ck0001137360-20211231
VANECK
CLO
ETF CLOI
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Principal
U.S. Listing Exchange for the Fund: 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
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
The VanEck CLO ETF (the "Fund") seeks
capital preservation and current income.
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 |
0.40 |
% |
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Other
Expenses(a)(b) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(b) |
0.40 |
% |
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(a) “Other Expenses” are based
on estimated amounts for the current fiscal
year.
(b)
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 May 1,
2024.
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 |
$41 |
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3 |
$128 |
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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 normally invests
at least 80% of its total assets in investment grade-rated debt tranches of
collateralized loan obligations (“CLOs”) of any maturity. Investment grade CLO
securities are rated inclusive and above BBB- by S&P Global Ratings or Baa3
Moody’s Investors Service, Inc. (or equivalent rating issued by a nationally
recognized statistical rating organization (“NRSRO”)), or if unrated, determined
to be of comparable credit quality by the Adviser and/or PineBridge Investments
LLC, the Fund’s sub-adviser (the “Sub-Adviser”). The Fund will not invest in any
CLO equity security or in any CLO debt security rated below BB-/Ba3 or if
unrated, determined to be of comparable credit quality by the Adviser and/or the
Sub-Adviser. The Fund’s 80% investment policy is non-fundamental and may be
changed without shareholder approval upon 60 days’ prior written notice to
shareholders. This percentage limitation applies at the time of the
investment.
For
purposes of the Fund’s investment policies, CLOs are trusts that are typically
collateralized by a pool of loans, which may include, among others, domestic and
foreign senior secured loans, senior unsecured loans and subordinate corporate
loans, including loans that may be rated below investment grade or equivalent
unrated loans, and including “covenant lite” loans, which
have
few or no financial maintenance covenants. CLOs may also hold debt securities
rated below investment grade. The Fund is actively managed and does not seek to
track the performance of any particular index.
The
Fund intends to invest primarily in CLO securities that are U.S. dollar
denominated. However, the Fund may from time to time invest up to 30% of its net
assets in CLO securities that are denominated in foreign currencies. To the
extent the Fund invests in non-U.S. dollar denominated securities, it may seek
to hedge its exposure to foreign currency to U.S. dollars, as described more
fully below.
The
Fund may purchase CLO securities both in the primary (e.g.
purchased directly from the issuer) and secondary markets. The Sub-Adviser uses
a bottom-up analysis to select CLO investments which considers several factors,
including an assessment of the CLO manager, the CLO’s underlying collateral,
performance under various stress scenarios and an analysis of the CLO’s
documentation and structural terms. The Fund’s portfolio is constructed using
this security-level analysis, combined with a top-down overlay which
incorporates the Sub-Adviser’s credit views as well as risk factor
positioning.
The
Fund may invest in derivatives in order to seek to mitigate risks associated
with the Fund’s existing portfolio of CLOs. Derivatives are instruments that
have a value derived from, or directly linked to, an underlying asset, such as
fixed-income securities, interest rates, currencies, or market indices. The Fund
currently expects that its use of derivatives will be limited to currency
forward contracts or futures contracts to hedge any foreign currency exposure.
The
Fund may invest up to 10% of its net assets in affiliated or non-affiliated
ETFs. The Fund may invest a portion of its assets in cash or other short-term
instruments, such as money market instruments or money market funds, while
deploying new capital, for liquidity management purposes, managing redemptions,
or for defensive purposes, including navigating unusual market conditions.
The Fund is classified as a non-diversified
fund 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.
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.
Debt
Securities Risk.
Variable-and
floating-rate debt obligations (including CLOs and the portfolio of loans
underlying the CLOs), as well as fixed-income debt instruments are subject to
the following risks:
•Liquidity
Risk.
Liquidity risk refers to the possibility that the Fund may not be able to sell
or buy a security or close out an investment contract at a favorable price or
time. Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash, or give up an investment
opportunity, any of which could have a negative effect on the Fund’s
performance. Infrequent trading of securities also may lead to an increase in
their price volatility. CLOs, and their underlying loan obligations, are
typically not registered for sale to the public and therefore are subject to
certain restrictions on transfer and sale, potentially making them less liquid
than other types of securities. Additionally, when the Fund purchases a newly
issued CLO security directly from the issuer (rather than from the secondary
market), there often may be a delayed settlement period, during which time the
liquidity of the CLO may be further reduced. During periods of limited liquidity
and higher price volatility, the Fund’s ability to acquire or dispose of CLO
securities at a price and time the Fund deems advantageous may be impaired. CLO
securities are generally considered to be long-term investments and there is no
guarantee that an active secondary market will exist or be maintained for any
given CLO security.
•Interest
Rate Risk. As
interest rates decrease, issuers of the underlying loan obligations may
refinance any floating rate loans, which will result in a reduction in the
principal value of the CLO’s portfolio and require the CLO to reinvest cash at
an inopportune time. Conversely, as interest rates rise, borrowers with floating
rate loans may experience difficulty in making payments, resulting in
delinquencies and defaults, which will result in a reduction in cash flow to the
CLO and the
CLO
investors, including the Fund. An increase in interest rates may cause the value
of fixed-income securities held by the Fund to decline. The Fund may be subject
to a greater risk of rising interest rates due to the current period of
historically low rates and the effect of potential government fiscal and
monetary policy initiatives and resulting market reaction to those
initiatives.
•Floating
Rate Obligations Risk. Securities
with floating or variable interest rates can be less sensitive to interest rate
changes than securities with fixed interest rates, but may decline in value if
their interest rates do not rise as much, or as quickly, as interest rates in
general. Conversely, floating rate securities will not generally increase in
value if interest rates decline. A decline in interest rates may result in a
reduction of income received from floating rate securities held by the Fund and
may adversely affect the value of the Fund’s shares. Generally, floating rate
securities carry lower yields than fixed notes of the same maturity. The
interest rate for a floating rate note resets or adjusts periodically by
reference to a benchmark interest rate. The impact of interest rate changes on
floating rate investments is typically mitigated by the periodic interest rate
reset of the investments. Securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than
securities with shorter durations. Benchmark interest rates may not accurately
track market interest rates.
•Credit
Risk. Debt
issuers and other counterparties may not honor their obligations or may have
their debt downgraded by ratings agencies. Ratings provided by NRSROs represent
their opinions of the claims-paying ability of the entities rated by them. Such
ratings are general and are not absolute standards of quality. For CLOs, the
primary source of credit risk is the ability of the underlying portfolio of
loans to generate sufficient cash flow to pay investors on a full and timely
basis when principal and/or interest payments are due. Default in payment on the
underlying loans will result in less cash flow from the underlying portfolio
and, in turn, less funds available to pay investors in the CLO.
•Call
Risk. During
periods of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security before its stated maturity. CLOs are typically
structured such that, after a specified period of time, the majority investor in
the equity tranche can call (i.e., redeem) the securities issued by the CLO in
full. The Fund may not be able to accurately predict when or which of its CLO
investments may be called, resulting in the Fund having to reinvest the proceeds
in unfavorable circumstances, which in turn could cause in a decline in the
Fund’s income.
•Extension
Risk. During
periods of rising interest rates, certain debt obligations potentially including
the portfolio of loans underlying a CLO will be paid off substantially more
slowly than originally anticipated and the value of those securities may fall
sharply, resulting in a decline in the Fund’s income and potentially in the
value of the Fund’s investments.
•High
Yield Securities Risk.
The Fund may invest in CLO debt tranches that are rated below investment grade.
Additionally, CLOs may hold below-investment grade securities and certain of the
underlying loans in which a CLO may invest may be rated below investment grade.
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.
•Income
Risk. The
Fund’s income may decline if interest rates fall. This decline in income can
occur because most of the CLO debt instruments held by the Fund will have
floating or variable interest rates.
•Valuation
Risk.
Valuation Risk is the risk that one or more of the debt securities in which the
Fund invests are priced differently than the value realized upon such security’s
sale. In times of market instability, valuation may be more difficult. The
tiered structure of certain CLOs may subject them to price volatility and
enhanced liquidity and valuation risk in times of market stress.
•Privately
Issued Securities Risk. CLO
securities are generally privately-issued securities, and are normally purchased
pursuant to Rule 144A or Regulation S under the Securities Act of 1933, as
amended (the “Securities Act”). Privately-issued securities typically may be
resold only to qualified institutional buyers, in a privately negotiated
transaction, to a limited number of purchasers, or in limited quantities after
they have been held for a specified period of time and other conditions are met
for an exemption from registration. Because there may be relatively few
potential purchasers for such securities, especially under adverse market or
economic conditions or in the event of adverse changes in the financial
condition of the issuer, the Fund may find it more difficult to sell such
securities when it may be advisable to do so or it may be able to sell such
securities only at prices lower than if such securities were more widely held
and traded. At times, it also may be more difficult to determine the fair value
of such securities for purposes of computing the Fund’s net asset value per
share (“NAV”) due to the absence of an active trading market. There can be no
assurance that a privately-issued security previously deemed to be liquid when
purchased will continue to be liquid for as long as it is held by the Fund, and
its value may decline as a result.
•Covenant
Lite Loans Risk.
Certain
of the underlying loans in which a CLO may invest may be issued or offered as
“covenant lite” loans, which have few or no financial maintenance covenants that
would require a borrower to maintain certain financial metrics. A CLO may be
delayed in enforcing its interests in covenant lite loans, which may result in
losses.
•CLO
Manager Risk.
CLO securities are managed by investment advisers independent of the Sub-Adviser
and the Adviser. CLO managers are responsible for selecting, managing and
replacing the underlying bank loans within a CLO. CLO managers may have limited
operating histories, may be subject to conflicts of interests, including
managing the assets of other clients or other investment vehicles, or receiving
fees that incentivize maximizing the yield, and indirectly the risk, of a CLO.
Adverse developments with respect to a CLO manager, such as personnel and
resource constraints, regulatory issues or other developments that may impact
the ability and/or performance of the CLO manager, may adversely impact the
performance of the CLO securities in which the Fund invests.
LIBOR
Replacement Risk. The
Fund may invest in certain debt securities (including CLOs), derivatives, or
other financial instruments that utilize the London Inter-Bank Offered Rate
(“LIBOR”) as a reference rate for various rate calculations. On July 27, 2017,
the U.K. Financial Conduct Authority, which regulates LIBOR, announced that the
FCA would no longer persuade nor require banks to submit rates for the
calculation of LIBOR after 2021. At the end of 2021, certain LIBORs were
discontinued, but the most widely used LIBORs may continue to be provided on a
representative basis until June 30, 2023. Although the transition process away
from LIBOR has become increasingly well-defined, there remains uncertainty
regarding the future utilization of LIBOR and the nature of any replacement
rates. The elimination of LIBOR or changes to other reference rates or any other
changes or reforms to the determination or supervision of reference rates could
adversely impact (i) volatility and liquidity in markets that are tied to LIBOR,
(ii) the market for, or value of, specific securities or payments linked to
those reference rates resulting in a reduction in the value of certain
instruments held by the Fund, (iii) availability or terms of borrowing or
refinancing, or (iv) the effectiveness of hedging strategies. For these and
other reasons, the elimination of LIBOR or changes to other interest rates may
adversely affect the Fund’s performance and/or net asset value. Alternatives to
LIBOR are established or in development in most major currencies including the
Secured Overnight Financing Rate (“SOFR”) that is intended to replace the U.S.
dollar LIBOR.
Uncertainty
regarding the process for amending existing contracts or instruments to
transition away from LIBOR remains a concern for the Fund. The effect of the
discontinuation of LIBOR on the Fund will vary depending on, among other things
(i) existing fallback or termination provisions in individual contracts and (ii)
how and when industry participants develop and adopt new reference rates and
fallbacks for both legacy and new products and instruments. For example, certain
of the Fund’s investments may involve individual contracts that have (i) no
existing fallback provision or language that contemplates the discontinuation of
LIBOR or (ii) inadequate fallback provisions or language that does not
contemplate a permanent discontinuation of LIBOR, and those investments could
experience increased volatility or reduced liquidity as a result of the
transition process. In addition, interest rate provisions included in such
contracts may need to be renegotiated in contemplation of the transition away
from LIBOR. In addition, an instrument’s transition to a replacement rate could
result in variations in the reported yields for such instrument if held by the
Fund. Accordingly, it is difficult to predict the full impact of the transition
away from LIBOR on the Fund until new reference rates and fallbacks for both
legacy and new products, instruments and contracts are commercially accepted.
Foreign
Currency Risk. Because
the Fund’s assets may be invested in securities denominated in foreign
currencies, the proceeds received by the Fund from its investments and/or the
revenues received by the CLO issuer may be in foreign currencies. The Fund’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 Fund, and the value
of certain foreign currencies may be subject to a high degree of fluctuation.
Moreover, the Fund may incur costs in connection with conversions between U.S.
dollars and foreign currencies.
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. The Fund may invest 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 Fund’s
investments.
Investment
Focus Risk.
Because the Fund invests primarily in CLO securities it is susceptible to an
increased risk of loss due to adverse occurrences in the CLO market, generally,
and in the various markets impacting the portfolios of loans underling these CLO
securities. The Fund’s CLO investment focus may cause the Fund to perform
differently than the overall financial market and the Fund’s performance may be
more volatile than if the Fund’s investments were more diversified across
financial instruments and or markets.
Newly
Issued Securities Risk.
The credit obligations in which the Fund invests may include newly issued
securities, or “new issues,” such as initial debt offerings. New issues may have
a magnified impact on the performance of the Fund during periods in which it has
a small asset base. The impact of new issues on the Fund’s performance likely
will decrease as the Fund’s asset size increases, which could reduce the Fund’s
returns. New issues may not be consistently available to the Fund for investing,
particularly as the Fund’s asset base grows. Certain new issues, such as initial
debt offerings, may be volatile in price due to the
absence
of a prior trading market, limited quantities available for trading and limited
information about the issuer. The Fund may hold new issues for a short period of
time. This may increase the Fund’s portfolio turnover and may lead to increased
expenses for the Fund, such as transaction costs. In addition, new issues can
experience an immediate drop in value after issuance if the demand for the
securities does not continue to support the offering price.
Extended
Settlement Risk.
Newly issued CLO securities purchased in the primary market typically experience
delayed or extended settlement periods, possibly longer than seven days. In the
period following such a purchase and prior to settlement these CLO securities
may be considered less liquid than similar CLO securities available in the
secondary market. In such circumstances the Fund bears a risk of loss if the
value of the CLO declines before the settlement date or if the Fund is required
to sell the CLO security prior to settlement. There is also the risk that the
security will not be issued or that the counterparty will not meet its
obligation, resulting in a loss of the investment opportunity.
Affiliated
Fund Risk.
In managing the Fund, the Adviser and/or the Sub-Adviser will have the ability
to select underlying funds which they believe will achieve the Fund’s investment
objective. The Adviser and/or the Sub-Adviser may be subject to potential
conflicts of interest in selecting underlying funds because the Adviser and/or
the Sub-Adviser may, due to its own financial interest or other business
considerations, have an incentive to invest in funds managed by the Adviser
and/or the Sub-Adviser or their affiliates in lieu of investing in funds managed
or sponsored by others.
Management
Risk.
The Fund is an actively managed investment portfolio and is therefore subject to
the risk that the investment strategies employed for the Fund may fail to
produce the intended results. Although the Fund seeks to provide capital
preservation and current income, market conditions or implementation of the
Fund’s investment process may result in losses, and the Fund may not meet its
investment objective. As such, there can be no assurance of positive “absolute”
returns.
Derivatives
Risk.
The use of derivatives presents risks different from, and possibly greater than,
the risks associated with investing directly in traditional securities. The use
of derivatives by the Fund can lead to losses because of adverse movements in
the price or value of the underlying reference asset, which may be magnified by
certain features of the derivatives. Derivative strategies often involve
leverage, which may exaggerate a loss, potentially causing the Fund to lose more
money than it originally committed to initial margin, and more money than it
would have lost had it invested in the underlying reference asset. The values of
derivatives may move in unexpected ways, especially in unusual market
conditions, and may result in increased volatility, among other consequences.
There may be imperfect correlation between changes in the market value of a
derivative and the value of its underlying reference asset, and this may be
exaggerated in times of market stress or volatility. Derivatives require the
Fund to post margin or collateral or otherwise maintain liquid assets in a
manner that satisfies contractual undertakings and regulatory requirements. In
order to satisfy margin or other requirements, the Fund may need to sell
securities from its portfolio or exit positions at a time when it may be
disadvantageous to do so. All of this could, in turn, affect the Fund’s ability
to fully execute its investment strategies and/or achieve its investment
objective. The use of derivatives may also increase the amount of taxes payable
by shareholders because changes in government regulation of derivatives could
affect the character, timing and amount of the Fund’s taxable income or gains.
Other risks arise from the Fund’s potential inability to terminate or sell
derivative positions. A liquid secondary market may not always exist for the
Fund’s derivative positions at times when the Fund might wish to terminate or
sell such positions. The use of derivatives also involves the risk of mispricing
or improper valuation and that changes in the value of the derivative may not
correlate perfectly with the underlying reference rate. Derivatives may be
subject to changing government regulation that could impact the Fund’s ability
to use certain derivatives and their cost.
Risk
of Cash Transactions.
Unlike other ETFs, the Fund expects to effect most of its creations and
redemptions primarily for cash, rather than in-kind securities. Therefore, it
may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF.
Market
Risk.
The
prices of the securities in the Fund 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 may lose
money.
Sub-Adviser
Risk.
The Sub-Adviser may have little experience managing registered investment
companies which are subject to daily inflows and outflows of investor cash and
are subject to certain legal and tax-related restrictions on their investments
and operations.
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.
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.
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
Exchange, there can be no assurance that active trading markets for the Shares
will develop or be maintained. 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.
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. The
securities held by the Fund may be traded in markets that close at a different
time than the Exchange. Liquidity in those securities may be reduced after the
applicable closing times. Accordingly, during the time when the Exchange is open
but after the applicable market closing, fixing or settlement times, bid-ask
spreads on the Exchange and the resulting premium or discount to the Shares’ NAV
may widen. 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.
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.
Seed
Investor Risk.
The Adviser and/or its affiliates may make payments to one or more investors
that contribute seed capital to the Fund. Such payments may continue for a
specified period of time and/or until a specified dollar amount is reached.
Those payments will be made from the assets of the Adviser and/or such
affiliates (and not the Fund). Seed investors may contribute all or a majority
of the assets in the Fund. There is a risk that such seed investors may redeem
all or part of their investments in the Fund, particularly after payments from
the Adviser and/or its affiliates have ceased. The timing of a redemption by a
seed investor could benefit the seed investor. As with redemptions by other
large shareholders, such redemptions could have a significant negative impact on
the Fund including by reducing the Fund’s liquidity, causing the Fund to realize
gains that will be distributed and taxable to remaining shareholders and
increasing the Fund’s transaction costs. A large redemption may also have a
material upward or downward effect on the market price of the Fund’s
Shares.
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.
Investment
Sub-Adviser.
PineBridge Investments LLC.
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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Francis
Rodilosso |
Portfolio
Manager |
June
2022 |
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Name |
Title
with Sub-Adviser |
Date
Began Managing the Fund |
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Laila
Kollmorgen |
Portfolio
Manager |
June
2022 |
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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’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
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 normally invests at least 80% of its total
assets in investment grade-rated debt tranches of CLOs of any maturity.
Investment grade CLO securities are rated inclusive and above BBB- by S&P
Global Ratings or Baa3 Moody’s Investors Service, Inc. (or equivalent rating
issued by a NRSRO), or if unrated, determined to be of comparable credit quality
by the Adviser and/or the Sub-Adviser. The Fund will not invest in any CLO
equity security or in any CLO debt security rated below BB-/Ba3 or if unrated,
determined to be of comparable credit quality by the Adviser and/or the
Sub-Adviser. The Fund’s 80% investment policy is non-fundamental and may be
changed without shareholder approval upon 60 days’ prior written notice to
shareholders. This percentage limitation applies at the time of the
investment.
For
purposes of the Fund’s investment policies, CLOs are trusts that are typically
collateralized by a pool of loans, which may include, among others, domestic and
foreign senior secured loans, senior unsecured loans and subordinate corporate
loans, including loans that may be rated below investment grade or equivalent
unrated loans, and including “covenant lite” loans, which have few or no
financial maintenance covenants. CLOs may also hold debt securities rated below
investment grade. The Fund is actively managed and does not seek to track the
performance of any particular index.
The
Fund intends to invest primarily in CLO securities that are U.S. dollar
denominated. However, the Fund may from time to time invest up to 30% of its net
assets in CLO securities that are denominated in foreign currencies. To the
extent the Fund invests in non-U.S. dollar denominated securities, it may seek
to hedge its exposure to foreign currency to U.S. dollars, as described more
fully below.
The
Fund may purchase CLO securities both in the primary (e.g.
purchased directly from the issuer) and secondary markets. The Sub-Adviser uses
a bottom-up analysis to select CLO investments which considers several factors,
including an assessment of the CLO manager, the CLO’s underlying collateral,
performance under various stress scenarios and an analysis of the CLO’s
documentation and structural terms. The Fund’s portfolio is constructed using
this security-level analysis, combined with a top-down overlay which
incorporates the Sub-Adviser’s credit views as well as risk factor
positioning.
Typically
organized as a trust or other special purpose vehicle, a CLO issues debt and
equity interests and uses the proceeds from this issuance to acquire a portfolio
of bank loans made primarily to businesses that are rated below investment
grade. The underlying loans in which a CLO may invest may be issued or offered
as “covenant lite” loans, which have few or no financial maintenance covenants.
The underlying loans are generally senior-secured/first-priority loans; however,
the CLO may also include an allowance for second-lien and/or unsecured debt.
Additionally, the underlying loans may include domestic and foreign senior
secured loans, senior unsecured loans and subordinate corporate loans, some of
which may individually be below investment grade or the equivalent if unrated.
The portfolio of underlying loans is actively managed by the CLO manager for a
fixed period of time (“reinvestment period”). During the reinvestment period,
the CLO manager may buy and sell individual loans to create trading gains or
mitigate loses. The CLO portfolio will generally be required to adhere to
certain diversification rules established by the CLO issuer to mitigate against
the risk of concentrated defaults within a given industry or sector. After a
specified period of time, the majority owner of equity interests in the CLO may
seek to call the CLO’s outstanding debt or refinance its position. If not called
or refinanced, when the reinvestment period ends, the CLO uses cash flows from
the underlying loans to pay down the outstanding debt tranches and wind up the
CLO’s operations.
Interests
in the CLOs are divided into two or more separate debt and equity tranches, each
with a different credit rating and risk/return profile based upon its priority
of claim on the cash flows produced by the underlying loan pool. Tranches are
categorized as senior, mezzanine and subordinated/equity, according to their
degree of credit risk. If there are defaults or the CLO’s collateral otherwise
underperforms, scheduled payments to senior tranches take precedence over those
of mezzanine tranches, and scheduled payments to mezzanine tranches take
precedence over those to subordinated/equity tranches. The riskiest portion is
the “equity” tranche, which bears the bulk of defaults from the loans in the
trust and serves to protect the other, more senior tranches from default in all
but the most severe circumstances. Senior and mezzanine tranches are typically
rated, with the former typically receiving ratings of A/A to AAA/Aaa and the
latter typically receiving ratings of B/B2 to BBB/Baa2. The ratings reflect both
the credit quality of underlying collateral as well as how much protection a
given tranche is afforded by tranches that are subordinate to it. Normally, CLOs
are privately offered and sold, and thus are not registered under the securities
laws. CLO securities are typically floating-rate debt instruments; however, in
some cases, certain CLO securities may pay a fixed-rate.
The
Fund may invest in derivatives in order to seek to mitigate risks associated
with the Fund’s existing portfolio of CLO securities. Derivatives are
instruments that have a value derived from, or directly linked to, an underlying
asset, such as fixed-income securities, interest rates, currencies, or market
indices. The Fund currently expects that it’s use of derivatives will be limited
to currency forward contracts or futures contracts to hedge any foreign currency
exposure.
The
Fund may invest up to 10% of its net assets in affiliated or non-affiliated
ETFs. The Fund may invest a portion of its assets in cash or other short-term
instruments, such as money market instruments or money market funds, while
deploying new capital, for liquidity management purposes, managing redemptions,
or for defensive purposes, including navigating unusual market conditions.
The
Fund is classified as a non-diversified fund and, therefore, may invest a
greater percentage of its assets in a particular issuer.
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.
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 CLOs 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.
Debt
Securities Risk.
Variable-and
floating-rate debt obligations (including CLOs and the portfolio of loans
underlying the CLOs), as well as fixed-income debt instruments are subject to
the following risks:
•Liquidity
Risk.
Liquidity risk refers to the possibility that the Fund may not be able to sell
or buy a security or close out an investment contract at a favorable price or
time. Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash, or give up an investment
opportunity, any of which could have a negative effect on the Fund’s
performance. Infrequent trading of securities also may lead to an increase in
their price volatility. CLO securities, and their underlying loan obligations,
are typically not registered for sale to the public and therefore are subject to
certain restrictions on transfer and sale, potentially making them less liquid
than other types of securities. Additionally, when the Fund purchases a newly
issued CLO security directly from the issuer (rather than from the secondary
market), there often may be a delayed settlement period, during which time the
liquidity of the CLO may be further reduced. During periods of limited liquidity
and higher price volatility, the Fund’s ability to acquire or dispose of CLO
securities at a price and time the Fund deems advantageous may be impaired. CLO
securities are generally considered to be long-term investments and there is no
guarantee that an active secondary market will exist or be maintained for any
given CLO security.
•Interest
Rate Risk. As
interest rates decrease, issuers of the underlying loan obligations may
refinance any floating rate loans, which will result in a reduction in the
principal value of the CLO’s portfolio and require the CLO to reinvest cash at
an inopportune time. Conversely, as interest rates rise, borrowers with floating
rate loans may experience difficulty in making payments, resulting in
delinquencies and defaults, which will result in a reduction in cash flow to the
CLO and the CLO investors, including the Fund. An increase in interest rates may
cause the value of fixed-income securities held by the Fund to decline.
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.
•Floating
Rate Obligations Risk. Securities
with floating or variable interest rates can be less sensitive to interest rate
changes than securities with fixed interest rates, but may decline in value if
their interest rates do not rise as much, or as quickly, as interest rates in
general. Conversely, floating rate securities will not generally increase in
value if interest rates decline. A decline in interest rates may result in a
reduction of income received from floating rate securities held by the Fund and
may adversely affect the value of the Fund’s shares. Generally, floating rate
securities carry lower yields than fixed notes of the same maturity. The
interest rate for a floating rate note resets or adjusts periodically by
reference to a
benchmark
interest rate. The impact of interest rate changes on floating rate investments
is typically mitigated by the periodic interest rate reset of the investments.
Securities with longer durations tend to be more sensitive to interest rate
changes, usually making them more volatile than securities with shorter
durations. Benchmark interest rates may not accurately track market interest
rates.
•Credit
Risk. Debt
issuers and other counterparties may not honor their obligations or may have
their debt downgraded by ratings agencies. Ratings provided by NRSROs represent
their opinions of the claims-paying ability of the entities rated by them. Such
ratings are general and are not absolute standards of quality. For CLOs, the
primary source of credit risk is the ability of the underlying portfolio of
loans to generate sufficient cash flow to pay investors on a full and timely
basis when principal and/or interest payments are due. Default in payment on the
underlying loans will result in less cash flow from the underlying portfolio
and, in turn, less funds available to pay investors in the CLO.
•Call
Risk. During
periods of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security before its stated maturity. CLOs are typically
structured such that, after a specified period of time, the majority investor in
the equity tranche can call (i.e., redeem) the securities issued by the CLO in
full. The Fund may not be able to accurately predict when or which of its CLO
investments may be called, resulting in the Fund having to reinvest the proceeds
in unfavorable circumstances, which in turn could cause in a decline in the
Fund’s income.
•Extension
Risk. During
periods of rising interest rates, certain debt obligations potentially including
the portfolio of loans underlying a CLO will be paid off substantially more
slowly than originally anticipated and the value of those securities may fall
sharply, resulting in a decline in the Fund’s income and potentially in the
value of the Fund’s investments.
•High
Yield Securities Risk.
The Fund may invest in CLO debt tranches that are rated below investment grade.
Additionally, CLOs may hold below-investment grade securities and certain of the
underlying loans in which a CLO may invest may be rated below investment grade.
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.
•Income
Risk. The
Fund’s income may decline if interest rates fall. This decline in income can
occur because most of the CLO debt instruments held by the Fund will have
floating or variable interest rates.
•Valuation
Risk.
Valuation Risk is the risk that one or more of the debt securities in which the
Fund invests are priced differently than the value realized upon such security’s
sale. In times of market instability, valuation may be more difficult. The
tiered structure of certain CLOs may subject them to price volatility and
enhanced liquidity and valuation risk in times of market stress.
•Privately
Issued Securities Risk. CLO
securities are generally privately-issued securities, and are normally purchased
pursuant to Rule 144A or Regulation S under the Securities Act. Privately-issued
securities typically may be resold only to qualified institutional buyers, in a
privately negotiated transaction, to a limited number of purchasers, or in
limited quantities after they have been held for a specified period of time and
other conditions are met for an exemption from registration. Because there may
be relatively few potential purchasers for such securities, especially under
adverse market or economic conditions or in the event of adverse changes in the
financial condition of the issuer, the Fund may find it more difficult to sell
such securities when it may be advisable to do so or it may be able to sell such
securities only at prices lower than if such securities were more widely held
and traded. At times, it also may be more difficult to determine the fair value
of such securities for purposes of computing the Fund’s NAV due to the absence
of an active trading market. There can be no assurance that a privately-issued
security previously deemed to be liquid when purchased will continue to be
liquid for as long as it is held by the Fund, and its value may decline as a
result.
•Covenant
Lite Loans Risk.
Certain of the underlying loans in which a CLO may invest may be issued or
offered as “covenant lite” loans, which have few or no financial maintenance
covenants that would require a borrower to maintain certain financial metrics. A
CLO may be delayed in enforcing its interests in covenant lite loans, which may
result in losses.
•CLO
Manager Risk.
CLOs are managed by investment advisers independent of the Adviser and the
Sub-Adviser. CLO managers are responsible for selecting, managing and replacing
the underlying bank loans within a CLO. CLO managers may have limited operating
histories, may be subject to conflicts of interests, including managing the
assets of other clients or other investment vehicles, or receiving fees that
incentivize maximizing the yield, and indirectly the risk, of a CLO. Adverse
developments with respect to a CLO manager, such as personnel and resource
constraints, regulatory issues or other developments that may impact the ability
and/or performance of the CLO manager, may adversely impact the performance of
the CLO securities in which the Fund invests.
LIBOR
Replacement Risk. The
Fund may invest in certain debt securities (including CLOs), derivatives, or
other financial instruments that utilize the LIBOR as a reference rate for
various rate calculations. On July 27, 2017, the U.K. Financial Conduct
Authority, which regulates LIBOR, announced that the FCA would no longer
persuade nor require banks to submit rates for the calculation of LIBOR after
2021. At the end of 2021, certain LIBORs were discontinued, but the most widely
used LIBORs may continue to be provided on a representative basis until June 30,
2023. Although the transition process away from LIBOR has become increasingly
well-defined, there remains uncertainty regarding the future utilization of
LIBOR and the nature of any replacement rates. The elimination of LIBOR or
changes to other reference rates or any other changes or reforms to the
determination or supervision of reference rates could adversely impact (i)
volatility and liquidity in markets that are tied to LIBOR, (ii) the market for,
or value of, specific securities or payments linked to those reference rates
resulting in a reduction in the value of certain instruments held by the Fund,
(iii) availability or terms of borrowing or refinancing, or (iv) the
effectiveness of hedging strategies. For these and other reasons, the
elimination of LIBOR or changes to other interest rates may adversely affect the
Fund’s performance and/or net asset value. Alternatives to LIBOR are established
or in development in most major currencies including the SOFR that is intended
to replace the U.S. dollar LIBOR.
Uncertainty
regarding the process for amending existing contracts or instruments to
transition away from LIBOR remains a concern for the Fund. The effect of the
discontinuation of LIBOR on the Fund will vary depending on, among other things
(i) existing fallback or termination provisions in individual contracts and (ii)
how and when industry participants develop and adopt new reference rates and
fallbacks for both legacy and new products and instruments. For example, certain
of the Fund’s investments may involve individual contracts that have (i) no
existing fallback provision or language that contemplates the discontinuation of
LIBOR or (ii) inadequate fallback provisions or language that does not
contemplate a permanent discontinuation of LIBOR, and those investments could
experience increased volatility or reduced liquidity as a result of the
transition process. In addition, interest rate provisions included in such
contracts may need to be renegotiated in contemplation of the transition away
from LIBOR. In addition, an instrument’s transition to a replacement rate could
result in variations in the reported yields for such instrument if held by the
Fund. Accordingly, it is difficult to predict the full impact of the transition
away from LIBOR on the Fund until new reference rates and fallbacks for both
legacy and new products, instruments and contracts are commercially
accepted.
Foreign
Exposure Risk. The
Fund may have exposure to foreign markets as a result of its investments in
foreign securities and securities denominated in foreign currencies. As a
result, its returns and net asset value may be affected to a large degree by
fluctuations in currency exchange rates or political or economic conditions in a
particular country. In some foreign markets, there may not be protection against
failure by other parties to complete transactions. It may not be possible for
the Fund to repatriate capital, dividends, interest, and other income from a
particular country or governmental entity. In addition, a market swing in one or
more countries or regions where the Fund has invested a significant amount of
its assets may have a greater effect on the Fund’s performance than it would in
a more geographically diversified portfolio. To the extent the Fund invests in
foreign debt securities, such investments are sensitive to changes in interest
rates. The Fund’s investments may be denominated in foreign currencies and
therefore, changes in the value of a country’s currency compared to the U.S.
dollar may affect the value of the Fund’s investments.
Foreign
Currency Risk. Because
the Fund’s assets may be invested in securities denominated in foreign
currencies, the proceeds received by the Fund from its investments and/or the
revenues received by the CLO issuer may be in foreign currencies. The Fund’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 Fund, and the value
of certain foreign currencies may be subject to a high degree of fluctuation.
Moreover, the Fund may incur costs in connection with conversions between U.S.
dollars and foreign currencies.
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. Certain foreign markets that have historically been considered
relatively stable may become volatile in response to changed conditions or new
developments. Increased interconnectivity of world economies and financial
markets increases the possibility that adverse developments and conditions in
one country or region will affect the stability of economies and financial
markets in other countries or regions. The Fund may invest 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 Fund’s investments. Because the Fund may invest in securities denominated in
foreign currencies and some of the income received by the Fund may be in foreign
currencies, changes in currency exchange rates may negatively impact the Fund’s
return. The risks of investing in emerging and frontier market countries are
greater than risks associated with investments in foreign developed
countries.
Foreign
issuers are often subject to less stringent requirements regarding accounting,
auditing, financial reporting and record keeping than are U.S. issuers, and
therefore, not all material information may be available or reliable. Securities
exchanges or foreign governments may adopt rules or regulations that may
negatively impact the Fund’s ability to invest in foreign securities or may
prevent the Fund from repatriating its investments. The Fund may also invest in
depositary receipts which involve similar risks to those associated with
investments in foreign securities. In addition, the Fund may not receive
shareholder communications or
be
permitted to vote the securities that it holds, as the issuers may be under no
legal obligation to distribute shareholder communications.
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, organizations, entities
and/or individuals, changes in international trade patterns, trade barriers, and
other protectionist or retaliatory measures. The United States and other nations
or international organizations may impose economic sanctions or take other
actions that may adversely affect issuers of specific countries. Economic
sanctions could, among other things, effectively restrict or eliminate the
Fund’s ability to purchase or sell securities or groups of securities for a
substantial period of time, and may make the Fund’s investments in such
securities harder to value. These sanctions, any future sanctions or other
actions, or even the threat of future sanctions or other actions, may negatively
affect the value and liquidity of the Fund.
Also,
certain issuers located in foreign countries in which the Fund invests may
operate in, or have dealings with, countries subject to sanctions and/or
embargoes imposed by the U.S. Government and the United Nations and/or countries
identified by the U.S. Government as state sponsors of terrorism. As a result,
an issuer may sustain damage to its reputation if it is identified as an issuer
which operates in, or has dealings with, such countries. The Fund, as an
investor in such issuers, will be indirectly subject to those
risks.
Investment
Focus Risk.
Because the Fund invests primarily in CLO securities it is susceptible to an
increased risk of loss due to adverse occurrences in the CLO market, generally,
and in the various markets impacting the portfolios of loans underling these CLO
securities. The Fund’s CLO investment focus may cause the Fund to perform
differently than the overall financial market and the Fund’s performance may be
more volatile than if the Fund’s investments were more diversified across
financial instruments and or markets.
Newly
Issued Securities Risk.
The credit obligations in which the Fund invests may include newly issued
securities, or “new issues,” such as initial debt offerings. New issues may have
a magnified impact on the performance of the Fund during periods in which it has
a small asset base. The impact of new issues on the Fund’s performance likely
will decrease as the Fund’s asset size increases, which could reduce the Fund’s
returns. New issues may not be consistently available to the Fund for investing,
particularly as the Fund’s asset base grows. Certain new issues, such as initial
debt offerings, may be volatile in price due to the absence of a prior trading
market, limited quantities available for trading and limited information about
the issuer. The Fund may hold new issues for a short period of time. This may
increase the Fund’s portfolio turnover and may lead to increased expenses for
the Fund, such as transaction costs. In addition, new issues can experience an
immediate drop in value after issuance if the demand for the securities does not
continue to support the offering price.
Extended
Settlement Risk.
Newly issued CLO securities purchased in the primary market typically experience
delayed or extended settlement periods, possibly longer than seven days. In the
period following such a purchase and prior to settlement these CLO securities
may be considered less liquid than similar CLOs available in the secondary
market. In such circumstances the Fund bears a risk of loss if the value of the
CLO declines before the settlement date or if the Fund is required to sell the
CLO security prior to settlement. There is also the risk that the security will
not be issued or that the counterparty will not meet its obligation, resulting
in a loss of the investment opportunity.
Affiliated
Fund Risk.
In managing the Fund, the Adviser and/or the Sub-Adviser will have the ability
to select underlying funds which they believe will achieve the Fund’s investment
objective. The Adviser and/or the Sub-Adviser may be subject to potential
conflicts of interest in selecting underlying funds because the Adviser and/or
the Sub-Adviser may, due to its own financial interest or other business
considerations, have an incentive to invest in funds managed by the Adviser
and/or the Sub-Adviser or their affiliates in lieu of investing in funds managed
or sponsored by others.
Management
Risk.
The Fund is an actively managed investment portfolio and is therefore subject to
the risk that the investment strategies employed for the Fund may fail to
produce the intended results. Although the Fund seeks to provide capital
preservation and current income, market conditions or implementation of the
Fund’s investment process may result in losses, and the Fund may not meet its
investment objective. As such, there can be no assurance of positive “absolute”
returns.
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
that will rescind and withdraw the guidance of the SEC and its staff regarding
asset segregation and cover transactions. The final rule requires funds to trade
derivatives and other transactions that create future payment or delivery
obligations (except reverse repurchase agreements and similar financing
transactions) subject to a value-at-risk (“VaR”) leverage limit, 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 final rule. Under the final 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 new rule regarding use of securities lending collateral that may limit
a fund's securities lending activities. Compliance with these new requirements
will be required after an eighteen-month transition period.
Risk
of Cash Transactions. Unlike
most other ETFs, the Fund effects most of its creations and redemptions
primarily for cash, rather than in-kind securities. Because the Fund currently
intends to effect most redemptions for cash, rather than in-kind distributions,
it may be required to sell portfolio securities in order to obtain the cash
needed to distribute redemption proceeds, which involves transaction costs that
the Fund may not have incurred had it effected redemptions entirely in kind.
These costs may include brokerage costs and/or taxable gains or losses, which
may be imposed on the Fund and decrease the Fund’s NAV to the extent such costs
are not offset by a transaction fee payable by an AP. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it
might not otherwise have recognized if it were to distribute portfolio
securities in-kind or to recognize such gain sooner than would otherwise be
required. As a result, an investment in the Fund may be less tax-efficient than
an investment in a more conventional ETF. Other ETFs generally are able to make
in-kind redemptions and avoid realizing gains in connection with transactions
designed to raise cash to meet redemption requests. The Fund generally intends
to distribute these gains to shareholders to avoid being taxed on this gain at
the Fund level and otherwise comply with the special tax rules that apply to it.
This strategy may cause shareholders to be subject to tax on gains they would
not otherwise be subject to, or at an earlier date than, if they had made an
investment in a different ETF. Additionally, transactions may have to be carried
out over several days if the securities market is relatively illiquid and may
involve considerable transaction fees and taxes.
Market
Risk.
The prices of the securities in the Fund 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 could underperform other investments. An
investment in the Fund may lose money.
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.
Sub-Adviser
Risk. The
Sub-Adviser may have little experience managing registered investment companies
which are subject to daily inflows and outflows of investor cash and are subject
to certain legal and tax-related restrictions on their investments and
operations.
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.
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.
Absence
of Prior Active Market. The
Fund is a newly organized series of an investment company and thus has no
operating history. While Shares are expected to be listed on the Exchange, there
can be no assurance that an active trading market for the Shares will develop or
be maintained. 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 the
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 the 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.
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 may fluctuate with changes in the market value of the Fund’s
securities holdings. The market price of Shares will 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, 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. In addition, because certain
of the Fund’s underlying securities trade on exchanges that are closed when the
Exchange (i.e.,
the exchange that Shares of the Fund trade on) is open, there are likely to be
deviations between the expected value of an underlying security and the closing
security’s price (i.e.,
the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs. In
addition, the securities held by the Fund may be traded in markets that close at
a different time than the Exchange. Liquidity in those securities may be reduced
after the applicable closing times. Accordingly, during the time when the
Exchange is open but after the applicable market closing, fixing or settlement
times, bid/ask spreads and the resulting premium or discount to the Shares’ NAV
may widen. 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.
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 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.
Seed
Investor Risk.
The Adviser and/or its affiliates may make payments to one or more investors
that contribute seed capital to the Fund. Such payments may continue for a
specified period of time and/or until a specified dollar amount is reached.
Those payments will be made from the assets of the Adviser and/or such
affiliates (and not the Fund). Seed investors may contribute all or a majority
of the assets in the Fund. There is a risk that such seed investors may redeem
all or part of their investments in the Fund, particularly after payments from
the Adviser and/or its affiliates have ceased. The timing of a redemption by a
seed investor could benefit the seed investor. As with redemptions by other
large shareholders, such redemptions could have a significant negative impact on
the Fund including by reducing the Fund’s liquidity, causing the Fund to realize
gains that will be distributed and taxable to remaining shareholders and
increasing the Fund’s transaction costs. A large redemption may also have a
material upward or downward effect on the market price of the Fund’s
Shares.
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 is expected 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; at such times, the Fund will appreciate or depreciate in
value. 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
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. To
manage the risk associated with leveraging, the Fund may segregate liquid
assets, or otherwise “cover” its derivatives position in a manner consistent
with the 1940 Act and the rules and SEC interpretations thereunder. The Fund may
modify its asset segregation policies at any time to comply with any changes in
the SEC’s positions regarding asset segregation.
Temporary
Defensive Strategy. When
the Fund utilizes a temporary defensive strategy, it may not achieve its
investment objective.
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 and Sub-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. PineBridge Investments LLC acts as
investment sub-adviser to the Fund and, subject to the oversight of the Adviser,
is responsible for the day-to-day investment management of the assets allocated
to it by the Adviser. The Sub-Adviser serves as investment sub-adviser to the
Fund pursuant to an investment sub-advisory agreement between the Adviser and
the Sub-Adviser (the “Investment Sub-Advisory Agreement”). As of April 30, 2022,
the Adviser managed approximately $79.39 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 and the Investment Sub-Advisory
Agreement will be available in the Trust’s semi-annual report for the period
ended October 31, 2022.
The
Sub-Adviser is
PineBridge Investments LLC.
PineBridge
Investments LLC has been a registered investment adviser since its inception in
2010 and is headquartered in New York City. As of March 31, 2022, PineBridge
Investments LLC, including its affiliates, had approximately $146.0 billion in
total assets under management.
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 0.40% 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 May 1, 2024.
The
Fund is responsible for all of its expenses, including the investment advisory
fees, costs of transfer agency, custody, legal, audit and other services,
interest, taxes, any distribution fees or expenses, offering fees or expenses
and extraordinary expenses.
For
the services provided and the expenses assumed by the Sub-Adviser pursuant to
the Investment Sub-Advisory Agreement, the Adviser (not the Fund) will pay a
monthly fee to the Sub-Adviser based on a percentage of the management fee paid
to the Adviser after taking into account expenses paid by the
Adviser.
The
Adviser and/or its affiliates expect to make payments to one or more investors
that contribute seed capital to the Fund. Such payments may continue for a
specified period of time and/or until a specified dollar amount is reached.
Those payments will be made from assets of the Adviser and/or such affiliates
(and not the Fund). Seed investors may contribute all or a majority of the
assets in the Fund. There is a risk that such seed investors may redeem their
investments in the Fund. As with redemptions by other large shareholders, such
redemptions could have a significant negative impact on the Fund.
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.
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 Francis Rodilosso and Laila Kollmorgen.
Mr.
Rodilosso has been employed by the Adviser as a portfolio manager since March
2012. Mr. Rodilosso graduated from Princeton University in 1990 with a Bachelor
of Arts and from the Wharton School of Business in 1993 with a Masters of
Business Administration.
Ms.
Kollmorgen joined the Sub-Adviser in 2015 and is responsible for managing the
investments in CLO securities issued by third-party managers. Prior to joining
the Sub-Adviser, she was Managing Director, Head of European Structured Products
Trading at Raymond James Financial in London. Ms. Kollmorgen holds an MBA from
the Wharton School, an MA from the Joseph H. Lauder Institute, University of
Pennsylvania, and a BA from Wellesley College. She is a CFA charterholder and
holds series 7 and 63 licenses.
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 certain Fund 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 expected to be 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 of 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. Net capital gains 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 gains.
Net
investment income, if any, is typically distributed monthly and net realized
capital gains, if any, is typically distributed to shareholders 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, 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.
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
of net investment income, including net short-term gains, if any, are generally
taxable 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% or 20%, provided holding
period and other requirements are met at both the shareholder and the Fund
level. There can be no assurance that any significant portion of the Fund’s
distributions will be eligible for qualified dividend treatment.
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.
Dividends,
interest and gains from non-U.S. investments of the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may, in some cases, reduce or
eliminate such taxes.
If
more than 50% of the Fund’s total assets at the end of its taxable year consist
of foreign securities, the Fund may elect to “pass through” to its investors
certain foreign income taxes paid by the Fund, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor’s pro rata share of the Fund’s foreign income taxes, and (ii)
either deduct (in calculating U.S. taxable income) or credit (in calculating
U.S. federal income), subject to certain holding period and other limitations,
the investor’s pro rata share of the Fund’s foreign income taxes.
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
Internal Revenue Service (“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 the Fund 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.
Any
capital gain realized by a Non-U.S. shareholder upon a sale of Shares of the
Fund will generally not be subject to U.S. federal income or withholding tax
unless (i) the gain is effectively connected with the shareholder’s trade or
business in the United States, or in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met or (ii) the Fund is or has been a U.S. real property holding corporation, as
defined below, at any time within the five-year period preceding the date of
disposition of the Fund’s Shares or, if shorter, within the period during which
the Non-U.S. shareholder has held the Shares. Generally, a corporation is a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests, as defined in the Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. The
Fund may be, or may prior to a Non-U.S. shareholder’s disposition of Shares
become, a U.S. real property holding corporation. If the Fund is or becomes a
U.S. real property holding corporation, so long as the Fund’s Shares are
regularly traded on an established securities market, only a Non-U.S.
shareholder who holds or held (at any time during the shorter of the five year
period preceding the date of disposition or the holder’s holding period) more
than 5% (directly or indirectly as determined under applicable attribution rules
of the Code) of the Fund’s Shares will be subject to United States federal
income tax on the disposition of Shares.
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. Changes
in applicable tax authority could materially affect the conclusions discussed
above and could adversely affect the Fund, and such changes often
occur.
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.
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)
[THIS
PAGE INTENTIONALLY LEFT BLANK]
For
more detailed information about the Fund, see the SAI dated June 10, 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
CLOIPRO |
800.826.2333
www.vaneck.com |