ck0001137360-20221024
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PROSPECTUS |
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October 24,
2022 |
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VanEck®
Dynamic High Income ETF INC
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Principal
U.S. Listing Exchange: NYSE Arca, Inc. |
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The
U.S. Securities and Exchange Commission ("SEC") has not approved or
disapproved these securities or passed upon the accuracy or adequacy of
this Prospectus. Any representation to the contrary is a criminal
offense. |
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800.826.2333 vaneck.com
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VANECK®
DYNAMIC
HIGH INCOME ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
The
VanEck®
Dynamic
High Income ETF (the "Fund") seeks to provide high current income with
consideration for capital appreciation.
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”).
You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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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 |
0.10 |
% |
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Other
Expenses(a)(b) |
0.00 |
% |
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Acquired
Fund Fees and Expenses(b)(c) |
0.33 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.43 |
% |
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(a)
Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
(b) “Other Expenses” and
“Acquired Fund Fees and Expenses” are based on estimated amounts for the current
fiscal year.
(c)
“Acquired Fund Fees
and Expenses” include fees and expenses incurred indirectly by the Fund as a
result of investments in other investment companies, including VanEck
exchange-traded funds and funds which invest exclusively in money market
instruments. Because Acquired Fund Fees and Expenses are not borne directly by
the Fund, they will not be reflected in the expense information in the Fund’s
financial statements and the information presented in the table will differ from
that presented in the Fund’s financial highlights included in the Fund’s reports
to shareholders. Acquired Fund Fees and Expenses are based on estimated amounts
for the current fiscal year.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR
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EXPENSES |
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1 |
$44 |
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3 |
$138 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. Because
the Fund is newly organized, no portfolio turnover figures are
available.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund is an actively managed
exchange-traded fund (“ETF”) that seeks to achieve its investment objective by
investing, under normal circumstances, in exchange-traded products (“ETPs”) that
are registered under the applicable federal securities laws and that invest in
securities that generate income. The Fund may also invest in U.S. Treasury
securities under normal circumstances. While the Adviser currently anticipates
that the ETPs that the Fund may invest in will primarily be ETFs managed by the
Adviser, Van Eck Absolute Return Advisers Corporation or their affiliates
("VanEck ETFs"), the Fund may also invest in affiliated and unaffiliated ETPs,
which could include ETFs and closed-end funds that invest in income generating
asset classes. The Fund does
not
have any limits on its investments in below-investment grade securities (“junk”
bonds), and the Fund will have indirect exposure to below investment grade
securities through its investments in ETPs.
The
Adviser considers various inputs to guide asset allocation decisions and select
investments that the Adviser believes will offer income and enhanced
risk-adjusted returns. The term “risk-adjusted returns” does not imply that the
Adviser employs low-risk strategies or that an investment in the Fund should be
considered a low-risk or no risk investment. The Adviser seeks to maximize
risk-adjusted returns through an optimization process that incorporates both the
yield and observed risks of each ETP. Additionally, the Adviser may utilize
relative momentum and other discretionary factors of each underlying ETP to
allocate the Fund’s portfolio to ETPs with the highest expected risk-adjusted
returns. The term “relative momentum” means the speed at which the total returns
of an ETP are changing compared to other ETPs. Based on these inputs, the
Adviser selects the income generating asset classes that the Fund will invest in
and determines the relative weights each class will represent in the Fund. The
Fund may engage in active and frequent trading of portfolio
securities.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “1940 Act”) and, therefore, may invest a greater
percentage of its assets in a particular issuer.
PRINCIPAL RISKS OF INVESTING IN THE
FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Fund
of Funds Risk.The
performance of the Fund is largely dependent on the performance of underlying
funds. The Fund is subject to the risks of the underlying funds’ investments. In
addition, the Fund’s shareholders will indirectly bear the expenses of the
underlying funds, absorbing duplicative levels of fees with respect to
investments in the underlying funds. In addition, at times certain segments of
the market represented by the underlying funds may be out of favor and
underperform other segments.
Risk
of ETPs.
The Fund may be subject to the following risks as a result of its investments in
ETPs:
Dividend
Paying Securities Risk.
There
can be no assurance that securities that pay dividends will continue to have a
high dividend yield, strong financial health or attractive valuation for any
period of time. Securities that pay dividends, as a group, may be out of favor
with the market and may underperform the overall equity market or stocks of
companies that do not pay dividends. In addition, changes in the dividend
policies of the companies held by an ETP or the capital resources available for
such companies' dividend payments may adversely affect the ETP.
Risk
of Investing in Foreign Securities.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. An ETP invests in securities of issuers located in countries whose
economies are heavily dependent upon trading with key partners. Any reduction in
this trading may have an adverse impact on the ETP’s investments.
Risk
of Investing in Emerging Market Issuers.
Investments in securities of emerging market issuers are exposed to a number of
risks that may make these investments volatile in price or difficult to trade.
Emerging markets are more likely than developed markets to experience problems
with the clearing and settling of trades, as well as the holding of securities
by local banks, agents and depositories. Political risks may include unstable
governments, nationalization, restrictions on foreign ownership, laws that
prevent investors from getting their money out of a country and legal systems
that do not protect property rights as well as the laws of the United States.
Market risks may also include economies that concentrate in only a few
industries, securities issues that are held by only a few investors, liquidity
issues and limited trading capacity in local exchanges and the possibility that
markets or issues may be manipulated by foreign nationals who have inside
information. The frequency, availability and quality of financial information
about investments in emerging markets varies. An ETP has limited rights and few
practical remedies in emerging markets and the ability of U.S. authorities to
bring enforcement actions in emerging markets may be limited. All of these
factors can make emerging market securities more volatile and potentially less
liquid than securities issued in more developed markets.
Foreign
Currency Risk.
Because
all or a portion of the income received by an ETP from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the ETP’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the ETP, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. Moreover, an ETP may incur costs in connection with
conversions between U.S. dollars and foreign currencies.
Risk
of Investing in Mortgage REITs.
Mortgage
real estate investment trusts (“REITs”) are exposed to the risks specific to the
real estate market as well as the risks that relate specifically to the way in
which mortgage REITs are organized and operated. Mortgage REITs receive
principal and interest payments from the owners of the mortgaged properties.
Accordingly,
mortgage REITs are subject to the credit risk of the borrowers. Credit risk
refers to the possibility that the borrower will be unable and/or unwilling to
make timely interest payments and/or repay the principal on the loan to a
mortgage REIT when due. To the extent that a mortgage REIT invests in
mortgage-backed securities offered by private issuers, such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers, the mortgage REIT may be subject to
additional risks. Timely payment of interest and principal of non-governmental
issuers may be supported by various forms of private insurance or guarantees,
including individual loan, title, pool and hazard insurance purchased by the
issuer. However, there can be no assurance that the private insurers can or will
meet their obligations under such policies. Unexpected high rates of default on
the mortgages held by a mortgage pool may adversely affect the value of a
mortgage-backed security and could result in losses to a mortgage REIT. The risk
of such defaults is generally higher in the case of mortgage pools that include
subprime mortgages. To the extent that a mortgage REIT’s portfolio is exposed to
lower-rated, unsecured or subordinated instruments, the risk of loss may
increase, which may have a negative impact on an ETP. Mortgage REITs also are
subject to the risk that the value of mortgaged properties may be less than the
amounts owed on the properties. If a mortgage REIT is required to foreclose on a
borrower, the amount recovered in connection with the foreclosure may be less
than the amount owed to the mortgage REIT. Mortgage REITs typically use leverage
and many are highly leveraged, which exposes them to leverage risk and the risks
generally associated with debt financing. Leverage risk refers to the risk that
leverage created from borrowing may impair a mortgage REIT’s liquidity, cause it
to liquidate positions at an unfavorable time and increase the volatility of the
values of securities issued by the mortgage REIT.
Preferred
Securities Risk.
Preferred securities are essentially contractual obligations that entail rights
to distributions declared by the issuer’s board of directors but may permit the
issuer to defer or suspend distributions for a certain period of time. If an ETP
owns a preferred security whose issuer has deferred or suspended distributions,
the ETP may be required to account for the distribution that has been deferred
or suspended for tax purposes, even though it may not have received this income
in cash. Further, preferred securities may lose substantial value if
distributions are deferred, suspended or not declared. Preferred securities may
also permit the issuer to convert preferred securities into the issuer’s common
stock. Preferred securities that are convertible to common stock may decline in
value if the common stock into which preferred securities may be converted
declines in value. Preferred securities are subject to greater credit risk than
traditional fixed income securities because the rights of holders of preferred
securities are subordinated to the rights of the bond and debt holders of an
issuer.
CLO
Risk.
The risks of investing in CLO securities include both the economic risks of the
underlying loans combined with the risks associated with the CLO structure
governing the priority of payments. The degree of such risk will generally
correspond to the specific tranche in which the Fund is invested. The Fund
intends to invest primarily in investment grade-rated tranches of CLOs rated
between and inclusive of AAA/Aaa and BBB-/Baa3; however, this rating does not
constitute a guarantee of credit quality and may be downgraded, and in stressed
market environments it is possible that even senior CLO debt tranches could
experience losses due to actual defaults, increased sensitivity to defaults due
to collateral default and the disappearance of the subordinated/equity tranches,
market anticipation of defaults, as well as negative market sentiment with
respect to CLO securities as an asset class. The Fund’s portfolio managers may
not be able to accurately predict how specific CLO securities or the portfolio
of underlying loans for such CLO securities will react to changes or stresses in
the market, including changes in interest rates. The most common risks
associated with investing in CLO securities are liquidity risk, interest rate
risk, credit risk, call risk, and the risk of default of the underlying
asset.
Credit
Risk.
Debt securities are subject to credit risk. Credit risk refers to the
possibility that the issuer or guarantor of a security will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt or to otherwise honor its obligations and/or default completely on
securities. Debt securities are subject to varying degrees of credit risk,
depending on the issuer’s financial condition and on the terms of the
securities, which may be reflected in credit ratings. There is a possibility
that the credit rating of a debt security may be downgraded after purchase or
the perception of an issuer’s credit worthiness may decline, which may adversely
affect the value of the security.
High
Yield Securities Risk.
Securities rated below investment grade are commonly referred to as high yield
securities or “junk bonds.” High yield securities are often issued by issuers
that are restructuring, are smaller or less creditworthy than other issuers, or
are more highly indebted than other issuers. High yield securities are subject
to greater risk of loss of income and principal than higher rated securities and
are considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities. During an economic downturn or substantial period
of rising interest rates, issuers of high yield securities may experience
financial stress that would adversely affect their ability to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. In the event of a default, an ETP may
incur additional expenses to seek recovery. The secondary market for securities
that are high yield securities may be less liquid than the markets for higher
quality securities and high yield securities issued by non-corporate issuers may
be less liquid than high yield securities issued by corporate issuers, which, in
either instance, may have an adverse effect on the market prices of and an ETP’s
ability to arrive at a fair value for certain securities. The illiquidity of the
market also could make it difficult for an ETP to sell certain securities in
connection with a rebalancing of its index, if applicable. In addition, periods
of economic
uncertainty
and change may result in an increased volatility of market prices of high yield
securities and a corresponding volatility in an ETP’s NAV.
Interest
Rate Risk.
Debt securities, such as bonds, are also subject to interest rate risk. Interest
rate risk refers to fluctuations in the value of a debt security resulting from
changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities go down. When the
general level of interest rates goes down, the prices of most debt securities go
up. A low interest rate environment increases the risk associated with rising
interest rates, including the potential for periods of volatility and increased
redemptions. In addition, debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities with shorter durations. In addition, in response to the COVID-19
pandemic, as with other serious economic disruptions, governmental authorities
and regulators are enacting significant fiscal and monetary policy changes,
including providing direct capital infusions into companies, creating new
monetary programs and lowering interest rates. These actions present heightened
risks to debt instruments, and such risks could be even further heightened if
these actions are unexpectedly or suddenly reversed or are ineffective in
achieving their desired outcomes.
Call
Risk.
An ETP may invest in callable debt securities. If interest rates fall, it is
possible that issuers of callable securities will “call” (or prepay) their debt
securities before their maturity date. If a call were exercised by the issuer
during or following a period of declining interest rates, the ETP is likely to
have to replace such called security with a lower yielding security or
securities with greater risks or other less favorable features. If that were to
happen, it would decrease the ETP’s net investment income.
Concentration
Risk.
Certain of the ETPs may be concentrated in a particular sector or sectors or
industry or group of industries. To the extent that an ETP is concentrated in a
particular sector or sectors or industry or group of industries, the ETP will be
subject to the risk that economic, political or other conditions that have a
negative effect on those sectors and/or industry or groups of industries may
negatively impact the ETP to a greater extent than if the ETP’s assets were
invested in a wider variety of sectors or industries.
U.S.
Treasury Securities
Risk.
Direct obligations of the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary.
Interest
Rate Risk.
Debt securities, such as bonds, are subject to interest rate risk. Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. When the general level of interest rates
goes up, the prices of most debt securities go down. When the general level of
interest rates goes down, the prices of most debt securities go up. Many factors
can cause interest rates to rise, including central bank monetary policy, rising
inflation rates and general economic conditions. Debt securities with longer
durations tend to be more sensitive to interest rate changes, usually making
them more volatile than debt securities, such as bonds, with shorter durations.
To the extent the Fund invests a substantial portion of its assets in debt
securities with longer-term maturities, rising interest rates may cause the
value of the Fund’s investments to decline significantly.
Income
Risk.
The Fund’s income may fluctuate and may decline during periods of falling
interest rates.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities.
High portfolio turnover may result in increased transaction costs to the Fund,
including brokerage commissions, dealer mark-ups and other transaction costs on
the sale of the securities and on reinvestment in other securities. High
portfolio turnover may also result in higher taxes when Fund Shares are held in
a taxable account.
Management
Risk.
The Fund is subject to management risk because it is an actively managed ETF. In
managing the Fund’s portfolio, the Adviser will apply investment techniques and
risk analyses in making investment decisions for the Fund, but there can be no
guarantee that these will produce the desired results.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or system failures.
Authorized
Participant Concentration Risk. The
Fund may have a limited number of financial institutions that act as APs, none
of which are obligated to engage in creation and/or redemption transactions. To
the extent that those APs exit the business, or are unable to or choose not to
process creation and/or redemption orders, and no other AP is able to step
forward to create and redeem, there may be a significantly diminished trading
market for Shares or Shares may trade like closed-end funds at a greater
discount (or premium) to NAV and possibly face trading halts and/or de-listing.
The AP concentration risk may be heightened in scenarios where APs have limited
or diminished access to the capital required to post collateral.
Absence
of Prior Active Market.
The Fund is a newly organized series of an investment company and thus has no
operating history. While the Fund’s Shares are expected to be listed on the
Fund’s listing exchange (the “Exchange”), there can be no assurance that active
trading markets for the Shares will develop or be maintained, especially for
recently organized Funds.
Further,
secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement
periods
in times of market stress because market makers and APs may step away from
making a market in the Shares and in executing creation and redemption orders,
which could cause a material deviation in the Fund’s market price from its NAV.
Trading
Issues.
Trading in Shares on the Exchange may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the Exchange’s “circuit
breaker” rules. There can be no assurance that the requirements of the Exchange
necessary to maintain the listing of the Fund will continue to be met or will
remain unchanged.
Market
Risk. Both
the Fund and the ETPs in which the Fund may invest are subject to market risk.
The prices of the securities in the Fund or
an
ETP are subject to the risks associated with investing in the securities market,
including general economic conditions, sudden and unpredictable drops in value,
exchange trading suspensions and closures and public health risks. These risks
may be magnified if certain social, political, economic and other conditions and
events (such as natural disasters, epidemics and pandemics, terrorism, conflicts
and social unrest) adversely interrupt the global economy; in these and other
circumstances, such events or developments might affect companies world-wide.
An
investment in the Fund or an ETP may lose money.
Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s NAV, the
intraday value of the Fund’s holdings and supply and demand for Shares. The
Adviser cannot predict whether Shares will trade above, below, or at their most
recent NAV. Disruptions to creations and redemptions, the existence of market
volatility or potential lack of an active trading market for Shares (including
through a trading halt), as well as other factors, may result in Shares trading
at a significant premium or discount to NAV or to the intraday value of the
Fund’s holdings. 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 pay significantly more or
receive significantly less than the underlying value of the Shares that were
bought or sold, or the shareholder may be unable to sell his or her Shares.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings. There are various methods by which
investors can purchase and sell Shares. Investors should consult their financial
intermediaries before purchasing or selling Shares of the Fund.
Affiliated
Fund Risk.
In managing the Fund, the Adviser will have the ability to select underlying
funds which it believes will achieve the Fund’s investment objective. The
Adviser may be subject to potential conflicts of interest in selecting
underlying funds because the Adviser may, due to its own financial interest or
other business considerations, have an incentive to invest in funds managed by
the Adviser or its affiliates in lieu of investing in funds managed or sponsored
by others.
New
Fund Risk.
The Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund's small asset base, certain of the Fund's expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
Non-Diversified
Risk. The Fund is classified as a “non-diversified”
fund under the 1940 Act. Therefore, the Fund may invest a relatively high
percentage of its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. Moreover, the gains and losses on a
single investment may have a greater impact on the Fund’s NAV and may make the
Fund more volatile than more diversified
funds.
PERFORMANCE
The Fund has not yet commenced operations and
therefore does not have a performance history. Once available,
the Fund’s performance information will be accessible on the Fund’s website at
www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily and jointly responsible for the
day-to-day management of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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David
Schassler |
Portfolio
Manager |
Since
Inception |
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John
Lau |
Deputy
Portfolio Manager |
Since
Inception |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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SUMMARY
INFORMATION ABOUT PURCHASES AND SALES OF FUND SHARES, TAXES
AND
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES |
PURCHASE
AND SALE OF FUND SHARES
Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through a broker or dealer at a market price. Shares of the Fund
are listed on the Exchange, and because Shares trade at market prices rather
than NAV, Shares of the Fund may trade at a price greater than NAV (i.e.,
a “premium”) or less than NAV (i.e.,
a “discount”).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares of the Fund (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”).
Recent
information, including information about the Fund’s NAV, market price, premiums
and discounts, and bid/ask spreads, is included on the Fund’s website at
www.vaneck.com.
TAX
INFORMATION
The
Fund expects to distribute net investment income, if any, at least monthly, and
any net realized long-term or short-term capital gains, if any, annually. The
Fund may also pay a special distribution at any time to comply with U.S. federal
tax requirements. Dividends paid by the Fund that are properly reported as
exempt-interest dividends will not be subject to regular U.S. federal income
tax. Such distributions will generally be subject to state income
taxes.
Distributions
from the Fund’s net investment income (other than net tax-exempt income),
including any net short-term capital gains, if any, are taxable to you as
ordinary income.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
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ADDITIONAL
INFORMATION ABOUT THE FUND'S INVESTMENT STRATEGIES AND
RISKS |
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund is an actively managed ETF that seeks to achieve its investment objective
by investing, under normal circumstances, in ETPs that are registered under the
applicable federal securities laws and that invest in securities that generate
income. The Fund may also invest in U.S. Treasury securities under normal
circumstances. While the Adviser currently anticipates that the ETPs that the
Fund may invest in will primarily be VanEck ETFs, the Fund may also invest in
affiliated and unaffiliated ETPs, which could include ETFs and closed-end funds
that invest in income generating asset classes. The Fund does not have any
limits on its investments in below-investment grade securities ("junk" bonds),
and the Fund will have indirect exposure to below-investment grade securities
through its investments in ETPs.
The
Adviser considers various inputs to guide asset allocation decisions and select
investments that the Adviser believes will offer income and enhanced
risk-adjusted returns. The term “risk-adjusted returns” does not imply that the
Adviser employs low-risk strategies or that an investment in the Fund should be
considered a low-risk or no risk investment. The Adviser seeks to maximize
risk-adjusted returns through an optimization process that incorporates both the
yield and observed risks of each ETP. Additionally, the Adviser may utilize
relative momentum and other discretionary factors of each underlying ETP to
allocate the Fund’s portfolio to ETPs with the highest expected risk-adjusted
returns. The term “relative momentum” means the speed at which the total returns
of an ETP are changing compared to other ETPs. Based on these inputs, the
Adviser selects the income generating asset classes that the Fund will invest in
and determines the relative weights each class will represent in the Fund. The
Fund may engage in active and frequent trading of portfolio
securities.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
The
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees of the
Trust (the “Board of Trustees”) without shareholder approval, except as noted in
this Prospectus or the Statement of Additional Information (“SAI”) under the
section entitled “Investment Policies and Restrictions— Investment
Restrictions.”
RISKS
OF INVESTING IN THE FUND
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund’s
“Summary Information” section followed by additional risk information.
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not
a deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore, you should
consider carefully the following risks before investing in the Fund, each of
which could significantly and adversely affect the value of an investment in the
Fund.
Fund
of Funds Risk. The
performance of the Fund is largely dependent on the performance of underlying
funds. The Fund is subject to the risks of the underlying funds’ investments. In
addition, the Fund’s shareholders will indirectly bear the expenses of the
underlying funds, absorbing duplicative levels of fees with respect to
investments in the underlying funds. In addition, at times certain segments of
the market represented by the underlying funds may be out of favor and
underperform other segments.
Risk
of ETPs.
The Fund may be subject to the following risks as a result of its investments in
ETPs:
Dividend
Paying Securities Risk.
There
can be no assurance that securities that pay dividends will continue to have a
high dividend yield, strong financial health or attractive valuation for any
period of time. Securities that pay dividends, as a group, may be out of favor
with the market and may underperform the overall equity market or stocks of
companies that do not pay dividends. In addition, changes in the dividend
policies of the companies held by an ETP or the capital resources available for
such companies' dividend payments may adversely affect the ETP.
Risk
of Investing in Foreign Securities.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. An ETP invests in securities of issuers located in countries whose
economies are heavily dependent upon trading with key partners. Any reduction in
this trading may have an adverse impact on the ETP’s investments.
Risk
of Investing in Emerging Market Issuers.
Investments in securities of emerging market issuers are exposed to a number of
risks that may make these investments volatile in price or difficult to trade.
Emerging markets are more likely than developed markets to experience problems
with the clearing and settling of trades, as well as the holding of securities
by local banks, agents and depositories. Political risks may include unstable
governments, nationalization, restrictions on foreign ownership, laws that
prevent investors from getting their money out of a country and legal systems
that do not protect property rights as well as the laws of the United States.
Market risks may also include economies that concentrate in only a few
industries, securities issues that are held by only a few investors, liquidity
issues and limited trading capacity in local exchanges and the possibility that
markets or issues may be manipulated by foreign nationals who have inside
information. The frequency, availability and quality of financial information
about investments in emerging
markets
varies. The Fund has limited rights and few practical remedies in emerging
markets and the ability of U.S. authorities to bring enforcement actions in
emerging markets may be limited. All of these factors can make emerging market
securities more volatile and potentially less liquid than securities issued in
more developed markets.
Foreign
Currency Risk.
Because
all or a portion of the income received by an ETP from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the ETP's exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the ETP, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. Moreover, an ETP may incur costs in connection with
conversions between U.S. dollars and foreign currencies.
Risk
of Investing in Mortgage REITs.
Mortgage
real estate investment trusts (“REITs”) are exposed to the risks specific to the
real estate market as well as the risks that relate specifically to the way in
which mortgage REITs are organized and operated. Mortgage REITs receive
principal and interest payments from the owners of the mortgaged properties.
Accordingly, mortgage REITs are subject to the credit risk of the borrowers.
Credit risk refers to the possibility that the borrower will be unable and/or
unwilling to make timely interest payments and/or repay the principal on the
loan to a mortgage REIT when due. To the extent that a mortgage REIT invests in
mortgage-backed securities offered by private issuers, such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers, the mortgage REIT may be subject to
additional risks. Timely payment of interest and principal of non-governmental
issuers may be supported by various forms of private insurance or guarantees,
including individual loan, title, pool and hazard insurance purchased by the
issuer. However, there can be no assurance that the private insurers can or will
meet their obligations under such policies. Unexpected high rates of default on
the mortgages held by a mortgage pool may adversely affect the value of a
mortgage-backed security and could result in losses to a mortgage REIT. The risk
of such defaults is generally higher in the case of mortgage pools that include
subprime mortgages. To the extent that a mortgage REIT’s portfolio is exposed to
lower-rated, unsecured or subordinated instruments, the risk of loss may
increase, which may have a negative impact on an ETP. Mortgage REITs also are
subject to the risk that the value of mortgaged properties may be less than the
amounts owed on the properties. If a mortgage REIT is required to foreclose on a
borrower, the amount recovered in connection with the foreclosure may be less
than the amount owed to the mortgage REIT. Mortgage REITs typically use leverage
and many are highly leveraged, which exposes them to leverage risk and the risks
generally associated with debt financing. Leverage risk refers to the risk that
leverage created from borrowing may impair a mortgage REIT’s liquidity, cause it
to liquidate positions at an unfavorable time and increase the volatility of the
values of securities issued by the mortgage REIT.
Preferred
Securities Risk.
Preferred securities are essentially contractual obligations that entail rights
to distributions declared by the issuer’s board of directors but may permit the
issuer to defer or suspend distributions for a certain period of time. If an ETP
owns a preferred security whose issuer has deferred or suspended distributions,
the ETP may be required to account for the distribution that has been deferred
or suspended for tax purposes, even though it may not have received this income
in cash. Further, preferred securities may lose substantial value if
distributions are deferred, suspended or not declared. Preferred securities may
also permit the issuer to convert preferred securities into the issuer’s common
stock. Preferred securities that are convertible to common stock may decline in
value if the common stock into which preferred securities may be converted
declines in value. Preferred securities are subject to greater credit risk than
traditional fixed income securities because the rights of holders of preferred
securities are subordinated to the rights of the bond and debt holders of an
issuer.
CLO
Risk.
The risks of investing in CLO securities include both the economic risks of the
underlying loans combined with
the risks associated with the CLO structure governing the priority of payments.
The degree of such risk will generally correspond to the specific tranche in
which the Fund is invested. The Fund intends to invest primarily in investment
grade-rated tranches of CLOs rated between and inclusive of AAA/Aaa and
BBB-/Baa3; however, this rating does not constitute a guarantee of credit
quality and may be downgraded, and in stressed market environments it is
possible that even senior CLO debt tranches could experience losses due to
actual defaults, increased sensitivity to defaults due to collateral default and
the disappearance of the subordinated/equity tranches, market anticipation of
defaults, as well as negative market sentiment with respect to CLO securities as
an asset class. The Fund’s portfolio managers may not be able to accurately
predict how specific CLO securities or the portfolio of underlying loans for
such CLO securities will react to changes or stresses in the market, including
changes in interest rates. The most common risks associated with investing in
CLO securities are liquidity risk, interest rate risk, credit risk, call risk,
and the risk of default of the underlying asset.
Credit
Risk.
Debt securities are subject to credit risk. Credit risk refers to the
possibility that the issuer or guarantor of a security will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt or to otherwise honor its obligations and/or default completely on
securities. Debt securities are subject to varying degrees of credit risk,
depending on the issuer’s financial condition and on the terms of the
securities, which may be reflected in credit ratings. There is a possibility
that the credit rating of a debt security may be downgraded after purchase or
the perception of an issuer’s credit worthiness may decline, which may adversely
affect the value of the security.
High
Yield Securities Risk.
Securities rated below investment grade are commonly referred to as high yield
securities or “junk bonds.” High yield securities are often issued by issuers
that are restructuring, are smaller or less creditworthy than other issuers, or
are more highly indebted than other issuers. High yield securities are subject
to greater risk of loss of income and principal than higher rated securities and
are considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities. During an economic downturn or substantial period
of rising interest rates, high yield security issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. In the event of a default, an ETP may incur
additional expenses to seek recovery. The secondary market for securities that
are high yield securities may be less liquid than the markets for higher quality
securities and high yield securities issued by non-corporate issuers may be less
liquid than high yield securities issued by corporate issuers, which, in either
instance, may have an adverse effect on the market prices of and an ETP’s
ability to arrive at a fair value for certain securities. The illiquidity of the
market also could make it difficult for an ETP to sell certain securities in
connection with a rebalancing of its index, if applicable. In addition, periods
of economic uncertainty and change may result in an increased volatility of
market prices of high yield securities and a corresponding volatility in an
ETP’s NAV. In addition, adverse publicity and investor perceptions may decrease
the values and liquidity of high yield securities.
Interest
Rate Risk. Debt
securities, such as bonds, are also subject to interest rate risk. Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. When the general level of interest rates
goes up, the prices of most debt securities go down. When the general level of
interest rates goes down, the prices of most debt securities go up. Many factors
can cause interest rates to rise, including central bank monetary policy, rising
inflation rates and general economic conditions. A low interest rate environment
increases the risk associated with rising interest rates, including the
potential for periods of volatility and increased redemptions.
Measures
taken by the Federal Reserve Board may affect the money supply and as a result
of these measures, an ETF may face a heightened interest rate risk.
In
addition, debt securities with longer durations tend to be more sensitive to
interest rate changes, usually making them more volatile than debt securities
with shorter durations. To the extent an ETP invests a substantial portion of
its assets in debt securities with longer-term maturities, rising interest rates
may cause the value of an ETP’s investments to decline significantly.
In
addition, in response to the COVID-19 pandemic, as with other serious economic
disruptions, governmental authorities and regulators are enacting significant
fiscal and monetary policy changes, including providing direct capital infusions
into companies, creating new monetary programs and lowering interest rates
considerably. These actions present heightened risks to debt instruments, and
such risks could be even further heightened if these actions are unexpectedly or
suddenly reversed or are ineffective in achieving their desired
outcomes.
Call
Risk.
An ETP may invest in callable debt securities. If interest rates fall, it is
possible that issuers of callable securities will “call” (or prepay) their debt
securities before their maturity date. If a call were exercised by the issuer
during or following a period of declining interest rates, the ETP is likely to
have to replace such called security with a lower yielding security or
securities with greater risks or other less favorable features. If that were to
happen, it would decrease the ETP’s net investment income. An ETP also may fail
to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Concentration
Risk. Certain
of the ETPs may be concentrated in a particular sector or sectors or industry or
group of industries. To the extent that an ETP is concentrated in a particular
sector or sectors or industry or group of industries, the ETP will be subject to
the risk that economic, political or other conditions that have a negative
effect on those sectors and/or industry or groups of industries may negatively
impact the ETP to a greater extent than if the ETP’s assets were invested in a
wider variety of sectors or industries.
U.S.
Treasury Securities Risk.
Direct obligations of the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary.
Interest
Rate Risk.
Debt securities, such as bonds, are subject to interest rate risk. Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. When the general level of interest rates
goes up, the prices of most debt securities go down. When the general level of
interest rates goes down, the prices of most debt securities go up. Many factors
can cause interest rates to rise, including central bank monetary policy, rising
inflation rates and general economic conditions. Debt securities with longer
durations tend to be more sensitive to interest rate changes, usually making
them more volatile than debt securities, such as bonds, with shorter durations.
To the extent the Fund invests a substantial portion of its assets in debt
securities with longer-term maturities, rising interest rates may cause the
value of the Fund’s investments to decline significantly.
Income
Risk. The
Fund’s income may fluctuate and may decline during periods of falling interest
rates.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities.
High portfolio turnover may result in increased transaction costs to the Fund,
including brokerage commissions, dealer mark-ups and other transaction costs on
the sale of the securities and on reinvestment in other securities. High
portfolio turnover may also result in higher taxes when Fund Shares are held in
a taxable account.
Management
Risk.
The Fund is subject to management risk because it is an actively managed ETF. In
managing the Fund’s portfolio, the Adviser will apply investment techniques and
risk analyses in making investment decisions for the Fund, but there can be no
guarantee that these will produce the desired results.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or system failures.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of financial institutions that act as
Authorized Participants (“APs”), none of which are obligated to engage in
creation and/or redemption transactions. To the extent that those APs exit the
business, or are unable to or choose not to process creation and/or redemption
orders, and no other AP is able to step forward to create and redeem, there may
be a significantly diminished trading market for Shares or Shares may trade like
closed-end funds at a greater discount (or premium) to net asset value (“NAV”)
and possibly face trading halts and/or de-listing. The AP concentration risk may
be heightened in scenarios where APs have limited or diminished access to the
capital required to post collateral.
Absence
of Prior Active Market.
The Fund is a newly organized series of an investment company and thus has no
operating history. While the Fund’s Shares are expected to be listed on the
Fund’s listing exchange (the “Exchange”), there can be no assurance that active
trading markets for the Shares will develop or be maintained, especially for
recently organized Funds.
Further,
secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods in times of market stress because
market makers and APs may step away from making a market in the Shares and in
executing creation and redemption orders, which could cause a material deviation
in the Fund’s market price from its NAV. Van Eck Securities Corporation, the
distributor of the Shares (the “Distributor”), does not maintain a secondary
market in the Shares. Investors purchasing and selling Shares in the secondary
market may not experience investment results consistent with those experienced
by those APs creating and redeeming directly with a Fund.
Decisions
by market makers or APs 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 a Fund’s portfolio securities and the Fund’s market price. This reduced
effectiveness could result in Fund Shares trading at a price which differs
materially from NAV and also in greater than normal intraday bid/ask spreads for
Fund Shares.
Trading
Issues. Trading
in Shares on the Exchange may be halted due to market conditions or for reasons
that, in the view of the Exchange, make trading in Shares inadvisable. In
addition, trading in Shares on the Exchange is subject to trading halts caused
by extraordinary market volatility pursuant to the Exchange’s “circuit breaker”
rules. If a trading halt or unanticipated early close of the Exchange occurs, a
shareholder may be unable to purchase or sell Shares of the Fund. There can be
no assurance that the requirements of the Exchange necessary to maintain the
listing of the Fund will continue to be met or will remain
unchanged.
Market
Risk. Both
the Fund and the ETPs in which the Fund may invest are subject to market risk.
The prices of the securities in the Fund or an ETP are subject to the risks
associated with investing in the securities market, including general economic
conditions, sudden and unpredictable drops in value, exchange trading
suspensions and closures and public health risks. These risks may be magnified
if certain social, political, economic and other conditions and events (such as
natural disasters, epidemics and pandemics, terrorism, conflicts and social
unrest) adversely interrupt the global economy; in these and other
circumstances, such events or developments might affect companies world-wide.
Overall securities values could decline generally or underperform other
investments. An investment in the Fund or an ETP may lose money.
Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund Shares.
Disruptions to creations and redemptions, the existence of market volatility or
potential lack of an active trading market for Shares (including through a
trading halt), as well as other factors, may result in Shares trading at a
significant premium or discount to NAV or to the intraday value of the Fund’s
holdings. The NAV of the Shares will fluctuate with changes in the market value
of the Fund’s securities holdings. The market prices of Shares may fluctuate, in
some cases materially, in accordance with changes in NAV and the intraday value
of the Fund’s holdings, as well as supply and demand on the Exchange. The
Adviser cannot predict whether Shares will trade below, at or above their NAV.
Given the fact that Shares can be created and redeemed by APs in Creation Units
(defined herein), the Adviser believes that large discounts or premiums to the
NAV of Shares should not be sustained in the long-term. While the
creation/redemption feature is designed to make it likely that Shares normally
will trade close to the value of the Fund’s holdings, market prices are not
expected to correlate exactly to the Fund’s NAV due to timing reasons, supply
and demand imbalances and other factors. The price differences may be due, in
large part, to the fact that supply and demand forces at work in the secondary
trading market for Shares may be closely related to, but not necessarily
identical to, the same forces influencing the prices of the securities of the
Fund’s portfolio of investments trading individually or in the aggregate at any
point in time. 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 pay significantly more or receive
significantly less than the underlying value of the Shares that were bought or
sold or the shareholder may be unable to sell his or her Shares. Any of these
factors, discussed above and further below, may lead to the Shares trading at a
premium or discount to the Fund’s NAV. Additionally, in stressed market
conditions, the market for the Fund’s Shares may become less liquid in response
to deteriorating liquidity in the markets for the Fund’s underlying portfolio
holdings. There are various methods by which investors can purchase and sell
Shares. Investors should consult their financial intermediaries before
purchasing or selling Shares of the Fund.
When
you buy or sell Shares of the Fund through a broker, you will likely incur a
brokerage commission or other charges imposed by brokers. In addition, the
market price of Shares, like the price of any exchange-traded security, includes
a bid/ask spread charged by the market makers or other participants that trade
the particular security. The spread of the Fund’s Shares varies over time based
on the Fund’s trading volume and market liquidity and may increase if the Fund’s
trading volume, the spread of the Fund’s underlying securities, or market
liquidity decrease. In times of severe market disruption, including when trading
of the Fund’s holdings may be halted, the bid/ask spread may increase
significantly. This means that Shares may trade at a discount to the Fund’s NAV,
and the discount is likely to be greatest during significant market
volatility.
Affiliated
Fund Risk.
In managing the Fund, the Adviser will have the ability to select underlying
funds which it believes will achieve the Fund’s investment objective. The
Adviser may be subject to potential conflicts of interest in selecting
underlying funds because the Adviser may, due to its own financial interest or
other business considerations, have an incentive to invest in funds managed by
the Adviser or its affiliates in lieu of investing in funds managed or sponsored
by others.
New
Fund Risk. The
Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund's small asset base, certain of the Fund's expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
Non-Diversified
Risk. The
Fund is a separate investment portfolio of VanEck ETF Trust (the “Trust”), which
is an open-end investment company registered under the 1940 Act. The Fund is
classified as a “non-diversified” fund under the 1940 Act. Moreover, the Fund is
subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on each the
Fund’s NAV and may make the Fund more volatile than more diversified
funds.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
The
Fund may also invest in securities issued by other investment companies, equity
securities, fixed income securities and money market instruments, including
repurchase agreements or other funds which invest exclusively in money market
instruments. For temporary defensive purposes, the Fund may invest without limit
in money market instruments, including repurchase agreements or other funds
which invest exclusively in money market instruments. The Fund may also pursue
temporary defensive positions in anticipation of or in an attempt to respond to
adverse market, economic, political or other conditions. Such a position could
have the effect of reducing any benefit the Fund may receive from a market
increase.
BORROWING
MONEY
The
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. The Fund intends to enter into a credit facility to borrow money
for temporary, emergency or other purposes, including the funding of shareholder
redemption requests, trade settlements and as necessary to distribute to
shareholders any income required to maintain the Fund’s status as a regulated
investment company. To the extent that the Fund borrows money, it may be
leveraged. Leveraging generally exaggerates the effect on NAV of any increase or
decrease in the market value of the Fund’s portfolio securities. Leverage
generally has the effect of increasing the amount of loss or gain the Fund might
realize, and may increase volatility in the value of the Fund’s
investments.
LENDING
PORTFOLIO SECURITIES
The
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, the Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Fund's
bank lending agent equal to at least 102% of the value of the portfolio
securities being loaned. This collateral is marked-to-market on a daily basis.
Although the Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower fail to return the borrowed securities (e.g., the Fund would have to
buy replacement securities and the loaned securities may have appreciated beyond
the value of the collateral held by the Fund) or become insolvent. The Fund may
pay fees to the party arranging the loan of securities. In addition, the Fund
will bear the risk that it may lose money because the borrower of the loaned
securities fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of any cash
collateral or in the value of investments made with the cash collateral. These
events could trigger adverse tax consequences for the Fund. Substitute payments
for dividends received by the Fund for securities loaned out by the Fund will
not be considered qualified dividend income.
ADDITIONAL
NON-PRINCIPAL RISKS
Risk
of Investing in Derivatives.
Derivatives are financial instruments whose values are based on the value of one
or more reference assets or indicators, such as a security, currency, interest
rate or index. The Fund’s use of derivatives involves risks different from, and
possibly greater than, the risks associated with investing directly in
securities and other more traditional investments. Moreover, although the value
of a derivative is based on an underlying asset or indicator, a derivative
typically does not carry the same rights as would be the case if the Fund
invested directly in the underlying securities, currencies or other
assets.
Derivatives
are subject to a number of risks, such as potential changes in value in response
to market developments or, in the case of “over-the-counter” derivatives, as a
result of a counterparty’s credit quality and the risk that a derivative
transaction may not have the effect the Adviser anticipated. Derivatives also
involve the risk of mispricing or improper valuation and the risk that changes
in the value of a derivative may not achieve the desired correlation with the
underlying asset or indicator. Derivative transactions can create investment
leverage, and may be highly volatile, and the Fund could lose more than the
amount it invests. The use of derivatives may increase the amount and affect the
timing and character of taxes payable by shareholders of the Fund.
Many
derivative transactions are entered into “over-the-counter” without a central
clearinghouse; as a result, the value of such a derivative transaction will
depend on, among other factors, the ability and the willingness of the Fund’s
counterparty to perform its obligations under the transaction. If a counterparty
were to default on its obligations, the Fund’s contractual remedies against such
counterparty may be subject to bankruptcy and insolvency laws, which could
affect the Fund’s rights as a creditor (e.g., the Fund may not receive the net
amount of payments that it is contractually entitled to receive). A liquid
secondary market may not always exist for the Fund’s derivative positions at any
time, and the Fund may not be able to initiate or liquidate a swap position at
an advantageous time or price, which may result in significant
losses.
In
October 2020, the Securities and Exchange Commission (the “SEC”) adopted a final
rule related to the use of derivatives, short sales, reverse repurchase
agreements and certain other transactions by registered investment companies
(the “derivatives rule”). The derivatives rule requires funds to trade
derivatives and other transactions that create future fund payment or delivery
obligations subject to a value-at-risk (“VaR”) leverage limit, and certain
derivatives risk management program and reporting requirements. Generally, these
requirements apply unless a fund qualifies as a “limited derivatives user,” as
defined in the derivatives rule. Under the derivatives rule, when a fund trades
reverse repurchase agreements or similar financing transactions, including
certain tender option bonds, it needs to aggregate the amount of indebtedness
associated with the reverse repurchase agreements or similar financing
transactions with the aggregate amount of any other senior securities
representing indebtedness when calculating the fund’s asset coverage ratio or
treat all such transactions as derivatives transactions. Reverse repurchase
agreements or similar financing transactions aggregated with other indebtedness
do not need to be included in the calculation of whether a fund is a limited
derivatives user, but for funds subject to the VaR testing, reverse repurchase
agreements and similar financing transactions must be included for purposes of
such testing whether treated as derivatives transactions or not. The SEC also
provided guidance in connection with the derivatives rule regarding use of
securities lending collateral that may limit a fund's securities lending
activities. In addition, under the derivatives rule, the Fund is permitted to
invest in a security on a when-issued or forward-settling basis, or with a
non-standard settlement cycle, and the transaction will be deemed not to involve
a senior security under the 1940 Act, provided that (i) the Fund intends to
physically settle the transaction and (ii) the transaction will settle within 35
days of its trade date (the “Delayed-Settlement Securities Provision”). The Fund
may otherwise engage in such transactions that do not meet the conditions of the
Delayed-Settlement Securities Provision so long as the Fund treats any such
transaction as a “derivatives transaction” for purposes of compliance with the
derivatives rule. Furthermore, under the derivatives rule, the Fund will be
permitted to enter into an unfunded commitment agreement, and such unfunded
commitment agreement will not be subject to the asset coverage requirements
under the 1940 Act, if the Fund reasonably believes, at the time it enters into
such agreement, that it will have sufficient cash and cash equivalents to meet
its obligations with respect to all such agreements as they come due.
Leverage
Risk. To
the extent that the Fund borrows money or utilizes certain derivatives, it may
be leveraged. Leveraging generally exaggerates the effect on NAV of any increase
or decrease in the market value of the Fund’s portfolio securities. The Fund is
required to comply with the derivatives rule when they engage in transactions
that create future Fund payment or delivery obligations.
Temporary
Defensive Strategy.
When the Fund utilizes a temporary defensive strategy, it may not achieve its
investment objective.
INFORMATION
ABOUT UNDERLYING FUNDS AND ETPs
Under
normal circumstances, the Fund intends to invest primarily in VanEck ETPs that
are registered under the federal securities laws and that invest in publicly
traded securities that generate income The following table sets forth (i) the
names of the underlying funds that the Fund anticipates investing in, and (ii)
brief descriptions of the underlying funds’ investment objectives and principal
investment strategies. The list of underlying funds is subject to change at the
discretion of the Adviser without notice to shareholders. In addition, the
investment objective(s) and principal investment strategies of each underlying
fund are subject to change without notice to shareholders.
Prospectuses
for the VanEck ETPs can be obtained at www.vaneck.com.
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VanEck
Fund Name |
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Investment
Objective(s) and Principal Investment Strategies |
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VanEck
BDC Income ETF |
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VanEck®
BDC Income ETF seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the MVIS®
US Business Development Companies Index (the “BDC Index”). The BDC Index
is comprised of business development companies (“BDCs”). To be eligible
for the BDC Index and qualify as a BDC, a company must be organized under
the laws of, and have its principal place of business in, the United
States, be registered with the SEC and have elected to be regulated as a
BDC under the 1940 Act. |
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VanEck
CLO ETF |
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VanEck®
CLO ETF seeks capital preservation and current income. VanEck CLO ETF is
an actively managed ETF that normally invests at least 80% of its total
assets in investment grade-rated debt tranches of collateralized loan
obligations (“CLOs”) of any maturity. |
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VanEck
Emerging Markets High Yield Bond ETF |
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VanEck®
Emerging Markets High Yield Bond ETF
seeks
to replicate as closely as possible, before fees and expenses, the price
and yield performance of ICE BofA Diversified High Yield US Emerging
Markets Corporate Plus Index (the “Emerging Markets High Yield Index”).
VanEck Emerging Markets High Yield Bond ETF normally invests at least 80%
of its total assets in securities that comprise the VanEck Emerging
Markets High Yield Bond ETF’s benchmark index. The Emerging Markets High
Yield Index is comprised of U.S. dollar denominated bonds issued by
non-sovereign emerging market issuers that have a below investment grade
rating and that are issued in the major domestic and Eurobond markets.
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VanEck
Energy Income ETF |
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VanEck®
Energy Income ETF seeks to replicate as closely as possible, before fees
and expenses, the price and yield performance of the MVIS®
North
America Energy Infrastructure Index. VanEck Energy Income ETF normally
invests at least 80% of its total assets in securities that comprise the
MVIS®
North
America Energy Infrastructure Index. MVIS®
North America Energy Infrastructure Index is a rules-based index designed
to give investors a means to track the overall performance of North
American companies involved in the midstream energy segment, which
includes master limited partnerships (“MLPs”) and corporations involved in
oil and gas storage and transportation. |
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VanEck
Fallen Angel High Yield Bond ETF |
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VanEck®
Fallen
Angel High Yield Bond ETF seeks to replicate as closely as possible,
before fees and expenses, the price and yield performance of ICE US Fallen
Angel High Yield 10% Constrained Index (the “Fallen Angel Index”). VanEck
Fallen Angel High Yield Bond ETF normally invests at least 80% of its
total assets in securities that comprise the VanEck Fallen Angel High
Yield Bond ETF’s benchmark index. The Fallen Angel Index is comprised of
below investment grade corporate bonds denominated in U.S. dollars that
were rated investment grade at the time of issuance. |
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VanEck
Inflation Allocation ETF |
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VanEck®
Inflation Allocation ETF is an actively managed ETF that seeks to achieve
its investment objective by investing, under normal circumstances,
primarily in (i) exchange traded products that provide exposure to real
assets through investment in domestic and foreign equity and debt
securities, MLPs, and commodities, including ETFs and non-1940 Act
commodity pools or commodity trusts and exchange traded notes; and (ii)
cash or cash equivalents. |
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VanEck
International High Yield Bond ETF |
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VanEck®
International High Yield Bond ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of ICE
BofA Global ex-US Issuers High Yield Constrained Index (the “International
High Yield Index”). VanEck International High Yield Bond ETF normally
invests at least 80% of its total assets in securities that comprise the
VanEck International High Yield Bond ETF’s benchmark index. The
International High Yield Index is comprised of below investment grade
bonds issued by corporations located throughout the world (which may
include emerging market countries) excluding the United States,
denominated in euros, U.S. dollars, Canadian dollars or pound sterling and
issued in the major domestic or eurobond markets. |
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VanEck
J.P. Morgan EM Local Currency Bond ETF |
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VanEck®
J.P. Morgan EM Local Currency Bond ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of the
J.P. Morgan GBI-EM Global Core Index (the “Emerging Markets Global Core
Index”). VanEck J.P. Morgan EM Local Currency Bond ETF normally invests at
least 80% of its total assets in securities that comprise the Emerging
Markets Global Core Index, which is comprised of bonds issued by emerging
market governments and denominated in the local currency of the issuer.
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VanEck
Long/Flat Trend ETF |
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VanEck®
Long/Flat Trend ETF seeks to replicate as closely as possible, before fees
and expenses, the price and yield performance of the Ned Davis Research
CMG US Large Cap Long/Flat Index (the “NDR CMG Index”). VanEck Long/Flat
Trend ETF normally invests at least 80% of its total assets in securities
that track and/or comprise the VanEck Long/Flat Trend ETF’s benchmark
index. |
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VanEck
Mortgage REIT Income ETF |
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VanEck®
Mortgage REIT Income ETF
seeks
to replicate as closely as possible, before fees and expenses, the price
and yield performance of the MVIS®
US Mortgage REITs Index (the “Mortgage REITs Index”). VanEck Mortgage REIT
Income ETF normally invests at least 80% of its total assets in securities
that comprise the VanEck Mortgage REIT Income ETF’s benchmark index. The
Mortgage REITs Index is comprised of publicly traded U.S. REITs that
derive at least 50% of their revenues from (or, where applicable, have at
least 50% of their assets related to) mortgage-related activity.
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VanEck
Morningstar Durable Dividend ETF |
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VanEck®
Morningstar Durable Dividend ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of the
Morningstar®
US Dividend Valuation IndexSM
(the “US Dividend Valuation Index”). VanEck Morningstar Durable Dividend
ETF normally invests at least 80% of its total assets in securities that
comprise the VanEck Morningstar Durable Dividend ETF’s benchmark index.
The US Dividend Valuation Index is comprised of securities of companies
with a high dividend yield, strong financial health and an attractive
uncertainty-adjusted valuation. |
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VanEck
Preferred Securities ex Financials ETF |
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VanEck®
Preferred Securities ex Financials ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of the
ICE Exchange-Listed Fixed & Adjustable Rate Non-Financial Preferred
Securities Index (the “Preferred Securities Index”). VanEck Preferred
Securities ex Financials ETF normally invests at least 80% of its total
assets in securities that comprise the VanEck Preferred Securities ex
Financials ETF’s benchmark index. The Preferred Securities Index is
comprised of U.S. exchange-listed hybrid debt, preferred stock and
convertible preferred stock issued by non-financial
corporations. |
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TAX
ADVANTAGED PRODUCT STRUCTURE |
Unlike
many conventional mutual funds which are only bought and sold at closing NAVs,
the Shares of the Fund have been designed to be tradable in a secondary market
on an intra-day basis and to be created and redeemed in-kind in Creation Units
at each day’s market close. These in-kind arrangements are designed to mitigate
the adverse effects on the Fund’s portfolio that could arise from frequent cash
purchase and redemption transactions that affect the NAV of the Fund. Moreover,
in contrast to conventional mutual funds, where frequent redemptions can have an
adverse tax impact on taxable shareholders because of the need to sell portfolio
securities which, in turn, may generate taxable gain, the in-kind redemption
mechanism of the Fund, to the extent used, generally is not expected to lead to
a tax event for shareholders whose Shares are not being redeemed.
A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities is available in the Fund’s SAI.
Board
of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight
of the management of the Fund, including general supervision of the Adviser and
other service providers, but is not involved in the day-to-day management of the
Trust. A list of the Trustees and the Trust officers, and their present
positions and principal occupations, is provided in the Fund’s SAI.
Investment
Adviser.
Under the terms of an investment management agreement between the Trust and Van
Eck Associates Corporation with respect to the Fund (the “Investment Management
Agreement”), Van Eck Associates Corporation serves as the adviser to the Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
day-to-day investment management of the Fund. As of September 30, 2022, the
Adviser managed approximately $60.76 billion in assets. The Adviser has been an
investment adviser since 1955 and also acts as adviser or sub-adviser to mutual
funds, other ETFs, other pooled investment vehicles and separate accounts. The
Adviser’s principal business address is 666 Third Avenue, 9th Floor, New York,
New York 10017. A discussion regarding the Board of Trustees’ approval of the
Investment Management Agreement will be available in the Trust’s semi-annual
report for the period ended October 31, 2022.
Pursuant
to the Investment Management Agreement, the Adviser is responsible for all
expenses of the Fund, including the costs of
transfer
agency, custody, fund administration, legal, audit and other services, except
for the fee payment under the Investment Management Agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. For its services to the Fund, the Fund has agreed to pay
the Adviser an annual unitary management fee equal to 0.10% of its average daily
net assets. Offering costs excluded from the annual unitary management fee are:
(a) legal fees pertaining to the Fund’s Shares offered for sale, (b) SEC and
state registration fees; and (c) initial fees paid for Shares of the Fund to be
listed on an exchange. Notwithstanding the foregoing, the Adviser has agreed to
pay all such offering costs until at least September 1, 2024.
Manager
of Managers Structure.
The Adviser and the Trust may rely on an exemptive order (the “Order”) from the
SEC that permits the Adviser to enter into investment sub-advisory agreements
with unaffiliated sub-advisers without obtaining shareholder approval. The
Adviser, subject to the review and approval of the Board of Trustees, may select
one or more sub- advisers for the Fund and supervise, monitor and evaluate the
performance of each sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Fund and
its shareholders. The Adviser thus would have the responsibility (subject to the
oversight of the Board of Trustees) to recommend the hiring and replacement of
sub-advisers as well as the discretion to terminate any sub-adviser and
reallocate the Fund’s assets for management among any other sub-adviser(s) and
itself. This means that the Adviser would be able to reduce the sub-advisory
fees and retain a larger portion of the management fee, or increase the
sub-advisory fees and retain a smaller portion of the management fee. The
Adviser would compensate each sub-adviser out of its management
fee.
Administrator,
Custodian and Transfer Agent.
Van Eck Associates Corporation is the administrator for the Fund (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
the Fund’s assets and provides transfer agency and fund accounting services to
the Fund. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
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MANAGEMENT
OF THE FUND (continued) |
Distributor.
Van Eck Securities Corporation is the distributor of the Shares (the
“Distributor”). The Distributor will not distribute Shares in less than a
specified number of Shares, each called a “Creation Unit,” and does not maintain
a secondary market in the Shares. The Shares are traded in the secondary
market.
The
portfolio managers who currently share joint responsibility for the day-to-day
management of the Fund’s portfolio are David Schassler and John
Lau.
Mr.
Schassler has been employed by the Adviser as a portfolio manager since May
2016, a deputy portfolio manager from 2015 to 2016 and a director of manager
research from 2012 to 2015. Mr. Schassler graduated from the State University of
New York College at Cortland in 2003 with a Bachelor of Arts and from the NYU
Stern School of Business in 2012 with a Masters of Business
Administration.
Mr.
Lau is deputy portfolio manager of the Fund. He has been employed with the
Adviser since 2007 and has over 10 years’ experience in the financial markets.
Mr. Lau received his BS in Business Administration, with a concentration in
Financial Analysis from the State University of New York at Buffalo.
See
the Fund’s SAI for additional information about the portfolio managers’
compensation, other accounts managed by the portfolio managers and their
respective ownership of Shares.
DETERMINATION
OF NAV
The
NAV per Share for the Fund is computed by dividing the value of the net assets
of the Fund (i.e.,
the value of its total assets less total liabilities) by the total number of
Shares outstanding. Expenses and fees, including the management fee, are accrued
daily and taken into account for purposes of determining NAV. The NAV of the
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of the Fund’s portfolio securities are based on the securities’ closing
prices on the markets on which the securities trade, when available. Due to the
time differences between the United States and certain countries in which the
Fund invests, securities on these exchanges may not trade at times when Shares
of the Fund will trade. In the absence of a last reported sales price, or if no
sales were reported, and for other assets for which market quotes are not
readily available, values may be based on quotes obtained from a quotation
reporting system, established market makers or by an outside independent pricing
service. Debt instruments with remaining maturities of more than 60 days are
valued at the evaluated mean price provided by an outside independent pricing
service. If an outside independent pricing service is unable to provide a
valuation, the instrument is valued at the mean of the highest bid and the
lowest asked quotes obtained from one or more brokers or dealers selected by the
Adviser. Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values obtained
from yield data related to investments or securities with similar
characteristics and may use a computerized grid matrix of securities and its
evaluations in determining what it believes is the fair value of the portfolio
securities. Short-term debt instruments having a maturity of 60 days or less are
valued at amortized cost. Any assets or liabilities denominated in currencies
other than the U.S. dollar are converted into U.S. dollars at the current market
rates on the date of valuation as quoted by one or more sources. If a market
quotation for a security or other asset is not readily available or the Adviser
believes it does not otherwise accurately reflect the market value of the
security or asset at the time the Fund calculates its NAV, the security or asset
will be fair valued by the Adviser in accordance with the Trust’s valuation
policies and procedures approved by the Board of Trustees. The Fund may also use
fair value pricing in a variety of circumstances, including but not limited to,
situations when the value of a security in the Fund’s portfolio has been
materially affected by events occurring after the close of the market on which
the security is principally traded (such as a corporate action or other news
that may materially affect the price of a security) or trading in a security has
been suspended or halted. In addition, the Fund currently expects that it will
fair value certain of the foreign equity securities held by the Fund, if any,
each day the Fund calculates its NAV, except those securities principally traded
on exchanges that close at the same time the Fund calculates its
NAV.
Accordingly,
the Fund’s NAV may reflect certain portfolio securities’ fair values rather than
their market prices at the time the exchanges on which they principally trade
close. Fair value pricing involves subjective judgments and it is possible that
a fair value determination for a security or other asset is materially different
than the value that could be realized upon the sale of such security or asset.
With respect to securities that are principally traded on foreign exchanges, the
value of the Fund’s portfolio securities may change on days when you will not be
able to purchase or sell your Shares.
INTRADAY
VALUE
The
trading prices of the Fund’s Shares in the secondary market generally differ
from the Fund’s daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by the Fund,
economic conditions and other factors. Information regarding the intraday value
of the Fund’s Shares (“IIV”) may be disseminated throughout each trading day by
the Exchange or by market data vendors or other information providers. The IIV
is based on the current market value of the securities and/or cash required to
be deposited in exchange for a Creation Unit. The IIV does not necessarily
reflect the precise composition of the current portfolio of securities held by
the Fund at a particular point in time or the best possible valuation of the
current portfolio. Therefore, the IIV should not be viewed as a “real-time”
update of the Fund’s NAV, which is computed only once a day. The IIV is
generally determined by using current market quotations and/or price quotations
obtained from broker-dealers and other market intermediaries that may trade in
the portfolio securities held by the Fund and valuations based on current market
rates. The quotations and/or valuations of the Fund’s holdings may not
be
updated during U.S. trading hours if such holdings do not trade in the
United States. The Fund is not involved in, or responsible for, the calculation
or dissemination of the IIV and makes no warranty as to its accuracy.
RULE
144A AND OTHER UNREGISTERED SECURITIES
An
AP (i.e.,
a person eligible to place orders with the Distributor to create or redeem
Creation Units of the Fund) that is not a “qualified institutional buyer,” as
such term is defined under Rule 144A of the Securities Act of 1933, as amended
(the “Securities Act”), will not be able to receive, as part of a redemption,
restricted securities eligible for resale under Rule 144A or other unregistered
securities.
BUYING
AND SELLING EXCHANGE-TRADED SHARES
The
Shares of the Fund are listed on the Exchange. If you buy or sell Shares in the
secondary market, you will incur customary brokerage commissions and charges and
may pay some or all of the “spread,” which is any difference between the bid
price and the ask price. The spread varies over time for the Fund’s Shares based
on the Fund’s trading volume and market liquidity, and is generally lower if the
Fund has high trading volume and market liquidity, and generally higher if the
Fund has little trading volume and market liquidity (which is often the case for
funds that are newly launched or small in size). In times of severe market
disruption or low trading volume in the Fund’s Shares, this spread can increase
significantly. Shares of the Fund are bought and sold in the secondary market at
the market price. It is anticipated that the Shares will trade in the secondary
market at prices that may differ to varying degrees from the NAV of the Shares.
Shares may trade at a premium or discount to NAV. During periods of disruptions
to creations and redemptions or the existence of extreme market volatility, the
market prices of Shares are more likely to differ significantly from the Shares’
NAV.
The
Depository Trust Company (“DTC”) serves as securities depository for the Shares.
(The Shares may be held only in book-entry form; stock certificates will not be
issued.) DTC, or its nominee, is the record or registered owner of all
outstanding Shares. Beneficial ownership of Shares will be shown on the records
of DTC or its participants (described below). Beneficial owners of Shares are
not entitled to have Shares registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and are
not considered the registered holder thereof. Accordingly, to exercise any
rights of a holder of Shares, each beneficial owner must rely on the procedures
of: (i) DTC; (ii) “DTC Participants,” i.e.,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives) own
DTC; and (iii) “Indirect Participants,”
i.e.,
brokers, dealers, banks and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly,
through which such beneficial owner holds its interests. The Trust understands
that under existing industry practice, in the event the Trust requests any
action of holders of Shares, or a beneficial owner desires to take any action
that DTC, as the record owner of all outstanding Shares, is entitled to take,
DTC would authorize the DTC Participants to take such action and that the DTC
Participants would authorize the Indirect Participants and beneficial owners
acting through such DTC Participants to take such action and would otherwise act
upon the instructions of beneficial owners owning through them. As described
above, the Trust recognizes DTC or its nominee as the owner of all Shares for
all purposes. For more information, see the section entitled “Book Entry Only
System” in the Fund’s SAI.
The
Exchange is open for trading Monday through Friday and is closed on weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because
non-U.S. exchanges may be open on days when the Fund does not price its Shares,
the value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell the Fund’s
Shares.
The
right of redemption by an AP may be suspended or the date of payment postponed
(1) for any period during which the Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on the
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of the Fund or
determination of its NAV is not reasonably practicable; or (4) in such other
circumstance as is permitted by the SEC.
Market
Timing and Related Matters.
The Fund imposes no restrictions on the frequency of purchases and redemptions.
Frequent purchases and redemptions of Fund Shares may attempt to take advantage
of a potential arbitrage opportunity presented by a lag between a change in the
value of the Fund’s portfolio securities after the close of the primary markets
for the Fund’s portfolio securities and the reflection of that change in the
Fund’s NAV (“market timing”). The Board of Trustees considered
the
nature of the Fund (i.e.,
a fund whose shares are expected to trade intraday), that the Adviser monitors
the trading activity APs for patterns of abusive trading, that the Fund reserves
the right to reject orders that may be disruptive to the management of or
otherwise not in the Fund’s best interests, and that the Fund may fair value
certain of its securities. Given this structure, the Board of Trustees
determined that it is not necessary to impose restrictions on the frequency of
purchases and redemptions for the Fund at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains. As
a shareholder of the Fund, you are entitled to your share of the Fund’s
distributions of net investment income and net realized capital gains on its
investments. The Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
The
Fund typically earns income dividends from stocks and interest from debt
securities. These amounts, net of expenses, are typically passed along to Fund
shareholders as dividends from net investment income. The Fund realizes capital
gains or losses whenever it sells securities. Any net realized long-term capital
gains they are anticipated, are distributed to shareholders as “capital gain
distributions.” Distributions from the Fund’s net investment income, including
net short-term capital gains, if any, are taxable to you as ordinary income. Any
long-term capital gains distributions you receive from the Fund are taxable as
long-term capital gain.
Net
investment income, if any, is typically distributed to shareholders at least
monthly, and net realized capital gains, if any, are typically distributed
annually. Dividends may be declared and paid more frequently to comply with the
distribution requirements of the Code. In addition, in situations where the Fund
acquires investment securities after the beginning of a dividend period, the
Fund may elect to distribute at least annually amounts representing the full
dividend yield net of expenses on the underlying investment securities, as if
the Fund owned the underlying investment securities for the entire dividend
period. If the Fund so elects, some portion of each distribution may result in a
return of capital, which, for tax purposes, is treated as a return of your
investment in Shares. You will be notified regarding the portion of the
distribution which represents a return of capital.
Distributions
in cash may be reinvested automatically in additional Shares of the Fund only if
the broker through which you purchased Shares makes such option
available.
TAX
INFORMATION
As
with any investment, you should consider how your Fund investment will be taxed.
The tax information in this Prospectus is provided as general information. You
should consult your own tax professional about the tax consequences of an
investment in the Fund, including the possible application of foreign, state and
local taxes. Unless your investment in the Fund is through a tax-exempt entity
or tax-deferred retirement account, such as a 401(k) plan, you need to be aware
of the possible tax consequences when: (i) the Fund makes distributions, (ii)
you sell Shares in the secondary market or (iii) you create or redeem Creation
Units.
Taxes
on Distributions.
As noted above, the Fund expects to distribute net investment income, if any,
monthly, and any net realized long-term or short-term capital gains, if any,
annually. As a result of the Fund’s investment strategies, it is expected that
any distributions by the Fund will be taxable as ordinary income and capital
gains. The Fund may also pay a special distribution at any time to comply with
U.S. federal tax requirements.
In
general, your distributions are subject to U.S. federal income tax when they are
paid, whether you take them in cash or reinvest them in the Fund. Distributions
from the Fund’s net investment income, including net short-term gains, if any,
are taxable to you as ordinary income. Whether distributions of capital gains
represent long-term or short-term capital gains is determined by how long the
Fund owned the investments that generated them, rather than how long you have
owned your Shares. Distributions of net short-term capital gains in excess of
net long–term capital losses, if any, are generally taxable as ordinary income.
Distributions of net long-term capital gains in excess of net short-term capital
losses, if any, that are properly reported as capital gain dividends are
generally taxable as long-term capital gains. Long-term capital gains of a
non-corporate shareholder are generally taxable at a maximum rate of 15% or 20%,
depending on whether the shareholder’s income exceeds certain threshold
amounts.
The
Fund may receive dividends, the distribution of which the Fund may report as
qualified dividends. In the event that the Fund receives such a dividend and
reports the distribution of such dividend as a qualified dividend, the dividend
may be taxed at the maximum capital gains rates of 15% of 20%, provided holding
period and other requirements are met at both the shareholder and the Fund
level. Given the investment strategies of the Fund, it is not anticipated that a
significant portion of the Fund’s distributions will be eligible to be reported
as qualified dividends.
Distributions
in excess of the Fund’s current and accumulated earnings and profits are treated
as a tax-free return of your investment to the extent of your basis in the
Shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce the Fund’s NAV per Share and
may be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of
capital.
Backup
Withholding. The
Fund may be required to withhold a percentage of your distributions and proceeds
if you have not provided a taxpayer identification number or social security
number or otherwise established a basis for exemption from backup
withholding.
The backup withholding rate for individuals is currently 24%. This is not an
additional tax and may be refunded, or credited against your U.S. federal income
tax liability, provided certain required information is furnished to the
IRS.
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares. Currently,
any capital gain or loss realized upon a sale of Shares 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 held for one year or less.
However, any capital loss on a sale of Shares held for six months or less is
treated as long-term capital loss to the extent that capital gain dividends were
paid with respect to such Shares. The ability to deduct capital losses may be
limited. To the extent that a shareholder’s Shares are redeemed for cash, this
is normally treated as a sale for tax purposes.
Taxes
on Creations and Redemptions of Creation Units.
A person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The IRS, however, may assert that a
loss realized upon an exchange of primarily 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 for Creation Units or redeeming Creation Units should
consult their own tax adviser with respect to whether wash sale rules apply and
when a loss might be deductible and the tax treatment of any creation or
redemption transaction. Under current U.S. federal income tax laws, any capital
gain or loss realized upon a redemption (or creation) of Creation Units held as
capital assets is generally treated as long-term capital gain or loss if the
Shares (or securities surrendered) have been held for more than one year and as
a short-term capital gain or loss if the Shares (or securities surrendered) have
been held for one year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
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 certain threshold
amounts.
Non-U.S.
Shareholders. Dividends
paid by the Fund to non-U.S. shareholders are generally subject to withholding
tax at a 30% rate or a reduced rate specified by an applicable income tax treaty
to the extent derived from investment income and short-term capital gains.
Dividends paid by the Fund from net tax-exempt income or long-term capital gains
are generally not subject to such withholding tax. Properly-reported dividends
are generally exempt from U.S. federal withholding tax where they (i) are paid
in respect of the Fund’s “qualified net interest income” (generally, the Fund’s
U.S. source interest income, other than certain contingent interest and interest
from obligations of a corporation or partnership in which the Fund is at least a
10% shareholder, reduced by expenses that are allocable to such income); or (ii)
are paid in respect of the Fund’s “qualified short-term capital gains”
(generally, the excess of the Fund’s net short-term capital gain over the Fund’s
long-term capital loss for such taxable year). However, depending on its
circumstances, the Fund may report all, some or none of its potentially eligible
dividends as such qualified net interest income or as qualified short-term
capital gains and/or treat such dividends, in whole or in part, as ineligible
for this exemption from withholding.
As
part of the Foreign Account Tax Compliance Act, (“FATCA”), the Fund may be
required to withhold 30% tax on certain types of U.S. sourced income (e.g.,
dividends, interest, and other types of passive income) paid to (i) foreign
financial institutions (“FFIs”), including non-U.S. investment funds, unless
they agree to collect and disclose to the IRS information regarding their direct
and indirect U.S. account holders and (ii) certain nonfinancial foreign entities
(“NFFEs”), unless they certify certain information regarding their direct and
indirect U.S. owners. To avoid possible withholding, FFIs will need to enter
into agreements with the IRS which state that they will provide the IRS
information, including the names, account numbers and balances, addresses and
taxpayer identification numbers of U.S. account holders and comply with due
diligence procedures with respect to the identification of U.S. accounts as well
as agree to withhold tax on certain types of withholdable payments made to
non-compliant foreign financial institutions or to applicable foreign account
holders who fail to provide the required information to the IRS, or similar
account information and required documentation to a local revenue authority,
should an applicable intergovernmental agreement be implemented. NFFEs will need
to provide certain information regarding each substantial U.S. owner or
certifications of no substantial U.S. ownership, unless certain exceptions
apply, or agree to provide certain information to the IRS.
The
Fund may be subject to the FATCA withholding obligation, and also will be
required to perform due diligence reviews to classify foreign entity investors
for FATCA purposes. Investors are required to agree to provide information
necessary to allow the Fund to comply with the FATCA rules. If the Fund is
required to withhold amounts from payments pursuant to FATCA, investors will
receive distributions that are reduced by such withholding amounts.
Non-U.S.
shareholders are advised to consult their tax advisors with respect to the
particular tax consequences to them of an investment in the Fund, including the
possible applicability of the U.S. estate tax.
The
foregoing discussion summarizes some of the consequences under current U.S.
federal income tax law of an investment in the Fund. It is not a substitute for
personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in the Fund under all applicable tax
laws.
The
Fund has not yet commenced operations as of the date of this Prospectus and
therefore does not have a financial history.
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PREMIUM/DISCOUNT
INFORMATION |
The
Fund has not yet commenced operations and, therefore, does not have information
about the differences between the Fund’s daily market price on the Exchange and
its NAV. Information regarding how often the closing trading price of the
Shares of the Fund was above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the Fund for the most recently completed calendar year
and the most recently completed calendar quarter(s) since that year (or the life
of the Fund, if shorter) can be found at www.vaneck.com.
CONTINUOUS
OFFERING
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act may occur at any point. 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 which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on the Exchange is satisfied by the fact that
the prospectus is available at the Exchange upon request. The prospectus
delivery mechanism provided in Rule 153 is only available with respect to
transactions on an exchange.
In
addition, certain affiliates of the Fund and the Adviser may purchase and resell
Fund Shares pursuant to this Prospectus.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on March 15, 2001. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of shareholders will not be held except as required by the 1940 Act and other
applicable law. See the Fund’s SAI for more information concerning the Trust’s
form of organization. Section 12(d)(1) of the 1940 Act restricts investments by
investment companies in the securities of other investment companies, including
Shares of the Fund. Registered investment companies are not permitted to invest
in the Fund beyond the limits set forth in Section 12(d)(1).
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the Fund’s shareholders and the Trust, the Fund, the Adviser
and/or the Trustees. Further, shareholders are not intended third party
beneficiaries of any contracts entered into by (or on behalf of) the Fund,
including contracts with the Adviser or other parties who provide services to
the Fund.
Dechert
LLP serves as counsel to the Trust, including the Fund. PricewaterhouseCoopers
LLP serves as the Trust’s independent registered public accounting firm and will
audit the Fund’s financial statements annually.
ADDITIONAL
INFORMATION
This
Prospectus does not contain all the information included in the Registration
Statement filed with the SEC with respect to the Fund’s Shares. The Fund’s
Registration Statement, including this Prospectus, the Fund’s SAI and the
exhibits are available on the EDGAR database at the SEC’s website
(http://www.sec.gov), and copies may be obtained, after paying a duplicating
fee, by electronic request at the following email address:
[email protected].
The
SAI for the Fund, which has been filed with the SEC, provides more information
about the Fund. The SAI for the Fund is incorporated herein by reference and is
legally part of this Prospectus. Additional information about the Fund’s
investments is available in the Fund’s annual and semi-annual reports to
shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year. The SAI and the Fund’s annual
and semi-annual reports may be obtained without charge by writing to the Fund at
Van Eck Securities Corporation, the Fund’s Distributor, at 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling the Distributor at the following
number: Investor Information: 800.826.2333.
Shareholder
inquiries may be directed to the Fund in writing to 666 Third Avenue, 9th Floor,
New York, New York 10017 or by calling 800.826.2333.
The
Fund’s SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
For
more detailed information about the Fund, see the SAI dated October 24, 2022, as
may be supplemented from time to time. Additional information about the Fund’s
investments is or will be available in the Fund’s annual and semi-annual reports
to shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year.
Call
VanEck at 800.826.2333 to request, free of charge, the annual or semi-annual
reports, the SAI, or other information about the Fund or to make shareholder
inquiries. You may also obtain the SAI or the Fund’s annual or semi-annual
reports, by visiting the VanEck website at www.vaneck.com.
Reports
and other information about the Fund are available on the EDGAR Database on the
SEC’s internet site at http://www.sec.gov. In addition, copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following email address: [email protected].
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Transfer
Agent: State Street Bank and Trust Company
SEC
Registration Number: 333-123257
1940
Act Registration Number: 811-10325
INCPRO |
800.826.2333
www.vaneck.com |
