cause the value of equity securities,
and the Portfolio that owns them, to rise or fall. Stock markets tend to move in
cycles, with periods of rising prices and periods of falling prices.
Foreign Securities
and Currencies Risk:
Foreign securities prices may decline or fluctuate because of: (a) economic
or political actions of foreign governments, and/or (b) less regulated or
liquid securities markets. Investors holding these securities may also be
exposed to foreign currency risk (the possibility that foreign currency will
fluctuate in value against the U.S. dollar or that a foreign government will
convert, or be forced to convert, its currency to another currency, changing its
value against the U.S. dollar). The Portfolio does not hedge foreign currency
risk.
Depositary
receipts are generally subject to the same risks as the foreign securities that
they evidence or into which they may be converted. In addition, the underlying
issuers of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Depositary receipts that
are not sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.
Small and Mid-Cap
Company Risk: Securities of small and mid-cap companies are often
less liquid than those of large companies and this could make it difficult to
sell a small or mid-cap company security at a desired time or price. As a
result, small and mid-cap company stocks may fluctuate relatively more in price.
In general, small and mid- capitalization companies are also more vulnerable
than larger companies to adverse business or economic developments and they may
have more limited resources.
Emerging
Markets Risk:
Numerous emerging market countries have a history of, and continue to experience
serious, and potentially continuing, economic and political problems. Stock
markets in many emerging market countries are relatively small, expensive to
trade in and generally have higher risks than those in developed markets.
Securities in emerging markets also may be less liquid than those in developed
markets and foreigners are often limited in their ability to invest in, and
withdraw assets from, these markets. Additional restrictions may be imposed
under other conditions. Frontier market countries generally have smaller
economies or less developed capital markets and, as a result, the risks of
investing in emerging market countries are magnified in frontier market
countries.
China Investments
Risk: There are special risks associated with investments in China
and Taiwan, which are considered emerging market countries by the Portfolio. The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. But there can
be no assurance that these reforms will continue or that they will be effective.
Despite reforms and privatizations of companies in certain sectors, the Chinese
government still exercises substantial influence over many aspects of the
private sector and may own or control many companies. The Chinese government
continues to maintain a major role in economic policy making and investing in
China involves risks of losses due to expropriation, nationalization,
confiscation of assets and property, and the imposition of restrictions on
foreign investments and on repatriation of capital invested.
68
A reduction in spending on
Chinese products and services or the institution of additional tariffs or other
trade barriers, including as a result of heightened trade tensions between China
and the United States may also have an adverse impact on the Chinese economy. In
addition, investments in Taiwan could be adversely affected by its political and
economic relationship with China. Certain securities issued by companies located
or operating in China, such as China A-shares, are also subject to trading
restrictions, quota limitations and less market liquidity, which could pose
risks to the Portfolio. The Portfolio may also invest in special structures that
utilize contractual arrangements to provide exposure to certain Chinese
companies, known as variable interest entities (“VIEs”), that operate in sectors
in which China restricts and/or prohibits foreign investments. The Chinese
government’s acceptance of VIE structure is evolving. It is uncertain whether
Chinese officials and regulators will withdraw their acceptance of the structure
or whether Chinese courts or arbitration bodies would decline to enforce the
contractual rights of foreign investors, each of which would likely have
significant, detrimental, and possibly permanent losses on the value of such
investments.
Profitability
Investment Risk: High
relative profitability stocks may perform differently from the market as a whole
and an investment strategy purchasing these securities may cause the Portfolio
to at times underperform equity funds that use other investment
strategies.
Value Investment
Risk: Value stocks may perform differently from the market as
a whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of
time.
Market Trading
Risk: Active trading markets for the Portfolio’s shares may
not be developed or maintained by market makers or authorized participants.
Authorized participants are not obligated to make a market in the Portfolio’s
shares or to submit purchase or redemption orders for creation units. Trading in
shares on an exchange may be halted in certain circumstances. There can be no
assurance that the requirements of the listing exchange necessary to maintain
the listing of the Portfolio will continue to be
met.
Premium/Discount
Risk: The net asset value (“NAV”) of the Portfolio and the
value of your investment may fluctuate. Disruptions to creations and redemptions
or the market price of the Portfolio’s holdings, the existence of extreme market
volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or
discount to NAV. 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, the shareholder may sustain
losses.
Derivatives
Risk: Derivatives are
instruments, such as futures contracts, and options thereon, foreign currency
forward contracts, and swaps, whose value is derived from that of other assets,
rates or indices. The use of derivatives for non-hedging purposes may be
considered to carry more risk than other types of investments. When the
Portfolio uses derivatives, the Portfolio will be directly exposed to the risks
of those derivatives. Derivative instruments are subject to a number of risks
including counterparty, settlement, liquidity, interest rate, market, credit and
management risks, as well as the risk of improper valuation. Changes in the
value of a derivative may not correlate perfectly with the underlying asset,
rate or index, and the Portfolio could lose more than the principal amount
invested.
Securities Lending
Risk: Securities lending
involves the risk that the borrower may fail to return the securities in a
timely manner or at all. As a result, the Portfolio may lose money and there may
be a delay in recovering the loaned securities. The Portfolio could also lose
money if it does not recover the securities and/or the value of the collateral
falls, including the value of investments made with cash collateral. Securities
lending also may have certain adverse tax
consequences.
Operational
Risk: Operational risks
include human error, changes in personnel, system changes, faults in
communication, and failures in systems, technology, or processes. Various
operational events or circumstances are outside the Advisor’s control, including
instances at third parties. The Portfolio and the Advisor seek to reduce these
operational risks through controls and procedures. However, these measures do
not address every possible risk and may be inadequate to address these
risks.
69
Cyber Security
Risk: The Portfolio’s and
its service providers’ use of internet, technology and information systems may
expose the Portfolio to potential risks linked to cyber security breaches of
those technological or information systems. Cyber security breaches, amongst
other things, could allow an unauthorized party to gain access to proprietary
information, customer data, or fund assets, or cause the Portfolio and/or its
service providers to suffer data corruption or lose operational
functionality.
Large Shareholder
Risk: Certain shareholders, including other funds or accounts
advised by the Advisor, may from time to time own a substantial amount of the
Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio
achieving a specified size or scale. There can be no assurance that
any large shareholder would not redeem its investment, that the size
of the Portfolio would be maintained at such levels or that the Portfolio would
continue to meet applicable listing requirements. Redemptions by large
shareholders could have a significant negative impact on the Portfolio. In
addition, transactions by large shareholders may account for a large percentage
of the trading volume on the listing exchange and may, therefore, have a
material upward or downward effect on the market price of the
shares.
Performance
Performance information is not available for
the Emerging Markets Core 2 ETF because it has not yet commenced
operations. Updated performance information for the Portfolio
can be obtained in the future by visiting https://us.dimensional.com/etfs.
Investment
Advisor/Portfolio Management
Dimensional
Fund Advisors LP serves as the investment advisor for the Emerging Markets Core
2 ETF. Dimensional Fund Advisors Ltd. and DFA Australia Limited serve as the
sub-advisors for the Portfolio. The following individuals are responsible for
leading the day-to-day management of the Portfolio:
|
• |
|
Jed S. Fogdall, Global Head of Portfolio
Management, Chairman of the Investment Committee, Vice President and
Senior Portfolio Manager of the Advisor, has been a portfolio manager of
the Portfolio since inception (2022). |
|
• |
|
Joseph F. Hohn, Vice President and Senior
Portfolio Manager of the Advisor, has been a portfolio manager of the
Portfolio since inception (2022). |
|
• |
|
Allen Pu, Deputy Head of Portfolio
Management, North America, member of the Investment Committee, Vice
President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception
(2022). |
|
• |
|
Mary T. Phillips, Deputy Head of
Portfolio Management, North America, member of the Investment Committee,
Vice President and Senior Portfolio Manager of the Advisor, has been a
portfolio manager of the Portfolio since inception
(2022). |
|
• |
|
William B. Collins-Dean, Vice President
and Senior Portfolio Manager of the Advisor, has been a portfolio manager
of the Portfolio since inception (2022). |
Purchase
and Sale of Fund Shares
The
Emerging Markets Core 2 ETF will issue (or redeem) shares at NAV only to certain
financial institutions that have entered into agreements with the Portfolio’s
distributor in large aggregated blocks known as “Creation Units.” A Creation
Unit of the Portfolio consists of 100,000 shares. Creation Units are issued (or
redeemed) in-kind for securities (and an amount of cash) that the Portfolio
specifies each day at the NAV next determined after receipt of an order.
70
Individual
Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other
alternative trading systems through your broker-dealer at market prices. An
investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling
shares in the secondary market (the “bid-ask spread”). Because Portfolio shares
trade at market prices rather than at NAV, Portfolio shares may trade at a price
less than (discount) or greater than (premium) the Portfolio’s NAV. Recent
information, including information on the Portfolio’s NAV, market price,
premiums and discounts, and bid-ask spreads, is available on the Portfolio’s
website at https://us.dimensional.com/etfs.
Tax
Information
The
dividends and distributions you receive from the Emerging Markets Core 2 ETF are
taxable and generally will be taxed as ordinary income, capital gains, or some
combination of both, unless you are investing through a tax-advantaged
arrangement, such as a 401(k) plan or an individual retirement account, in which
case distributions may be taxed as ordinary income when withdrawn from the plan
or account.
Payments
to Financial Intermediaries
If
you purchase the Emerging Markets Core 2 ETF through a broker-dealer or other
financial intermediary (such as a bank), the Portfolio and its related companies
may pay the intermediary for the sale of the Portfolio shares and/or related
services. These payments may create a conflict of interest by influencing the
financial intermediary to recommend the Portfolio over another investment. Ask
your financial advisor or visit your financial intermediary’s website for more
information.
71
Additional
Information on Investment Objectives and Policies
Dimensional
ETF Trust (the “Trust”) offers a variety of investment portfolios. Each of the
investment company’s portfolios has its own investment objective and is the
equivalent of a separate exchange-traded fund (“ETF”). Shares of the Dimensional
US Core Equity Market ETF (the “US Core ETF”), Dimensional US High Profitability
ETF (the “US High Profitability ETF”), Dimensional US Real Estate ETF (the “US
Real Estate ETF”), Dimensional US Small Cap Value ETF (the “US Small Cap Value
ETF”), Dimensional International Core Equity Market ETF (the “International Core
ETF”), Dimensional International Core Equity 2 ETF (the “International Core
Equity 2 ETF”), Dimensional International Small Cap Value ETF (the
“International Small Cap Value ETF”), Dimensional International Small Cap ETF
(the “International Small Cap ETF”), Dimensional International High
Profitability ETF (the “International High Profitability ETF”), Dimensional
Emerging Core Equity Market ETF (the “Emerging Markets Core ETF”), Dimensional
Emerging Markets High Profitability ETF (the “Emerging Markets High
Profitability ETF”), Dimensional Emerging Markets Value ETF (the “Emerging
Markets Value ETF”) and Dimensional Emerging Markets Core Equity 2 ETF (the
“Emerging Markets Core 2 ETF”) (each, a “Portfolio” and collectively, the
“Portfolios”) are offered in this Prospectus. The Portfolios are designed for
long-term investors.
The
investment objective of each Portfolio is to achieve long-term capital
appreciation. Each Portfolio’s investment objective is non‑fundamental, which
means it may be changed by the Board of Trustees without shareholder approval.
Shareholders will be given at least 60 days’ advance notice of any change to a
Portfolio’s investment objective.
Below
are the definitions of some terms that the Advisor uses to describe the
investment strategies for certain Portfolios.
Free Float generally describes the
number of publicly traded shares of a company.
Momentum generally describes the past
performance of a stock relative to other stocks.
Trading Strategies generally refers to
the ability to execute purchases and sales of stocks in a cost-effective
manner.
Profitability generally measures a
company’s profit in relation to its book value or assets.
To
achieve the US Core ETF’s investment objective, the Advisor implements an
integrated investment approach that combines research, portfolio design,
portfolio management, and trading functions. As further described below, the
Portfolio’s design emphasizes long-term drivers of expected returns identified
by the Advisor’s research, while balancing risk through broad diversification
across companies and sectors. The Advisor’s portfolio management and trading
processes further balance those long-term drivers of expected returns with
shorter-term drivers of expected returns and trading costs.
The
US Core ETF is designed to achieve its investment objective by purchasing a
broad and diverse group of readily marketable securities of U.S. companies that
is composed of companies within the U.S. Universe that meet the Advisor’s
investment criteria. The Advisor defines the “U.S. Universe” as a market
capitalization weighted set of U.S. operating companies listed on securities
exchanges in the United States that are deemed appropriate by the Advisor.
Market capitalization weighted means that a company’s weighting in the U.S.
Universe is proportional to that company’s actual market capitalization compared
to the total market capitalization of all eligible companies. The higher the
company’s relative market capitalization, the greater its representation. The
Portfolio will invest in companies of all sizes, with increased exposure to
smaller capitalization, lower relative price, and higher profitability companies
as compared to their representation in the U.S. Universe. The Portfolio’s
increased exposure to smaller capitalization, lower relative price, and higher
profitability companies may be achieved by decreasing the allocation of the
Portfolio’s assets to larger capitalization, higher relative price, or lower
profitability companies relative to their weight in the U.S.
Universe.
72
An
equity issuer is considered to have a high relative price (i.e., a growth stock)
primarily because it has a high price in relation to its book value. An equity
issuer is considered to have a low relative price (i.e., a value stock)
primarily because it has a low price in relation to their book value. In
assessing relative price, the Advisor may consider additional factors such as
price‑to‑cash‑flow or price‑to‑earnings ratios. An equity issuer is considered
to have high profitability because it has high earnings or profits from
operations in relation to its book value or assets. The criteria the Advisor
uses for assessing relative price and profitability are subject to change from
time to time.
The
Advisor may also increase or reduce the US Core ETF’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. The Advisor may
consider a small capitalization company’s investment characteristics as compared
to other eligible companies when making investment decisions and may exclude a
small capitalization company with high investment as measured by the company’s
recent asset growth. The Portfolio will generally not exclude more than 5% of
the eligible small capitalization companies within the U.S. Universe based on
such investment characteristics. The criteria the Advisor uses for assessing a
company’s investment characteristics are subject to change from time to time.
The Advisor may decrease the amount that the Portfolio invests in small
capitalization companies that have lower profitability and/or higher relative
prices. In addition, the Advisor seeks to reduce trading costs using a flexible
trading approach that looks for opportunities to participate in the available
market liquidity, while managing turnover and explicit transaction costs.
The
US Core ETF may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices, to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
US Core ETF may invest in ETFs for the purpose of gaining exposure to the U.S.
stock market while maintaining liquidity. In addition to money market
instruments and other short-term investments, the Portfolio may invest in
affiliated and unaffiliated registered and unregistered money market funds to
manage the Portfolio’s cash pending investment in other securities or to
maintain liquidity for the payment of redemptions or other purposes. Investments
in ETFs and money market funds may involve a duplication of certain fees and
expenses. The Portfolio will look through to the security holdings of any
investment companies in which it invests for purposes of compliance with its 80%
policy, to the extent that the Portfolio has sufficient information about the
holdings of such investment companies.
To
achieve the US High Profitability ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies and sectors. The Advisor’s portfolio management
and trading processes further balance those long-term drivers of expected
returns with shorter-term drivers of expected returns and trading costs.
The
Portfolio is designed to purchase a broad and diverse group of readily
marketable securities of large U.S. companies that the Advisor determines to
have high profitability relative to other U.S. large cap companies at the time
of purchase. An equity issuer is considered to have high profitability because
it has high earnings or profits from operations in relation to its book value or
assets. The Advisor may also adjust the representation in the Portfolio of an
eligible company, or exclude a company, after considering such factors as market
capitalization, free float, size, relative price, profitability, momentum,
trading strategies, liquidity management and other factors that the Advisor
determines to be appropriate. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to its book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time.
As
a non‑fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in securities of U.S. companies. As of the date
of this Prospectus, for purposes of the Portfolio, the Advisor considers large
cap companies to be companies whose market capitalizations are generally in the
highest 90% of
73
total
market capitalization or companies whose market capitalizations are larger than
or equal to the 1,000th largest U.S. company, whichever results in the higher
market capitalization break. Total market capitalization is based on the market
capitalization of eligible U.S. operating companies listed on a securities
exchange in the U.S. that is deemed appropriate by the Advisor. Under the
Advisor’s market capitalization guidelines described above, based on market
capitalization data as of December 31, 2021, the market capitalization of a
large cap company would be $10,142 million or above. This threshold will
change due to market conditions.
At
least semi-annually, the Advisor reviews total market capitalization to
determine those companies whose stock may be eligible for investment. Generally,
the Portfolio does not intend to purchase or sell securities based on the
prospects for the economy, the securities markets or the individual issuers
whose shares are eligible for purchase. The Portfolio may sell portfolio
securities when the issuer’s market capitalization falls below that of the
issuer with the minimum market capitalization that is then eligible for purchase
by the Portfolio.
The
total market capitalization range used by the Advisor for the Portfolio, as
described above, generally applies at the time of purchase. The Portfolio is not
required to dispose of a security if the security’s issuer is no longer within
the total market capitalization range criteria. Securities that do meet the
market capitalization criteria nevertheless may be sold at any time when, in the
Advisor’s judgment, circumstances warrant their sale. See “Portfolio Transactions—All Portfolios.”
The
Portfolio may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
Portfolio may invest in ETFs for the purpose of gaining exposure to the U.S.
stock market while maintaining liquidity. In addition to money market
instruments and other short-term investments, the Portfolio may invest in
affiliated and unaffiliated registered and unregistered money market funds to
manage the Portfolio’s cash pending investment in other securities or to
maintain liquidity for the payment of redemptions or other purposes. Investments
in ETFs and money market funds may involve a duplication of certain fees and
expenses.
To
achieve the US Real Estate ETF’s investment objective, the Advisor implements an
integrated investment approach that combines research, portfolio design,
portfolio management, and trading functions.
The
Portfolio, using a market capitalization weighted approach, purchases readily
marketable equity securities of companies whose principal activities include
ownership, management, development, construction, or sale of residential,
commercial or industrial real estate. The Portfolio will principally invest in
equity securities of companies in certain real estate investment trusts
(“REITs”) and companies engaged in residential construction and firms, except
partnerships, whose principal business is to develop commercial property. A
company’s market capitalization is the number of its shares outstanding times
its price per share. Under a market capitalization weighted approach, companies
with higher market capitalizations generally represent a larger proportion of
the Portfolio than companies with relatively lower market capitalizations. The
Advisor may adjust the representation in the Portfolio of an eligible company,
or exclude a company, after considering such factors as free float, momentum,
trading strategies, liquidity, size, relative price, profitability, and other
factors that the Advisor determines to be appropriate. An equity issuer is
considered to have a low relative price (i.e., a value stock) primarily because
it has a low price in relation to its book value. In assessing relative price,
the Advisor may consider additional factors such as price to cash flow or price
to earnings ratios. An equity issuer is considered to have high profitability
because it has high earnings or profits from operations in relation to its book
value or assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time.
As
a non‑fundamental policy, under normal circumstances, at least 80% of the
Portfolio’s net assets will be invested in securities of U.S. companies in the
real estate industry. The Portfolio generally considers a company to be
principally engaged in the real estate industry if the company (i) derives
at least 50% of its revenue or profits from the ownership, management,
development, construction, or sale of residential, commercial, industrial, or
other real estate; (ii) has at least 50% of the value of its assets
invested in residential, commercial,
74
industrial,
or other real estate; or (iii) is organized as a REIT or REIT-like entity.
REITs and REIT-like entities are types of real estate companies that pool
investors’ funds for investment primarily in income producing real estate or
real estate related loans or interests. A REIT is not taxed on income
distributed to shareholders if it complies with several requirements relating to
its organization, ownership, assets, and income and a requirement that it
distribute to its shareholders at least 90% of its taxable income (other than
net capital gains) for each taxable year.
The
Portfolio will make equity investments in securities listed on a securities
exchange in the United States that is deemed appropriate by the Advisor.
The
Portfolio may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
At
least semi-annually, the Advisor identifies a schedule of eligible investments
consisting of equity securities of companies in the real estate industry
described above. It is the intention of the Portfolio to invest in the
securities of eligible companies using a market capitalization weighted
approach. See “Market Capitalization Weighted
Approach.”
The
Portfolio generally redeems its shares in kind. See “Creations and Redemptions.” If securities must
be sold in order to obtain funds to make redemption payments, such securities
may be repurchased by the Portfolio, as additional cash becomes available to it.
However, the Portfolio has retained the right to borrow to make redemption
payments. Further, because the securities of certain companies whose shares are
eligible for purchase are thinly traded, the Portfolio might not be able to
purchase the number of shares that strict adherence to market capitalization
weighting might require.
Investments
will not be based upon an issuer’s dividend payment policy or record. However,
many of the companies whose securities will be included in the Portfolio do pay
dividends. It is anticipated, therefore, that the Portfolio will receive
dividend income. Periodically, the Advisor may expand the investments eligible
for the Portfolio to include equity securities of companies in sectors of the
real estate industry in addition to those described above as eligible for
investment as of the date of this Prospectus.
The
Portfolio may invest in exchange-traded funds (ETFs) for the purpose of gaining
exposure to the U.S. stock market while maintaining liquidity. In addition to
money market instruments and other short-term investments, the Portfolio may
invest in affiliated and unaffiliated registered and unregistered money market
funds to manage the Portfolio’s cash pending investment in other securities or
to maintain liquidity for the payment of redemptions or other purposes.
Investments in ETFs and money market funds may involve a duplication of certain
fees and expenses.
To
achieve the US Small Cap Value ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies and sectors. The Advisor’s portfolio management
and trading processes further balance those long-term drivers of expected
returns with shorter-term drivers of expected returns and trading costs.
The
Portfolio, using a market capitalization weighted approach, is designed to
purchase a broad and diverse group of the readily marketable securities of U.S.
small cap companies that the Advisor determines to be value stocks. A company’s
market capitalization is the number of its shares outstanding times its price
per share. Under a market capitalization weighted approach, companies with
higher market capitalizations generally represent a larger proportion of the
Portfolio than companies with relatively lower market capitalizations. The
Advisor may adjust the representation in the Portfolio of an eligible company,
or exclude a company, after considering such factors as free float, momentum,
trading strategies, liquidity, relative price, profitability, investment
characteristics, and other factors that the Advisor determines to be
appropriate. An equity issuer is considered to
75
have
a low relative price (i.e., a value stock) primarily because it has a low price
in relation to its book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time.
As
a non‑fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in securities of small cap U.S. companies. As of
the date of this Prospectus, for purposes of the Portfolio, the Advisor
considers small cap companies to be companies whose market capitalizations are
generally in the lowest 10% of total market capitalization or companies whose
market capitalizations are smaller than the 1,000th largest U.S. company,
whichever results in the higher market capitalization break. Total market
capitalization is based on the market capitalization of eligible U.S. operating
companies listed on a securities exchange in the U.S. that is deemed appropriate
by the Advisor. Under the Advisor’s market capitalization guidelines described
above, based on market capitalization data as of December 31, 2021, the market
capitalization of a small cap company would be below $10,142 million. This
threshold will change due to market conditions.
The
Portfolio may purchase or sell futures contracts and options on futures
contracts for U.S. equity securities and indices to increase or decrease equity
market exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
The
Advisor may consider a small capitalization company’s investment characteristics
as compared to other eligible companies when making investment decisions and may
exclude a small capitalization company with high investment as measured by the
company’s recent asset growth. The Portfolio will generally not exclude more
than 5% of the eligible U.S. small capitalization companies based on investment
characteristics. The criteria the Advisor uses for assessing investment
characteristics are subject to change from time to time. The Advisor may also
decrease the amount that the Portfolio invests in small capitalization companies
that have lower profitability and/or higher relative prices.
The
Portfolio will purchase securities that are listed on the U.S. national
securities exchanges and using a market capitalization weighted approach. See
“Market Capitalization Weighted Approach”
in this Prospectus. On not less than a semi-annual basis, the Advisor calculates
price to book ratios and reviews total market capitalization to determine those
companies whose stock may be eligible for investment.
Generally,
the Portfolio does not intend to purchase or sell securities based on the
prospects for the economy, the securities markets or the individual issuers
whose shares are eligible for purchase.
The
Portfolio may sell portfolio securities when the issuer’s market capitalization
increases to a level that exceeds that of the issuer with the largest market
capitalization that is then eligible for investment by that Portfolio. In
addition, the Portfolio may also sell portfolio securities in the same
circumstances, however, the Portfolio may retain securities of issuers with
relatively smaller market capitalizations for longer periods, despite a decrease
in the issuers’ price to book ratios.
The
total market capitalization range, and the value criteria used by the Advisor
for Portfolio, as described above, generally apply at the time of purchase by
the Portfolio. The Portfolio is not required to dispose of a security if the
security’s issuer is no longer within the total market capitalization range or
does not meet current value criteria. Securities that do meet the market
capitalization and/or value criteria nevertheless may be sold at any time when,
in the Advisor’s judgment, circumstances warrant their sale. See “Portfolio Transactions—All Portfolios” in this
Prospectus.
The
Portfolio may invest in exchange-traded funds (ETFs) for the purpose of gaining
exposure to the U.S. stock market while maintaining liquidity. In addition to
money market instruments and other short-term investments, the Portfolio may
invest in affiliated and unaffiliated registered and unregistered money market
funds to manage cash pending investment in other securities or to maintain
liquidity for the payment of redemptions or other purposes. Investments in ETFs
and money market funds may involve a duplication of certain fees and
expenses.
76
To
achieve the International Core ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
International Core ETF is designed to achieve its investment objective by
purchasing a broad and diverse group of readily marketable securities of
non‑U.S. companies that is composed of companies within the International
Universe that meet the Advisor’s investment criteria. The Advisor defines the
“International Universe” as a market capitalization weighted set of non‑U.S.
companies associated with developed markets that have been designated as
Approved Markets for investment by the Advisor. Market capitalization weighted
means that a company’s weighting in the International Universe is proportional
to that company’s actual market capitalization compared to the total market
capitalization of all eligible companies. The higher the company’s relative
market capitalization, the greater its representation. For a description of the
securities and countries approved for investment, see “Approved Markets” below. The Portfolio will
invest in companies of all sizes, with increased exposure to smaller
capitalization, lower relative price, and higher profitability companies as
compared to their representation in the International Universe. The Portfolio’s
increased exposure to smaller capitalization, lower relative price, and higher
profitability companies may be achieved by decreasing the allocation of the
Portfolio’s assets to larger capitalization, higher relative price, or lower
profitability companies relative to their weight in the International Universe.
An equity issuer is considered to have a high relative price (i.e., a growth
stock) primarily because it has a high price in relation to its book value. An
equity issuer is considered to have a low relative price (i.e., a value stock)
primarily because it has a low price in relation to their book value. In
assessing relative price, the Advisor may consider additional factors, such as
price‑to‑cash‑flow or price‑to‑earnings ratios. An equity issuer is considered
to have high profitability because it has high earnings or profits from
operations in relation to its book value or assets. The criteria the Advisor
uses for assessing relative price and profitability are subject to change from
time to time.
The
Advisor will seek to set country weights based on the relative market
capitalizations of eligible companies within each Approved Market. The Advisor
may also increase or reduce the International Core ETF’s exposure to an eligible
company, or exclude a company, based on shorter-term considerations, such as a
company’s price momentum and investment characteristics. The Advisor may
consider a small capitalization company’s investment characteristics as compared
to other eligible companies when making investment decisions and may exclude a
small capitalization company with high investment as measured by the company’s
recent asset growth. The Portfolio will generally not exclude more than 5% of
the eligible small capitalization company universe within each eligible country
based on such investment characteristics. The criteria the Advisor uses for
assessing investment characteristics are subject to change from time to time.
The Advisor may decrease the amount that the Portfolio invests in small
capitalization companies that have lower profitability and/or higher relative
prices. In addition, the Advisor seeks to reduce trading costs using a flexible
trading approach that looks for opportunities to participate in the available
market liquidity, while managing turnover and explicit transaction
costs.
Under
normal market conditions, the International Core ETF intends to invest at least
40% of its assets in three or more non‑U.S. countries by investing in securities
of companies associated with such countries.
The
International Core ETF may gain exposure to companies associated with Approved
Markets by purchasing equity securities in the form of depositary receipts,
which may be listed or traded outside the issuer’s domicile country. The
Portfolio also may purchase or sell futures contracts and options on futures
contracts for foreign or U.S. equity securities and indices, to increase or
decrease equity market exposure based on actual or expected cash inflows to or
outflows from the Portfolio.
The
International Core ETF may invest in ETFs for the purpose of gaining exposure to
the equity markets while maintaining liquidity. In addition to money market
instruments and other short-term investments, the International Core ETF may
invest in affiliated and unaffiliated registered and unregistered money market
funds to manage cash pending investment in other securities or to maintain
liquidity for the payment of redemptions or
77
other
purposes. Investments in ETFs and money market funds may involve a duplication
of certain fees and expenses. The Portfolio will look through to the security
holdings of any investment companies in which it invests for purposes of
compliance with its 80% policy, to the extent that the Portfolio has sufficient
information about the holdings of such investment companies.
To
achieve the International Core Equity 2 ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase a broad and diverse group of securities of
non-U.S. companies in developed markets. The Portfolio invests in companies of
all sizes, with increased exposure to smaller capitalization, lower relative
price, and higher profitability companies as compared to their representation in
the International Universe. For purposes of this Portfolio, the Advisor defines
the International Universe as a market capitalization weighted set (e.g., the
larger the company, the greater the proportion of the International Universe it
represents) of non-U.S. companies in developed markets that have been
authorized as approved markets for investment by the Advisor’s Investment
Committee. See “Approved Markets” in this
Prospectus. The Portfolio’s increased exposure to smaller capitalization, lower
relative price, and higher profitability companies may be achieved by decreasing
the allocation of the Portfolio’s assets to larger capitalization, higher
relative price, or lower profitability companies relative to their weight in the
International Universe. An equity issuer is considered to have a high relative
price (i.e., a growth stock) primarily because it has a high price in relation
to its book value. An equity issuer is considered to have a low relative price
(i.e., a value stock) primarily because it has a low price in relation to its
book value. In assessing relative price, the Advisor may consider additional
factors such as price to cash flow or price to earnings ratios. An equity issuer
is considered to have high profitability because it has high earnings or profits
from operations in relation to its book value or assets. The criteria the
Advisor uses for assessing relative price and profitability are subject to
change from time to time.
The
Portfolio intends to purchase securities of companies associated with developed
market countries that the Advisor has designated as approved markets. As
a non-fundamental policy, under normal circumstances, the Portfolio will
invest at least 80% of its net assets in equity securities. The Advisor
determines company size on a country or region-specific basis and based
primarily on market capitalization. The percentage allocation of the assets of
the Portfolio to securities of the largest high relative price companies will
generally be reduced from between 5% and 35% of their percentage weight in the
International Universe. The percentage by which the Portfolio’s allocation to
securities of the largest high relative price companies is reduced will change
due to market movements and other factors.
The
Advisor may also adjust the representation in the Portfolio of an eligible
company, or exclude a company, after considering such factors as free float,
momentum, trading strategies, liquidity, size, relative price, profitability,
investment characteristics, and other factors that the Advisor determines to be
appropriate. In assessing a company’s investment characteristics, the Advisor
considers ratios such as recent changes in assets divided by total assets. The
criteria the Advisor uses for assessing a company’s investment characteristics
are subject to change from time to time.
The
Portfolio may gain exposure to companies associated with approved markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio also may purchase or sell futures
contracts and options on futures contracts for foreign or U.S. equity securities
and indices to increase or decrease equity market exposure based on actual or
expected cash inflows to or outflows from the Portfolio.
Under
normal market conditions, the Portfolio intends to invest at least 40% of its
assets in three or more non-U.S. countries by investing in securities of
companies associated with such countries.
78
The
Advisor may consider a small capitalization company’s investment characteristics
as compared to other eligible companies when making investment decisions and may
exclude a small capitalization company with high
investment
as measured by the company’s recent asset growth. The Portfolio will generally
not exclude more than 5% of the eligible small capitalization company universe
within each eligible country based on investment characteristics. The criteria
the Advisor uses for assessing a company’s investment characteristics are
subject to change from time to time. The Advisor may decrease the amount that
the Portfolio invests in small capitalization companies that have lower
profitability and/or higher relative prices. In addition, the Advisor seeks to
reduce trading costs using a flexible trading approach that looks for
opportunities to participate in the available market liquidity, while managing
turnover and explicit transaction costs.
The
Portfolio may invest in exchange-traded funds (ETFs) for the purpose of gaining
exposure to the equity markets while maintaining liquidity. In addition to money
market instruments and other short-term investments, the Portfolio may invest in
affiliated and unaffiliated registered and unregistered money market funds to
manage cash pending investment in other securities or to maintain liquidity for
the payment of redemptions or other purposes. Investments in ETFs and money
market funds may involve a duplication of certain fees and expenses.
To
achieve the Portfolios’ investment objectives, the Advisor implements an
integrated investment approach that combines research, portfolio design,
portfolio management, and trading functions. As further described below, the
Portfolios’ design emphasizes long-term drivers of expected returns identified
by the Advisor’s research, while balancing risk through broad diversification
across companies, sectors, and countries. The Advisor’s portfolio management and
trading processes further balance those long-term drivers of expected returns
with shorter-term drivers of expected returns and trading costs.
The
International Small Cap Value ETF, using a market capitalization weighted
approach, is designed to purchase securities of small, non-U.S. companies
in countries with developed markets that the Advisor determines to be value
stocks at the time of purchase. The International Small Cap ETF, using a market
capitalization weighted approach, is designed to purchase securities of small,
non-U.S. companies in countries with developed markets. A company’s market
capitalization is the number of its shares outstanding times its price per
share. Under a market capitalization weighted approach, companies with higher
market capitalizations generally represent a larger proportion of the Portfolio
than companies with relatively lower market capitalizations. The Advisor may
adjust the representation in a Portfolio of an eligible company, or exclude a
company, after considering such factors as free float, momentum, trading
strategies, liquidity, relative price, profitability, investment
characteristics, and other factors that the Advisor determines to be
appropriate. An equity issuer is considered to have a low relative price (i.e.,
a value stock) primarily because it has a low price in relation to its book
value. In assessing relative price, the Advisor may consider additional factors
such as price to cash flow or price to earnings ratios. An equity issuer is
considered to have high profitability because it has high earnings or profits
from operations in relation to its book value or assets. The criteria the
Advisor uses for assessing relative price and profitability are subject to
change from time to time.
The
International Small Cap Value ETF intends to purchase securities of small value
companies associated with developed market countries that the Advisor has
designated as approved markets. The International Small Cap ETF intends to
purchase securities of small companies associated with developed market
countries that the Advisor has designated as approved markets. For a
description of the securities and countries approved for investment, see “Approved Markets” in this Prospectus. Under
normal market conditions, each Portfolio intends to invest at least 40% of its
assets in three or more non-U.S. countries by investing in securities of
companies associated with such countries.
Each
Portfolio intends to invest in the stock of eligible companies using a market
capitalization weighted approach. The Advisor, using this approach and its
judgment, will seek to set country weights based on the relative market
capitalizations of eligible small companies within each country. See “Market Capitalization Weighted Approach” in
this Prospectus. The weightings of countries in each Portfolio may vary from
their weightings in international indices, such as those published by FTSE
International, and MSCI.
As
a non-fundamental policy, under normal circumstances, each Portfolio will
invest at least 80% of its net assets in securities of small companies in the
particular markets in which it invests. The Advisor determines the
maximum
79
market
capitalization of a small company with respect to each country in which each
Portfolio invests. In the countries or regions authorized for investment, the
Advisor first ranks eligible companies listed on selected exchanges based on the
companies’ market capitalizations. The Advisor then determines the universe of
eligible securities by defining the maximum market capitalization of a small
company that may be purchased by a Portfolio with respect to each country or
region. Based on market capitalization data as of December 31, 2021, for each
Portfolio, the market capitalization of a small company in any country in which
the Portfolio invests would be below $8,603 million. This threshold will vary by
country or region. For example, based on market capitalization data as of
December 31, 2021, the Advisor would consider a small company in Switzerland to
have a market capitalization below $8,603 million, a small company in Norway to
have a market capitalization below $2,152 million, and a small company in Japan
to have a market capitalization below $2,362 million. These thresholds will
change due to market conditions.
Each
Portfolio may gain exposure to companies associated with approved markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. Each Portfolio also may purchase or sell futures
contracts and options on futures contracts for foreign and U.S. equity
securities and indices to increase or decrease equity market exposure based on
actual or expected cash inflows to or outflows from a Portfolio.
Each
Portfolio does not seek current income as an investment objective and
investments will not be based upon an issuer’s dividend payment policy or
record. However, many of the companies whose securities will be included in a
Portfolio do pay dividends. It is anticipated, therefore, that each Portfolio
will receive dividend income.
The
Advisor may consider a small capitalization company’s investment characteristics
as compared to other eligible companies with high investment as measured by the
company’s recent net asset growth. Each Portfolio will generally not exclude
more than 5% of the eligible small capitalization company universe within each
eligible country based on investment characteristics. The criteria the Advisor
uses for assessing investment characteristics are subject to change from time to
time. The Advisor may also decrease the amount that each Portfolio invests in
small capitalization companies that have lower profitability and/or higher
relative prices.
Each
Portfolio may invest in exchange-traded funds (ETFs) for the purpose of gaining
exposure to the equity markets while maintaining liquidity. In addition to money
market instruments and other short-term investments, a Portfolio may invest in
affiliated and unaffiliated registered and unregistered money market funds to
manage the Portfolio’s cash pending investment in other securities or to
maintain liquidity for the payment of redemptions or other purposes. Investments
in ETFs and money market funds may involve a duplication of certain fees and
expenses.
To
achieve the International High Profitability ETF’s investment objective, the
Advisor implements an integrated investment approach that combines research,
portfolio design, portfolio management, and trading functions. As further
described below, the Portfolio’s design emphasizes long-term drivers of expected
returns identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase securities of
large non-U.S. companies that the Advisor determines to have high
profitability relative to other large capitalization companies in the same
country or region, at the time of purchase. An equity issuer is considered to
have high profitability because it has high earnings or profits from operations
in relation to its book value or assets. The Advisor may also adjust the
representation in the Portfolio of an eligible company, or exclude a company,
after considering such factors as market capitalization, free float, size,
relative price, profitability, momentum, trading strategies, liquidity
management, and other factors that the Advisor determines to be appropriate. An
equity issuer is considered to have a low relative price (i.e., a value stock)
primarily because it has a low price in relation to its book value. In assessing
relative price, the Advisor may consider additional factors such as price to
cash flow or price to earnings ratios. The criteria the Advisor uses for
assessing relative price and profitability are subject to change from time to
time.
80
Under
normal market conditions, the Portfolio intends to invest at least 40% of its
assets in three or more non‑U.S. countries by investing in securities of
companies associated with such countries. The Portfolio invests its assets in
securities of large non-U.S. companies associated with approved
markets. For a description of the securities and countries approved for
investment, see “Approved Markets” in
this Prospectus. In addition, the Portfolio may continue to hold securities of
developed market countries that are not listed in Approved Markets, but had been
authorized for investment in the past, and may reinvest distributions received
in connection with such existing investments in such previously Approved
Markets.
As
a non-fundamental policy, under normal circumstances, the Portfolio
will invest at least 80% of its net assets in securities of companies in the
particular non-U.S. markets in which the Portfolio invests. The
Advisor determines the minimum market capitalization of a large company with
respect to each country or region in which the Portfolio invests. Based on
market capitalization data as of December 31, 2021, the market capitalization of
a large company in any country or region in which the Portfolio invests would be
$2,044 million or above. This threshold will vary by country or region. For
example, based on market capitalization data as of December 31, 2021, the
Advisor considered a large company in the EMU to have a market capitalization of
at least $7,611 million, a large company in Norway to have a market
capitalization of at least $2,152 million and a large company in Switzerland to
have a market capitalization of at least $8,603 million. These thresholds will
change due to market conditions.
The
Portfolio does not seek current income as an investment objective and
investments will not be based upon an issuer’s dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.
The
Portfolio may gain exposure to companies in an approved market by purchasing
equity securities in the form of depositary receipts, which may be listed or
traded outside the issuer’s domicile country, or by entering into equity
swap agreements. The Portfolio also may purchase or sell futures contracts and
options on futures contracts for foreign or U.S. equity securities and indices
to increase or decrease equity market exposure based on actual or expected cash
inflows to or outflows from the Portfolio.
The
Portfolio may invest in ETFs for the purpose of gaining exposure to the equity
markets while maintaining liquidity. In addition to money market instruments and
other short-term investments, the Portfolio may invest in affiliated and
unaffiliated registered and unregistered money market funds to manage the
Portfolio’s cash pending investment in other securities or to maintain liquidity
for the payment of redemptions or other purposes. Investments in ETFs and money
market funds may involve a duplication of certain fees and expenses.
To
achieve the Emerging Markets Core ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Emerging Markets Core ETF is designed to purchase a broad and diverse group of
readily marketable emerging markets securities that is composed of companies
within the Emerging Markets Universe that meet the Advisor’s investment
criteria. The Advisor defines the “Emerging Markets Universe” as a market
capitalization weighted set of non‑U.S. companies associated with emerging
markets, which may include frontier markets (emerging market countries in an
earlier stage of development), that have been designated as Approved Markets for
investment by the Advisor. Market capitalization weighted means that a company’s
weighting in the Emerging Markets Universe is proportional to that company’s
actual market capitalization compared to the total market capitalization of all
eligible companies. The higher the company’s relative market capitalization, the
greater its representation. For a description of the securities and countries
approved for investment, see “Approved
Markets” below. The Portfolio invests its assets primarily in Approved
Market equity securities listed on bona fide securities exchanges. The Portfolio
may also invest in China A‑shares (equity securities of companies listed in
China) that are accessible through Stock Connect.
81
The
Emerging Markets Core ETF will invest in companies of all sizes, with increased
exposure to smaller capitalization, lower relative price, and higher
profitability companies as compared to their representation in the Emerging
Markets Universe. The Portfolio’s increased exposure to smaller capitalization,
lower relative price, and higher profitability companies may be achieved by
decreasing the allocation of the Portfolio’s assets to larger capitalization,
higher relative price, or lower profitability companies relative to their weight
in the Emerging Markets Universe. An equity issuer is considered to have a high
relative price (i.e., a growth stock) primarily because it has a high price in
relation to its book value. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to their book value. In assessing relative price, the Advisor may
consider additional factors, such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time.
The
Advisor may also increase or reduce the Emerging Markets Core ETF’s exposure to
an eligible company, or exclude a company, based on shorter-term considerations,
such as a company’s price momentum and investment characteristics. The Advisor
may consider a small capitalization company’s investment characteristics as
compared to other eligible companies when making investment decisions and may
exclude a small capitalization company with high investment as measured by the
company’s recent asset growth. The Portfolio will generally not exclude more
than 5% of the eligible small capitalization company universe within each
eligible country based on such investment characteristics. The criteria the
Advisor uses for assessing investment characteristics are subject to change from
time to time. The Advisor may decrease the amount that the Portfolio invests in
small capitalization companies that have lower profitability and/or higher
relative prices. In addition, the Advisor seeks to reduce trading costs using a
flexible trading approach that looks for opportunities to participate in the
available market liquidity, while managing turnover and explicit transaction
costs.
As
a non‑fundamental policy, under normal circumstances, the Emerging Markets Core
ETF will invest at least 80% of its net assets in emerging markets investments
that are defined in the Prospectus as Approved Market securities. The Portfolio
may gain exposure to companies in Approved Markets by purchasing equity
securities in the form of depositary receipts, which may be listed or traded
outside the issuer’s domicile country, or by entering into swap agreements. The
Portfolio may purchase or sell futures contracts and options on futures
contracts for Approved Market or other equity market securities and indices,
including those of the United States, to increase or decrease equity market
exposure based on actual or expected cash inflows to or outflows from the
Portfolio.
In
determining which emerging market countries are eligible markets for the
Emerging Markets Core ETF, the Advisor may consider various factors, including
without limitation, the data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank), the International Finance
Corporation, FTSE International, and MSCI. Approved Markets may not include all
such emerging markets. In determining whether to approve emerging markets for
investment, the Advisor may take into account, among other things, market
liquidity, relative availability of investor information, government regulation,
including fiscal and foreign exchange repatriation rules and the availability of
other access to these markets for the Emerging Markets Core ETF.
Pending
the investment of new capital in Approved Markets securities, the Emerging
Markets Core ETF will typically invest in money market instruments or other
highly liquid debt instruments including those denominated in U.S. dollars
(including, without limitation, repurchase agreements). In addition, the
Emerging Markets Core ETF, may, for liquidity, or for temporary defensive
purposes during periods in which market or economic or political conditions
warrant, purchase highly liquid debt instruments or hold freely convertible
currencies.
The
Emerging Markets Core ETF also may invest up to 10% of its total assets in
shares of other registered investment companies that invest in one or more
Approved Markets, although it intends to do so only where access to those
markets is otherwise significantly limited. The Portfolio may also invest in
ETFs that provide exposure to Approved Markets or other equity markets,
including the United States, for the purposes of gaining exposure to the equity
markets while maintaining liquidity. In addition to money market instruments and
other short-term investments, the Emerging Markets Core ETF may invest in
affiliated and unaffiliated registered and unregistered money market funds to
manage cash pending investment in other securities or to maintain
liquidity
82
for
the payment of redemptions or other purposes. Investments in ETFs and money
market funds may involve a duplication of certain fees and expenses. The
Portfolio will look through to the security holdings of any investment companies
in which it invests for purposes of compliance with its 80% policy, to the
extent that the Portfolio has sufficient information about the holdings of such
investment companies.
The
Emerging Markets Core ETF does not seek current income as an investment
objective, and investments will not be based upon an issuer’s dividend payment
policy or record. However, many of the companies whose securities will be
included in the Emerging Markets Core ETF do pay dividends. It is anticipated,
therefore, that the Emerging Markets Core ETF will receive dividend
income.
To
achieve the Emerging Markets High Profitability ETF’s investment objective, the
Advisor implements an integrated investment approach that combines research,
portfolio design, portfolio management, and trading functions. As further
described below, the Portfolio’s design emphasizes long-term drivers of expected
returns identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase securities of large companies associated with
emerging markets that the Advisor determines to have high profitability relative
to other large companies in the same country or region at the time of
purchase. An equity issuer is considered to have high profitability because
it has high earnings or profits from operations in relation to its book value or
assets. The Advisor may also adjust the representation in the Portfolio of an
eligible company, or exclude a company, after considering such factors as market
capitalization, free float, size, relative price, profitability, momentum,
trading strategies, liquidity management, and other factors that the Advisor
determines to be appropriate. An equity issuer is considered to have a low
relative price (i.e., a value stock) primarily because it has a low price in
relation to its book value. In assessing relative price, the Advisor may
consider additional factors such as price to cash flow or price to earnings
ratios. The criteria the Advisor uses for assessing relative price and
profitability are subject to change from time to time.
The
Portfolio intends to purchase securities of large companies that are associated
with emerging markets, which may include frontier markets (emerging market
countries in an earlier stage of development), that have been designated as
Approved Markets. The Advisor’s definition of a large company varies across
countries and is based primarily on market capitalization. A company’s market
capitalization is the number of its shares outstanding times its price per
share. In each country authorized for investment, the Advisor first ranks
eligible companies listed on selected exchanges based on the companies’ market
capitalizations. The Advisor then defines the minimum market capitalization for
a large company in that country. Based on market capitalization data as of
December 31, 2021, the market capitalization of a large cap company in any
country or region in which the Portfolio invests would be $554 million or
above. This threshold will vary by country or region. For example, based on
market capitalization data as of December 31, 2021, the Advisor considered a
large company in Mexico to have a market capitalization of at least $4,573
million, and a large company in the Czech Republic to have a market
capitalization of at least $2,023 million. These thresholds will change due to
market conditions.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in emerging markets investments that are defined
in the prospectus as Approved Market securities. The Portfolio may gain
exposure to companies in an Approved Market by purchasing equity securities in
the form of depositary receipts, which may be listed or traded outside the
issuer’s domicile country, or by entering into equity swap agreements. The
Portfolio also may purchase or sell futures contracts and options on futures
contracts for Approved Market or other equity market securities and indices,
including those of the United States, to increase or decrease market exposure
based on actual or expected cash inflows to or outflows from the Portfolio. The
Portfolio may also invest in China A-shares (equity securities of companies
listed in China) that are accessible through Stock Connect.
The
Portfolio does not seek current income as an investment objective, and
investments will not be based upon an issuer’s dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.
83
The
Portfolio may also invest in exchange-traded funds (ETFs) that provide exposure
to Approved Markets or other equity markets, including the United States, for
the purposes of gaining exposure to the equity markets while maintaining
liquidity. In addition to money market instruments and other short-term
investments, the Portfolio may invest in affiliated and unaffiliated registered
and unregistered money market funds to manage cash pending investment in other
securities or to maintain liquidity for the payment of redemptions or other
purposes. Investments in ETFs and money market funds may involve a duplication
of certain fees and expenses.
Pending
the investment of new capital in Approved Markets securities, the Portfolio will
typically invest in money market instruments or other highly liquid debt
instruments including those denominated in U.S. dollars (including, without
limitation, repurchase agreements). In addition, the Portfolio, may, for
liquidity, or for temporary defensive purposes during periods in which market or
economic or political conditions warrant, purchase highly liquid debt
instruments or hold freely convertible currencies, although the Portfolio does
not expect the aggregate of all such amounts to exceed 20% of its net assets
under normal circumstances.
The
Portfolio also may invest up to 10% of its total assets in shares of other
investment companies that invest in one or more Approved Markets, although it
intends to do so only where access to those markets is otherwise significantly
limited. In some Approved Markets, it may be necessary or advisable for the
Portfolio to establish a wholly owned subsidiary or a trust for the purpose of
investing in the local markets.
To
achieve the Emerging Markets Value ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase emerging market equity securities that are
deemed by the Advisor to be value stocks at the time of purchase, which may
include frontier markets (emerging market countries in an earlier stage of
development), that have been designated as Approved Markets. An equity issuer is
considered to have a low relative price (i.e., a value stock) primarily because
it has a low price in relation to its book value. In assessing relative price,
the Advisor may consider additional factors such as price to cash flow or price
to earnings ratios. The Advisor may also adjust the representation in the
Portfolio of an eligible company, or exclude a company, after considering such
factors as free float, momentum, trading strategies, liquidity, size, relative
price, profitability, investment characteristics, and other factors that the
Advisor determines to be appropriate. An equity issuer is considered to have
high profitability because it has high earnings or profits from operations in
relation to its book value or assets. The criteria the Advisor uses for
assessing relative price and profitability are subject to change from time to
time.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in emerging markets investments that are defined
in the Prospectus as Approved Markets securities. The Portfolio may purchase
emerging market equity securities across all market capitalizations.
The
Portfolio may gain exposure to companies associated with Approved Markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio may purchase or sell futures contracts and
options on futures contracts for Approved Market or other equity market
securities and indices, including those of the United States, to increase or
decrease equity market exposure based on actual or expected cash inflows to or
outflows from the Portfolio. The Portfolio may also invest in China A-shares
(equity securities of companies listed in China) that are accessible through
Stock Connect.
The
Portfolio does not seek current income as an investment objective, and
investments will not be based upon an issuer’s dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.
84
The
Portfolio may also invest in exchange-traded funds (ETFs) that provide exposure
to Approved Markets or other equity markets, including the United States, for
the purposes of gaining exposure to the equity markets while maintaining
liquidity. In addition to money market instruments and other short-term
investments, the Portfolio may invest in affiliated and unaffiliated registered
and unregistered money market funds to manage cash pending investment in other
securities or to maintain liquidity for the payment of redemptions or other
purposes. Investments in ETFs and money market funds may involve a duplication
of certain fees and expenses.
Generally,
changes in the composition and relative ranking (in terms of price to book
ratio) of the stocks which are eligible for purchase by the Portfolio take place
with every trade when the securities markets are open for trading due primarily
to price changes of such securities. On a periodic basis, the Advisor will
identify value stocks that are eligible for investment and re-evaluate eligible
value stocks no less than semi-annually.
Pending
the investment of new capital in Approved Markets securities, the Portfolio will
typically invest in money market instruments or other highly liquid debt
instruments including those denominated in U.S. dollars (including, without
limitation, repurchase agreements). In addition, the Portfolio, may, for
liquidity, or for temporary defensive purposes during periods in which market or
economic or political conditions warrant, purchase highly liquid debt
instruments or hold freely convertible currencies, although the Portfolio does
not expect the aggregate of all such amounts to exceed 20% of its net assets
under normal circumstances.
The
Portfolio also may invest up to 10% of its total assets in shares of other
investment companies that invest in one or more Approved Markets, although it
intends to do so only where access to those markets is otherwise significantly
limited. In some Approved Markets, it may be necessary or advisable for the
Portfolio to establish a wholly owned subsidiary or a trust for the purpose of
investing in the local markets.
The
Advisor may consider a small capitalization company’s investment characteristics
as compared to other eligible companies when making investment decisions and may
exclude a small capitalization company with high investment as measured by the
company’s recent asset growth. The Portfolio will generally not exclude more
than 5% of the eligible small capitalization company universe within each
eligible country based on investment characteristics. The criteria the Advisor
uses for assessing investment characteristics are subject to change from time to
time. The Advisor may also decrease the amount that the Portfolio invests in
small capitalization companies that have lower profitability and/or higher
relative prices.
To
achieve the Emerging Markets Core 2 ETF’s investment objective, the Advisor
implements an integrated investment approach that combines research, portfolio
design, portfolio management, and trading functions. As further described below,
the Portfolio’s design emphasizes long-term drivers of expected returns
identified by the Advisor’s research, while balancing risk through broad
diversification across companies, sectors, and countries. The Advisor’s
portfolio management and trading processes further balance those long-term
drivers of expected returns with shorter-term drivers of expected returns and
trading costs.
The
Portfolio is designed to purchase a broad and diverse group of securities
associated with emerging markets, which may include frontier markets (emerging
market countries in an earlier stage of development), that have been designated
as Approved Markets. The Portfolio will invest in companies of all sizes, with
increased exposure to smaller capitalization, lower relative price, and higher
profitability companies. The Portfolio’s increased exposure to smaller
capitalization, lower relative price, and higher profitability companies may be
achieved by decreasing the allocation of the Portfolio’s assets to larger
capitalization, higher relative price, or lower profitability companies. An
equity issuer is considered to have a high relative price (i.e., a growth stock)
primarily because it has a high price in relation to its book value. An equity
issuer is considered to have a low relative price (i.e., a value stock)
primarily because it has a low price in relation to its book value. In assessing
relative price, the Advisor may consider additional factors such as price to
cash flow or price to earnings ratios. An equity issuer is considered to have
high profitability because it has high earnings or profits from operations in
relation to its book value or assets. The criteria the Advisor uses for
assessing relative price and profitability are subject to change from time to
time. The Advisor may also adjust the representation in the Portfolio of an
eligible company, or exclude a company, after considering such factors as free
float, momentum, trading strategies, liquidity, size, relative price,
profitability, investment characteristics, and other factors that the Advisor
determines to be appropriate.
85
The
Advisor defines the “Emerging Markets Universe” as a market capitalization
weighted set (e.g., the larger the company, the greater the proportion of the
Emerging Markets Universe it represents) of non-U.S. companies associated with
Approved Markets. The percentage allocation of the assets of the Portfolio to
securities of the largest high relative price companies will generally be
reduced from between 5% and 35% of their percentage weight in the Emerging
Markets Universe. The percentage by which the Portfolio’s allocation to
securities of the largest high relative price companies is reduced will change
due to market movements and other factors.
As
a non-fundamental policy, under normal circumstances, the Portfolio will invest
at least 80% of its net assets in emerging markets equity investments that are
defined in the prospectus as Approved Market securities.
The
Portfolio may gain exposure to companies associated with Approved Markets by
purchasing equity securities in the form of depositary receipts, which may be
listed or traded outside the issuer’s domicile country, or by entering into
equity swap agreements. The Portfolio may purchase or sell futures contracts and
options on futures contracts for Approved Market or other equity market
securities and indices, including those of the United States, to increase or
decrease equity market exposure based on actual or expected cash inflows to or
outflows from the Portfolio. The Portfolio may also invest in China A-shares
(equity securities of companies listed in China) that are accessible through
Stock Connect.
The
Portfolio does not seek current income as an investment objective, and
investments will not be based upon an issuer’s dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.
The
Portfolio may also invest in exchange- traded funds (ETFs) that provide exposure
to Approved Markets or other equity markets, including the United States, for
the purposes of gaining exposure to the equity markets while maintaining
liquidity. In addition to money market instruments and other short-term
investments, the Portfolio may invest in affiliated and unaffiliated registered
and unregistered money market funds to manage cash pending investment in other
securities or to maintain liquidity for the payment of redemptions or other
purposes. Investments in ETFs and money market funds may involve a duplication
of certain fees and expenses.
Pending
the investment of new capital in Approved Markets securities, the Portfolio will
typically invest in money market instruments or other highly liquid debt
instruments including those denominated in U.S. dollars (including, without
limitation, repurchase agreements). In addition, the Portfolio, may, for
liquidity, or for temporary defensive purposes during periods in which market or
economic or political conditions warrant, purchase highly liquid debt
instruments or hold freely convertible currencies, although the Portfolio does
not expect the aggregate of all such amounts to exceed 20% of its net assets
under normal circumstances.
The
Portfolio also may invest up to 10% of its total assets in shares of other
investment companies that invest in one or more Approved Markets, although it
intends to do so only where access to those markets is otherwise significantly
limited. In some Approved Markets, it may be necessary or advisable for the
Portfolio to establish a wholly owned subsidiary or a trust for the purpose of
investing in the local markets.
The
Advisor may consider a small capitalization company’s investment characteristics
as compared to other eligible companies when making investment decisions and may
exclude a small capitalization company with high investment as measured by the
company’s recent asset growth. The Portfolio will generally not exclude more
than 5% of the eligible small capitalization company universe within each
eligible country based on investment characteristics. The criteria the Advisor
uses for assessing investment characteristics are subject to change from time to
time. The Advisor may decrease the amount that the Portfolio invests in small
capitalization companies that have lower profitability and/or higher relative
prices. In addition, the Advisor seeks to reduce trading costs using a flexible
trading approach that looks for opportunities to participate in the available
market liquidity, while managing turnover and explicit transaction
costs.
86
APPROVED
MARKETS
As
of the date of this Prospectus, the International Core ETF, International Core
Equity 2 ETF, International Small Cap Value ETF, International Small Cap ETF,
International High Profitability ETF, Emerging Markets High Profitability ETF,
Emerging Markets Core 2 ETF, Emerging Markets Value ETF and Emerging Markets
Core ETF (each, an “International Portfolio” and collectively, the
“International Portfolios”) can invest in the following countries that are
designated as “Approved Markets”:
International Core ETF, International Core
Equity 2 ETF, International Small Cap Value ETF, International Small Cap ETF and
International High Profitability ETF: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy,
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom.
Emerging Markets Value ETF: Brazil,
Chile, China, Colombia, Czech Republic, Greece, Hungary, India, Indonesia,
Malaysia, Mexico, the Philippines, Poland, Qatar, Russia, Saudi Arabia, South
Africa, South Korea, Taiwan, Thailand, Turkey, and United Arab Emirates.
Emerging Markets Core ETF, Emerging Markets
High Profitability ETF and Emerging Markets Core 2 ETF: Brazil, Chile,
China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia,
Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Russia, Saudi Arabia,
South Africa, South Korea, Taiwan, Thailand, Turkey, and United Arab Emirates
(collectively, the “Approved Markets”).
The
Advisor will determine in its discretion when and whether to invest in countries
that have been authorized as Approved Markets, depending on a number of factors,
including, but not limited to, asset growth in the International Portfolio,
constraints imposed within Approved Markets, and other characteristics of each
country’s markets. The Investment Committee of the Advisor also may authorize
other countries for investment in the future, in addition to the Approved
Markets listed above. Although the Advisor does not intend to purchase
securities not associated with an Approved Market, an International Portfolio
may acquire such securities in connection with corporate actions or other
reorganizations or transactions with respect to securities that are held by the
Portfolio from time to time. Also, an International Portfolio may continue to
hold investments in countries that are not currently designated as Approved
Markets, but had been authorized for investment in the past, and may reinvest
distributions received in connection with such existing investments in such
previously Approved Markets. Emerging Markets approved for investment may
include countries in an earlier stage of development that are sometimes referred
to as frontier markets.
The
International Portfolios invest in securities of Approved Markets (as identified
above) listed on bona fide securities exchanges or traded on the
over‑the‑counter markets. These exchanges or over‑the‑counter markets may be
either within or outside the issuer’s domicile country. For example, the
securities may be listed or traded in the form of European Depositary Receipts
(“EDRs”), Global Depositary Receipts (“GDRs”), American Depositary Receipts
(“ADRs”), or other types of depositary receipts (including non‑voting depositary
receipts) or may be listed on bona fide securities exchanges in more than one
country. An International Portfolio will consider for purchase securities that
are associated with an Approved Market (“Approved Market Securities”). Approved
Market Securities are: (a) securities of companies that are organized under
the laws of, or maintain their principal place of business in, an Approved
Market; (b) securities for which the principal trading market is in an
Approved Market; (c) securities issued or guaranteed by the government of
an Approved Market, its agencies or instrumentalities, or the central bank of
such country or territory; (d) securities of companies that derive at least
50% of their revenues or profits from goods produced or sold, investments made,
or services performed in Approved Markets or have at least 50% of their assets
in Approved Markets; (e) securities included in the Portfolio’s benchmark
index, which tracks Approved Markets; or (f) depositary shares of companies
associated with Approved Markets under the criteria above. Securities of
Approved Markets may include securities of companies that have characteristics
and business relationships common to companies in other countries or regions. As
a result, the value of the securities of such companies may reflect economic and
market forces in such other countries or regions as well as in the Approved
Markets. The Advisor, however, will select only those companies that, in its
view, have sufficiently strong exposure to economic and market forces in
Approved Markets that satisfy the criteria described above. The International
Portfolios also may obtain exposure to Approved Market Securities by investing
in derivative instruments that derive their value from Approved Markets
Securities, or by investing in securities of pooled investment vehicles that
invest at least 80% of their assets in Approved Markets Securities.
87
In
determining what countries are eligible markets for the Emerging Markets High
Profitability, Emerging Markets Core 2 and Emerging Markets Value ETFs, the
Advisor may consider various factors, including without limitation, the data,
analysis, and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (commonly known as the
World Bank), the International Finance Corporation, FTSE International, and
MSCI. Approved Markets may not include all such emerging markets. In determining
whether to approve markets for investment, the Advisor may take into account,
among other things, market liquidity, relative availability of investor
information, government regulation, including fiscal and foreign exchange
repatriation rules and the availability of other access to these markets for the
Emerging Markets High Profitability, Emerging Markets Core 2 and Emerging
Markets Value ETFs.
MARKET
CAPITALIZATION WEIGHTED APPROACH
The
portfolio structures of the US Real Estate ETF, US Small Cap Value ETF,
International Small Cap Value ETF, and International Small Cap ETF involve
market capitalization weighting in determining individual security
weights and, where applicable, country or region weights. Market
capitalization weighting means each security is generally purchased based on the
issuer’s relative market capitalization. Market capitalization weighting may be
modified by the Advisor for a variety of reasons. The Advisor may adjust the
representation in the US Real Estate ETF of an eligible company, or exclude a
company, after considering such factors as free float, momentum, trading
strategies, liquidity, size, relative price, profitability, and other factors
that the Advisor determines to be appropriate. The Advisor may adjust the
representation in the US Small Cap Value, International Small Cap Value and
International Small Cap ETFs of an eligible company, or exclude a company, after
considering such factors as free float, momentum, trading strategies, liquidity,
relative price, profitability, investment characteristics, and other factors
that the Advisor determines to be appropriate. An equity issuer is considered to
have a low relative price (i.e., a value stock) primarily because it has a low
price in relation to its book value. In assessing relative price, the Advisor
may consider additional factors such as price to cash flow or price to earnings
ratios. An equity issuer is considered to have high profitability because it has
high earnings or profits from operations in relation to its book value or
assets. In assessing a company’s investment characteristics, the Advisor
considers ratios such as recent changes in assets divided by total assets. The
criteria the Advisor uses for assessing relative price, profitability, and
investment characteristics are subject to change from time to time. The Advisor
may deviate from market capitalization weighting to limit or fix the exposure of
a Portfolio to a particular issuer to a maximum proportion of the assets of the
Portfolio. The Advisor may exclude the stock of a company that meets applicable
market capitalization criterion if the Advisor determines, in its judgment, that
the purchase of such stock is inappropriate in light of other conditions. With
respect to the US Small Cap Value, International Small Cap Value and
International Small Cap ETFs, the Advisor may decrease the allocation of the
Portfolio’s assets to eligible small capitalization companies that generally
have lower profitability and/or higher relative prices. These adjustments will
result in a deviation from traditional market capitalization weighting.
Adjustment
for free float modifies market capitalization weighting to exclude the share
capital of a company that is not freely available for trading in the public
equity markets. For example, the following types of shares may be excluded: (i)
those held by strategic investors (such as governments, controlling shareholders
and management), (ii) treasury shares, or (iii) shares subject to foreign
ownership restrictions.
Furthermore,
the Advisor may reduce the relative amount of any security held in order to
retain sufficient portfolio liquidity. A portion, but generally not in excess of
20% of assets, may be invested in interest bearing obligations, such as money
market instruments, thereby causing further deviation from market capitalization
weighting. A further deviation may occur due to holdings in securities received
in connection with corporate actions.
Block
purchases of eligible securities may be made at opportune prices, even though
such purchases exceed the number of shares that, at the time of purchase,
adherence to a market capitalization weighted approach would otherwise require.
In addition, securities eligible for purchase or otherwise represented in a
Portfolio may be acquired in exchange for the issuance of shares. See “Creations and Redemptions.” While such
transactions might cause a deviation from market capitalization weighting, they
would ordinarily be made in anticipation of further growth of assets.
Generally,
changes in the composition and relative ranking (in terms of market
capitalization) of the stocks that are eligible for purchase take place with
every trade when the securities markets are open for trading due,
88
primarily,
to price changes of such securities. At least semi-annually, the Advisor will
identify companies whose stock is eligible for investment by a Portfolio.
Additional investments generally will not be made in securities that have
changed in value sufficiently to be excluded from the Advisor’s then current
market capitalization requirement for eligible portfolio securities. This may
result in further deviation from market capitalization weighting. Such deviation
could be substantial if a significant amount of holdings of a Portfolio change
in value sufficiently to be excluded from the requirement for eligible
securities, but not by a sufficient amount to warrant their sale.
Country
weights may be based on the total market capitalization of companies within each
country. The country weights may take into consideration the free float of
companies within a country or whether these companies are eligible to be
purchased for the particular strategy. In addition, to maintain a satisfactory
level of diversification, the Investment Committee may limit or fix the exposure
to a particular country or region to a maximum proportion of the assets of that
vehicle. Country weights may also vary due to general day-to-day trading
patterns and price movements. The weighting of countries may vary from their
weighting in published international indices.
PORTFOLIO
TRANSACTIONS
In
general, securities will not be purchased or sold based on the prospects for the
economy, the securities markets, or the individual issuers whose shares are
eligible for purchase. Securities that have depreciated in value since their
acquisition will not be sold solely because prospects for the issuer are not
considered attractive or due to an expected or realized decline in securities
prices in general. Securities generally will not be sold solely to realize
short-term profits, but when circumstances warrant, they may be sold without
regard to the length of time held. Securities, including those eligible for
purchase, may be disposed of, however, at any time when, in the Advisor’s
judgment, circumstances warrant their sale, including, but not limited to,
tender offers, mergers, and similar transactions, or bids made for block
purchases at opportune prices. Generally, securities will be purchased with the
expectation that they will be held for longer than one year and will be held
until such time as they are no longer an appropriate holding in light of the
investment policies of each Portfolio.
In
attempting to respond to adverse market, economic, political, or other
considerations, each Portfolio may, from time to time, invest its assets in a
temporary defensive manner that is inconsistent with the Portfolio’s principal
investment strategies. In these circumstances, the Portfolio may invest a
portion of its assets in highly liquid debt instruments, freely convertible
currencies, or index futures contracts, and options thereon, which may prevent
the Portfolio from achieving its investment objective.
89
ADDITIONAL
INFORMATION REGARDING INVESTMENT RISKS
Because
the value of your investment in a Portfolio will fluctuate, there is the risk
that you will lose money. An investment in a Portfolio is not a deposit of a
bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. The following is a description of
principal risks of investing in the Portfolios.
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Risk |
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US Core Equity Markets ETF
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US
High Profitability ETF |
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US Real Estate ETF |
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US Small Cap Value ETF |
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International Core
Equity Market ETF |
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International Core
Equity 2 ETF |
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International Small
Cap Value ETF |
China
Investments Risk |
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Cyber
Security Risk |
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Depositary
Receipts Risk |
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Derivatives
Risk |
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Equity
Market Risk |
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Foreign
Securities and Currencies Risk |
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International
Closed Market Trading Risk |
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Large
Shareholder Risk |
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Market
Trading Risk |
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X |
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|
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|
X |
|
|
|
|
X |
|
|
|
|
X |
|
|
|
|
X |
|
|
|
|
X |
|
|
|
|
X |
|
Operational
Risk |
|
|
|
X |
|
|
|
|
X |
|
|
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|
X |
|
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|
X |
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|
X |
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|
X |
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|
X |
|
Premium/Discount
Risk |
|
|
|
X |
|
|
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|
X |
|
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|
|
X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Profitability
Investment Risk |
|
|
|
X |
|
|
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|
X |
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|
X |
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|
X |
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X |
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|
X |
|
Risks
of Concentrating in the Real Estate Industry |
|
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|
X |
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Securities
Lending Risk |
|
|
|
X |
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|
X |
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|
X |
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|
X |
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|
X |
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X |
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X |
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Small
Company Risk |
|
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X |
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X |
|
Small
and Mid-Cap Company Risk |
|
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|
X |
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|
X |
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X |
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Value
Investment Risk |
|
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|
X |
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|
X |
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X |
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|
X |
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X |
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X |
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90
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Risk |
|
International Small
Cap ETF |
|
International High Profitability ETF |
|
Emerging Core Equity Market ETF
|
|
Emerging Markets High Profitability ETF |
|
Emerging Markets Core
2 ETF |
|
Emerging Markets Value ETF |
China
Investments Risk |
|
|
|
X |
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Cyber
Security Risk |
|
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Depositary
Receipts Risk |
|
|
|
X |
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|
X |
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X |
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|
X |
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X |
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|
X |
|
Derivatives
Risk |
|
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Emerging
Markets Risk |
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|
X |
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|
X |
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|
X |
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|
X |
|
Equity
Market Risk |
|
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
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X |
|
Foreign
Securities and Currencies Risk |
|
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|
X |
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|
X |
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|
X |
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X |
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X |
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|
X |
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International
Closed Market Trading Risk |
|
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X |
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X |
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X |
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X |
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X |
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X |
|
Large
Shareholder Risk |
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|
X |
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X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Market
Trading Risk |
|
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Operational
Risk |
|
|
|
X |
|
|
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|
X |
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|
X |
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|
X |
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|
X |
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|
X |
|
Premium/Discount
Risk |
|
|
|
X |
|
|
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|
X |
|
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|
X |
|
|
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|
X |
|
|
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|
X |
|
|
|
|
X |
|
Profitability
Investment Risk |
|
|
|
X |
|
|
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|
X |
|
|
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|
X |
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|
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|
X |
|
|
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|
X |
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|
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|
X |
|
Securities
Lending Risk |
|
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|
X |
|
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|
X |
|
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|
X |
|
|
|
|
X |
|
|
|
|
X |
|
|
|
|
X |
|
Small
Company Risk |
|
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|
X |
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|
Small
and Mid-Cap Company Risk |
|
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|
|
|
|
|
|
|
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|
X |
|
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|
|
|
|
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|
X |
|
|
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|
X |
|
Value
Investment Risk |
|
|
|
X |
|
|
|
|
X |
|
|
|
|
X |
|
|
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|
X |
|
|
|
|
X |
|
|
|
|
X |
|
China Investments
Risk: There are special risks associated with investments in
China, Hong Kong and Taiwan. The Chinese government has implemented significant
economic reforms in order to liberalize trade policy, promote foreign investment
in the economy, reduce government control of the economy and develop market
mechanisms. But there can be no assurance that these reforms will continue or
that they will be effective. Despite reforms and privatizations of companies in
certain sectors, the Chinese government still exercises substantial influence
over many aspects of the private sector and may own or control many companies.
The Chinese government continues to maintain a major role in economic policy
making and investing in China involves risks of losses due to expropriation,
nationalization, confiscation of assets and property, and the imposition of
restrictions on foreign investments and on repatriation of capital invested. In
addition, investments in Taiwan could be adversely affected by its political and
economic relationship with China. The Chinese economy is also vulnerable to the
long-running disagreements with Hong Kong related to integration.
Investing
in China A‑shares through Stock Connect is subject to trading, clearance,
settlement, and other procedures, which could pose risks to the Portfolio.
Trading through the Stock Connect program is subject to daily quotas that limit
the maximum daily net purchases on any particular day, each of which may
restrict or preclude the Portfolio’s ability to invest in China A‑shares through
the Stock Connect program. Trading through Stock Connect may require
pre‑validation of cash or securities prior to acceptance of orders. This
requirement may limit the Portfolio’s ability to dispose of its A‑shares
purchased through Stock Connect in a timely manner.
A
primary feature of the Stock Connect program is the application of the home
market’s laws and rules applicable to investors in China A‑shares. Therefore,
the Portfolio’s investments in Stock Connect China A‑shares are generally
subject to the securities regulations and listing rules of the People’s Republic
of China (“PRC”), among other restrictions. Stock Connect can only operate when
both PRC and Hong Kong markets are open for trading and when banking services
are available in both markets on the corresponding settlement days. As such, the
Shanghai and Shenzhen markets may be open at a time when Stock Connect is not
trading, with the result that prices of China A‑shares may fluctuate at times
when the Portfolio is unable to add to or exit its position, which could
adversely affect the Portfolio’s performance.
91
Changes
in the operation of the Stock Connect program may restrict or otherwise affect
the Portfolio’s investments or returns. Furthermore, any changes in laws,
regulations and policies of the China A‑shares market or rules in relation to
Stock Connect may affect China A‑share prices. These risks are heightened
generally by the developing state of the PRC’s investment and banking systems
and the uncertainty about the precise nature of the rights of equity owners and
their ability to enforce such rights under Chinese law. An investment in China
A‑Shares is also generally subject to the risks identified under “Emerging
Markets Risk,” and foreign investment risks such as price controls,
expropriation of assets, confiscatory taxation, and nationalization may be
heightened when investing in China. Certain investments in Chinese companies may
be made through a special structure known as a VIE. In a VIE structure, foreign
investors, such as the Portfolio, will only own stock in a shell company rather
than directly in the VIE, which must be owned by Chinese nationals (and/or
Chinese companies) to obtain the licenses and/or assets required to operate in
certain restricted or prohibited sectors in China. The value of the shell
company is derived from its ability to consolidate the VIE into its financials
pursuant to contractual arrangements that allow the shell company to exert a
degree of control over, and obtain economic benefits arising from, the VIE
without formal legal ownership. While VIEs are a longstanding industry practice
and are well known by Chinese officials and regulators, historically the
structure has not been formally recognized under Chinese law and Chinese
regulations regarding the structure are evolving. It is uncertain whether
Chinese officials or regulators will withdraw their acceptance of the structure.
It is also uncertain whether the contractual arrangements, which may be subject
to conflicts of interest between the legal owners of the VIE and foreign
investors, would be enforced by Chinese courts or arbitration bodies.
Prohibitions of these structures by the Chinese government, or the inability to
enforce such contracts, from which the shell company derives its value, would
likely cause the VIE-structured holding(s) to suffer significant, detrimental,
and possibly permanent losses, and in turn, adversely affect the Portfolio’s
returns and net asset value.
Cyber Security
Risk: The Portfolio’s and its service providers’ use of internet,
technology and information systems may expose the Portfolio to potential risks
linked to cyber security breaches of those technological or information systems.
Cyber security breaches, amongst other things, could allow an unauthorized party
to gain access to proprietary information, customer data, or fund assets, or
cause the Portfolio and/or its service providers to suffer data corruption or
lose operational functionality.
Depositary Receipts
Risk: Depositary receipts, such as EDRs, GDRs and ADRs, are
subject to many of the risks of the underlying securities. For some depositary
receipts, the custodian or similar financial institution that holds the issuer’s
shares in a trust account is located in the issuer’s home country. In these
cases if the issuer’s home country does not have developed financial markets,
the Portfolio could be exposed to the credit risk of the custodian or financial
institution and greater market risk. In addition, the depository institution may
not have physical custody of the underlying securities at all times and may
charge fees for various services. The Portfolio may experience delays in
receiving its dividend and interest payments or exercising rights as a
shareholder. There may be an increased possibility of untimely responses to
certain corporate actions of the issuer in an unsponsored depositary receipt
program. Accordingly, there may be less information available regarding issuers
of securities underlying unsponsored programs and there may not be a correlation
between this information and the market value of the depositary receipts.
Derivatives
Risk: Derivatives are instruments, such as futures, and options
thereon, foreign currency forward contracts and swaps whose value is derived
from that of other assets, rates or indices. The use of derivatives for
non-hedging purposes may be considered to carry more risk than other types of
investments. When the Portfolio uses derivatives, the Portfolio will be directly
exposed to the risks of those derivatives. Derivatives expose the Portfolio to
counterparty risk (the risk that the derivative counterparty will not fulfill
its contractual obligations), including credit risk of the derivative
counterparty, and settlement risk (the risk faced when one party to a
transaction has performed its obligations under a contract but has not yet
received value from its counterparty). The possible lack of a liquid secondary
market for derivatives and the resulting inability of the Portfolio to sell or
otherwise close a derivatives position could expose the Portfolio to losses and
could make derivatives more difficult for the Portfolio to value accurately.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than other securities. The Portfolio could also suffer losses
related to its derivatives positions as a result of unanticipated market
movements, which losses are potentially unlimited. The Advisor may not be able
to predict correctly the direction of securities prices, interest rates,
currency exchange rates and other economic factors, which could cause the
Portfolio’s derivatives positions to lose value. Valuation of derivatives may
also be more difficult in times of market turmoil since many investors and
market makers may be
92
reluctant
to purchase derivatives or quote prices for them. Changes in the value of a
derivative may not correlate perfectly with the underlying asset, rate or index,
and the Portfolio could lose more than the principal amount invested. Additional
risks are associated with the use of swaps including counterparty and credit
risk (the risk that the other party to a swap agreement will not fulfill its
contractual obligations, whether because of bankruptcy or other default) and
liquidity risk (the possible lack of a secondary market for the swap agreement).
Counterparty risk increases when the Portfolio is a buyer of swaps. Swaps may be
illiquid or difficult to value.
Emerging Markets
Risk: Securities of issuers associated with emerging market
countries, including, but not limited to, issuers that are organized under the
laws of, maintain a principal place of business in, derive significant revenues
from, or issue securities backed by the government (or, its agencies or
instrumentalities) of emerging market countries may be subject to higher and
additional risks than securities of issuers in developed foreign markets. These
risks include, but are not limited to (i) social, political and economic
instability; (ii) government intervention, including policies or
regulations that may restrict the Portfolio’s investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive
to an emerging market country’s national interests; (iii) less transparent
and established taxation policies; (iv) less developed legal systems
allowing for enforcement of private property rights and/or redress for injuries
to private property; (v) the lack of a capital market structure or
market-oriented economy; (vi) higher degree of corruption and fraud;
(vii) counterparties and financial institutions with less financial
sophistication, creditworthiness and/or resources as those in developed foreign
markets; and (viii) the possibility that the process of easing restrictions
on foreign investment occurring in some emerging market countries may be slowed
or reversed by unanticipated economic, political or social events in such
countries, or the countries that exercise a significant influence over those
countries. Similar to foreign issuers, emerging market issuers may not be
subject to uniform accounting, auditing and financial reporting standards and
there may be less publicly available financial and other information about such
issuers, comparable to U.S. issuers. Stock markets in many emerging market
countries are relatively small, expensive to trade in and generally have higher
risks than those in developed markets. Securities in emerging markets also may
be less liquid than those in developed markets and foreigners are often limited
in their ability to invest in, and withdraw assets from, these markets.
Additional restrictions may be imposed under other conditions. Frontier market
countries generally have smaller economies or less developed capital markets
and, as a result, the risks of investing in emerging market countries are
magnified in frontier market countries.
Equity Market
Risk: Even a long-term investment approach cannot guarantee a
profit. Economic, market, political, and issuer-specific conditions and events
will cause the value of equity securities, and the Portfolio that owns them, to
rise or fall. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices. In addition, economies and financial
markets throughout the world have become increasingly interconnected, which
increases the likelihood that events or conditions in one region or country will
adversely affect markets or issuers in other regions or countries. Portfolio
securities may be negatively impacted by inflation (or expectations for
inflation), interest rates, global demand for particular products/services or
resources, natural disasters, pandemics, epidemics, terrorism, war, military
confrontations, regulatory events and governmental or quasi-governmental
actions, among others.
The
ongoing outbreak of the novel coronavirus, COVID-19, has resulted, at times, in
market closures, market volatility, liquidity constraints and increased trading
costs. Efforts to contain the spread of COVID-19 have resulted in global travel
restrictions and disruptions of healthcare systems, business operations and
supply chains, layoffs, reduced consumer demand, defaults and credit rating
downgrades, and other significant economic impacts. The effects of COVID-19 have
impacted global economic activity and may heighten pre-existing political,
social and economic risks, domestically or globally. The full impact of the
COVID-19 pandemic is unpredictable and may adversely affect the Portfolio’s
performance.
Foreign Securities
and Currencies Risk: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions of foreign
governments, and/or (b) less regulated or liquid securities markets.
Investors holding these securities may also be exposed to foreign currency risk
(the possibility that foreign currency will fluctuate in value against the U.S.
dollar or that a foreign government will convert, or be forced to convert, its
currency to another currency, changing its value against the U.S. dollar). The
Portfolio does not hedge foreign currency risk.
Foreign
issuers may not be subject to uniform accounting, auditing and financial
reporting standards and there may be less publicly available financial and other
information about such issuers, comparable to U.S. issuers.
93
Certain
countries’ legal institutions, financial markets, and services are less
developed than those in the U.S. or other major economies. The Portfolio may
have greater difficulty voting proxies, exercising shareholder rights, securing
dividends and obtaining information regarding corporate actions on a timely
basis, pursuing legal remedies, and obtaining judgments with respect to foreign
investments in foreign courts than with respect to domestic issuers in U.S.
courts.
International Closed
Market Trading Risk: To the extent that the underlying securities
held by the Portfolio trade on an exchange that is closed when the securities
exchange on which the Portfolio shares list and trade is open, there may be
market uncertainty about the stale security pricing (i.e., the last quote from
its closed foreign market) resulting in premiums or discounts to NAV that may be
greater than those experienced by other ETFs.
Large Shareholder
Risk: Certain large shareholders, including other funds or
accounts advised by the Advisor, may from time to time own a substantial amount
of the Portfolio’s shares. In addition, a third party investor, the Advisor, an
authorized participant, a lead market maker, or another entity may invest in the
Portfolio and hold its investment for a limited period of time solely to
facilitate commencement of the Portfolio or to facilitate the Portfolio’s
achieving a specified size or scale. There can be no assurance that any large
shareholder would not redeem its investment. Dispositions of a large number of
shares by these shareholders may adversely affect the Portfolio’s liquidity and
net assets to the extent such transactions are executed directly with the
Portfolio in the form of redemptions through an authorized participant, rather
than executed in the secondary market. These redemptions may also force the
Portfolio to sell portfolio securities when it might not otherwise do so, which
may negatively impact the Portfolio’s NAV and increase the Portfolio’s brokerage
costs. To the extent these large shareholders transact in shares on the
secondary market, such transactions may account for a large percentage of the
trading volume on listing exchange and may, therefore, have a material upward or
downward effect on the market price of the shares.
Market Trading
Risk: Although shares of the Portfolio are listed for trading on
one or more stock exchanges, there can be no assurance that an active trading
market for such shares will develop or be maintained. There are no obligations
of market makers to make a market in the Portfolio’s shares or of an authorized
participant to submit purchase or redemption orders for Creation Units.
Decisions by market makers or authorized participants to reduce their role or
step away from these activities in times of market stress could inhibit the
effectiveness of the arbitrage process in maintaining the relationship between
the underlying value of the Portfolio’s portfolio securities and the Portfolio’s
market price. This reduced effectiveness could result in Portfolio shares
trading at a premium or discount to its NAV and also greater than normal
intraday bid/ask spreads. Additionally, in stressed market conditions, the
market for the Portfolio’s shares may become less liquid in response to
deteriorating liquidity in the markets for the Portfolio’s portfolio holdings,
which may cause a significant variance in the market price of the Portfolio’s
shares and their underlying value as well as an increase in the Portfolio’s
bid-ask spread.
There
can be no assurance that the Portfolio’s shares will continue to trade on a
stock exchange or in any market or that the Portfolio’s shares will continue to
meet the requirements for listing or trading on any exchange or in any market,
or that such requirements will remain unchanged. Secondary market trading in
Portfolio shares may be halted by a stock exchange because of market conditions
or other reasons. In addition, trading in Portfolio shares on a stock exchange
or in any market may be subject to trading halts caused by extraordinary market
volatility pursuant to “circuit breaker” rules on the stock exchange or
market.
During
a “flash crash,” the market prices of the Portfolio’s shares may decline
suddenly and significantly. Such a decline may not reflect the performance of
the portfolio securities held by the Portfolio. Flash crashes may cause
authorized participants and other market makers to limit or cease trading in the
Portfolio’s shares for temporary or longer periods. Shareholders could suffer
significant losses to the extent that they sell shares at these temporarily low
market prices. Shares of the Portfolio, similar to shares of other issuers
listed on a stock exchange, may be sold short and are therefore subject to the
risk of increased volatility associated with short selling.
Operational
Risk: Operational risks include human error, changes in personnel,
system changes, faults in communication, and failures in systems, technology, or
processes. Various operational events or circumstances are outside the Advisor’s
control, including instances at third parties. The Portfolio and the Advisor
seek to reduce these operational risks through controls and procedures. However,
these measures do not address every possible risk and may be inadequate to
address these risks.
94
Premium/Discount
Risk: Shares of the Portfolio may trade at prices other than NAV.
Shares of the Portfolio trade on stock exchanges at prices at, above or below
their most recent NAV. The NAV of the Portfolio is calculated at the end of each
business day and fluctuates with changes in the market value of the Portfolio’s
holdings since the most recent calculation. The trading prices of the
Portfolio’s shares fluctuate continuously throughout trading hours based on
market supply and demand rather than NAV. As a result, the trading prices of the
Portfolio’s shares may deviate significantly from NAV during periods of market
volatility.
Any
of these factors, among others, may lead to the Portfolio’s shares trading at a
premium or discount to NAV. Thus, you may pay more (or less) than NAV when you
buy shares of the Portfolio in the secondary market, and you may receive less
(or more) than NAV when you sell those shares in the secondary market. The
Advisor cannot predict whether shares will trade above (premium), below
(discount) or at NAV. However, because shares can be created and redeemed in
Creation Units at NAV, the Advisor believes that large discounts or premiums to
the NAV of the Portfolio are not likely to be sustained over the long-term.
While the creation/redemption feature is designed to make it likely that the
Portfolio’s shares normally will trade on stock exchanges at prices close to the
Portfolio’s next calculated NAV, exchange prices are not expected to correlate
exactly with the Portfolio’s NAV due to timing reasons as well as market supply
and demand factors. In addition, disruptions to creations and redemptions or
extreme market volatility may result in trading prices for shares of the
Portfolio that differ significantly from its NAV.
Profitability
Investment Risk: High relative profitability stocks may perform
differently from the market as a whole and an investment strategy purchasing
these securities may cause the Portfolio to at times underperform equity funds
that use other investment strategies.
Risks of
Concentrating in the Real Estate Industry: The Portfolio is
concentrated in the real estate industry. The exclusive focus by the Portfolio
on the real estate industry will cause the Portfolio to be exposed to the
general risks of direct real estate ownership. The value of securities in the
real estate industry can be affected by changes in real estate values and rental
income, property taxes, and tax and regulatory requirements. Also, the value of
securities in the real estate industry may decline with changes in interest
rates. Investing in REITs and REIT-like entities involves certain unique risks
in addition to those risks associated with investing in the real estate industry
in general. REITs and REIT-like entities are dependent upon management skill,
may not be diversified, and are subject to heavy cash flow dependency and
self-liquidation. REITs and REIT-like entities also are subject to the
possibility of failing to qualify for tax free pass-through of income. Also,
because REITs and REIT-like entities typically are invested in a limited number
of projects or in a particular market segment, these entities are more
susceptible to adverse developments affecting a single project or market segment
than more broadly diversified investments. The performance of Portfolio may be
materially different from the broad equity market.
Securities Lending
Risk: Securities lending involves the risk that the borrower may
fail to return the securities in a timely manner or at all. As a result, the
Portfolio may lose money and there may be a delay in recovering the loaned
securities. The Portfolio could also lose money if it does not recover the
securities and/or the value of the collateral falls, including the value of
investments made with cash collateral. Securities lending also may have certain
adverse tax consequences.
Small Company
Risk: Securities of small companies are often less liquid than
those of large companies and this could make it difficult to sell a small
company security at a desired time or price. As a result, small company stocks
may fluctuate relatively more in price. In general, smaller capitalization
companies are also more vulnerable than larger companies to adverse business or
economic developments and they may have more limited resources.
Small and Mid‑Cap
Company Risk: Securities of small and mid‑cap companies are often
less liquid than those of large companies and this could make it difficult to
sell a small or mid‑cap company security at a desired time or price. As a
result, small and mid‑cap company stocks may fluctuate relatively more in price.
In general, small and mid‑capitalization companies are also more vulnerable than
larger companies to adverse business or economic developments and they may have
more limited resources.
Value Investment
Risk: Value stocks may perform differently from the market as a
whole and an investment strategy purchasing these securities may cause the
Portfolio to at times underperform equity funds that use other
95
investment
strategies. Value stocks can react differently to political, economic, and
industry developments than the market as a whole and other types of stocks.
Value stocks also may underperform the market for long periods of time.
Other
Information
COMMODITY
POOL OPERATOR EXEMPTION
Each
Portfolio is operated by a person that has claimed an exclusion from the
definition of the term “commodity pool operator” under the Commodity Exchange
Act (“CEA”) with respect to the Portfolio, and, therefore, such person is not
subject to registration or regulation as a pool operator under the CEA with
respect to the Portfolio.
Securities
Loans
Each
Portfolio is authorized to lend securities to qualified brokers, dealers, banks
and other financial institutions for the purpose of earning additional income.
While a Portfolio may earn additional income from lending securities, such
activity is incidental to the investment objective of the Portfolio. The value
of securities loaned may not exceed 33 1/3% of the value of the Portfolio’s
total assets, which includes the value of collateral received. To the extent the
Portfolio loans a portion of its securities, the Portfolio will receive
collateral consisting generally of cash or U.S. government securities.
Collateral received will be maintained by marking to market daily and
(i) in an amount equal to at least 100% of the current market value of the
loaned securities with respect to securities of the U.S. Government or its
agencies, (ii) in an amount generally equal to 102% of the current market
value of the loaned securities with respect to U.S. securities, and
(iii) in an amount generally equal to 105% of the current market value of
the loaned securities with respect to foreign securities. Subject to its stated
investment policies, a Portfolio will generally invest the cash collateral
received for the loaned securities in The DFA Short Term Investment Fund (the
“Money Market Series”), an affiliated registered money market fund advised by
the Advisor for which the Advisor receives a management fee of 0.05% of the
average daily net assets of the Money Market Series. A Portfolio may also invest
such collateral in securities of the U.S. Government or its agencies, repurchase
agreements collateralized by securities of the U.S. Government or its agencies,
and unaffiliated registered and unregistered money market funds. For purposes of
this paragraph, agencies include both agency debentures and agency
mortgage-backed securities.
In
addition, a Portfolio will be able to terminate the loan at any time and will
receive reasonable interest on the loan, as well as amounts equal to any
dividends, interest or other distributions on the loaned securities. However,
dividend income received from loaned securities may not be eligible to be taxed
at qualified dividend income rates. See each Portfolio’s Statement of Additional
Information (“SAI”) for a further discussion of the tax consequences related to
securities lending. A Portfolio will be entitled to recall a loaned security in
time to vote proxies or otherwise obtain rights to vote proxies of loaned
securities if the Portfolio knows that a material event will occur. In the event
of the bankruptcy of the borrower, a Portfolio could experience delay in
recovering the loaned securities or only recover cash or a security of
equivalent value. See “Principal
Risks—Securities Lending Risk” for a
discussion of the risks related to securities lending.
During
the fiscal year ended October 31, 2021, the following Portfolios received
the following net revenues from a securities lending program (see “SECURITIES LOANS”), which constituted a
percentage of the average daily net assets of the Portfolio:
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio |
|
Net Revenue* |
|
Percentage of
Net Assets |
US
Core ETF |
|
|
$ |
9,293 |
|
|
|
|
0.00% |
|
International
Core ETF |
|
|
$ |
44,716 |
|
|
|
|
0.01% |
|
Emerging
Core ETF |
|
|
$ |
103,294 |
|
|
|
|
0.05% |
|
* |
The
amounts included in the table above may differ from the amounts disclosed
in the Portfolios’ annual reports due to timing differences,
reconciliations, and certain other
adjustments. |
Management
of the Trust
The
Advisor serves as investment advisor to each of the Portfolios. Pursuant to an
Investment Management Agreement with each Portfolio, the Advisor is responsible
for the management of their respective assets. The Portfolios are managed using
a team approach. The investment team includes the Investment Committee of the
Advisor, portfolio managers and trading personnel.
The
Investment Committee is composed primarily of certain officers and directors of
the Advisor who are appointed annually. As of the date of this Prospectus, the
Investment Committee has fourteen members. Investment strategies for all
Portfolios are set by the Investment Committee, which meets on a regular basis
and also as needed to consider investment issues. The Investment Committee also
sets and reviews all investment related policies and procedures and approves any
changes in regards to approved countries, security types and
brokers.
In
accordance with the team approach used to manage the Portfolios, the portfolio
managers and portfolio traders implement the policies and procedures established
by the Investment Committee. The portfolio managers and portfolio traders also
make daily investment decisions regarding the Portfolios based on the parameters
established by the Investment Committee. The individuals named in a Portfolio’s
“INVESTMENT ADVISOR/PORTFOLIO MANAGEMENT”
section coordinate the efforts of all other portfolio managers or trading
personnel with respect to the day to day management of such Portfolio.
Mr.
Collins-Dean is Vice President and a Senior Portfolio Manager of the Advisor.
Mr. Collins-Dean holds an MBA from the University of Chicago and a BS from Wake
Forest University. Mr. Collins-Dean joined the Advisor in 2014, has been a
portfolio manager since 2016, and has been responsible for the International
Core Equity 2 ETF and Emerging Markets Core 2 ETF since inception (2022).
Mr. Fogdall
is Global Head of Portfolio Management, Chairman of the Investment Committee,
Vice President, and a Senior Portfolio Manager of the Advisor. Mr. Fogdall
has an MBA from the University of California, Los Angeles and a BS from Purdue
University. Mr. Fogdall joined the Advisor as a portfolio manager in 2004
and has been responsible for the Portfolios since inception (2020), with respect
to the US Core ETF, International Core ETF and Emerging Core ETF, and 2022 with
respect to each other Portfolio.
Mr.
Hertzer is Vice President and a Senior Portfolio Manager of the Advisor. Mr.
Hertzer holds an MBA from the University of California, Los Angeles and a BA
from Dartmouth College. Mr. Hertzer joined the Adviser in 2013, has been a
portfolio manager since 2016, and has been responsible for the US High
Profitability ETF and US Real Estate ETF since inception (2022).
Mr. Hohn
is Vice President and a Senior Portfolio Manager of the Advisor. Mr. Hohn
holds an MBA from the University of California, Los Angeles, an MS from the
University of Southern California and a BS from Iowa State University.
Mr. Hohn joined the Advisor in 2012, has been a portfolio manager since
2015, and has been responsible for the Portfolios since inception (2020), with
respect to the US Core ETF, International Core ETF and Emerging Core ETF, and
2022 with respect to each other Portfolio.
97
Mr.
Keswani is Vice President and a Senior Portfolio Manager of the Advisor. Mr.
Keswani holds an MBA from the Massachusetts Institute of Technology Sloan School
of Management, an MS from Pennsylvania State University, and a BS from Purdue
University. Mr. Keswani joined the Advisor in 2011, has been a portfolio manager
since 2013, and has been responsible for the International Small Cap Value ETF,
International Small Cap ETF and International High Profitability ETF since
inception (2022).
Mr.
Leblond is Vice President and a Senior Portfolio Manager of the Advisor. Mr.
Leblond holds an MBA from the University of Chicago, and an MS and BS from
Columbia University. Mr. Leblond joined the Advisor in 2015, has been a
portfolio manager since 2017, and has been responsible for the US Small Cap
Value ETF since inception (2022).
Ms.
Phillips is Deputy Head of Portfolio Management, North America, a member of the
Investment Committee, Vice President, and a Senior Portfolio Manager of the
Advisor. Ms. Phillips holds an MBA from the University of Chicago Booth School
of Business and a BA from the University of Puget Sound. Ms. Phillips joined the
Advisor in 2012, has been a portfolio manager since 2014, and has been
responsible for the US High Profitability ETF, US Real Estate ETF, International
Core Equity 2 ETF and Emerging Markets Core 2 ETF since inception (2022).
Mr. Pu
is Deputy Head of Portfolio Management, North America, a member of the
Investment Committee, Vice President, and a Senior Portfolio Manager of the
Advisor. Mr. Pu has an MBA from the University of California, Los Angeles,
an MS and PhD from Caltech, and a BS from Cooper Union for the Advancement of
Science and Art. Mr. Pu joined the Advisor as a portfolio manager in 2006
and has been responsible for the International Core ETF and Emerging Markets
Core ETF since inception (2020), the Emerging Markets High Profitability ETF,
Emerging Markets Value ETF and Emerging Markets Core 2 ETF since inception
(2022) and the US Core ETF since 2022.
Mr.
Schneider is Deputy Head of Portfolio Management, North America, a member of the
Investment Committee, Vice President, and a Senior Portfolio Manager of the
Advisor. Mr. Schneider holds an MBA from the University of Chicago Booth School
of Business, an MS from the University of Minnesota, and a BS from Iowa State
University. Mr. Schneider joined the Advisor in 2011, has been a portfolio
manager since 2013, and has been responsible for the US Small Cap Value ETF,
International Small Cap Value ETF, International High Profitability ETF and
International Small Cap ETF since inception (2022).
Mr.
Wren is Vice President and a Senior Portfolio Manager of the Advisor. Mr. Wren
holds an MBA and an MPA from the University of Texas at Austin. Mr. Wren joined
the Advisor in 2010, has been a portfolio manager since 2018, and has been
responsible for the Emerging Markets High Profitability ETF and Emerging Markets
Value ETF since inception (2022).
The
Portfolios’ SAI provides information about each portfolio manager’s
compensation, other accounts managed by the portfolio manager, and the portfolio
manager’s ownership of Portfolio shares.
The
Advisor and, with respect to the International Portfolios, Dimensional Fund
Advisors Ltd. (“DFAL”) and DFA Australia Limited (“DFA Australia”), provide the
Portfolios with a trading department and selects brokers and dealers to effect
securities transactions. Securities transactions are placed with a view to
obtaining best price and execution. The Advisor may pay compensation, out of the
Advisor’s profits and not as an additional charge to a Portfolio, to financial
intermediaries to support the sale of Portfolio shares. The Advisor’s address is
6300 Bee Cave Road, Building One, Austin, TX 78746. A discussion regarding the
basis for the Board of Trustees approving the Investment Management Agreements
and Sub-Advisory Agreements with respect to the US Core ETF, International Core
ETF and Emerging Core ETF is available in the semi-annual report for the
Portfolios for the fiscal period ending April 30, 2021 and, with respect to all
other Portfolios, will be available in a future semi-annual report for such
Portfolios.
The
Advisor has been engaged in the business of providing investment management
services since May 1981. The Advisor is currently organized as a Delaware
limited partnership and is controlled and operated by its general partner,
Dimensional Holdings Inc., a Delaware corporation. The Advisor controls DFAL and
DFA Australia. As of January 31, 2022, assets under management for all
Dimensional affiliated advisors totaled approximately $659 billion.
98
The
Agreement and Declaration of Trust (the “Declaration”) provides that by virtue
of becoming a shareholder of the Trust, each shareholder shall be held expressly
to have agreed to be bound by the provisions of the Declaration. However,
shareholders should be aware that they cannot waive their rights under the
federal securities laws. The Declaration provides a detailed process for the
bringing of derivative actions by shareholders for claims other than federal
securities law claims beyond the process otherwise required by law. This
derivative actions process is intended to permit legitimate inquiries and claims
while avoiding the time, expense, distraction, and other harm that can be caused
to a Portfolio or its shareholders as a result of spurious shareholder demands
and derivative actions. Prior to bringing a derivative action, a demand by the
complaining shareholder must first be made on the Trustees. The Declaration
details conditions that must be met with respect to the demand. Following
receipt of the demand, the Trustees must be afforded a reasonable amount of time
to investigate and consider the demand. The Trustees will be entitled to
retain counsel or other advisors in considering the merits of the request and
shall require an undertaking by the shareholders making such request to
reimburse the Trust for the expense of any such advisors in the event that the
Trustees determine not to bring such action. The Trust’s process for bringing
derivative suits may be more restrictive than other investment companies. The
process for derivative actions for the Trust also may make it more expensive for
a shareholder to bring a suit than if the shareholder was not required to follow
such a process.
The
Declaration also requires that actions by shareholders against a Portfolio be
brought only in a certain federal court in Texas, or if not permitted to be
brought in federal court, then in the Court of Chancery of the State of Delaware
as required by applicable law, or the Superior Court of Delaware (the “Exclusive
Jurisdictions”), and that the right to jury trial be waived to the fullest
extent permitted by law. Other investment companies may not be subject to
similar restrictions. In addition, the designation of Exclusive Jurisdictions
may make it more expensive for a shareholder to bring a suit than if the
shareholder was permitted to select another jurisdiction. Also, the designation
of Exclusive Jurisdictions and the waiver of jury trials limit a shareholder’s
ability to litigate a claim in the jurisdiction and in a manner that may be more
favorable to the shareholder. A court may choose not to enforce these provisions
of the Declaration.
UNITARY
FEES
Each
of the US Core ETF, International Core ETF and Emerging Core ETF (the “Unitary
Portfolios”) pays the Advisor a unified management fee for managing the Unitary
Portfolio’s assets. Pursuant to the investment management agreement with the
Trust, on behalf of each Unitary Portfolio, the Advisor is responsible for
substantially all ordinary fund operating expenses, except for (i) payments
under the Unitary Portfolio’s 12b‑1 plan (if any); (ii) brokerage expenses
(including any costs incidental to transactions in portfolio securities,
instruments and other investments); (iii) taxes; (iv) interest expenses
(including borrowing costs and dividend expenses on securities sold short and
overdraft charges); (v) litigation expenses (including litigation to which the
Trust or Portfolio may be a party and indemnification of the Trustees and
officers with respect thereto); (vi) Trustees’ fees and expenses;
(vii) legal expenses of counsel to the Independent Trustees;
(viii) Chief Compliance Officer (“CCO”) compensation; (ix) acquired
fund fees and expenses (if any); and (x) other non‑routine or extraordinary
expenses. The fee is equal to the following annual rate based on the net assets
of an Unitary Portfolio:
|
|
|
|
|
|
Dimensional
US Core Equity Market ETF |
|
|
|
0.12% |
|
Dimensional
International Core Equity Market ETF |
|
|
|
0.18% |
|
Dimensional
Emerging Core Equity Market ETF |
|
|
|
0.35% |
|
Pursuant
to a separate contractual arrangement, the Advisor arranges for the provision of
CCO services with respect to each Unitary Portfolio, and is liable and
responsible for, and administers, payments to the CCO, the Independent Trustees
and counsel to the Independent Trustees. The Advisor receives a fee of up to
0.0044% of each Unitary Portfolio’s average daily net assets for providing such
services and paying such expenses. The Advisor provides CCO services to the
Trust.
MANAGEMENT
FEES
The
“Annual Fund Operating Expenses” table
describes the anticipated fees to be incurred by each non-Unitary Portfolio for
the services provided by the Advisor for the first full fiscal year.
99
Sub‑Advisors
The
Advisor has entered into Sub‑Advisory Agreements with DFAL and DFA Australia,
respectively, with respect to each International Portfolio. Pursuant to the
terms of each Sub‑Advisory Agreement, DFAL and DFA Australia each have the
authority and responsibility to select brokers or dealers to execute securities
transactions for the Portfolio. Each Sub‑Advisor’s duties include the
maintenance of a trading desk and the determination of the best and most
efficient means of executing securities transactions. On at least a semi-annual
basis, the Advisor will review the holdings of an International Portfolio and
review the trading process and the execution of securities transactions. The
Advisor is responsible for determining those securities that are eligible for
purchase and sale by an International Portfolio and may delegate this task,
subject to its own review, to DFAL and DFA Australia. DFAL and DFA Australia
maintain and furnish to the Advisor information and reports on securities of
companies in certain markets, including recommendations of securities to be
added to the securities that are eligible for purchase by an International
Portfolio, as well as making recommendations and elections on corporate actions.
The Advisor controls DFAL and DFA Australia. DFA Australia has been a U.S.
federally registered investment advisor since 1994 and is located at
Level 43 Gateway, 1 Macquarie Place, Sydney, New South Wales 2000,
Australia. DFAL has been a U.S. federally registered investment advisor since
1991 and is located at 20 Triton Street, Regent’s Place, London NW13BF, United
Kingdom. The Advisor, not the International Portfolios, compensates the
sub‑advisors.
Manager of Managers Structure
The
Advisor and the Trust have received an exemptive order from the Securities and
Exchange Commission (the “SEC”) for a manager of managers structure that allows
the Advisor to appoint, remove or change Dimensional Wholly-Owned Sub‑advisors
(defined below), and enter into, amend and terminate sub‑advisory agreements
with Dimensional Wholly-Owned Sub‑advisors, without prior shareholder approval,
but subject to Board approval. A “Dimensional Wholly-Owned Sub‑advisor” includes
(1) sub‑advisors that are wholly-owned by the Advisor (i.e., an indirect or
direct “wholly-owned subsidiary” (as such term is defined in the Investment
Company Act of 1940 (the “1940 Act”)) of the Advisor, or (2) a sister
company of the Advisor that is an indirect or direct “wholly-owned subsidiary”
(as such term is defined in the 1940 Act) of the same company that, indirectly
or directly, wholly owns the Advisor (“Dimensional Wholly-Owned Sub‑advisors”).
The Board only will approve a change with respect to sub‑advisors if the
Trustees conclude that such arrangements would be in the best interests of the
shareholders of a Portfolio. If a new Dimensional Wholly-Owned Sub‑advisor is
hired for a Portfolio, shareholders will receive information about the new
sub‑advisor within 90 days of the change. The exemptive order allows greater
flexibility for the Advisor to utilize, if desirable, personnel throughout the
worldwide organization enabling a Portfolio to operate more efficiently. The
Advisor will not hire unaffiliated sub‑advisors without prior shareholder
approval and did not request the ability to do so in its application to the SEC
for an exemptive order to allow the manager of managers structure.
The
use of the manager of managers structure with respect to a Portfolio is subject
to certain conditions set forth in the SEC exemptive order. Under the manager of
managers structure, the Advisor has the ultimate responsibility, subject to
oversight by the Board, to oversee the Dimensional Wholly-Owned Sub‑advisors and
recommend their hiring, termination and replacement. The Advisor will provide
general management services to a Portfolio, including overall supervisory
responsibility for the general management and investment of the Portfolio’s
assets. Subject to review and approval of the Board, the Advisor will
(a) set a Portfolio’s overall investment strategies, (b) evaluate,
select, and recommend Dimensional Wholly-Owned Sub‑advisors to manage all or a
portion of a Portfolio’s assets, and (c) implement procedures reasonably
designed to ensure that Dimensional Wholly-Owned Sub‑advisors comply with a
Portfolio’s investment objective, policies and restrictions. Subject to review
by the Board, the Advisor will (a) when appropriate, allocate and
reallocate a Portfolio’s assets among multiple Dimensional Wholly-Owned
Sub‑advisors; and (b) monitor and evaluate the performance of Dimensional
Wholly-Owned Sub‑advisors.
Fee
Waiver and Expense Assumption Agreements
Pursuant
to a Fee Waiver and/or Expense Assumption Agreement for each Portfolio
(excluding the Unitary Portfolios), the Advisor has agreed to waive certain fees
and in certain instances, assume certain expenses of the Portfolio, as described
below. The Fee Waiver and/or Expense Assumption Agreement will remain in
effect
100
through
February 28, 2023, and may only be terminated by the Trust’s Board of Trustees
prior to that date. The Fee Waiver and/or Expense Assumption Agreement shall
continue in effect from year to year thereafter unless terminated by the Trust
or the Advisor. With respect to each Fee Waiver and/or Expense Assumption
Agreement, prior year waived fees and/or assumed expenses can be recaptured only
if the expense ratio following such recapture would be less than the expense cap
that was in place when such prior year fees were waived and/or expenses assumed,
and less than the current expense cap in place for the Portfolio. The Portfolio
is not obligated to reimburse the Advisor for fees previously waived or expenses
previously assumed by the Advisor more than thirty-six months before the date of
such reimbursement.
The
Advisor has contractually agreed to waive all or a portion of its management fee
and assume the ordinary operating expenses of each of the Portfolios (excluding
the expenses that the Portfolio incurs indirectly through its investment in
other investment companies) (“Portfolio Expenses”) to the extent necessary to
limit the Portfolio Expenses of each Portfolio, on an annualized basis, to the
rates listed below as a percentage of the respective Portfolio’s average net
assets (the “Expense Limitation Amount”). At any time that the Portfolio
Expenses of a Portfolio are less than the Expense Limitation Amount for the
Portfolio, the Advisor retains the right to recover any fees previously waived
and/or expenses previously assumed to the extent that such recovery will not
cause the annualized Portfolio Expenses for such Portfolio to exceed the
applicable Expense Limitation Amount identified below.
|
|
|
|
|
|
|
|
Portfolio |
|
Expense Limitation Amount |
Dimensional
US High Profitability ETF |
|
|
|
0.22% |
|
Dimensional
US Real Estate ETF |
|
|
|
0.19% |
|
Dimensional
US Small Cap Value ETF |
|
|
|
0.31% |
|
Dimensional
International Core Equity 2 ETF |
|
|
|
0.23% |
|
Dimensional
International Small Cap Value ETF |
|
|
|
0.42% |
|
Dimensional
International Small Cap ETF |
|
|
|
0.39% |
|
Dimensional
International High Profitability ETF |
|
|
|
0.29% |
|
Dimensional
Emerging Markets High Profitability ETF |
|
|
|
0.41% |
|
Dimensional
Emerging Markets Value ETF |
|
|
|
0.43% |
|
Dimensional
Emerging Markets Core Equity 2 ETF |
|
|
|
0.39% |
|
Dividends,
Capital Gains Distributions and Taxes
Dividends and
Distributions. Each Portfolio intends to qualify each year as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the “Code”). As a regulated investment company, a Portfolio generally pays no
federal income tax on the income and gains it distributes. Dividends from net
investment income of the Portfolios are distributed quarterly (on a calendar
basis) and any net realized capital gains (after any reductions for available
capital loss carryforwards) are distributed annually, typically in December. A
Portfolio may distribute such income dividends and capital gains more
frequently, if necessary, in order to reduce or eliminate federal excise or
income taxes on the Portfolio.
Capital
gains distributions may vary considerably from year to year as a result of a
Portfolio’s normal investment activities and cash flows. During a time of
economic volatility, a Portfolio may experience capital losses and unrealized
depreciation in value of investments, the effect of which may be to reduce or
eliminate capital gains distributions for a period of time. A Portfolio may be
required to distribute taxable realized gains from a prior year, even if the
Portfolio has a net realized loss for the year of distribution.
Distributions
may be reinvested automatically in additional whole shares only if the broker
through whom you purchased shares makes such option available.
101
Annual Statements. Each year, you will receive
a statement that shows the tax status of distributions you received the previous
calendar year. Distributions declared in December to shareholders of record in
such month, but paid in January, are taxable as if they were paid in
December.
Avoid “Buying A Dividend.” At the time you
purchase your Portfolio shares, a Portfolio’s NAV may reflect undistributed
income or undistributed capital gains. A subsequent distribution to you of such
amounts, although constituting a return of your investment, would be taxable.
Buying shares in a Portfolio just before it declares an income dividend or
capital gains distribution is sometimes known as “buying a dividend.” In
addition, a Portfolio’s NAV may, at any time, reflect net unrealized
appreciation, which may result in future taxable distributions to you.
Tax Considerations.
In general, if you are a taxable investor, Portfolio distributions
are taxable to you as ordinary income, capital gains, or some combination of
both. This is true whether you reinvest your distributions in additional
Portfolio shares or receive them in cash.
For
federal income tax purposes, Portfolio distributions of short-term capital gains
are taxable to you at ordinary income rates. Portfolio distributions of
long-term capital gains are taxable to you at long-term capital gain rates no
matter how long you have owned your shares. A portfolio with a high portfolio
turnover rate (a measure of how frequently assets within a portfolio are bought
and sold) is more likely to generate short-term capital gains than a portfolio
with a low portfolio turnover. A portion of income dividends reported by a
Portfolio as qualified dividend income may be eligible for taxation by
individual shareholders at long-term capital gain rates provided certain holding
period requirements are met.
Compared
to other types of investments, derivatives may be less tax efficient. For
example, the use of derivatives by a Portfolio may cause the Portfolio to
realize higher amounts of ordinary income or short-term capital gain,
distributions from which are taxable to individual shareholders at ordinary
income tax rates rather than at the more favorable tax rates for long-term
capital gains. Changes in government regulation of derivative instruments could
affect the character, timing and amount of a Portfolio’s taxable income or
gains, and may limit or prevent the Portfolio from using certain types of
derivative instruments as a part of its investment strategy. A Portfolio’s use
of derivatives also may be limited by the requirements for taxation of the
Portfolio as a regulated investment company.
If
a Portfolio qualifies to pass through the tax benefits from foreign taxes it
pays on its investments, and elects to do so, then any foreign taxes it pays on
these investments will be treated as paid by you. You will then be entitled
either to deduct your share of these taxes in computing your taxable income, or
to claim a foreign tax credit for these taxes against your U.S. federal income
tax (subject to limitations for certain shareholders).
Sale of Portfolio Shares. The sale of shares
of a Portfolio is a taxable event and may result in a capital gain or loss to
you. Currently, any capital gain or loss realized upon a sale of Portfolio
shares generally is treated as long-term capital gain or loss if the shares have
been held for more than one year and as short-term capital gain or loss if the
shares have been held for one year or less. Any loss incurred on the sale or
exchange of a Portfolio’s shares, held for six months or less, will be treated
as a long-term capital loss to the extent of capital gain dividends received
with respect to such shares. The ability to deduct capital losses may be
limited.
Creation Units. An authorized participant who
exchanges equity securities for Creation Units generally will recognize a gain
or a loss. The gain or loss will be equal to the difference between the market
value of the Creation Units at the time of purchase (plus any cash received by
the authorized participant as part of the issue) and the authorized
participant’s aggregate basis in the securities surrendered (plus any cash paid
by the authorized participant as part of the issue). An authorized participant
who exchanges Creation Units for equity securities generally will recognize a
gain or loss equal to the difference between the authorized participant’s basis
in the Creation Units (plus any cash paid by the authorized participant as part
of the redemption) and the aggregate market value of the securities received
(plus any cash received by the authorized participant as part of the
redemption). The Internal Revenue Service, however, may assert that a loss
realized upon an exchange of securities for Creation Units cannot be deducted
currently under the rules governing “wash sales,” or on the basis that there has
been no significant change in economic position. Persons exchanging securities
should consult their own tax advisor with respect to whether the wash sale rules
apply and when a loss might be deductible.
102
Under
current federal tax laws, any capital gain or loss realized upon redemption of
Creation Units is generally treated as long-term capital gain or loss if the
shares have been held for more than one year and as a short-term capital gain or
loss if the shares have been held for one year or less, assuming such Creation
Units are held as a capital asset.
If
a Portfolio redeems Creation Units in cash, it may recognize more capital gains
than it will if it redeems Creation Units in‑kind.
Medicare Tax. An additional 3.8% Medicare tax
is imposed on certain net investment income (including ordinary dividends and
capital gain distributions received from a Portfolio and net gains from
redemptions or other taxable dispositions of Portfolio shares) of U.S.
individuals, estates and trusts to the extent that such person’s “modified
adjusted gross income” (in the case of an individual) or “adjusted gross income”
(in the case of an estate or trust) exceeds a threshold amount. This Medicare
tax, if applicable, is reported by you on, and paid with, your federal income
tax return.
Backup Withholding. By law, a 24% withholding
tax may apply to taxable dividends, capital gains distributions, and redemption
proceeds paid to you if you do not provide your proper taxpayer identification
number and certain required certifications. You may avoid this withholding
requirement by providing and certifying on the account registration form your
correct Taxpayer Identification Number and by certifying that you are not
subject to backup withholding and are a U.S. person (including a U.S. resident
alien). Withholding is also imposed if the Internal Revenue Service requires
it.
State and Local Taxes. In addition to federal
taxes, you may be subject to state and local taxes on distributions from a
Portfolio and on gains arising on redemption or exchange of a Portfolio’s
shares. Distributions of interest income and capital gains realized from certain
types of U.S. Government securities may be exempt from state personal income
taxes.
Non‑U.S. Investors. Non‑U.S. investors may be
subject to U.S. withholding tax, at either the 30% statutory rate or a lower
rate if you are a resident of a country that has a tax treaty with the U.S., and
are subject to special U.S. tax certification requirements to avoid backup
withholding and claim any treaty benefits. Exemptions from U.S. withholding tax
are provided for certain capital gain dividends paid by a Portfolio from net
long-term capital gains, if any, interest-related dividends paid by a Portfolio
from its qualified net interest income from U.S. sources and short-term capital
gain dividends, if such amounts are reported by a Portfolio. However,
notwithstanding such exemptions from U.S. withholding at the source, any such
dividends and distributions of income and capital gains will be subject to
backup withholding at a rate of 24% if you fail to properly certify that you are
not a U.S. person. Non‑U.S. investors also may be subject to U.S. estate
tax.
Other Reporting and Withholding
Requirements. Under the Foreign Account Tax
Compliance Act (“FATCA”), a 30% withholding tax is imposed on income dividends
made by the Portfolio to certain foreign entities, referred to as foreign
financial institutions or non‑financial foreign entities, that fail to comply
(or be deemed compliant) with extensive reporting and withholding requirements
designed to inform the U.S. Department of the Treasury of U.S.-owned foreign
investment accounts. After December 31, 2018, FATCA withholding also would
have applied to certain capital gain distributions, return of capital
distributions and the proceeds arising from the sale of Portfolio shares;
however, based on proposed regulations issued by the Internal Revenue Service,
which may be relied upon currently, such withholding is no longer required
unless final regulations provide otherwise (which is not expected). Information
about a Portfolio shareholder may be disclosed to the Internal Revenue Service,
non‑U.S. taxing authorities or other parties as necessary to comply with FATCA
or similar laws. Withholding also may be required if a foreign entity that is a
shareholder of a Portfolio fails to provide the appropriate certifications or
other documentation concerning its status under FATCA.
This
discussion of “DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES” is not intended
or written to be used as tax advice. Because everyone’s tax situation is unique,
you should consult your tax professional about federal, state, local or foreign
tax consequences before making an investment in a Portfolio. Prospective
investors should also consult the SAI.
103
Purchase
and Sale of Shares
Shares
of a Portfolio may be acquired or redeemed directly from the Portfolio only in
Creation Units or multiples thereof, as discussed in the “Creations and Redemptions” section of this
Prospectus. Only an Authorized Participant (defined below) may engage in
creation or redemption transactions directly with a Portfolio. An “Authorized
Participant” is either a “participating party” (i.e., a broker-dealer or other
participant in the clearing process through the Continuous Net Settlement System
of the National Securities Clearing Corporation) or a Depository Trust Company
participant who, in either case, has executed an agreement with the distributor
and transfer agent with respect to creations and redemptions of Creation Units.
Once created, shares of a Portfolio generally trade in the secondary market in
amounts less than a Creation Unit.
Shares
of a Portfolio are listed for trading on a national securities exchange during
the trading day. Shares can be bought and sold throughout the trading day like
shares of other publicly traded companies. However, there can be no guarantee
that an active trading market will develop or be maintained, or that a
Portfolio’s shares listing will continue or remain unchanged. The Trust does not
impose any minimum investment for shares of a Portfolio purchased on an
exchange. Shares of the Portfolios trade under the following symbols:
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Ticker: |
Dimensional
US Core Equity Market ETF |
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DFAU |
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Dimensional
US High Profitability ETF |
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DUHP |
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Dimensional
US Real Estate ETF |
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DFAR |
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Dimensional
US Small Cap Value ETF |
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DFSV |
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Dimensional
International Core Equity Market ETF |
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DFAI |
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Dimensional
International Core Equity 2 ETF |
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DFIC |
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Dimensional
International Small Cap Value ETF |
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DISV |
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Dimensional
International Small Cap ETF |
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DFIS |
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Dimensional
International High Profitability ETF |
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DIHP |
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Dimensional
Emerging Core Equity Market ETF |
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DFAE |
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Dimensional
Emerging Markets High Profitability ETF |
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DEHP |
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Dimensional
Emerging Markets Value ETF |
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DFEV |
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Dimensional
Emerging Markets Core Equity 2 ETF |
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DFEM |
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Buying
or selling a Portfolio’s shares on an exchange involves certain costs that may
apply to all securities transactions. When buying or selling shares of a
Portfolio through a financial intermediary, you may incur a brokerage commission
or other charges determined by your financial intermediary. Due to these
brokerage costs, if any, frequent trading may detract significantly from
investment returns. 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 also incur the cost of the “spread” (the
difference between the bid price and the ask price). The spread varies over time
for shares of a Portfolio based on its trading volume and market liquidity and
is generally less if the Portfolio has more trading volume and market liquidity
and more if the Portfolio has less trading volume and market liquidity. Because
shares of the Portfolios trade at market price rather than NAV, an investor may
pay more than NAV when purchasing shares and receive less than NAV when selling
Portfolio shares. Authorized Participants may acquire Portfolio shares directly
from a Portfolio, and Authorized Participants may tender their shares for
redemption directly to a Portfolio, at NAV per share only in Creation Units, and
in accordance with the procedures described in the SAI.
104
The
Portfolios’ primary listing exchanges are listed below (each, an “Exchange” and
collectively the “Exchanges”):
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Portfolio |
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Exchange: |
Dimensional
US Core Equity Market ETF |
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NYSE Arca, Inc. |
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Dimensional
US High Profitability ETF |
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NYSE Arca, Inc. |
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Dimensional
US Real Estate ETF |
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NYSE Arca, Inc. |
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Dimensional
US Small Cap Value ETF |
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NYSE Arca, Inc. |
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Dimensional
International Core Equity Market ETF |
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NYSE Arca, Inc. |
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Dimensional
International Core Equity 2 ETF |
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Cboe BZX Exchange, Inc. |
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Dimensional
International Small Cap Value ETF |
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Cboe BZX Exchange, Inc. |
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Dimensional
International Small Cap ETF |
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Cboe BZX Exchange, Inc. |
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Dimensional
International High Profitability ETF |
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Cboe BZX Exchange, Inc. |
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Dimensional
Emerging Core Equity Market ETF |
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NYSE Arca, Inc. |
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Dimensional
Emerging Markets High Profitability ETF |
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NYSE Arca, Inc. |
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Dimensional
Emerging Markets Value ETF |
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NYSE Arca, Inc. |
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Dimensional
Emerging Markets Core Equity 2 ETF |
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NYSE Arca, Inc. |
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Each
Exchange is open for trading Monday through Friday and is closed on the
following holidays: New Year’s Day (NYSE only), Martin Luther King, Jr. Day,
Washington’s Birthday, Good Friday, Memorial Day, Juneteenth National
Independence Day, Independence Day, Labor Day, Thanksgiving Day, Thanksgiving
early close (Cboe only) and Christmas Day.
The
Board has not adopted a policy of monitoring for frequent purchases and
redemptions of Portfolio shares (“frequent trading”) that appear to attempt to
take advantage of potential arbitrage opportunities presented by a lag between a
change in the value of a Portfolio’s portfolio securities after the close of the
primary markets for the Portfolio’s portfolio securities and the reflection of
that change in the Portfolio’s NAV (“market timing”) because each Portfolio
sells and redeems its shares directly through transactions that are in‑kind
and/or for cash, subject to the conditions described below under “Creations and Redemptions.” The
Board has not adopted a policy of monitoring for other frequent trading activity
because shares of the Portfolios are listed for trading on a national securities
exchange.
SHARE
PRICE
The
trading prices of a Portfolio’s shares in the secondary market will fluctuate
continuously throughout trading hours based on the supply of and demand for
Portfolio shares and shares of underlying securities held by a Portfolio,
economic conditions and other factors, rather than a Portfolio’s NAV, which is
calculated at the end of each business day. Portfolio shares will trade on an
Exchange at prices that may be above (i.e., at a premium) or below (i.e., at a
discount), to varying degrees, the daily NAV of a Portfolio’s shares. The
trading prices of a Portfolio’s shares may deviate significantly from the
Portfolio’s NAV during periods of market volatility. Given, however, that a
Portfolio’s shares can be issued and redeemed daily in Creation Units, the
Advisor believes that large discounts and premiums to NAV should not be
sustained over long periods.
Each
Exchange will disseminate, every fifteen seconds during the regular trading day,
an indicative optimized portfolio value (“IOPV”) relating to a Portfolio. The
IOPV calculations are estimates of the value of a Portfolio’s NAV per share.
Premiums and discounts between the IOPV and the market price may occur. This
should not be viewed as a “real-time” update of the NAV per share. The IOPV is
based on the current market value of the published basket of portfolio
securities and/or cash required to be deposited in exchange for a Creation Unit
and does not necessarily reflect the precise composition of a Portfolio’s actual
portfolio at a particular point in time. Moreover, the IOPV is generally
determined by using current market quotations and/or price quotations obtained
from broker-dealers and other market intermediaries and valuations based on
current market rates. The IOPV may not be calculated in the same manner as the
NAV, which (i) is computed only once a day, (ii) unlike the
calculation of the IOPV, takes into account Portfolio expenses, and
(iii) may be subject, in accordance with the
105
requirements
of the 1940 Act, to fair valuation at different prices than those used in the
calculations of the IOPV. The IOPV price is based on quotes and closing prices
from the securities’ local market converted into U.S. dollars at the current
currency rates and may not reflect events that occur subsequent to the local
market’s close. Therefore, the IOPV may not reflect the best possible valuation
of a Portfolio’s current portfolio. Neither the Portfolio nor the Advisor or any
of their affiliates are involved in, or responsible for, the calculation or
dissemination of such IOPVs and make no warranty as to their accuracy. In the
future, the dissemination of the IOPV may be discontinued.
BOOK
ENTRY
Shares
of the Portfolios are held in book-entry form, which means that no stock
certificates are issued. The Depository Trust Company (“DTC”) or its nominee is
the record owner of, and holds legal title to, all outstanding shares of the
Portfolios.
Investors
owning shares of the Portfolios are beneficial owners as shown on the records of
DTC or its participants. DTC serves as the securities depository for shares of
the Portfolios. DTC participants include securities brokers and dealers, banks,
trust companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of stock certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other securities that you
hold in book-entry or “street name” form.
NET
ASSET VALUE
The
NAV per share of each Portfolio is normally calculated once daily after the
close of the Exchange on which the Portfolio is listed for trading (normally,
4:00 p.m. ET) by dividing the total value of the Portfolio’s investments and
other assets, less any liabilities, by the total outstanding shares of
beneficial interest of the Portfolio. Note: The time at which transactions and
shares are priced may be changed in case of an emergency or if the Exchange on
which the Portfolio is listed for trading closes at a time other than 4:00 p.m.
ET or in other situations to the extent permitted by the SEC.
The
value of shares of each Portfolio will fluctuate in relation to its investment
experience. Securities held by the Portfolios will be valued in accordance with
applicable laws and procedures adopted by the Board, and generally, as described
below.
Securities
held by the Portfolios (including over‑the‑counter securities) are valued at, as
applicable: (1) the official closing price on the exchange or market where
the security is principally traded; or (2) the last reported sale price
prior to that day’s close. Securities held by the Portfolios that are listed on
Nasdaq are valued at the Nasdaq Official Closing Price (“NOCP”). If there is no
last reported sales price or official closing price of the day, the Portfolios
value the securities at the mean between the most recent quoted bid and asked
prices. Price information on listed securities is taken from the exchange where
the security is primarily traded. Generally, options will be valued using the
same pricing methods discussed above.
The
value of the securities and other assets of the Portfolios for which no market
quotations are readily available (including restricted securities), or for which
market quotations have become unreliable, are determined in good faith at fair
value in accordance with procedures adopted by the Board. Fair value pricing may
also be used if events that have a significant effect on the value of an
investment (as determined in the discretion of the Advisor) occur before the NAV
is calculated. When fair value pricing is used, the prices of securities used by
the Portfolios may differ from the quoted or published prices for the same
securities on their primary markets or exchanges.
To
the extent that the Portfolios hold large numbers of securities, it is likely
that it will have a larger number of securities that may be deemed illiquid and
therefore must be valued pursuant to special procedures adopted by the Board
than would a fund that holds a smaller number of securities. Portfolios that
invest in small capitalization companies are more likely to hold illiquid
securities than would a fund that invests in larger capitalization
companies.
106
Valuing
securities at fair value involves greater reliance on judgment than valuing
securities that have readily available market quotations. There can be no
assurance that a Portfolio could obtain the fair value assigned to a security if
it were to sell the security at approximately the time at which the Portfolio
determines its NAV per share. As a result, the sale or redemption by a Portfolio
of its shares at NAV, at a time when a holding or holdings are valued at fair
value, may have the effect of diluting or increasing the economic interest of
existing shareholders.
For
the International Portfolios, the prices of securities traded in foreign
currencies will be expressed in U.S. dollars by using the mid‑rate prices for
the U.S. dollar as quoted by generally recognized reliable sources at
4 p.m. London time. Because the International Portfolios own securities
that are primarily traded in foreign markets which may trade on days when the
Portfolios do not price their shares, the NAVs of the Portfolios may change on
days when shareholders will not be able to purchase or redeem shares.
Certain
of the securities holdings of the Emerging Markets Core, Emerging Markets High
Profitability, Emerging Markets Value and Emerging Markets Core 2 ETFs in
Approved Markets may be subject to tax, investment and currency repatriation
regulations of the Approved Markets that could have a material effect on the
values of the securities. For example, a Portfolio might be subject to different
levels of taxation on current income and realized gains depending upon the
holding period of the securities. In general, a longer holding period (e.g., 5
years) may result in the imposition of lower tax rates than a shorter holding
period (e.g., 1 year). The Emerging Markets Core, Emerging Markets High
Profitability, Emerging Markets Value and Emerging Markets Core 2 ETFs may also
be subject to certain contractual arrangements with investment authorities in an
Approved Market which require a Portfolio to maintain minimum holding periods or
to limit the extent of repatriation of income and realized gains.
Futures
contracts are valued using the settlement price established each day on the
exchange on which they are traded. The value of such futures contracts held by a
Portfolio is determined each day as of such close. In the absence of prices that
are believed to reflect the current market value of a futures contract, the
futures contract will be valued in good faith at fair value in accordance with
procedures adopted by the Board.
Swap
agreements will be valued at the price provided by an independent third-party
pricing service or source. If a price is not available from an independent
third-party pricing service or source, the swap agreement will be valued in good
faith at fair value in accordance with procedures adopted by the Board.
Each
Portfolio generally calculates its NAV per share and accepts purchase and
redemption orders of Creation Units on days that the Exchange on which the
Portfolio is listed for trading is open for trading.
Creations
and Redemptions
Prior
to trading in the secondary market, shares of a Portfolio are “created” at NAV
by market makers, large investors and institutions only in block-size Creation
Units of the following number of shares, or multiples thereof:
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Portfolio |
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Creation Unit |
Dimensional
US Core Equity Market ETF |
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50,000 shares |
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Dimensional
US High Profitability ETF |
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50,000 shares |
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Dimensional
US Real Estate ETF |
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50,000 shares |
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Dimensional
US Small Cap Value ETF |
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50,000 shares |
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Dimensional
International Core Equity Market ETF |
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100,000 shares |
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Dimensional
International Core Equity 2 ETF |
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100,000 shares |
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Dimensional
International Small Cap Value ETF |
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50,000 shares |
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Dimensional
International Small Cap ETF |
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100,000 shares |
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Dimensional
International High Profitability ETF |
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50,000 shares |
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Dimensional
Emerging Core Equity Market ETF |
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100,000 shares |
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Dimensional
Emerging Markets High Profitability ETF |
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50,000 shares |
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Dimensional
Emerging Markets Value ETF |
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100,000 shares |
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Dimensional
Emerging Markets Core Equity 2 ETF |
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100,000 shares |
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107
All
orders to purchase Creation Units must be placed by or through an “Authorized
Participant” that has entered into an authorized participant agreement (an “AP
Agreement”) with the Portfolios’ distributor (the “Distributor”).
A
creation transaction, which is subject to acceptance by the Distributor or its
agents, generally takes place when an Authorized Participant deposits into a
Portfolio a designated portfolio of securities (including any portion of such
securities for which cash may be substituted) and a specified amount of cash in
exchange for a specified number of Creation Units.
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 Portfolio and a specified amount of cash. Except
when aggregated in Creation Units, shares are not redeemable by a
Portfolio.
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 Authorized Participant may create or redeem Creation Units directly with a
Portfolio. In the event of a system failure or other interruption, including
disruptions at market makers or Authorized Participants, orders to purchase or
redeem Creation Units either may not be executed according to a Portfolio’s
instructions or may not be executed at all, or a Portfolio may not be able to
place or change orders.
When
a Portfolio engages in in‑kind transactions, the Portfolio 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 Authorized Participant 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 and, in either case, has executed an AP Agreement with the
Distributor. 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 Portfolios’ SAI.
Because
new shares may be created and issued on an ongoing basis, at any point during
the life of a Portfolio a “distribution,” as such term is used in the 1933 Act,
may be occurring. 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.
Premium/Discount
Information
Information
showing the number of days the market price of a Portfolio’s shares was greater
than the Portfolio’s NAV and the number of days it was less than the Portfolio’s
NAV (i.e., premium or discount) for various time periods is available by
visiting the Portfolio’s website at https://us.dimensional.com/etfs.
108
Disclosure
of Portfolio Holdings
A
description of the Trust’s policies and procedures regarding the release of
portfolio holdings information is also available in the Trust’s SAI. Portfolio
holdings information is available by visiting a Portfolio’s website at
https://us.dimensional.com/etfs.
Delivery
of Shareholder Documents
To
eliminate duplicate mailings and reduce expenses, certain broker-dealers may
deliver a single copy of certain shareholder documents, such as this Prospectus
and annual and semi-annual reports, to related shareholders at the same address,
even if accounts are registered in different names. This practice is known as
“householding.” You may contact your broker-dealer to enroll in householding.
Once enrolled, this process will continue indefinitely unless you instruct your
broker-dealer otherwise. If you do not want the mailings of these documents to
be combined with those of other members of your household, please contact your
broker-dealer. At any time you may view current prospectuses and financial
reports on a Portfolio’s website at https://us.dimensional.com/etfs.
Distribution
The
Distributor or its agents distribute Creation Units for the Portfolios on an
agency basis. The Distributor does not maintain a secondary market in shares of
the Portfolios.
DISTRIBUTION
AND SERVICE (12B‑1) FEES
The
Board has adopted a distribution plan, sometimes known as a Rule 12b‑1 plan,
that allows a Portfolio to pay distribution fees of up to 0.25% per year, to
those who sell and distribute Portfolio shares and provide other services to
shareholders. However, the Board has determined not to authorize payment of a
Rule 12b‑1 plan fee at this time. Because these fees are paid out of a
Portfolio’s assets on an ongoing basis, to the extent that a fee is authorized,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
Financial
Highlights
The
Financial Highlights table is meant to help you understand each Portfolio’s
financial performance for the past 5 years or, if shorter, the period of that
Portfolio’s operations, as indicated by the table. The total returns in the
table represent the rate that you would have earned (or lost) on an investment
in the Portfolio, assuming reinvestment of all dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Portfolios’ financial statements, is included in the annual report.
Further information about the Portfolios’ performance is contained in the annual
report, which is available upon request.
109
DIMENSIONAL
ETF TRUST
FINANCIAL
HIGHLIGHTS
(for
a share outstanding throughout each period)
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Dimensional US Core Equity Market ETF |
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Period November 17, 2020
through October 31, 2021 |
Net
Asset Value, Beginning of Period |
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$ |
24.92 |
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Income
from Investment Operations(a) |
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|
Net
Investment Income (Loss) |
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|
|
0.36 |
|
Net
Gains (Losses) on Securities (Realized and Unrealized) |
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|
7.04 |
|
Total
from Investment Operations |
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|
|
7.40 |
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|
Less
Distributions: |
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|
|
|
Net
Investment Income |
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|
|
(0.24 |
) |
Net
Realized Gains |
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|
— |
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Total
Distributions |
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|
(0.24 |
) |
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|
Net
Asset Value, End of Period |
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|
$ |
32.08 |
|
Total
Return at NAV(b)(c) |
|
|
|
29.81 |
% |
Total
Return at Market(c)(d) |
|
|
|
29.88 |
% |
Net
Assets, End of Year (thousands) |
|
|
$ |
1,328,340 |
|
Ratio
of Expenses to Average Net Assets(e) |
|
|
|
0.12 |
% |
Ratio
of Expense to Average Net Assets (Excluding Fees (Waived), (Expenses
Reimbursed), (Previously Waived Fees Recovered by Advisor) and/or (Fees
Paid Indirectly)(e) |
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|
0.12 |
% |
Ratio
of Net Investment Income to Average Net Assets(e) |
|
|
|
1.27 |
% |
Portfolio
Turnover Rate(c)(f) |
|
|
|
3.00 |
% |
(a) |
Computed
using average shares outstanding |
(b) |
Net
asset value (“NAV”) total return is calculated assuming an initial
investment made at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions at net asset value during
the period, if any, and redemption on the last day of the period at net
asset value. This percentage is not an indication of the performance of a
shareholder’s investment in the Fund based on market value due to
differences between the market price of the shares and the net asset value
per share of the Fund |
(c) |
Not
annualized for periods less than one year |
(d) |
Market
value total return is calculated assuming an initial investment made at
the market value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, if any,
and redemption on the last day of the period at market value. Market value
is determined by the composite closing price. Composite closing security
price is defined as the last reported sale price from any primary listing
market (e.g., NYSE Arca) or participating regional exchanges or markets.
The composite closing price is the last reported sale price from any of
the eligible sources, regardless of volume and not an average price and
may have occurred on a date prior to the close of the reporting period.
Market value may be greater or less than net asset value, depending on the
Fund’s closing price on the listing market |
(e) |
Annualized
for periods less than one year |
(f) |
Excludes
impact of in‑kind transactions |
110
DIMENSIONAL
ETF TRUST
FINANCIAL
HIGHLIGHTS
(for
a share outstanding throughout each period)
|
|
|
|
|
|
|
|
|
|
Dimensional International Core
Equity Market ETF |
|
|
|
|
Period November 17, 2020
through October 31, 2021 |
Net
Asset Value, Beginning of Period |
|
|
$ |
25.07 |
|
|
|
Income
from Investment Operations(a) |
|
|
|
|
|
Net
Investment Income (Loss) |
|
|
|
0.77 |
|
Net
Gains (Losses) on Securities (Realized and Unrealized) |
|
|
|
4.36 |
|
Total
from Investment Operations |
|
|
|
5.13 |
|
|
|
Less
Distributions: |
|
|
|
|
|
Net
Investment Income |
|
|
|
(0.45 |
) |
Net
Realized Gains |
|
|
|
— |
|
Total
Distributions |
|
|
|
(0.45 |
) |
|
|
Net
Asset Value, End of Period |
|
|
$ |
29.75 |
|
Total
Return at NAV(b)(c) |
|
|
|
20.54 |
% |
Total
Return at Market(c)(d) |
|
|
|
21.08 |
% |
Net
Assets, End of Year (thousands) |
|
|
$ |
767,440 |
|
Ratio
of Expenses to Average Net Assets(e) |
|
|
|
0.18 |
% |
Ratio
of Net Investment Income to Average Net Assets(e) |
|
|
|
2.78 |
% |
Portfolio
Turnover Rate(c)(f) |
|
|
|
4.00 |
% |
(a) |
Computed
using average shares outstanding |
(b) |
Net
asset value (“NAV”) total return is calculated assuming an initial
investment made at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions at net asset value during
the period, if any, and redemption on the last day of the period at net
asset value. This percentage is not an indication of the performance of a
shareholder’s investment in the Fund based on market value due to
differences between the market price of the shares and the net asset value
per share of the Fund |
(c) |
Not
annualized for periods less than one year |
(d) |
Market
value total return is calculated assuming an initial investment made at
the market value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, if any,
and redemption on the last day of the period at market value. Market value
is determined by the composite closing price. Composite closing security
price is defined as the last reported sale price from any primary listing
market (e.g., NYSE Arca) or participating regional exchanges or markets.
The composite closing price is the last reported sale price from any of
the eligible sources, regardless of volume and not an average price and
may have occurred on a date prior to the close of the reporting period.
Market value may be greater or less than net asset value, depending on the
Fund’s closing price on the listing market |
(e) |
Annualized
for periods less than one year |
(f) |
Excludes
impact of in‑kind transactions |
111
DIMENSIONAL
ETF TRUST
FINANCIAL
HIGHLIGHTS
(for
a share outstanding throughout each period)
|
|
|
|
|
|
|
|
|
|
Dimensional Emerging Core Equity Market
ETF |
|
|
|
|
Period December 1, 2020
through October 31, 2021 |
Net
Asset Value, Beginning of Period |
|
|
$ |
25.41 |
|
|
|
Income
from Investment Operations(a) |
|
|
|
|
|
Net
Investment Income (Loss) |
|
|
|
0.62 |
|
Net
Gains (Losses) on Securities (Realized and Unrealized) |
|
|
|
1.75 |
* |
Total
from Investment Operations |
|
|
|
2.37 |
|
|
|
Less
Distributions: |
|
|
|
|
|
Net
Investment Income |
|
|
|
(0.30 |
) |
Total
Distributions |
|
|
|
(0.30 |
) |
|
|
Net
Asset Value, End of Period |
|
|
$ |
27.48 |
|
Total
Return at NAV(b)(c) |
|
|
|
9.33 |
% |
Total
Return at Market(c)(d) |
|
|
|
9.57 |
% |
Net
Assets, End of Year (thousands) |
|
|
$ |
395,729 |
|
Ratio
of Expenses to Average Net Assets(e) |
|
|
|
0.35 |
% |
Ratio
of Expenses to Average Net Assets (Excluding Fees (Waived), (Expenses
Reimbursed), (Previously Waived Fees Recovered by Advisor) and/or (Fees
Paid Indirectly)(e) |
|
|
|
0.35 |
% |
Ratio
of Net Investment Income to Average Net Assets(e) |
|
|
|
2.40 |
% |
Portfolio
Turnover Rate(c)(f) |
|
|
|
4.00 |
% |
* |
Realized
and unrealized gains per share are balancing amounts necessary to
reconcile the change in net asset value per share for the period, and may
not accord with the aggregate gains and losses in the Statements of
Operations due to share transactions for the
period. |
(a) |
Computed
using average shares outstanding |
(b) |
Net
asset value (“NAV”) total return is calculated assuming an initial
investment made at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions at net asset value during
the period, if any, and redemption on the last day of the period at net
asset value. This percentage is not an indication of the performance of a
shareholder’s investment in the Fund based on market value due to
differences between the market price of the shares and the net asset value
per share of the Fund |
(c) |
Not
annualized for periods less than one year |
(d) |
Market
value total return is calculated assuming an initial investment made at
the market value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, if any,
and redemption on the last day of the period at market value. Market value
is determined by the composite closing price. Composite closing security
price is defined as the last reported sale price from any primary listing
market (e.g., NYSE Arca) or participating regional exchanges or markets.
The composite closing price is the last reported sale price from any of
the eligible sources, regardless of volume and not an average price and
may have occurred on a date prior to the close of the reporting period.
Market value may be greater or less than net asset value, depending on the
Fund’s closing price on the listing market |
(e) |
Annualized
for periods less than one year |
(f) |
Excludes
impact of in‑kind transactions |
112
Other
Available Information
You
can find more information about the Trust and each Portfolio in the Portfolios’
SAI and Annual and Semi-Annual Reports.
Statement
of Additional Information.
The
SAI, incorporated herein by reference, supplements, and is technically part of,
this Prospectus. It includes an expanded discussion of investment practices,
risks, and fund operations.
Annual
and Semi-Annual Reports to Shareholders.
These
reports focus on Portfolio holdings and performance. The Annual Report also
discusses the market conditions and investment strategies that significantly
affected the Portfolios in their last fiscal year.
How
to get these and other materials:
• |
|
Your
investment advisor or broker-dealer—you are a client of an investment
advisor or broker-dealer who has invested in a Portfolio on your
behalf. |
• |
|
The
Trust—Call collect at (512) 306‑7400. |
• |
|
Access
them on our Web site at
https://us.dimensional.com/etfs. |
• |
|
Access
them on the EDGAR Database on the SEC’s Internet site at
http://www.sec.gov. |
• |
|
Obtain
them, after paying a duplicating fee, by electronic request at the
following e‑mail address: [email protected]. |
Dimensional
ETF Trust—Registration No. 811‑23580
|
|
|
Dimensional
Fund Advisors LP
6300
Bee Cave Road, Building One
Austin,
TX 78746
(512)
306‑7400
RRD022822‑073 |
|
|