ck0001137360-20221231
Africa
Index ETF AFK
Brazil
Small-Cap ETF BRF
Digital
India ETF DGIN
Egypt
Index ETF EGPT
India
Growth Leaders ETF GLIN
Indonesia
Index ETF IDX
Israel
ETF ISRA
Vietnam
ETF VNM
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Principal
U.S. Listing Exchange for AFK, BRF, DGIN, EGPT, GLIN, IDX and ISRA:
NYSE Arca, Inc. |
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Principal
U.S. Listing Exchange for VNM:
Cboe BZX Exchange, Inc. |
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U.S. Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense. |
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800.826.2333 vaneck.com
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TABLE
OF CONTENTS |
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| Summary
Information |
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SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Africa Index ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
GDP Africa Index (the “Africa Index” or the
“Index”).
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)
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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 |
0.50 |
% |
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Other
Expenses |
0.48 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.98 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.98 |
% |
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(a)
Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.78% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$100 |
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3 |
$312 |
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5 |
$542 |
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10 |
$1,201 |
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
33% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Africa Index includes securities of African companies. African
companies generally include local listings of companies that are incorporated in
Africa and listings of companies incorporated outside of Africa but that have at
least 50% of their revenues/related assets in Africa. Such companies may include
small- and medium-capitalization companies. Subject to country and issuer
limitations, the country weightings in the Africa Index are based on their
relative gross domestic product (“GDP”) weights as compared to all other
countries represented in the Africa Index. As of December 31, 2022, the Africa
Index included 77 securities of companies with a
market
capitalization range of between approximately $1.07 billion and $52.07 billion
and a weighted average market capitalization of $9.53 billion. These amounts are
subject to change. The Fund’s 80% investment policy is non-fundamental and may
be changed without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Africa Index by investing in a portfolio of
securities that generally replicates the Africa Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Africa Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Africa Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Africa Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the financials, basic materials and communication
services sectors represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in African Issuers. Investments
in securities of African issuers, including issuers located outside of Africa
that generate significant revenues from Africa, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in
international trade, confiscatory taxation, political instability, including
authoritarian and/or military involvement in governmental decision making, armed
conflict, terrorism, infectious disease outbreaks, strained international
relations related to border disputes, the impact on the economy as a result of
civil war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest and, in certain countries, genocidal warfare. Unanticipated
political or social developments may result in sudden and significant investment
losses. Additionally, Africa is located in a part of the world that has
historically been prone to natural disasters, such as droughts, and is
economically sensitive to environmental events.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than those markets located in more
developed countries or geographic regions. A subset of African emerging market
countries are considered to be “frontier markets.” Frontier market countries
generally have smaller economies and less developed capital markets than
traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier market countries. As a
result, securities markets in Africa are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations, uncertainty regarding the
existence of trading markets, governmental control and heavy regulation of labor
and industry. There may also be a high concentration of trading volume in a
small number of issuers, investors and financial intermediaries representing a
limited number of sectors or industries. Moreover, trading on securities markets
may be suspended altogether.
Certain
economies in African countries depend to a significant degree upon exports of
primary commodities such as agricultural products, gold, silver, copper,
diamonds and oil. These economies therefore are vulnerable to changes in
commodity prices, which in turn may be affected by a variety of
factors.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. Moreover, certain countries in Africa may require
governmental approval or special licenses prior to investments by foreign
investors and may limit the amount of investments by foreign investors in a
particular industry and/or issuer and may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domiciliaries of those countries
and/or impose additional taxes on foreign investors. These factors, among
others, make investing in issuers located or operating in countries in Africa
significantly riskier than investing in issuers located or operating in more
developed countries, and any one of them could cause a decline in the value of
the Fund’s Shares.
There
may be a risk of loss due to the imposition of restrictions on repatriation of
capital invested. In addition, certain African countries have currencies pegged
to the U.S. dollar. If such currency pegs are abandoned, such abandonment could
cause sudden and significant currency adjustments, which could impact the Fund’s
investment returns in those countries. There may be limitations or delays in the
convertibility or repatriation of certain African currencies, which would
adversely affect the U.S. dollar value and/or liquidity of the Fund’s
investments denominated in such African currencies, may impair the Fund’s
ability to achieve its investment objective and/or may impede the Fund’s ability
to satisfy redemption requests in a timely manner. For these or other reasons,
the Fund could seek to suspend redemptions of Creation Units, including in the
event that an emergency exists in which it is not reasonably practicable for the
Fund to dispose of its securities or to determine its net asset value. The Fund
could also, among other things, limit or suspend creations of Creation Units.
During the period that creations or redemptions are affected, the
Fund’s
shares could trade at a significant premium or discount to their net asset
value. In the case of a period during which creations are suspended, the Fund
could experience substantial redemptions, which may exacerbate the discount to
net asset value at which the Fund’s shares trade, cause the Fund to experience
increased transaction costs, and cause the Fund to make greater taxable
distributions to shareholders of the Fund. When the Fund holds illiquid
investments, its portfolio may be harder to value.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Special
Risk Considerations of Investing in South African Issuers. Investments
in securities of South African issuers involve risks and special considerations
not typically associated with investments in the U.S. securities markets. South
Africa’s economy exhibits characteristics of both a developed country and a
developing country and has historically experienced extremely uneven
distribution of wealth and income and high rates of unemployment. This may cause
civil and social unrest, which could adversely impact the South African economy.
Although economic reforms such as privatization have been enacted to promote
growth and foreign investments, there can be no assurance that these programs
will achieve the desired results. The securities markets in South Africa are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. In addition,
South Africa’s currency has at times been at risk of devaluation due to
inadequate foreign currency reserve. While economic reforms have been enacted in
recent periods, there can be no assurance that these reforms will achieve the
intended results. Furthermore, adverse social and economic conditions in a
neighboring country may have a significant adverse effect on South Africa.
Additionally, the agriculture and mining sectors of South Africa’s economy
account for a large portion of its exports, and thus the South African economy
is susceptible to fluctuations in these commodity markets. South Africa is
located in a part of the world that has historically been prone to natural
disasters, such as droughts, and is economically sensitive to environmental
events. Any such event may adversely impact South Africa’s economy or business
operations of companies in South Africa, causing an adverse impact on the value
of the Fund.
Special
Risk Considerations of Investing in Nigerian Issuers. Investments
in securities of Nigerian issuers,
including issuers located outside of Nigeria that generate significant revenues
from Nigeria, involve risks and special considerations not typically associated
with investments in the U.S. securities markets. The economic development of
Nigeria has been significantly hindered by military rule, mismanagement,
corruption and ethnic conflict. The Nigerian economy is heavily dependent on oil
production and sales and prices of oil in global markets, and the industry makes
up a significant portion of Nigeria’s economic output. The Nigerian government
has implemented capital controls restricting the free flow of capital to and
from international markets, which has led to bouts of speculative demand and
elevated arbitrage pressures.
Nigeria
has privatized certain industries, which may lose money or be re-nationalized.
Religious and social conflict is present in Nigeria, often resulting in the
outbreak of violence. Nigeria also suffers from the prevalence of organized
crime and corruption, which makes it more difficult for citizens and companies
to do business in Nigeria and has a significant impact on the Nigerian economy.
The persistence of organized crime and corruption may continue to drag on
economic growth in the country.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign
market trading hours, clearance and settlement procedures, and holiday schedules
may limit the Fund's ability to buy and sell securities.
Emerging
and Frontier Market Issuers Risk. Certain
Funds invest in securities of emerging market issuers and frontier market
issuers. Frontier market countries generally have smaller economies and less
developed capital markets than traditional emerging markets, and, as a result,
the risks of investing in frontier market countries are magnified. Investment in
securities of emerging and frontier market issuers involves risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging and frontier market countries are subject to less
stringent requirements regarding accounting, auditing, financial reporting and
record keeping than are issuers in more developed markets, and therefore, all
material information may not be available or reliable. Emerging and frontier
markets are also more likely to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging and frontier market countries are underdeveloped
and are often considered to be less correlated to global economic cycles than
those markets located in more developed countries. Securities markets in
emerging and frontier market countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations, uncertainty regarding the
existence of trading markets, governmental control and heavy regulation of labor
and industry. These factors, coupled with restrictions on foreign investment and
other factors, limit the supply of securities available for investment by the
Fund. This will affect the rate at which the Fund is able to invest in emerging
and frontier market countries, the purchase and sale prices for such securities
and the timing of purchases and sales. Emerging and frontier markets can
experience high rates of inflation, deflation and currency devaluation. The
prices of certain securities listed on securities markets in emerging and
frontier market countries have been subject to sharp fluctuations and sudden
declines, and no assurance can be given as to the future performance of listed
securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging and
frontier market countries may be closed for extended periods of time or trading
on securities markets may be suspended altogether due to political or civil
unrest. Market volatility may also be heightened by the actions of a small
number of investors. Brokerage firms in emerging and frontier market countries
may be fewer in number and less established than brokerage firms in more
developed markets. Since the Fund may need to effect securities transactions
through these brokerage firms, the Fund is subject to the risk that these
brokerage firms will not be able to fulfill their obligations to the Fund. This
risk is magnified to the extent the Fund effects securities transactions through
a single brokerage firm or a small number of brokerage firms. In addition, the
infrastructure for the safe custody of securities and for purchasing and selling
securities, settling trades, collecting dividends, initiating corporate actions,
and following corporate activity is not as well developed in emerging and
frontier market countries as is the case in certain more developed
markets.
Political
and Economic Risk.
Certain emerging and frontier market countries have historically been subject to
political instability and their prospects are tied to the continuation of
economic and political liberalization in the region. Instability may result from
factors such as government or military intervention in decision making,
terrorism, civil unrest, extremism or hostilities between neighboring countries.
Any of these factors, including an outbreak of hostilities could negatively
impact the Fund’s returns. Extremist groups in certain countries in the Middle
East and North Africa region have traditionally held anti-Western views and are
opposed to openness to foreign investments. Egypt borders the Gaza Strip and
Israel and there are risks of further instability and violence in the region.
Limited political and democratic freedoms in emerging and frontier market
countries might cause significant social unrest. These factors may have a
significant adverse effect on an emerging or frontier market country’s
economy.
Many
emerging and frontier market countries may be heavily dependent upon
international trade and, consequently, may continue to be negatively affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which it trades. They also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they
trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging markets’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation.
This
has, in turn, led to high interest rates, extreme measures by governments to
keep inflation in check, and a generally debilitating effect on economic growth.
Although inflation in many countries has lessened, there is no guarantee it will
remain at lower levels. The political history of certain emerging market
countries has been characterized by political uncertainty, intervention by the
military in civilian and economic spheres, and political corruption. Such events
could reverse favorable trends toward market and economic reform, privatization,
and removal of trade barriers, and result in significant disruption in
securities markets in the region.
Also,
from time to time, certain issuers located in emerging and frontier market
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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market-oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities included in the Fund’s Index. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market-oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging or frontier market country may restrict or control
to varying degrees the ability of foreign investors to invest in securities of
issuers located or operating in such emerging and frontier market countries.
These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in emerging and
frontier market countries and may inhibit the Fund’s ability to track its Index.
In addition, the Fund may not be able to buy or sell securities or receive full
value for such securities. Moreover, certain emerging and frontier market
countries may require governmental approval or special licenses prior to
investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer; may limit such foreign
investment to a certain class of securities of an issuer that may have less
advantageous rights than the classes available for purchase by domiciliaries of
such emerging and frontier market countries; and/or may impose additional taxes
on foreign investors. A delay in obtaining a required government approval or a
license would delay investments in those emerging and frontier market countries,
and, as a result, the Fund may not be able to invest in certain securities while
approval is pending. The government of certain emerging and frontier market
countries may also withdraw or decline to renew a license that enables the Fund
to invest in such country. These factors make investing in issuers located or
operating in emerging and frontier market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the value of the Fund’s
Shares.
Additionally,
investments in issuers located in certain emerging and frontier market countries
may be subject to a greater degree of risk associated with governmental approval
in connection with the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. Moreover, there is the
risk that if the balance of payments in an emerging or frontier market country
declines, the government of such country may impose temporary restrictions on
foreign capital remittances. Consequently, the Fund could be adversely affected
by delays in, or a refusal to grant, required governmental approval for
repatriation of capital, as well as by the application to the Fund of any
restrictions on investments. Furthermore, investments in emerging and frontier
market countries may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Fund.
Available
Disclosure About Emerging and Frontier Market Issuers.
Issuers located or operating in emerging and frontier market countries are not
subject to the same rules and regulations as issuers located or operating in
more developed countries. Therefore, there may be less financial and other
information publicly available with regard to issuers located or operating in
emerging and frontier market countries and such issuers are not subject to the
uniform accounting, auditing and financial reporting standards applicable to
issuers located or operating in more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in equity securities of issuers in emerging
and frontier market countries will generally be denominated in foreign
currencies, and the income received by the Fund from these investments will be
principally in foreign currencies. The value of an emerging or frontier market
country’s currency may be subject to a high degree of fluctuation. This
fluctuation may be due to changes in interest rates, the effects of monetary
policies
issued by the United States, foreign governments, central banks or supranational
entities, the imposition of currency controls or other national or global
political or economic developments. The economies of certain emerging and
frontier market countries can be significantly affected by currency
devaluations. Certain emerging and frontier market countries may also have
managed currencies which are maintained at artificial levels relative to the
U.S. dollar rather than at levels determined by the market. This type of system
can lead to sudden and large adjustments in the currency which, in turn, can
have a disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging or frontier market country’s currency and changes
in value of such foreign currencies versus the U.S. dollar may reduce the Fund’s
investment performance and the value of your investment in the Fund. Meanwhile,
the Fund will compute and expects to distribute its income in U.S. dollars, and
the computation of income will be made on the date that the income is earned by
the Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging or frontier market country’s currency falls
relative to the U.S. dollar between the earning of the income and the time at
which the Fund converts the relevant emerging or frontier market country’s
currency to U.S. dollars, the Fund may be required to liquidate certain
positions in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements under the Internal Revenue Code.
The liquidation of investments, if required, could be at disadvantageous prices
or otherwise have an adverse impact on the Fund’s performance.
Certain
emerging and frontier market countries also restrict the free conversion of
their currency into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for many such currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund’s interests in securities denominated
in such currencies. Furthermore, if permitted, the Fund may incur costs in
connection with conversions between U.S. dollars and an emerging or frontier
market country’s currency. Foreign exchange dealers realize a profit based on
the difference between the prices at which they are buying and selling various
currencies. Thus, a dealer normally will offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging and frontier
market countries have less developed custody and settlement practices than
certain developed countries. Rules adopted under the Investment Company Act of
1940 permit the Fund to maintain its foreign securities and cash in the custody
of certain eligible non-U.S. banks and securities depositories. Banks in
emerging and frontier market countries that are eligible foreign sub-custodians
may be recently organized or otherwise lack extensive operating experience. In
addition, in certain emerging and frontier market countries there may be legal
restrictions or limitations on the ability of the Fund to recover assets held in
custody by a foreign sub-custodian in the event of the bankruptcy of the
sub-custodian. Because settlement systems in emerging and frontier market
countries may be less organized than in other developed markets, there may be a
risk that settlement may be delayed and that cash or securities of the Fund may
be in jeopardy because of failures of or defects in the systems. Under the laws
in many emerging and frontier market countries, the Fund may be required to
release local shares before receiving cash payment or may be required to make
cash payment prior to receiving local shares, creating a risk that the Fund may
surrender cash or securities without ever receiving securities or cash from the
other party. Settlement systems in emerging and frontier market countries also
have a higher risk of failed trades and back to back settlements may not be
possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event of a redemption request from
an Authorized Participant, the Fund will be required to deliver U.S. dollars to
the Authorized Participant on the settlement date. In the event that the Fund is
not able to convert the foreign currency to U.S. dollars in time for settlement,
which may occur as a result of the delays described above, the Fund may be
required to liquidate certain investments and/or borrow money in order to fund
such redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain frontier and emerging market countries, the marketability of quoted
shares may be limited due to the restricted opening hours of stock exchanges,
and a narrow range of investors and a relatively high proportion of market value
may be concentrated in the hands of a relatively small number of shareholders.
In addition, because certain frontier and emerging market countries’ stock
exchanges on which the Fund’s portfolio securities may trade are open when the
Exchange is closed, the Fund may be subject to heightened risk associated with
market movements. Trading volume may be lower on certain frontier and emerging
market countries’ stock exchanges than on more developed securities markets and
equities may be generally less liquid. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of certain
frontier and emerging market countries are less developed than in certain other
markets and under certain circumstances this may result in the Fund experiencing
delays in settling and/or registering transactions in the markets in which it
invests, particularly if the growth of foreign and domestic investment in
certain frontier and emerging market countries
places
an undue burden on such investment infrastructure. Such delays could affect the
speed with which the Fund can transmit redemption proceeds and may inhibit the
initiation and realization of investment opportunities at optimum
times.
Certain
issuers in emerging and frontier market countries may utilize share blocking
schemes. Share blocking refers to a practice, in certain foreign markets, where
voting rights related to an issuer’s securities are predicated on these
securities being blocked from trading at the custodian or sub-custodian level
for a period of time around a shareholder meeting. These restrictions have the
effect of barring the purchase and sale of certain voting securities within a
specified number of days before and, in certain instances, after a shareholder
meeting where a vote of shareholders will be taken. Share blocking may prevent
the Fund from buying or selling securities for a period of time. During the time
that shares are blocked, trades in such securities will not settle. The blocking
period can last up to several weeks. The process for having a blocking
restriction lifted can be quite onerous with the particular requirements varying
widely by country. In addition, in certain countries, the block cannot be
removed. As a result of the ramifications of voting ballots in markets that
allow share blocking, the Adviser, on behalf of the Fund, reserves the right to
abstain from voting proxies in those markets.
Corporate
and Securities Laws. Securities
laws in emerging and frontier market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
shareholder rights. Accordingly, foreign investors may be adversely affected by
new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging and frontier market issuers are subject may be less
advanced than those systems to which issuers located in more developed countries
are subject, and therefore, shareholders of issuers located in emerging and
frontier market countries may not receive many of the protections available to
shareholders of issuers located in more developed countries. In circumstances
where adequate laws and shareholder rights exist, it may not be possible to
obtain swift and equitable enforcement of the law. In addition, the enforcement
of systems of taxation at federal, regional and local levels in emerging and
frontier market countries may be inconsistent and subject to sudden change. The
Fund has limited rights and few practical remedies in emerging markets and the
ability of U.S. authorities to bring enforcement actions in emerging markets may
be limited.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-Capitalization
Companies Risk. Small-capitalization
companies may be more volatile and more likely than medium- and
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of small-capitalization companies could trail the
returns on investments in securities of medium- and large-capitalization
companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for 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. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters,
epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The
bar chart that follows shows how the Fund performed for the calendar years
shown. The table below the bar chart shows the Fund’s average annual returns
(before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. Prior to June 24, 2013, the
Fund sought to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Dow Jones Titans IndexSM
(the “Prior Index”). Therefore, performance information prior to June 24, 2013
reflects the performance of the Fund while seeking to track the Prior Index. All
returns assume reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
28.52% |
2Q
2020 |
| Worst
Quarter: |
-37.33% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Africa Index ETF (return before
taxes) |
-18.34% |
-5.01% |
-3.43% |
|
|
VanEck Africa Index ETF (return after
taxes on distributions) |
-18.85% |
-5.97% |
-4.26% |
|
|
VanEck Africa Index ETF (return after
taxes on distributions
and sale of Fund
Shares) |
-10.20% |
-3.74% |
-2.55% |
|
|
MVIS®
GDP
Africa Index (reflects no deduction for fees, expenses or taxes, except
withholding taxes)* |
-15.99% |
-3.74% |
-1.97% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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*Prior to June 24, 2013,
the Fund sought to replicate as closely as possible, before fees and expenses,
the price and yield performance of the Prior Index. Therefore, performance
information prior to June 24, 2013 reflects the performance of the Fund while
seeking to track the Prior Index. Prior to June 24, 2013, index data reflects
that of the Prior Index. From June 24, 2013, the index data reflects that of the
Africa Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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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Peter
H. Liao |
Portfolio
Manager |
July
2008 |
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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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VANECK®
BRAZIL SMALL-CAP ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck®
Brazil Small-Cap ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Brazil Small-Cap Index (the “Brazil Small-Cap Index” or the
“Index”).
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 |
0.50 |
% |
|
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Other
Expenses |
0.33 |
% |
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Acquired
Fund Fees and Expenses |
0.07 |
% |
|
|
Total
Annual Fund Operating Expenses(a) |
0.90 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.24 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.66 |
% |
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|
(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.59% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$67 |
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3 |
$263 |
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5 |
$475 |
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10 |
$1,086 |
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
42% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Brazil Small-Cap Index includes securities of Brazilian
small-capitalization companies. A company is generally considered to be a
Brazilian company if it is incorporated in Brazil or is incorporated outside of
Brazil but has at least 50% of its revenues/related assets in Brazil. As of
December 31, 2022, the Brazil Small-Cap Index included 111 securities of
companies with a market capitalization range of between approximately $0.08
billion and $1.84 billion and a weighted average market capitalization of $0.85
billion.
These amounts are subject to change. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Brazil Small-Cap Index by investing in a
portfolio of securities that generally replicates the Brazil Small-Cap Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Brazil Small-Cap Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Brazil Small-Cap
Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Brazil Small-Cap Index concentrates in an industry or group of industries.
As of December 31, 2022, each of the consumer discretionary, industrials and
utilities sectors represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in Brazilian Issuers. Investments
in securities of Brazilian issuers, including issuers located outside of Brazil
that generate significant revenues from Brazil, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Brazilian economy has been characterized by frequent, and
occasionally drastic, interventions by the Brazilian government, including the
imposition of wage and price controls, exchange controls, limiting imports,
blocking access to bank accounts and other measures. The Brazilian government
has often changed monetary, taxation, credit, trade and other policies to
influence the core of Brazil’s economy. Actions taken by the Brazilian
government concerning the economy may have significant effects on Brazilian
companies and on market conditions and prices of Brazilian securities. Brazil’s
economy may be subject to sluggish economic growth due to, among other things,
weak consumer spending, political turmoil, high rates of inflation and low
commodity prices. Brazil suffers from chronic structural public sector deficits.
The Brazilian government has privatized certain entities, which have suffered
losses due to, among other things, the inability to adjust to a competitive
environment.
The
market for Brazilian securities is directly influenced by the flow of
international capital, and economic and market conditions of certain countries,
especially emerging market countries. As a result, adverse economic conditions
or developments in other emerging market countries have at times significantly
affected the availability of credit in the Brazilian economy and resulted in
considerable outflows of funds and declines in the amount of foreign currency
invested in Brazil.
Investments
in Brazilian securities may be subject to certain restrictions on foreign
investment. Brazilian law provides that whenever a serious imbalance in Brazil’s
balance of payments exists or is anticipated, the Brazilian government may
impose temporary restrictions on the remittance to foreign investors of the
proceeds of their investment in Brazil and on the conversion of the Brazilian
real into foreign currency.
Brazil
has historically experienced high rates of inflation, a high level of debt, and
high crime rates, each of which may constrain economic growth. Brazil suffers
from high levels of corruption, crime and income disparity. The Brazilian
economy is also heavily dependent upon commodity prices and international trade.
Unanticipated political or social developments may result in sudden and
significant investment losses. An increase in prices for commodities, such as
petroleum, the depreciation of the Brazilian real and future governmental
measures seeking to maintain the value of the Brazilian real in relation to the
U.S. dollar, may trigger increases in inflation in Brazil and may slow the rate
of growth of the Brazilian economy. Conversely, appreciation of the Brazilian
real relative to the U.S dollar may lead to the deterioration of Brazil’s
current account of balance of payments as well as limit the growth of
exports.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Companies in the
utilities sector may be adversely affected by changes in exchange rates,
domestic and international competition, difficulty in raising adequate amounts
of capital and governmental limitation on rates charged to customers.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they
trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market 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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the
speed
with which the Fund can transmit redemption proceeds and may inhibit the
initiation and realization of investment opportunities at optimum
times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Micro-Capitalization
Companies Risk.
Micro-capitalization companies are subject to substantially greater risks of
loss and price fluctuations because their earnings and revenues tend to be less
predictable (and some companies may be experiencing significant losses), and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market capitalizations. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell those securities.
Small-Capitalization
Companies Risk. Small-capitalization
companies may be more volatile and more likely than medium- and
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of small-capitalization companies could trail the
returns on investments in securities of medium- and large-capitalization
companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for 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. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than
preferred
securities or debt instruments. In addition, while broad market measures of
equity securities have historically generated higher average returns than fixed
income securities, equity securities have generally also experienced
significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after
taxes).The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
|
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|
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|
| Best
Quarter: |
30.76% |
4Q
2020 |
| Worst
Quarter: |
-52.13% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Brazil Small-Cap ETF (return
before taxes) |
-13.31% |
-7.64% |
-7.73% |
|
|
VanEck Brazil Small-Cap ETF (return
after taxes on distributions) |
-14.53% |
-8.55% |
-8.91% |
|
|
VanEck Brazil Small-Cap ETF (return
after taxes on distributions and sale of Fund Shares)
|
-7.73% |
-5.75% |
-5.62% |
|
|
MVIS®
Brazil Small-Cap Index (reflects no deduction for fees, expenses
or
taxes, except withholding taxes) |
-13.09% |
-7.08% |
-7.12% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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 |
|
|
Peter
H. Liao |
Portfolio
Manager |
May
2009 |
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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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VANECK®
DIGITAL INDIA ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Digital India ETF (the
“Fund”) seeks to track as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Digital India Index (the “Digital India Index” or the
“Index”).
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 |
0.75 |
% |
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|
Other
Expenses(a) |
0.01 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
0.76 |
% |
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|
(a) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least 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
|
EXPENSES |
|
|
1 |
$78 |
|
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|
3 |
$243 |
|
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|
5 |
$422 |
|
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|
10 |
$942 |
|
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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. During
the period from February 15, 2022 (the Fund's commencement of operations)
through December 31, 2022, the Fund’s portfolio turnover rate was
22% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Digital India Index consists of equity securities of companies
involved in supporting the digitalization of the Indian economy. To be initially
eligible for the Digital India Index, companies must (i) be domiciled,
headquartered, or incorporated in India (“Indian companies”) and (ii) generate
at least 50% of their revenues from one or more of the following categories:
software, hardware, information technology services and consulting,
communications equipment and infrastructure, telecommunication services,
internet applications, e-commerce sites including financial services and
electronic payment processing. In addition, Indian companies that are ranked
within the top 10 telecommunication services companies by annual revenue are
also eligible for inclusion in the Digital India Index because such companies
are involved with and/or support the digitization of the Indian
economy.
Such
companies may include small-, medium-, and large- capitalization companies and
foreign market issuers, including emerging market issuers. As of December 31,
2022, the Digital India Index included 35 securities of companies with a market
capitalization range of between approximately $1.08 billion and $208.4 billion
and a weighted average market capitalization of $42.97 billion. These amounts
are subject to change. The Digital India Index is published by MV Index
Solutions GmbH (the “Index provider” or “MVIS”), which is a wholly owned
subsidiary of the Adviser. The Digital India Index is reconstituted and
rebalanced quarterly. The Fund’s 80% investment policy is non-fundamental and
may be changed without shareholder approval upon 60 days’ prior written notice
to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Digital India Index by investing in a
portfolio of securities that generally replicates the Digital India Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Digital India Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to track the Digital India Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Digital India Index concentrates in an industry or group of industries. As
of December 31, 2022, each of the information technology and communication
services sectors represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in Indian Issuers.
Investments in securities of Indian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, greater government control
over the economy, including the risk that the Indian government may decide not
to continue to support economic reform programs, political and legal
uncertainty, competition from low-cost issuers of other emerging economies in
Asia, currency fluctuations or blockage of foreign currency exchanges and the
risk of nationalization or expropriation of assets. Issuers in India are subject
to less stringent requirements regarding accounting, auditing, financial
reporting and record keeping than are issuers in more developed markets, and
therefore, all material information may not be available or reliable. India is
also located in a part of the world that has historically been prone to natural
disasters, such as earthquakes and tsunamis. Any such natural disaster could
cause a significant impact on the Indian economy and could impact operations of
the Subsidiary, causing an adverse impact on the Fund. In addition, religious
and border disputes persist in India. Moreover, India has experienced civil
unrest and hostilities with neighboring countries, including Pakistan, and the
Indian government has confronted separatist movements in several Indian states.
India has experienced acts of terrorism that has targeted foreigners. Such acts
of terrorism have had a negative impact on tourism, an important sector of the
Indian economy.
The
securities market of India is considered an emerging market characterized by a
small number of listed companies with significantly smaller market
capitalizations, greater price volatility and substantially less liquidity than
developed markets, such as the United States. These factors, coupled with
restrictions on foreign investment and other factors, limit the supply of
securities available for investment by the Fund. This will affect the rate at
which the Fund is able to invest in India, the purchase and sale prices for such
securities and the timing of purchases and sales. Emerging markets can
experience high rates of inflation, deflation and currency devaluation. Certain
restrictions on foreign investment may decrease the liquidity of the Fund’s
portfolio or inhibit the Fund’s ability to pursue its investment objective. In
addition, the Reserve Bank of India, the Indian counterpart of the Federal
Reserve Bank in the United States, imposes certain limits on the foreign
ownership of Indian securities. These restrictions and/or controls may at times
limit or prevent foreign investment in securities of issuers located or
operating in India and may inhibit the Fund’s ability to pursue its investment
objective.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Equity
Securities Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the markets in which the
issuers of securities held by the Fund participate, or factors relating to
specific issuers in which the Fund invests. Equity securities are subordinated
to preferred securities and debt in a company’s capital structure with respect
to priority in right to a share of corporate income, and therefore will be
subject to greater dividend risk than preferred securities or debt instruments.
In addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns,
although under certain market conditions fixed income securities may have
comparable or greater price volatility.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s
economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market 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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the
Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk
associated
with market movements. Trading volume may be lower on certain emerging market
countries’ trading exchanges than on more developed securities markets and
securities may be generally less liquid. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of certain
emerging market countries are less developed than in certain other markets and
under certain circumstances this may result in the Fund experiencing delays in
settling and/or registering transactions in the markets in which it invests,
particularly if the growth of foreign and domestic investment in certain
emerging market countries places an undue burden on such investment
infrastructure. Such delays could affect the speed with which the Fund can
transmit redemption proceeds and may inhibit the initiation and realization of
investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for 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. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
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.
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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. 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 net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The Fund commenced operations on February 15,
2022 and therefore does not have a performance history for the full calendar
year ended December 31, 2022. Once available, the Fund’s
performance information will be accessible on the Fund’s website at
www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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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Peter
H. Liao |
Portfolio
Manager |
February
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.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Egypt Index ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Egypt Index (the “Egypt Index” or the “Index”).
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)
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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 |
0.50 |
% |
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Other
Expenses |
0.85 |
% |
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Total
Annual Fund Operating Expenses(a) |
1.35 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
-0.11 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
1.24 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.94% of the Fund’s average daily net
assets per year until May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$126 |
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3 |
$417 |
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5 |
$729 |
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10 |
$1,614 |
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
66% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund will normally invest at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Egypt Index includes securities of Egyptian companies. A company is
generally considered to be an Egyptian company if it is incorporated in Egypt or
is incorporated outside Egypt but has at least 50% of its revenues/related
assets in Egypt. Such companies may include small- and medium-capitalization
companies. As of December 31, 2022, the Egypt Index included 25 securities of
companies with a market capitalization range of between approximately $0.10
billion and $3.56 billion and a weighted
average
market capitalization of $1.09 billion. These amounts are subject to change. The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Egypt Index by investing in a portfolio of
securities that generally replicates the Egypt Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Egypt Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Egypt Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Egypt Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the real estate, basic materials, financials and
information technology sectors represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in Egyptian Issuers. The
government in Egypt may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
Egypt. These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in Egypt. For example,
there may be prohibitions or substantial restrictions on foreign investing in
Egypt’s capital markets or in certain sectors or industries. Moreover, Egypt may
require governmental approval or special licenses prior to investments by
foreign investors and may limit the amount of investments by foreign investors
in a particular industry and/or issuer and may limit such foreign investment to
a certain class of securities of an issuer that may have less advantageous
rights than the classes available for purchase by domiciliaries of Egypt and/or
impose additional taxes on foreign investors. There may be a risk of loss due to
the imposition of restrictions on repatriation of capital invested.
In
addition, there may be limitations or delays in the convertibility or
repatriation of the Egyptian pound which would adversely affect the U.S. dollar
value and/or liquidity of the Fund’s investments denominated in the Egyptian
pound, may impair the Fund’s ability to achieve its investment objective and/or
may impede the Fund’s ability to satisfy redemption requests in a timely manner.
When the Fund holds illiquid investments, its portfolio may be harder to
value.
In
addition, there may be limitations or delays in the convertibility or
repatriation of the Egyptian pound which would adversely affect the U.S. dollar
value and/or liquidity of the Fund’s investments denominated in the Egyptian
pound, may impair the Fund’s ability to achieve its investment objective and/or
may impede the Fund’s ability to satisfy redemption requests in a timely manner.
For these or other reasons, the Fund could seek to suspend redemptions of
Creation Units, including in the event that an emergency exists in which it is
not reasonably practicable for the Fund to dispose of its securities or to
determine its net asset value. The Fund could also, among other things, limit or
suspend creations of Creation Units. During the period that creations or
redemptions are affected, the Fund’s shares could trade at a significant premium
or discount to their net asset value. In the case of a period during which
creations are suspended, the Fund could experience substantial redemptions,
which may exacerbate the discount to net asset value at which the Fund’s shares
trade, cause the Fund to experience increased transaction costs, and cause the
Fund to make greater taxable distributions to shareholders of the Fund. When the
Fund holds illiquid investments, its portfolio may be harder to
value.
In
Egypt, the marketability of quoted shares is limited due to the restricted
opening hours of stock exchanges, a narrow range of investors and a relatively
high proportion of market value being concentrated in the hands of a relatively
small number of shareholders. In addition, because Egyptian stock exchanges on
which the Fund’s portfolio securities may trade are open when the Exchange is
closed, the Fund may be subject to heightened risk associated with market
movements.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed
restrictions on their businesses or face increased government involvement in
their operations. Increased government involvement in the financials sector,
including measures such as taking ownership positions in financial institutions,
could result in a dilution of the Fund’s investments in financial institutions.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s
economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market 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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the
Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk
associated
with market movements. Trading volume may be lower on certain emerging market
countries’ trading exchanges than on more developed securities markets and
securities may be generally less liquid. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of certain
emerging market countries are less developed than in certain other markets and
under certain circumstances this may result in the Fund experiencing delays in
settling and/or registering transactions in the markets in which it invests,
particularly if the growth of foreign and domestic investment in certain
emerging market countries places an undue burden on such investment
infrastructure. Such delays could affect the speed with which the Fund can
transmit redemption proceeds and may inhibit the initiation and realization of
investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Real
Estate Sector Risk.
Companies in the real estate sector include companies that invest in real
estate, such as REITs and real estate management and development companies. The
Fund will be sensitive to changes in, and its performance will depend to a
greater extent on, the overall condition of the real estate sector. Companies
that invest in real estate are subject to the risks of owning real estate
directly as well as to risks that relate specifically to the way that such
companies operate, including management risk (such companies are dependent upon
the management skills of a few key individuals and may have limited financial
resources). Adverse economic, business or political developments affecting real
estate could have a major effect on the values of the Fund’s investments.
Investing in real estate is subject to such risks as decreases in real estate
values, overbuilding, increased competition and other risks related to local or
general economic conditions, increases in operating costs and property taxes,
changes in zoning laws, casualty or condemnation losses, possible environmental
liabilities, regulatory limitations on rent, possible lack of availability of
mortgage financing, market saturation, fluctuations in rental income and the
value of underlying properties and extended vacancies of properties. Certain
real estate securities have a relatively small market capitalization, which may
tend to increase the volatility of the market price of these securities. Real
estate securities have limited diversification and are, therefore, subject to
risks inherent in operating and financing a limited number of projects. Real
estate securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants.
Micro-Capitalization
Companies Risk.
Micro-capitalization companies are subject to substantially greater risks of
loss and price fluctuations because their earnings and revenues tend to be less
predictable (and some companies may be experiencing significant losses), and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market
capitalizations.
The shares of micro-capitalization companies tend to trade less frequently than
those of larger, more established companies, which can adversely affect the
pricing of these securities and the future ability to sell those
securities.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for 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. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and
increase
tracking error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. 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 net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after
taxes).The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
|
|
|
|
|
|
|
|
|
| Best
Quarter: |
29.89% |
3Q
2013 |
| Worst
Quarter: |
-30.39% |
4Q
2016 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Egypt Index ETF (return before
taxes) |
-23.67% |
-7.27% |
-7.03% |
|
|
VanEck Egypt Index ETF (return after
taxes on distributions) |
-23.82% |
-7.50% |
-7.36% |
|
|
VanEck Egypt Index ETF (return after
taxes on distributions and sale of Fund Shares) |
-13.76% |
-5.06% |
-4.66% |
|
|
MVIS®
Egypt Index (reflects no deduction for fees, expenses or taxes, except
withholding taxes) |
-20.73% |
-5.22% |
-3.96% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
|
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|
|
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|
|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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 |
|
|
Peter
H. Liao |
Portfolio
Manager |
February
2010 |
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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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|
VANECK®
INDIA GROWTH LEADERS ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck®
India Growth Leaders ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MarketGrader India All-Cap Growth Leaders
Index (the “India Index”or the “Index”).
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 |
0.50 |
% |
|
|
Other
Expenses(a) |
0.30 |
% |
|
|
|
|
|
|
Total
Annual Fund Operating Expenses(b) |
0.80 |
% |
|
|
Fee
Waivers and Expense Reimbursement(b)(c) |
0.00 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(b)(c) |
0.80 |
% |
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|
|
(a)
“Other Expenses” reflects
the expenses of both the Fund and the Fund’s wholly-owned subsidiary (the
“Subsidiary”).
(b) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund and
Subsidiary expenses to the extent necessary to prevent the operating expenses of
the Fund (excluding acquired fund fees and expenses, interest expense, trading
expenses, taxes and extraordinary expenses of the Fund and the Subsidiary) from
exceeding 0.75% of the Fund’s average daily net assets per year until at least
May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
(c)
“Fee Waivers and Expense
Reimbursement” have been restated to reflect the current expense
limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
|
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|
YEAR |
EXPENSES |
|
|
1 |
$82 |
|
|
|
3 |
$255 |
|
|
|
5 |
$444 |
|
|
|
10 |
$990 |
|
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
102% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund currently intends to
achieve its investment objective by investing substantially all of its assets in
the Subsidiary, a wholly-owned subsidiary located in the Republic of Mauritius
(“Mauritius”). The Subsidiary in turn will normally invest at least 80% of its
total
assets in securities that comprise the Fund’s benchmark index, and depositary
receipts based on the securities in the Fund’s benchmark index. The India Index
is comprised of equity securities which are generally considered by
MarketGrader.com Corp. (the “Index provider”) to exhibit favorable fundamental
characteristics according to the Index provider’s proprietary scoring
methodology. For each company eligible for the India Index, the Index provider
creates a numerical score based on indicators measuring four fundamental
characteristics, derived from public company filings and stock prices. The four
fundamental characteristics are growth, value, profitability and cash flow. The
resulting score is a weighted average of these indicators. To be initially
eligible for inclusion in the India Index, companies must be domiciled in India
and listed on an eligible stock exchange, as determined by the Index provider.
From this universe of companies, the top-ranked names according to the Index
provider’s proprietary score are included, and then weighted according to their
free-float market capitalization.
As
of December 31, 2022, the India Index included 79 securities of companies with a
market capitalization range of between approximately $0.15 billion and $80
billion and a weighted average market capitalization of $14.9 billion. These
amounts are subject to change. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Adviser serves as investment adviser to both the Fund and the Subsidiary. Except
where otherwise indicated, the term “Fund,” as used throughout this Summary
Section, refers to the Fund and/or the Subsidiary, as applicable.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the India Index by investing in a portfolio of
securities that generally replicates the India Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the India Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the India Index.
The
Fund may become “non-diversified” as defined under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), solely as a result of a
change in relative market capitalization or index weighting of one or more
constituents of the India Index. This means that the Fund may invest a greater
percentage of its assets in a limited number of issuers than would be the case
if the Fund were always managed as a diversified management investment company.
The Fund intends to be diversified in approximately the same proportion as the
India Index. Shareholder approval will not be sought when the Fund crosses from
diversified to non-diversified status due solely to a change in the relative
market capitalization or index weighting of one or more constituents of the
India Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the India Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the information technology, basic materials, energy,
industrials and health care sectors represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in Indian Issuers.
Investments in securities of Indian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, greater government control
over the economy, including the risk that the Indian government may decide not
to continue to support economic reform programs, political and legal
uncertainty, competition from low-cost issuers of other emerging economies in
Asia, currency fluctuations or blockage of foreign currency exchanges and the
risk of nationalization or expropriation of assets. Issuers in India are subject
to less stringent requirements regarding accounting, auditing, financial
reporting and record keeping than are issuers in more developed markets, and
therefore, all material information may not be available or reliable. India is
also located in a part of the world that has historically been prone to natural
disasters, such as earthquakes and tsunamis. Any such natural disaster could
cause a significant impact on the Indian economy and could impact operations of
the Subsidiary, causing an adverse impact on the Fund. In addition, religious
and border disputes persist in India. Moreover, India has experienced civil
unrest and hostilities with neighboring countries, including Pakistan, and the
Indian government has confronted separatist movements in several Indian states.
India has experienced acts of terrorism that has targeted foreigners. Such acts
of terrorism have had a negative impact on tourism, an important sector of the
Indian economy.
The
securities market of India is considered an emerging market characterized by a
small number of listed companies with significantly smaller market
capitalizations, greater price volatility and substantially less liquidity than
developed markets, such as the United States. These factors, coupled with
restrictions on foreign investment and other factors, limit the supply of
securities available for investment by the Fund. This will affect the rate at
which the Fund is able to invest in India, the purchase and sale prices for such
securities and the timing of purchases and sales. Emerging markets can
experience high rates of inflation, deflation and currency devaluation. Certain
restrictions on foreign investment may decrease the liquidity of the Fund’s
portfolio or inhibit the Fund’s ability to pursue its investment objective. In
addition, the Reserve Bank of India, the Indian counterpart of the Federal
Reserve Bank in the United States, imposes certain limits on the foreign
ownership of Indian securities. These restrictions and/or
controls
may at times limit or prevent foreign investment in securities of issuers
located or operating in India and may inhibit the Fund’s ability to pursue its
investment objective.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases,
hyperinflation.
This has, in turn, led to high interest rates, extreme measures by governments
to keep inflation in check, and a generally debilitating effect on economic
growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market 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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United
States,
foreign governments, central banks or supranational entities, the imposition of
currency controls or other national or global political or economic
developments. The economies of certain emerging market countries can be
significantly affected by currency devaluations. Certain emerging market
countries may also have managed currencies which are maintained at artificial
levels relative to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum
times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Micro-Capitalization
Companies Risk.
Micro-capitalization companies are subject to substantially greater risks of
loss and price fluctuations because their earnings and revenues tend to be less
predictable (and some companies may be experiencing significant losses), and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market capitalizations. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell those securities.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for 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. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated
higher
average returns than fixed income securities, equity securities have generally
also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
Non-Diversification
Risk.
The Fund may become classified as
“non-diversified” under the Investment Company Act of 1940 solely as a result of
a change in relative market capitalization or index weighting of one or more
constituents of the its Index. If the Fund becomes non-diversified, it may
invest a greater portion of its assets in securities of a smaller number of
individual issuers than a diversified fund. As a result, changes in the market
value of a single investment could cause greater fluctuations in share price
than would occur in a more diversified
fund.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The
bar chart that follows shows how the Fund performed for the calendar years
shown. The table below the bar chart shows the Fund’s average annual returns
(before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by showing
the Fund’s performance from year to year and by showing how the Fund’s average
annual returns for the one year, five year, ten year and/or since inception
periods, as applicable, compared with the Fund’s benchmark index and a broad
measure of market performance. Prior to May 1, 2020, the Fund
sought to replicate as closely as possible, before fees and expenses, the price
and yield performance of the MVIS® India
Small-Cap Index (the “Prior Index”). Therefore, performance information prior to
May 1, 2020 reflects the performance of the Fund while seeking to track the
Prior Index. As a result, the Fund’s future performance may differ
substantially from the performance information shown below. All returns assume
reinvestment of dividends and
distributions. The Fund’s past performance
(before and after income taxes) is not necessarily indicative of how the Fund
will perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
43.41% |
2Q
2014 |
| Worst
Quarter: |
-38.49% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck India Growth Leaders ETF (return
before taxes) |
-21.99% |
-13.18% |
-2.09% |
|
|
VanEck India Growth Leaders ETF (return
after taxes on distributions) |
-21.89% |
-13.22% |
-2.29% |
|
|
VanEck India Growth Leaders ETF (return
after taxes on
distributions and sale of Fund
Shares) |
-12.38% |
-9.22% |
-1.52% |
|
|
MarketGrader India All-Cap Growth
Leaders Index (reflects no deduction for fees, expenses or taxes, except
withholding taxes)* |
-22.38% |
-12.03% |
-1.33% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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*Prior to May 1, 2020, the
Fund sought to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Prior Index. Therefore, the performance
information prior to May 1, 2020 reflects the performance of the Fund while
seeking to track the Prior Index. Prior to May 1, 2020, the index data included
in this table reflects that of the Prior Index. From May 1, 2020, the index data
reflects that of the India Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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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Peter
H. Liao |
Portfolio
Manager |
August
2010 |
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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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VANECK®
INDONESIA INDEX ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Indonesia Index ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Indonesia Index (the “Indonesia Index” or the
“Index”).
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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|
|
|
|
|
|
|
|
|
|
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Management
Fee |
0.50 |
% |
|
|
Other
Expenses |
0.17 |
% |
|
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|
|
|
Total
Annual Fund Operating Expenses(a) |
0.67 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.10 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.57 |
% |
|
|
|
|
|
(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.57% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
|
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|
YEAR |
EXPENSES |
|
|
1 |
$58 |
|
|
|
3 |
$204 |
|
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|
5 |
$363 |
|
|
|
10 |
$825 |
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
25% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Indonesia Index includes securities of Indonesian companies. A
company is generally considered to be an Indonesian company if it is
incorporated in Indonesia or is incorporated outside of Indonesia but has at
least 50% of its revenues/related assets in Indonesia. Such companies may
include small- and medium-capitalization companies. As of December 31, 2022, the
Indonesia Index
included
56 securities of companies with a market capitalization range of between
approximately $0.64 billion and $67.71 billion and a weighted average market
capitalization of $17.48 billion. These amounts are subject to change. The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Indonesia Index by investing in a portfolio of
securities that generally replicates the Indonesia Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Indonesia Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Indonesia Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Indonesia Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the financials, basic materials, energy,
communication services, consumer discretionary and consumer staples sectors
represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in Indonesian Issuers.
Investments in securities of Indonesian issuers, including issuers located
outside of Indonesia that generate significant revenues from Indonesia, involve
risks and special considerations not typically associated with investments in
the U.S. securities markets. Such heightened risks include, among others,
expropriation and/or nationalization of assets, restrictions on and government
intervention in international trade, confiscatory taxation, currency
devaluations, high rates of inflation, corruption, political instability,
including authoritarian and/or military involvement in governmental decision
making, sectarian and separatist violence, armed conflict, acts of terrorism,
the impact on the economy as a result of civil war, and social instability as a
result of religious, ethnic and/or socioeconomic unrest. In addition, the
Indonesian economy is dependent upon trade with other nations, including China,
Japan, Singapore and the United States. Adverse conditions or changes in
relationships with Indonesia’s major trading partners may significantly impact
the Indonesian economy. Indonesia has experienced acts of terrorism that have
targeted foreigners. Such acts of terrorism have had a negative impact on
tourism, an important sector of the Indonesian economy.
Indonesia
is considered an emerging market and its securities markets are characterized by
a small number of company listings and are underdeveloped and often considered
to be less correlated to global economic cycles than those markets located in
more developed countries. As a result, securities markets in Indonesia are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. Moreover,
trading on securities markets may be suspended altogether.
The
government in Indonesia may restrict or control to varying degrees the ability
of foreign investors to invest in securities of issuers located or operating in
Indonesia. These restrictions and/or controls may at times limit or prevent
foreign investment in securities of issuers located or operating in Indonesia.
Moreover, governmental approval or special licenses may be required prior to
investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer and may limit such
foreign investment to a certain class of securities of an issuer that may have
less advantageous rights than the classes available for purchase by
domiciliaries of Indonesia and/or impose additional taxes on foreign investors.
Indonesia’s securities laws are unsettled and judicial enforcement of contracts
with foreign entities is inconsistent and, as a result of pervasive corruption,
is subject to the risk that cases will not be judged impartially.
These
factors, among others, make investing in issuers located or operating in
Indonesia significantly riskier than investing in issuers located or operating
in more developed countries, and any one of them could cause a decline in the
value of the Fund’s Shares.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China that
generate significant revenues from China, involve certain risks and
considerations not typically associated with investments in U.S securities.
These risks include among others (i) more frequent (and potentially widespread)
trading
suspensions
and government interventions with respect to Chinese issuers resulting in a lack
of liquidity and in price volatility, (ii) currency revaluations and other
currency exchange rate fluctuations or blockage, (iii) the nature and extent of
intervention by the Chinese government in the Chinese securities markets,
whether such intervention will continue and the impact of such intervention or
its discontinuation, (iv) the risk of nationalization or expropriation of
assets, (v) the risk that the Chinese government may decide not to continue to
support economic reform programs, (vi) limitations on the use of brokers, (vii)
higher rates of inflation, (viii) greater political, economic and social
uncertainty, (ix) market volatility caused by any potential regional or
territorial conflicts or natural or other disasters, and (x) the risk of
increased trade tariffs, embargoes, sanctions, investment restrictions and other
trade limitations. Certain securities are, or may in the future become
restricted, and the Fund may be forced to sell such securities and incur a loss
as a result. In addition, the economy of China differs, often unfavorably, from
the U.S. economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, interest
rates, allocation of resources and capital reinvestment, among others. The
Chinese central government has historically exercised substantial control over
virtually every sector of the Chinese economy through administrative regulation
and/or state ownership and actions of the Chinese central and local government
authorities continue to have a substantial effect on economic conditions in
China. In addition, the Chinese government has from time to time taken actions
that influence the prices at which certain goods may be sold, encourage
companies to invest or concentrate in particular industries, induce mergers
between companies in certain industries and induce private companies to publicly
offer their securities to increase or continue the rate of economic growth,
control the rate of inflation or otherwise regulate economic expansion. The
Chinese government may do so in the future as well, potentially having a
significant adverse effect on economic conditions in China.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating
corporate
actions, and following corporate activity is not as well developed in emerging
market countries as is the case in certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market 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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order
to
fund such redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger
companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares
or
Shares may trade like closed-end funds at a discount (or premium) to net asset
value and possibly face trading halts and/or de-listing. This can be reflected
as a spread between the bid-ask prices for the Fund. The Authorized Participant
concentration risk may be heightened in cases where Authorized Participants have
limited or diminished access to the capital required to post collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. 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 net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows shows
how the Fund performed for the calendar years shown. The table below the bar
chart shows the Fund’s average annual returns (before and after
taxes).The bar chart and table provide
an indication of the risks of investing in the Fund by comparing the Fund’s
performance from year to year and by showing how the Fund’s average annual
returns for the one year, five year, ten year and/or since inception periods, as
applicable, compared with the Fund’s benchmark index and a broad
measure of market
performance. All returns assume reinvestment
of dividends and distributions. The Fund’s past performance (before and after
taxes) is not necessarily indicative of how the Fund will perform in the
future. Updated performance information is available online at
www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
30.40% |
4Q
2020 |
| Worst
Quarter: |
-43.35% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Indonesia Index ETF (return
before taxes) |
-9.88% |
-4.90% |
-2.83% |
|
|
VanEck Indonesia Index ETF (return
after taxes on distributions) |
-9.94% |
-5.00% |
-3.10% |
|
|
VanEck Indonesia Index ETF (return
after taxes on distributions and sale of Fund
Shares) |
-4.62% |
-3.24% |
-1.85% |
|
|
MVIS®
Indonesia Index (reflects no deduction for fees, expenses
or
taxes, except withholding taxes) |
-9.54% |
-4.65% |
-2.34% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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 |
|
|
Peter
H. Liao |
Portfolio
Manager |
January
2009 |
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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.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Israel ETF (the “Fund”)
seeks to replicate as closely as possible, before fees and expenses, the price
and yield performance of the BlueStar Israel Global Index®
(the “Israel Index” or the “Index”).
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 |
0.50 |
% |
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Other
Expenses |
0.14 |
% |
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|
|
Total
Annual Fund Operating Expenses(a) |
0.64 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.05 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.59 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.59% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$60 |
|
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|
3 |
$200 |
|
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|
5 |
$352 |
|
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|
10 |
$794 |
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
12% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Israel Index is comprised of equity securities, which may include
depositary receipts, of publicly traded companies that are generally considered
by MV Index Solutions GmbH (“MVIS” or the “Index provider”) to be Israeli
companies. The Index provider considers a range of factors such as domicile,
country of company formation/founding, primary location of management,
operations and/or research and development facilities, tax status, location of
revenues and employees, among others, when determining whether a company will be
included in the Israel Index. The Israel Index generally only includes the
largest and most liquid companies as well
as
medium-capitalization and small-capitalization companies that display sufficient
liquidity for global investors, as determined by the Index provider. The Fund
may also utilize depositary receipts to seek performance that corresponds to the
Fund’s benchmark index. Investments in depositary receipts of Israeli companies
whose securities are represented in the Israel Index will count towards
satisfaction of the Fund’s 80% investment policy. As of December 31, 2022, the
Israel Index included 101 securities of companies with a market capitalization
range of between approximately $0.33 billion and $15.83 billion and a weighted
average market capitalization of $7.60 billion. These amounts are subject to
change. The Fund’s 80% investment policy is non-fundamental and may be changed
without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Israel Index by investing in a portfolio of
securities that generally replicates the Israel Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Israel Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Israel Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Israel Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the information technology and financials sectors
represented a significant portion of the
Fund.
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.
Special
Risk Considerations of Investing in Israeli Issuers. Investments
in securities of Israeli issuers, including issuers located outside of Israel
that generate significant revenues from Israel, involve risks and special
considerations that are not typically associated with investments in the U.S.
securities markets. Israel’s economy depends on imports of certain key items
such as crude oil, natural gas, coal, grains, raw materials and military
equipment. Israel’s relations with the Palestinian Authority and its neighboring
countries such as Lebanon, Syria and Iran have at times been strained due to
territorial disputes, historical animosities or security concerns, which may
cause uncertainty in the Israeli markets and adversely affect the overall
economy. The Israeli economy is also dependent upon external trade with other
economies, notably the United States, China, Japan, Canada, and the European
Union. Reduction in spending on Israeli products and services or changes in any
of these other economies may adversely impact the Fund.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Micro-Capitalization
Companies Risk.
Micro-capitalization companies are subject to substantially greater risks of
loss and price fluctuations because their earnings and revenues tend to be less
predictable (and some companies may be experiencing significant losses), and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market capitalizations. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell those securities.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the
Index.
Therefore, errors and additional ad hoc rebalances carried out by the Index
provider or its agents to the Index may increase the costs to and the tracking
error risk of the Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. 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 net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after
taxes).The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
25.66% |
4Q
2020 |
| Worst
Quarter: |
-20.04% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Since
Inception (6/25/2013) |
|
|
VanEck Israel ETF (return before
taxes) |
-25.79% |
4.31% |
5.05% |
|
|
VanEck Israel ETF (return after taxes
on distributions) |
-25.68% |
4.30% |
4.84% |
|
|
VanEck Israel ETF (return after taxes
on distributions
and sale of Fund Shares) |
-14.75% |
3.60% |
4.10% |
|
|
BlueStar
Israel Global Index®
(reflects no deduction for fees,
expenses
or taxes, except withholding taxes) |
-25.61% |
4.73% |
5.47% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
11.85% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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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Peter
H. Liao |
Portfolio
Manager |
June
2013 |
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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.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Vietnam ETF (the “Fund”)
seeks to replicate as closely as possible, before fees and expenses, the price
and yield performance of the MarketVectorTM
Vietnam Local Index (the “Vietnam Index” or the
“Index”).
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 |
0.50 |
% |
|
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Other
Expenses |
0.16 |
% |
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|
|
Total
Annual Fund Operating Expenses(a) |
0.66 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.66 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.76% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
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 (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
|
|
1 |
$67 |
|
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3 |
$211 |
|
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|
5 |
$368 |
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|
10 |
$822 |
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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. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
57% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Vietnam Index consists of securities of Vietnamese companies. A
company is generally considered to be a Vietnamese company if it is incorporated
in Vietnam. Such companies may include small- and medium-capitalization
companies. As of March 31, 2023, the Vietnam Index included 41 securities of
companies with a market capitalization range of between approximately $0.19
billion and $18.43 billion and a weighted average market capitalization of $4.3
billion. The Fund’s 80% investment policy is non-fundamental and may be changed
without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Vietnam Index by investing in a portfolio of
securities that generally replicates the Vietnam Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Vietnam Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Vietnam Index.
The Fund is classified as a
non-diversified fund under the Investment Company Act of 1940, as amended (the
“Investment Company Act of 1940 Act”), and, therefore, may invest a greater
percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Vietnam Index concentrates in an industry or group of industries. As of
March 31, 2023, each of the financials, real estate, consumer staples and basic
materials sectors represented a significant portion of the Vietnam
Index.
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.
Special
Risk Considerations of Investing in Vietnamese Issuers. Investments
in securities of Vietnamese issuers, involve risks and special considerations
not typically associated with investments in the U.S. securities markets. Such
heightened risks include, among others, expropriation and/or nationalization of
assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, and social instability as a result of
religious, ethnic and/or socioeconomic unrest. Vietnam is dependent on trading
relationships with certain key trading partners, including the United States,
China and Japan, and as a result may be adversely affected if demand for
Vietnam’s exports in those nations decline or if there are regional disputes
involving those countries.
The
securities markets in Vietnam are underdeveloped and are often considered to be
less correlated to global economic cycles than those markets located in more
developed countries. As a result, securities markets in Vietnam are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, greater price fluctuations, uncertainty
regarding the existence of trading markets, governmental control, heavy
regulation of labor and industry and inflation. Vietnam has experienced, and may
in the future experience, a high inflation rate, which is at least partially a
result of the country’s large trade deficit. Due to governmental focus on
economic growth at the expense of currency stability, the inflation rate may
continue at a high level and economic stability could be threatened. Moreover,
trading on securities markets may be suspended altogether.
Regulations
in Vietnam may require the Fund to execute trades of securities of Vietnamese
companies through a single broker. As a result, the Adviser will have less
flexibility to choose among brokers on behalf of the Fund than is typically the
case for investment managers. In addition, because the process of purchasing
securities in Vietnam requires that payment to the local broker occur prior to
receipt of securities, failure of the broker to deliver the securities will
adversely affect the Fund.
The
government in Vietnam may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
Vietnam. These restrictions and/or controls may at times limit or prevent
foreign investment in securities of issuers located or operating in Vietnam.
Moreover, Vietnam may require governmental approval or special licenses prior to
investments by foreign investors and may also require governmental approval in
connection with the repatriation of capital by foreign investors. The Vietnamese
government may limit the amount of investments by foreign investors in a
particular industry and/or issuer and may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domiciliaries of Vietnam and/or
impose additional taxes on foreign investors. These factors, among others, make
investing in issuers located or operating in Vietnam significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the value of the Fund’s
Shares.
Real
Estate Sector Risk.
Companies in the real estate sector include companies that invest in real
estate, such as REITs and real estate management and development companies. The
Fund will be sensitive to changes in, and its performance will depend to a
greater extent on, the overall condition of the real estate sector. Companies
that invest in real estate are subject to the risks of owning real estate
directly as well as to risks that relate specifically to the way that such
companies operate, including management risk (such companies are dependent upon
the management skills of a few key individuals and may have limited financial
resources). Adverse economic, business or political developments affecting real
estate could have a major effect on the values of the Fund’s investments.
Investing in real estate is subject to such risks as decreases in real estate
values, overbuilding, increased competition and other risks related to local or
general economic conditions, increases in operating costs and property taxes,
changes in zoning laws, casualty or condemnation losses, possible environmental
liabilities, regulatory limitations on rent, possible lack of availability of
mortgage financing, market saturation, fluctuations in rental income and the
value of underlying properties and extended vacancies of properties. Certain
real estate securities have a relatively small market capitalization, which may
tend to increase the volatility of the market price of these securities. Real
estate securities have limited diversification and are,
therefore,
subject to risks inherent in operating and financing a limited number of
projects. Real estate securities are also subject to heavy cash flow dependency
and defaults by borrowers or tenants.
Consumer Staples Sector
Risk.
The Fund
will be sensitive to, and its performance will depend to a greater extent on,
the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Financials
Sector Risk. Companies
in the financials sector may be subject to extensive government regulation that
affects the scope of their activities, the prices they can charge and the amount
of capital they must maintain. The profitability of companies in the financials
sector may be adversely affected by increases in interest rates, by loan losses,
which usually increase in economic downturns, and by credit rating downgrades.
In addition, the financials sector is undergoing numerous changes, including
continuing consolidations, development of new products and structures and
changes to its regulatory framework. Furthermore, some companies in the
financials sector perceived as benefiting from government intervention in the
past may be subject to future government-imposed restrictions on their
businesses or face increased government involvement in their operations.
Increased government involvement in the financials sector, including measures
such as taking ownership positions in financial institutions, could result in a
dilution of the Fund’s investments in financial institutions.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Foreign
Securities Risk.
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
invests in securities of issuers located in countries whose economies are
heavily dependent upon trading with key partners. Any reduction in this trading
may have an adverse impact on the Fund’s investments. Foreign market trading
hours, clearance and settlement procedures, and holiday schedules may limit the
Fund's ability to buy and sell securities.
Emerging
and Frontier Market Issuers Risk.
Certain Funds invest in securities of emerging market issuers and frontier
market issuers. Frontier market countries generally have smaller economies and
less developed capital markets than traditional emerging markets, and, as a
result, the risks of investing in frontier market countries are magnified.
Investment in securities of emerging and frontier market issuers involves risks
not typically associated with investments in securities of issuers in more
developed countries that may negatively affect the value of your investment in
the Fund. Such heightened risks may include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in
international trade, confiscatory taxation, political instability, including
authoritarian and/or military involvement in governmental decision making, armed
conflict, the impact on the economy as a result of civil war, crime (including
drug violence) and social instability as a result of religious, ethnic and/or
socioeconomic unrest. Issuers in certain emerging and frontier market countries
are subject to less stringent requirements regarding accounting, auditing,
financial reporting and record keeping than are issuers in more developed
markets, and therefore, all material information may not be available or
reliable. Emerging and frontier markets are also more likely to experience
problems with the clearing and settling of trades, as well as the holding of
securities by local banks, agents and depositories. Low trading volumes and
volatile prices in less developed markets may make trades harder to complete and
settle, and governments or trade groups may compel local agents to hold
securities in designated depositories that may not be subject to independent
evaluation. Local agents are held only to the standards of care of their local
markets. In general, the less developed a country’s securities markets are, the
greater the likelihood of custody problems. Additionally, each of the factors
described below could have a negative impact on the Fund’s performance and
increase the volatility of the Fund.
Securities
Markets.
Securities markets in emerging and frontier market countries are underdeveloped
and are often considered to be less correlated to global economic cycles than
those markets located in more developed countries. Securities markets in
emerging and frontier market countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations, uncertainty regarding the
existence of trading markets, governmental control and heavy regulation of labor
and industry. These factors, coupled with restrictions on foreign investment and
other factors, limit the supply of securities available for investment by the
Fund. This will affect the rate at which the Fund is able to invest in emerging
and frontier market countries, the purchase and sale prices for such securities
and the timing of purchases and sales. Emerging and frontier markets can
experience high rates of inflation, deflation and currency devaluation. The
prices of certain securities listed on securities markets in emerging and
frontier market countries have been subject to sharp fluctuations and sudden
declines, and no assurance can be given as to the future
performance
of listed securities in general. Volatility of prices may be greater than in
more developed securities markets. Moreover, securities markets in emerging and
frontier market countries may be closed for extended periods of time or trading
on securities markets may be suspended altogether due to political or civil
unrest. Market volatility may also be heightened by the actions of a small
number of investors. Brokerage firms in emerging and frontier market countries
may be fewer in number and less established than brokerage firms in more
developed markets. Since the Fund may need to effect securities transactions
through these brokerage firms, the Fund is subject to the risk that these
brokerage firms will not be able to fulfill their obligations to the Fund. This
risk is magnified to the extent the Fund effects securities transactions through
a single brokerage firm or a small number of brokerage firms. In addition, the
infrastructure for the safe custody of securities and for purchasing and selling
securities, settling trades, collecting dividends, initiating corporate actions,
and following corporate activity is not as well developed in emerging and
frontier market countries as is the case in certain more developed
markets.
Political
and Economic Risk.
Certain emerging and frontier market countries have historically been subject to
political instability and their prospects are tied to the continuation of
economic and political liberalization in the region. Instability may result from
factors such as government or military intervention in decision making,
terrorism, civil unrest, extremism or hostilities between neighboring countries.
Any of these factors, including an outbreak of hostilities could negatively
impact the Fund’s returns. Extremist groups in certain countries in the Middle
East and North Africa region have traditionally held anti-Western views and are
opposed to openness to foreign investments. Egypt borders the Gaza Strip and
Israel and there are risks of further instability and violence in the region.
Limited political and democratic freedoms in emerging and frontier market
countries might cause significant social unrest. These factors may have a
significant adverse effect on an emerging or frontier market country’s
economy.
Many
emerging and frontier market countries may be heavily dependent upon
international trade and, consequently, may continue to be negatively affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which it trades. They also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they
trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging markets’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation.
This
has, in turn, led to high interest rates, extreme measures by governments to
keep inflation in check, and a generally debilitating effect on economic growth.
Although inflation in many countries has lessened, there is no guarantee it will
remain at lower levels. The political history of certain emerging market
countries has been characterized by political uncertainty, intervention by the
military in civilian and economic spheres, and political corruption. Such events
could reverse favorable trends toward market and economic reform, privatization,
and removal of trade barriers, and result in significant disruption in
securities markets in the region.
Also,
from time to time, certain issuers located in emerging and frontier market
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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market-oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities included in the Fund’s Index. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market-oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging or frontier market country may restrict or control
to varying degrees the ability of foreign investors to invest in securities of
issuers located or operating in such emerging and frontier market countries.
These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in emerging and
frontier market countries and may inhibit the Fund’s ability to track its Index.
In addition, the Fund may not be able to buy or sell securities or receive full
value for such securities. Moreover, certain emerging
and
frontier market countries may require governmental approval or special licenses
prior to investments by foreign investors and may limit the amount of
investments by foreign investors in a particular industry and/or issuer; may
limit such foreign investment to a certain class of securities of an issuer that
may have less advantageous rights than the classes available for purchase by
domiciliaries of such emerging and frontier market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging and
frontier market countries, and, as a result, the Fund may not be able to invest
in certain securities while approval is pending. The government of certain
emerging and frontier market countries may also withdraw or decline to renew a
license that enables the Fund to invest in such country. These factors make
investing in issuers located or operating in emerging and frontier market
countries significantly riskier than investing in issuers located or operating
in more developed countries, and any one of them could cause a decline in the
value of the Fund’s Shares.
Additionally,
investments in issuers located in certain emerging and frontier market countries
may be subject to a greater degree of risk associated with governmental approval
in connection with the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. Moreover, there is the
risk that if the balance of payments in an emerging or frontier market country
declines, the government of such country may impose temporary restrictions on
foreign capital remittances. Consequently, the Fund could be adversely affected
by delays in, or a refusal to grant, required governmental approval for
repatriation of capital, as well as by the application to the Fund of any
restrictions on investments. Furthermore, investments in emerging and frontier
market countries may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Fund.
Available
Disclosure About Emerging and Frontier Market Issuers.
Issuers located or operating in emerging and frontier market countries are not
subject to the same rules and regulations as issuers located or operating in
more developed countries. Therefore, there may be less financial and other
information publicly available with regard to issuers located or operating in
emerging and frontier market countries and such issuers are not subject to the
uniform accounting, auditing and financial reporting standards applicable to
issuers located or operating in more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in equity securities of issuers in emerging
and frontier market countries will generally be denominated in foreign
currencies, and the income received by the Fund from these investments will be
principally in foreign currencies. The value of an emerging or frontier market
country’s currency may be subject to a high degree of fluctuation. This
fluctuation may be due to changes in interest rates, the effects of monetary
policies issued by the United States, foreign governments, central banks or
supranational entities, the imposition of currency controls or other national or
global political or economic developments. The economies of certain emerging and
frontier market countries can be significantly affected by currency
devaluations. Certain emerging and frontier market countries may also have
managed currencies which are maintained at artificial levels relative to the
U.S. dollar rather than at levels determined by the market. This type of system
can lead to sudden and large adjustments in the currency which, in turn, can
have a disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging or frontier market country’s currency and changes
in value of such foreign currencies versus the U.S. dollar may reduce the Fund’s
investment performance and the value of your investment in the Fund. Meanwhile,
the Fund will compute and expects to distribute its income in U.S. dollars, and
the computation of income will be made on the date that the income is earned by
the Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging or frontier market country’s currency falls
relative to the U.S. dollar between the earning of the income and the time at
which the Fund converts the relevant emerging or frontier market country’s
currency to U.S. dollars, the Fund may be required to liquidate certain
positions in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements under the Internal Revenue Code.
The liquidation of investments, if required, could be at disadvantageous prices
or otherwise have an adverse impact on the Fund’s performance.
Certain
emerging and frontier market countries also restrict the free conversion of
their currency into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for many such currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund’s interests in securities denominated
in such currencies. Furthermore, if permitted, the Fund may incur costs in
connection with conversions between U.S. dollars and an emerging or frontier
market country’s currency. Foreign exchange dealers realize a profit based on
the difference between the prices at which they are buying and selling various
currencies. Thus, a dealer normally will offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging and frontier
market countries have less developed custody and settlement practices than
certain developed countries. Rules adopted under the Investment Company Act of
1940 permit the Fund to maintain its foreign securities and cash in the custody
of certain eligible non-U.S. banks and securities depositories. Banks in
emerging and frontier market countries that are eligible foreign sub-custodians
may be recently organized or otherwise lack extensive operating experience. In
addition, in certain emerging and
frontier
market countries there may be legal restrictions or limitations on the ability
of the Fund to recover assets held in custody by a foreign sub-custodian in the
event of the bankruptcy of the sub-custodian. Because settlement systems in
emerging and frontier market countries may be less organized than in other
developed markets, there may be a risk that settlement may be delayed and that
cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging and frontier market
countries, the Fund may be required to release local shares before receiving
cash payment or may be required to make cash payment prior to receiving local
shares, creating a risk that the Fund may surrender cash or securities without
ever receiving securities or cash from the other party. Settlement systems in
emerging and frontier market countries also have a higher risk of failed trades
and back to back settlements may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event of a redemption request from
an Authorized Participant, the Fund will be required to deliver U.S. dollars to
the Authorized Participant on the settlement date. In the event that the Fund is
not able to convert the foreign currency to U.S. dollars in time for settlement,
which may occur as a result of the delays described above, the Fund may be
required to liquidate certain investments and/or borrow money in order to fund
such redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain frontier and emerging market countries, the marketability of quoted
shares may be limited due to the restricted opening hours of stock exchanges,
and a narrow range of investors and a relatively high proportion of market value
may be concentrated in the hands of a relatively small number of shareholders.
In addition, because certain frontier and emerging market countries’ stock
exchanges on which the Fund’s portfolio securities may trade are open when the
Exchange is closed, the Fund may be subject to heightened risk associated with
market movements. Trading volume may be lower on certain frontier and emerging
market countries’ stock exchanges than on more developed securities markets and
equities may be generally less liquid. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of certain
frontier and emerging market countries are less developed than in certain other
markets and under certain circumstances this may result in the Fund experiencing
delays in settling and/or registering transactions in the markets in which it
invests, particularly if the growth of foreign and domestic investment in
certain frontier and emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging and frontier market countries may utilize share blocking
schemes. Share blocking refers to a practice, in certain foreign markets, where
voting rights related to an issuer’s securities are predicated on these
securities being blocked from trading at the custodian or sub-custodian level
for a period of time around a shareholder meeting. These restrictions have the
effect of barring the purchase and sale of certain voting securities within a
specified number of days before and, in certain instances, after a shareholder
meeting where a vote of shareholders will be taken. Share blocking may prevent
the Fund from buying or selling securities for a period of time. During the time
that shares are blocked, trades in such securities will not settle. The blocking
period can last up to several weeks. The process for having a blocking
restriction lifted can be quite onerous with the particular requirements varying
widely by country. In addition, in certain countries, the block cannot be
removed. As a result of the ramifications of voting ballots in markets that
allow share blocking, the Adviser, on behalf of the Fund, reserves the right to
abstain from voting proxies in those markets.
Corporate
and Securities Laws. Securities
laws in emerging and frontier market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
shareholder rights. Accordingly, foreign investors may be adversely affected by
new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging and frontier market issuers are subject may be less
advanced than those systems to which issuers located in more developed countries
are subject, and therefore, shareholders of issuers located in emerging and
frontier market countries may not receive many of the protections available to
shareholders of issuers located in more developed countries. In circumstances
where adequate laws and shareholder rights exist, it may not be possible to
obtain swift and equitable enforcement of the law. In addition, the enforcement
of systems of taxation at federal, regional and local levels in emerging and
frontier market countries may be inconsistent and subject to sudden change. The
Fund has limited rights and few practical remedies in emerging markets and the
ability of U.S. authorities to bring enforcement actions in emerging markets may
be limited.
Foreign Currency Risk.
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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the
underlying
foreign shares. The issuers of certain depositary receipts are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities. Investments in depositary receipts may be less liquid than
the underlying shares in their primary trading market. The issuers of depositary
receipts may discontinue issuing new depositary receipts and withdraw existing
depositary receipts at any time, which may result in costs and delays in the
distribution of the underlying assets to the Fund and may negatively impact the
Fund’s performance.
Small-
and Medium-Capitalization Companies Risk.
The
Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk. Unlike
other ETFs, the Fund expects to effect its creations and redemptions at least
partially for cash, rather than wholly for 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. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk.
The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those
returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Index Tracking Risk.
The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries,
certain
exchange listing standards (where applicable), a lack of liquidity in markets in
which such securities trade, potential adverse tax consequences or other
regulatory reasons (such as diversification requirements). To the extent the
Fund utilizes depositary receipts, the purchase of depositary receipts may
negatively affect the Fund’s ability to track the performance of the Index and
increase tracking error, which may be exacerbated if the issuer of the
depositary receipt discontinues issuing new depositary receipts or withdraws
existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk. 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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk. Unlike
many investment companies, the Fund is not “actively” managed. Therefore, unless
a specific security is removed from its Index, the Fund generally would not sell
a security because the security’s issuer is in financial trouble. If a specific
security is removed from the Fund’s Index, the Fund may be forced to sell such
security at an inopportune time or for prices other than at current market
values. An investment in the Fund involves risks similar to those of investing
in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different
time
than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell his or her Shares.
Issuer-Specific
Changes Risk. The
value of individual securities in the Fund’s portfolio can be more volatile than
the market as a whole and can perform differently from the value of the market
as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk. The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. 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 net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a
particular sector or sectors or industry or group of industries to reflect the
Index’s allocation to those types of securities. The securities of many or all
of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The
bar chart that follows shows how the Fund performed for the calendar years
shown. The table below the bar chart shows the Fund’s average annual returns
(before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. Prior to March 17, 2023, the
Fund sought to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS® Vietnam Index (the “Prior Index”).
Therefore, performance information prior to March 17, 2023 reflects the
performance of the Fund tracking the Prior Index. All returns
assume reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
27.92% |
2Q
2020 |
| Worst
Quarter: |
-34.24% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Vietnam ETF (return before
taxes)* |
-44.47% |
-6.94% |
-2.05% |
|
|
VanEck Vietnam ETF (return after taxes
on distributions) |
-44.64% |
-7.13% |
-2.65% |
|
|
VanEck Vietnam ETF (return after taxes
on distributions
and sale of Fund Shares) |
-26.28% |
-5.10% |
-1.68% |
|
|
MVIS®
Vietnam Index (reflects no deduction for fees, expenses or
taxes,
except withholding taxes) |
-44.02% |
-6.16% |
-1.03% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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*
Prior to March 17, 2023,
the Fund sought to replicate as closely as possible, before fees and expenses,
the price and yield performance of the Prior Index. Therefore, performance
information prior to March 17, 2023 reflects the performance of the Fund
tracking the Prior Index. Prior to March 17, 2023 the index data reflects that
of the Prior Index. From March 17, 2023, the index data will reflect that of the
Vietnam Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily 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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|
Peter
H. Liao |
Portfolio
Manager |
August
2009 |
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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 a Fund may only be purchased and sold in secondary market transactions
through a broker or dealer at a market price. Shares of the Funds are listed on
the Exchange, and because Shares trade at market prices rather than NAV, Shares
of the Funds 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 a 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 each 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
Each
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 FUNDS’ INVESTMENT STRATEGIES AND
RISKS |
PRINCIPAL
INVESTMENT STRATEGIES
The
Adviser anticipates that, generally, each Fund will hold or gain exposure to all
of the securities that comprise its benchmark index (the “Index”) in proportion
to their weightings in such Index. However, under various circumstances, it may
not be possible or practicable to purchase all of those securities in those
weightings. In these circumstances, a Fund may purchase a sample of securities
in its Index. There also may be instances in which the Adviser may choose to
underweight or overweight a security in a Fund’s Index, purchase securities not
in the Fund’s Index that the Adviser believes are appropriate to substitute for
certain securities in such Index or utilize various combinations of other
available investment techniques in seeking to replicate as closely as possible,
before fees and expenses, the price and yield performance of the Fund’s Index.
Each Fund may sell securities that are represented in its Index in anticipation
of their removal from its Index or purchase securities not represented in its
Index in anticipation of their addition to such Index. Each Fund may also, in
order to comply with the tax diversification requirements of the Internal
Revenue Code of 1986, as amended (the “Code”), temporarily invest in securities
not included in its Index that are expected to be highly correlated with the
securities included in its Index.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
Each
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees (the
“Board of Trustees”) of VanEck ETF Trust (the “Trust”) 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 FUNDS
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in each Fund’s
“Summary Information” section and additional (non-principal) risks, if
applicable. The risks checked in the chart below apply to each Fund as
indicated. For a description of the risks listed in the chart, please see
"Glossary – Investment Risks" below the chart. See also the Funds' Statement of
Additional Information for information on certain other investments in which
each Fund may invest and other investment techniques in which each Fund may
engage from time to time and related risks.
Investors
in a 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
a Fund involves a substantial degree of risk. An investment in a 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 a Fund, each of which
could significantly and adversely affect the value of an investment in a
Fund.
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| Risk |
Africa
Index ETF
(AFK) |
Brazil
Small-Cap ETF
(BRF) |
Digital
India ETF
(DGIN) |
Egypt
Index ETF
(EGPT) |
India
Growth Leaders ETF
(GLIN) |
Indonesia
Index ETF
(IDX) |
Israel
ETF
(ISRA) |
Vietnam
ETF
(VNM) |
| √
Principal Risk | X Additional Non-Principal Risk |
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| Authorized
Participant Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Basic
Materials Sector Risk |
√ |
|
|
√ |
√ |
√ |
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√ |
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| Cash
Transactions Risk |
√ |
√ |
√ |
√ |
√ |
|
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√ |
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| Communication
Services Sector Risk |
√ |
|
√ |
|
|
√ |
|
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|
|
|
|
|
|
| Consumer
Discretionary Sector Risk |
|
√ |
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|
√ |
|
|
| Consumer
Staples Sector Risk |
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√ |
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√ |
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| Depositary
Receipts Risk |
√ |
√ |
x |
√ |
√ |
√ |
√ |
√ |
| Derivatives
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
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| Emerging
and Frontier Market Issuers Risk |
√ |
|
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|
√ |
| Emerging
Market Issuers Risk |
|
√ |
√ |
√ |
√ |
√ |
|
|
| Energy
Sector Risk |
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√ |
√ |
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| Risk |
Africa
Index ETF
(AFK) |
Brazil
Small-Cap ETF
(BRF) |
Digital
India ETF
(DGIN) |
Egypt
Index ETF
(EGPT) |
India
Growth Leaders ETF
(GLIN) |
Indonesia
Index ETF
(IDX) |
Israel
ETF
(ISRA) |
Vietnam
ETF
(VNM) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Equity
Securities Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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| Financials
Sector Risk |
√ |
|
|
√ |
|
√ |
√ |
√ |
|
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|
|
| Floating
Rate Risk |
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|
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| Foreign
Currency Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
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| Foreign
Securities Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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| Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund
Shares |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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| Health
Care Sector Risk |
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√ |
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| Index-Related
Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Index
Tracking Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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| Industrials
Sector Risk |
|
√ |
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√ |
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| Information
Technology Sector Risk |
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|
√ |
√ |
√ |
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√ |
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| Issuer-Specific
Changes Risk |
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|
√ |
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√ |
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| Leverage
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
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| Market
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
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| Micro-Capitalization
Companies Risk |
|
√ |
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√ |
√ |
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√ |
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| No
Guarantee of Active Trading Market Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Non-Diversified
Risk |
|
|
√ |
√ |
|
√ |
√ |
√ |
| Non-Diversification
Risk |
|
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√ |
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| Operational
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Participation
Notes |
X |
X |
X |
X |
X |
X |
X |
X |
| Passive
Management Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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| Real
Estate Sector Risk |
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√ |
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√ |
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| Shareholder
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
| Small-
and Medium-Capitalization Companies Risk |
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|
√ |
√ |
√ |
√ |
√ |
√ |
| Small-Capitalization
Companies Risk |
√ |
√ |
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| Special
Risk Considerations of Investing in African Issuers |
√ |
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| Risk |
Africa
Index ETF
(AFK) |
Brazil
Small-Cap ETF
(BRF) |
Digital
India ETF
(DGIN) |
Egypt
Index ETF
(EGPT) |
India
Growth Leaders ETF
(GLIN) |
Indonesia
Index ETF
(IDX) |
Israel
ETF
(ISRA) |
Vietnam
ETF
(VNM) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Special
Risk Considerations of Investing in Brazilian Issuers |
|
√ |
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| Special
Risk Considerations of Investing in Chinese Issuers |
|
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√ |
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| Special
Risk Considerations of Investing in Egyptian Issuers |
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√ |
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| Special
Risk Considerations of Investing in Indian Issuers |
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√ |
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√ |
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| Special
Risk Considerations of Investing in Indonesian Issuers |
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√ |
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| Special
Risk Considerations of Investing in Israeli Issuers |
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√ |
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| Special
Risk Considerations of Investing in Nigerian Issuers |
√ |
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| Special
Risk Considerations of Investing in South African Issuers |
√ |
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| Special
Risk Considerations of Investing in Vietnamese Issuers |
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| Trading
Issues Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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| Utilities
Sector Risk |
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√ |
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GLOSSARY
– INVESTMENT RISKS
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Cash
Transactions Risk.
Unlike other ETFs, the Fund effects its creations and redemptions at least
partially for cash, rather than wholly for in-kind securities. Because the Fund
currently intends to effect all or a portion of 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
net
asset value to the extent such costs are not offset by a transaction fee payable
by an Authorized Participant. If the Fund recognizes a gain on these sales, this
generally will cause the Fund to recognize a 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.
Communication Services Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the communication services sector.
Companies in the communication services sector may be
affected by industry competition, substantial capital requirements, government
regulations and obsolescence of communications products and services due to
technological advancement.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Derivatives
Risk. Derivatives
and other similar instruments (referred to collectively as “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). Counterparty risk also refers to the related risks of
having concentrated exposure to such a counterparty. 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. The Fund may also face
the risk that it may not be able to meet margin and payment requirements and
maintain a derivatives position.
Derivatives
are also subject to operational and legal risks. Operational risk generally
refers to risk related to potential operational issues, including documentation
issues, settlement issues, system failures, inadequate controls, and human
errors. Legal risk generally refers to insufficient documentation, insufficient
capacity or authority of counterparty, or legality or enforceability of a
contract.
Under
Rule 18f-4 (the “derivatives rule”), funds need to trade derivatives and other
transactions that create future fund payment or delivery obligations subject to
a value-at-risk (“VaR”) leverage limit, and certain derivatives risk management
program and reporting requirements. Generally, these requirements apply unless a
fund qualifies as a “limited derivatives user,” as defined in the derivatives
rule. Under the derivatives rule, when a fund trades reverse repurchase
agreements or similar financing transactions, including certain tender option
bonds, it needs to aggregate the amount of indebtedness associated with the
reverse repurchase agreements or similar financing transactions with the
aggregate amount of any other senior securities representing indebtedness when
calculating the fund’s asset coverage ratio or treat all such transactions as
derivatives transactions. Reverse repurchase agreements or similar financing
transactions aggregated with other indebtedness do not need to be included in
the calculation of whether a fund is a limited derivatives user, but for funds
subject to the VaR testing, reverse repurchase agreements and similar financing
transactions must be included for purposes of such testing whether treated as
derivatives transactions or not. The Securities and Exchange Commission also
provided guidance in connection with the derivatives rule regarding use of
securities lending collateral that may limit a fund's securities lending
activities. In addition, under the derivatives rule, the Fund is permitted to
invest in a security on a when-issued or forward-settling basis, or with a
non-standard settlement cycle, and the transaction will be deemed not to involve
a senior security under the Investment Company Act of 1940, provided that (i)
the Fund intends to physically settle the transaction and (ii) the transaction
will settle within 35 days of its trade date (the “Delayed-Settlement Securities
Provision”). The Fund may otherwise engage in such transactions that do not meet
the conditions of the Delayed-Settlement Securities Provision so long as the
Fund treats any such transaction as a “derivatives transaction” for purposes of
compliance with the derivatives rule. Furthermore, under the derivatives rule,
the Fund will be permitted to enter into an unfunded commitment agreement, and
such unfunded commitment agreement will not be subject to the asset coverage
requirements under the Investment Company Act of 1940, if the Fund reasonably
believes, at the time it enters into such agreement, that it will have
sufficient cash and cash equivalents to meet its obligations with respect to all
such agreements as they come due.
Emerging
and Frontier Market Issuers Risk.
Certain Funds invest in securities of emerging market issuers and frontier
market issuers. Frontier market countries generally have smaller economies and
less developed capital markets than traditional emerging markets, and, as a
result, the risks of investing in frontier market countries are magnified.
Investment in securities of emerging and frontier market issuers involves risks
not typically associated with investments in securities of issuers in more
developed countries that may negatively affect the value of your investment in
the Fund. Such heightened risks may include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in
international trade, confiscatory taxation, political instability, including
authoritarian and/or military involvement in governmental decision making, armed
conflict, the impact on the economy as a result of civil war, crime (including
drug violence) and social instability as a result of religious, ethnic and/or
socioeconomic unrest. Issuers in certain emerging and frontier market countries
are subject to less stringent requirements regarding accounting, auditing,
financial reporting and record keeping than are issuers in more developed
markets, and therefore, all material information may not be available or
reliable. Emerging and frontier markets are also more likely to experience
problems with the clearing and settling of trades, as well as the holding of
securities by local banks, agents and depositories. Low trading volumes and
volatile prices in less developed markets may make trades harder to complete and
settle, and governments or trade groups may compel local agents to hold
securities in designated depositories that may not be subject to independent
evaluation. Local agents are held only to the standards of care of their local
markets. In general, the less developed a country’s securities markets are, the
greater the likelihood of custody problems. Additionally, each of the factors
described below could have a negative impact on the Fund’s performance and
increase the volatility of the Fund.
Securities
Markets.
Securities markets in emerging and frontier market countries are underdeveloped
and are often considered to be less correlated to global economic cycles than
those markets located in more developed countries. Securities markets in
emerging and frontier market countries are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations, uncertainty regarding the
existence of trading markets, governmental control and heavy regulation of labor
and industry. These factors, coupled with restrictions on foreign investment and
other factors, limit the supply of securities available for investment by the
Fund. This will affect the rate at which the Fund is able to invest in emerging
and frontier market countries, the purchase and sale prices for such securities
and the timing of purchases and sales. Emerging and frontier markets can
experience high rates of inflation, deflation and currency devaluation. The
prices of certain securities listed on securities markets in emerging and
frontier market countries have been subject to sharp fluctuations and sudden
declines, and no assurance can be given as to the future performance of listed
securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging and
frontier market countries may be closed for extended periods of time or trading
on securities markets may be suspended altogether due to political or civil
unrest. Market volatility may also be heightened by the actions of a small
number of investors. Brokerage firms in emerging and frontier market countries
may be fewer in number and less established than brokerage firms in more
developed markets. Since the Fund may need to effect securities transactions
through these brokerage firms, the Fund is subject to the risk that these
brokerage firms will not be able to fulfill their obligations to the Fund. This
risk is magnified to the extent the Fund effects securities transactions through
a single
brokerage
firm or a small number of brokerage firms. In addition, the infrastructure for
the safe custody of securities and for purchasing and selling securities,
settling trades, collecting dividends, initiating corporate actions, and
following corporate activity is not as well developed in emerging and frontier
market countries as is the case in certain more developed markets.
Political
and Economic Risk.
Certain emerging and frontier market countries have historically been subject to
political instability and their prospects are tied to the continuation of
economic and political liberalization in the region. Instability may result from
factors such as government or military intervention in decision making,
terrorism, civil unrest, extremism or hostilities between neighboring countries.
Any of these factors, including an outbreak of hostilities could negatively
impact the Fund’s returns. Extremist groups in certain countries in the Middle
East and North Africa region have traditionally held anti-Western views and are
opposed to openness to foreign investments. Egypt borders the Gaza Strip and
Israel and there are risks of further instability and violence in the region.
Limited political and democratic freedoms in emerging and frontier market
countries might cause significant social unrest. These factors may have a
significant adverse effect on an emerging or frontier market country’s
economy.
Many
emerging and frontier market countries may be heavily dependent upon
international trade and, consequently, may continue to be negatively affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which it trades. They also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they
trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging markets’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation.
This
has, in turn, led to high interest rates, extreme measures by governments to
keep inflation in check, and a generally debilitating effect on economic growth.
Although inflation in many countries has lessened, there is no guarantee it will
remain at lower levels. The political history of certain emerging market
countries has been characterized by political uncertainty, intervention by the
military in civilian and economic spheres, and political corruption. Such events
could reverse favorable trends toward market and economic reform, privatization,
and removal of trade barriers, and result in significant disruption in
securities markets in the region.
Also,
from time to time, certain issuers located in emerging and frontier market
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.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market-oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities included in the Fund’s Index. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market-oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging or frontier market country may restrict or control
to varying degrees the ability of foreign investors to invest in securities of
issuers located or operating in such emerging and frontier market countries.
These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in emerging and
frontier market countries and may inhibit the Fund’s ability to track its Index.
In addition, the Fund may not be able to buy or sell securities or receive full
value for such securities. Moreover, certain emerging and frontier market
countries may require governmental approval or special licenses prior to
investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer; may limit such foreign
investment to a certain class of securities of an issuer that may have less
advantageous rights than the classes available for purchase by domiciliaries of
such emerging and frontier market countries; and/or may impose additional taxes
on foreign investors. A delay in obtaining a required government approval or a
license would delay investments in those emerging and frontier market countries,
and, as a result, the Fund may not be able to invest in certain securities while
approval is pending. The government of certain emerging and frontier market
countries may also withdraw or decline to renew a license that
enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging and frontier market countries significantly
riskier than investing in issuers located or operating in more developed
countries, and any one of them could cause a decline in the value of the Fund’s
Shares.
Additionally,
investments in issuers located in certain emerging and frontier market countries
may be subject to a greater degree of risk associated with governmental approval
in connection with the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. Moreover, there is the
risk that if the balance of payments in an emerging or frontier market country
declines, the government of such country may impose temporary restrictions on
foreign capital remittances. Consequently, the Fund could be adversely affected
by delays in, or a refusal to grant, required governmental approval for
repatriation of capital, as well as by the application to the Fund of any
restrictions on investments. Furthermore, investments in emerging and frontier
market countries may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Fund.
Available
Disclosure About Emerging and Frontier Market Issuers.
Issuers located or operating in emerging and frontier market countries are not
subject to the same rules and regulations as issuers located or operating in
more developed countries. Therefore, there may be less financial and other
information publicly available with regard to issuers located or operating in
emerging and frontier market countries and such issuers are not subject to the
uniform accounting, auditing and financial reporting standards applicable to
issuers located or operating in more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in equity securities of issuers in emerging
and frontier market countries will generally be denominated in foreign
currencies, and the income received by the Fund from these investments will be
principally in foreign currencies. The value of an emerging or frontier market
country’s currency may be subject to a high degree of fluctuation. This
fluctuation may be due to changes in interest rates, the effects of monetary
policies issued by the United States, foreign governments, central banks or
supranational entities, the imposition of currency controls or other national or
global political or economic developments. The economies of certain emerging and
frontier market countries can be significantly affected by currency
devaluations. Certain emerging and frontier market countries may also have
managed currencies which are maintained at artificial levels relative to the
U.S. dollar rather than at levels determined by the market. This type of system
can lead to sudden and large adjustments in the currency which, in turn, can
have a disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging or frontier market country’s currency and changes
in value of such foreign currencies versus the U.S. dollar may reduce the Fund’s
investment performance and the value of your investment in the Fund. Meanwhile,
the Fund will compute and expects to distribute its income in U.S. dollars, and
the computation of income will be made on the date that the income is earned by
the Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging or frontier market country’s currency falls
relative to the U.S. dollar between the earning of the income and the time at
which the Fund converts the relevant emerging or frontier market country’s
currency to U.S. dollars, the Fund may be required to liquidate certain
positions in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements under the Internal Revenue Code.
The liquidation of investments, if required, could be at disadvantageous prices
or otherwise have an adverse impact on the Fund’s performance.
Certain
emerging and frontier market countries also restrict the free conversion of
their currency into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for many such currencies and it would, as a
result, be difficult for the Fund to engage in foreign currency transactions
designed to protect the value of the Fund’s interests in securities denominated
in such currencies. Furthermore, if permitted, the Fund may incur costs in
connection with conversions between U.S. dollars and an emerging or frontier
market country’s currency. Foreign exchange dealers realize a profit based on
the difference between the prices at which they are buying and selling various
currencies. Thus, a dealer normally will offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging and frontier
market countries have less developed custody and settlement practices than
certain developed countries. Rules adopted under the Investment Company Act of
1940 permit the Fund to maintain its foreign securities and cash in the custody
of certain eligible non-U.S. banks and securities depositories. Banks in
emerging and frontier market countries that are eligible foreign sub-custodians
may be recently organized or otherwise lack extensive operating experience. In
addition, in certain emerging and frontier market countries there may be legal
restrictions or limitations on the ability of the Fund to recover assets held in
custody by a foreign sub-custodian in the event of the bankruptcy of the
sub-custodian. Because settlement systems in emerging and frontier market
countries may be less organized than in other developed markets, there may be a
risk that settlement may be delayed and that cash or securities of the Fund may
be in jeopardy because of failures of or defects in the systems. Under the laws
in many emerging and frontier market countries, the Fund may be required to
release local shares before receiving cash payment or may be required to make
cash payment prior to receiving local shares, creating a risk that the Fund may
surrender cash or securities without ever receiving securities or cash from the
other party. Settlement systems
in
emerging and frontier market countries also have a higher risk of failed trades
and back to back settlements may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event of a redemption request from
an Authorized Participant, the Fund will be required to deliver U.S. dollars to
the Authorized Participant on the settlement date. In the event that the Fund is
not able to convert the foreign currency to U.S. dollars in time for settlement,
which may occur as a result of the delays described above, the Fund may be
required to liquidate certain investments and/or borrow money in order to fund
such redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain frontier and emerging market countries, the marketability of quoted
shares may be limited due to the restricted opening hours of stock exchanges,
and a narrow range of investors and a relatively high proportion of market value
may be concentrated in the hands of a relatively small number of shareholders.
In addition, because certain frontier and emerging market countries’ stock
exchanges on which the Fund’s portfolio securities may trade are open when the
Exchange is closed, the Fund may be subject to heightened risk associated with
market movements. Trading volume may be lower on certain frontier and emerging
market countries’ stock exchanges than on more developed securities markets and
equities may be generally less liquid. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of certain
frontier and emerging market countries are less developed than in certain other
markets and under certain circumstances this may result in the Fund experiencing
delays in settling and/or registering transactions in the markets in which it
invests, particularly if the growth of foreign and domestic investment in
certain frontier and emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging and frontier market countries may utilize share blocking
schemes. Share blocking refers to a practice, in certain foreign markets, where
voting rights related to an issuer’s securities are predicated on these
securities being blocked from trading at the custodian or sub-custodian level
for a period of time around a shareholder meeting. These restrictions have the
effect of barring the purchase and sale of certain voting securities within a
specified number of days before and, in certain instances, after a shareholder
meeting where a vote of shareholders will be taken. Share blocking may prevent
the Fund from buying or selling securities for a period of time. During the time
that shares are blocked, trades in such securities will not settle. The blocking
period can last up to several weeks. The process for having a blocking
restriction lifted can be quite onerous with the particular requirements varying
widely by country. In addition, in certain countries, the block cannot be
removed. As a result of the ramifications of voting ballots in markets that
allow share blocking, the Adviser, on behalf of the Fund, reserves the right to
abstain from voting proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging and frontier market countries are relatively new and
unsettled and, consequently, there is a risk of rapid and unpredictable change
in laws regarding foreign investment, securities regulation, title to securities
and shareholder rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging and frontier market issuers are subject may be less
advanced than those systems to which issuers located in more developed countries
are subject, and therefore, shareholders of issuers located in emerging and
frontier market countries may not receive many of the protections available to
shareholders of issuers located in more developed countries. In circumstances
where adequate laws and shareholder rights exist, it may not be possible to
obtain swift and equitable enforcement of the law. In addition, the enforcement
of systems of taxation at federal, regional and local levels in emerging and
frontier market countries may be inconsistent and subject to sudden change. The
Fund has limited rights and few practical remedies in emerging markets and the
ability of U.S. authorities to bring enforcement actions in emerging markets may
be limited.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption
may
significantly impact companies in this sector. Significant oil and gas deposits
are located in emerging markets countries where corruption and security may
raise significant risks, in addition to the other risks of investing in emerging
markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. For example, an adverse event, such as an
unfavorable earnings report, may result in a decline in the value of equity
securities of an issuer held by the Fund; the price of the equity securities of
an issuer may be particularly sensitive to general movements in the securities
markets; or a drop in the securities markets may depress the price of most or
all of the equities securities held by the Fund. In addition, the equity
securities of an issuer in the Fund’s portfolio may decline in price if the
issuer fails to make anticipated dividend payments. Equity securities are
subordinated to preferred securities and debt in a company’s capital structure
with respect to priority to a share of corporate income, and therefore will be
subject to greater dividend risk than preferred securities or debt instruments.
In addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Foreign Currency Risk. 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. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Several
factors may affect the price of euros and the British pound sterling, including
the debt level and trade deficit of the Economic and Monetary Union and the
United Kingdom, inflation and interest rates of the Economic and Monetary Union
and the United Kingdom and investors’ expectations concerning inflation and
interest rates and global or regional political, economic or financial events
and situations. The European financial markets have experienced, and may
continue to experience, volatility and have been adversely affected by concerns
about economic downturns, credit rating downgrades, rising government debt
levels and possible default on or restructuring of government debt in several
European countries. These events have adversely affected, and may in the future
affect, the value and exchange rate of the euro and may continue to
significantly affect the economies of every country in Europe, including
European Union member countries that do not use the euro and non-European Union
member countries. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the United Kingdom’s withdrawal from the European Union and the
subsequent transition period, there is likely to be considerable uncertainty as
to the United Kingdom’s post-transition framework. Significant uncertainty
exists regarding the effects such withdrawal will have on the euro, European
economies and the global markets. In addition, one or more countries may abandon
the euro and the impact of these actions, especially if conducted in a
disorderly manner, may have significant and far-reaching consequences on the
euro.
The
value of certain emerging market countries’ currencies may be subject to a high
degree of fluctuation. This fluctuation may be due to changes in interest rates,
investors’ expectations concerning inflation and interest rates, the emerging
market country’s debt levels and trade deficit, the effects of monetary policies
issued by the United States, foreign governments, central banks or supranational
entities, the imposition of currency controls or other national or global
political or economic developments. For
example,
certain emerging market countries have experienced economic challenges and
liquidity issues with respect to their currency. The economies of certain
emerging market countries can be significantly affected by currency
devaluations. Certain emerging market countries may also have managed currencies
which are maintained at artificial levels relative to the U.S. dollar rather
than at levels determined by the market. This type of system could lead to
sudden and large adjustments in the currency, which in turn, may have a negative
effect on the Fund and its investments.
Foreign
Securities Risk.
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 invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
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. 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.
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 further 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.
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 net asset value or to the intraday value of the Fund’s holdings.
The net asset value of the Shares will fluctuate with changes in the market
value of the Fund’s securities holdings. The market price of Shares may
fluctuate, in some cases materially, in accordance with changes in net asset
value and the intraday value of the Fund’s holdings, as well as supply and
demand on the Exchange. Shares may trade below, at or above their net asset
value. 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 net asset value 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 net asset value or sells Shares at a
time when the market price is at a discount to the net asset value, 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 net asset value. In addition, because certain of the Fund’s underlying
securities may trade on exchanges that are closed when 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 net asset value 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’ net asset value 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.
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 net
asset value, and the discount is likely to be greatest during significant market
volatility.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Health
care companies are subject to competitive forces that may make it difficult to
raise prices and, in fact, may result in price discounting. Many new products in
the health care sector may be subject to regulatory approvals. The process of
obtaining such approvals may be long and costly. Companies in the health care
sector may be thinly capitalized and may be susceptible to product
obsolescence.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to those types of
securities. The securities of many or all of the companies in the same sector or
industry may decline in value due to developments adversely affecting such
sector or industry. By concentrating its assets in a particular sector or
sectors or industry or group of industries, the Fund is subject to the risk that
economic, political or other conditions that have a negative effect on those
sectors and/or industries may negatively impact the Fund to a greater extent
than if the Fund’s assets were invested in a wider variety of
securities.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index, or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Unusual market conditions may cause the Index provider to postpone a
scheduled rebalance, which could cause the Index to vary from its normal or
expected composition. There is no assurance that the Index provider or any
agents that may act on its behalf will compile the Index accurately, or that the
Index will be determined, composed or calculated accurately. Errors in respect
of the quality, accuracy and completeness of the data used to compile the Index
may occur from time to time and may not be identified and corrected by the Index
provider, particularly where the indices are less commonly used as benchmarks by
funds or managers. Therefore, gains, losses or costs associated with errors of
the Index provider or its agents will generally be borne by the Fund and its
shareholders. For example, during a period where the Index contains incorrect
constituents, the Fund would have market exposure to such constituents and would
be underexposed to the Index’s other constituents. Such errors may negatively or
positively impact the Fund and its shareholders.
When
the Index is rebalanced and the Fund in turn rebalances its portfolio to attempt
to increase the correlation between the Fund’s portfolio and the Index, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne directly by the Fund and its shareholders. The Fund may not be
fully invested at times either as a result of cash flows into the Fund or
reserves of cash held by the Fund to pay expenses or to meet redemptions. In
addition, the Fund may not invest in certain securities and/or other assets
included in the Index, or invest in them in the exact proportions in which they
are represented in the Index. The Fund’s performance may also deviate from the
return of the Index for a variety of reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). A lack of liquidity may be due
to various events, including market events, economic conditions or investor
perceptions. Illiquid securities may be difficult to value and their value may
be lower than the market price of comparable liquid securities, which would
negatively affect the Fund’s performance. Moreover, the Fund may be delayed in
purchasing or selling securities included in the Index. When markets are
volatile, the ability to sell securities at fair value prices may be adversely
impacted and may result in additional trading costs and/or increase the index
tracking risk. To the extent the Fund encounters any issues with regard to
currency convertibility (including the cost of borrowing funds, if any),
repatriation or economic sanctions, such
issues
may also increase index tracking risk. The Fund may also need to rely on
borrowings to meet redemptions, which may lead to increased expenses. For tax
efficiency purposes, the Fund may sell certain securities, and such sale may
cause the Fund to realize a loss and deviate from the performance of the Index.
The Fund’s performance may also deviate from the performance of the Index due to
the impact of withholding taxes, late announcements relating to changes to the
Index and high turnover of the Index.
The
Fund may fair value certain of its investments, underlying currencies and/or
other assets. To the extent the Fund calculates its net asset value based on
fair value prices and the value of the Index is based on securities’ closing
prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices) or if the Fund
otherwise calculates its net asset value based on prices that differ from those
used in calculating the Index, the Fund’s ability to track the Index may be
adversely affected. The need to comply with the tax diversification and other
requirements of the Internal Revenue Code may also impact the Fund’s ability to
track the performance of the Index. In addition, if the Fund utilizes depositary
receipts or other derivative instruments, its return may not correlate as well
with the return of the Index as would be the case if the Fund purchased all the
securities in the Index directly. To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts. Actions taken
in response to proposed corporate actions could also result in increased
tracking error. In light of the factors discussed above, the Fund’s return may
deviate significantly from the return of the Index.
Apart
from scheduled rebalances, the Index provider or its agents may carry out
additional ad hoc rebalances to the Index in order, for example, to correct an
error in the selection of index constituents. When the Index is rebalanced and
the Fund in turn rebalances its portfolio to attempt to increase the correlation
between the Fund’s portfolio and the Index, any transaction costs and market
exposure arising from such portfolio rebalancing will be borne directly by the
Fund and its shareholders. Therefore, errors and additional ad hoc rebalances
carried out by the Index provider to the Index may increase the costs to and the
tracking error risk of the Fund.
Index
tracking risk may be heightened during times of increased market volatility or
other unusual market conditions. Changes to the composition of the Index in
connection with a rebalancing or reconstitution of the Index may cause the Fund
to experience increased volatility, during which time the Fund’s index tracking
risk may be heightened.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
The
stock prices of companies in the industrials sector are affected by supply and
demand both for their specific product or service and for industrial sector
products in general. The products of manufacturing companies may face product
obsolescence due to rapid technological developments and frequent new product
introduction. In addition, the industrials sector may also be adversely affected
by changes or trends in commodity prices, which may be influenced or
characterized by unpredictable factors.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Leverage
Risk.
To the extent that the Fund borrows money or utilizes certain derivatives, it
may be leveraged. Leveraging generally exaggerates the effect on net asset value
of any increase or decrease in the market value of the Fund’s portfolio
securities. The Fund is required to comply with the derivatives rule when it
engages in transactions that create future Fund payment or delivery obligations.
The Fund is required to comply with the asset coverage requirements under the
Investment Company Act of 1940 when it engages in borrowings and/or transactions
treated as borrowings.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Micro-Capitalization
Companies Risk.
The Fund may invest in micro-capitalization companies. These companies are
subject to substantially greater risks of loss and price fluctuations because
their earnings and revenues tend to be less predictable (and some companies may
be experiencing significant losses), and their share prices tend to be more
volatile and their markets less liquid than companies with larger market
capitalizations. Micro-capitalization companies may be newly formed or in the
early stages of development, with limited product lines, markets or financial
resources and may lack management depth. In addition, there may be less public
information available about these companies. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell these securities. Also, it may take a long time before
the Fund realizes a gain, if any, on an investment in a micro-capitalization
company.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Van
Eck Securities Corporation, the distributor of the Shares, 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 Authorized Participants creating and redeeming directly
with the Fund.
Decisions
by market makers or Authorized Participants to reduce their role or “step away”
from these activities in times of market stress could inhibit the effectiveness
of the arbitrage process in maintaining the relationship between the underlying
value of the 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 net asset value and also in greater than normal intraday
bid/ask spreads for Fund Shares.
Non-Diversification
Risk.
The Fund may become classified as “non-diversified” under the Investment Company
Act of 1940 solely as a result of a change in relative market capitalization or
index weighting of one or more constituents of the its Index. If the Fund
becomes non-diversified, it may invest a greater portion of its assets in
securities of a smaller number of individual issuers than a diversified fund. As
a result, changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a more diversified
fund.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified” fund under the Investment Company
Act of 1940. 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 net asset value and may make
the Fund more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
Participation
Notes.
Participation notes (“P-Notes”) are issued by banks or broker-dealers and are
designed to offer a return linked to the performance of a particular underlying
equity security or market. P-Notes can have the characteristics or take the form
of various instruments, including, but not limited to, certificates or warrants.
The holder of a P-Note that is linked to a particular underlying security is
entitled to receive any dividends paid in connection with the underlying
security. However, the holder of a P-Note generally does not receive voting
rights as it would if it directly owned the underlying security. P-Notes
constitute direct, general and unsecured contractual obligations of the banks or
broker-dealers that issue them, which therefore subject the Fund to counterparty
risk.
Investments
in P-Notes involve certain risks in addition to those associated with a direct
investment in the underlying foreign securities or foreign securities markets
whose return they seek to replicate. For instance, there can be no assurance
that the trading price of a P-Note will equal the value of the underlying
foreign security or foreign securities market that it seeks to replicate. As the
purchaser of a P-Note, the Fund is relying on the creditworthiness of the
counterparty issuing the P-Note and has no rights under a P-Note against the
issuer of the underlying security. Therefore, if such counterparty were to
become insolvent or default on its obligations, the Fund would lose its
investment. The risk that the Fund may lose its investments due to the
insolvency of a single counterparty may be amplified to the extent the Fund
purchases P-Notes issued by one issuer or a small number of issuers. P-Notes
also include transaction costs in addition to those applicable to a direct
investment in securities. In addition, the Fund’s use of P-Notes may cause the
Fund’s performance to deviate from the performance of the portion of the Index
to which the Fund is gaining exposure through the use of P-Notes.
Due
to liquidity and transfer restrictions, the secondary markets on which P-Notes
are traded may be less liquid than the markets for other securities, which may
lead to the absence of readily available market quotations for securities in the
Fund’s portfolio and may cause the value of the P-Notes to decline. The ability
of the Fund to value its securities may become more difficult and the Adviser’s
judgment in the application of fair value procedures may play a greater role in
the valuation of the Fund’s securities due
to
reduced availability of reliable objective pricing data. Consequently, while
such determinations will be made in good faith, it may nevertheless be more
difficult for the Fund to accurately assign a daily value to such
securities.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Shareholder
Risk. Certain
shareholders, including other funds advised by the Adviser, may from time to
time own a substantial amount of the Fund’s Shares. In addition, a third party
investor, the Adviser or an affiliate of the Adviser, an Authorized Participant,
a market maker, or another entity may invest in the Fund and hold its investment
for a limited period of time. There can be no assurance that any large
shareholder would not redeem its investment. Redemptions by shareholders could
have a negative impact on the Fund. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
exchange and may, therefore, have a material effect on the market price of the
Shares.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Special
Risk Considerations of Investing in African Issuers. Investments
in securities of African issuers, including issuers located outside of Africa
that generate significant revenues from Africa, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in
international trade, confiscatory taxation, political instability, including
authoritarian and/or military involvement in governmental decision making, armed
conflict, terrorism, infectious disease outbreaks, strained international
relations related to border disputes, the impact on the economy as a result of
civil war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest and, in certain countries, genocidal warfare. Unanticipated
political or social developments may result in sudden and significant investment
losses. Additionally, Africa is located in a part of the world that has
historically been prone to natural disasters, such as droughts, and is
economically sensitive to environmental events.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than those markets located in more
developed countries or geographic regions. A subset of African emerging market
countries are considered to be “frontier markets.” Frontier market countries
generally have smaller economies and less developed capital markets than
traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier market countries. In
addition, there may be no single centralized securities exchange on which
securities are traded. As a result, securities markets in Africa are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, inflation, greater price fluctuations,
uncertainty regarding the existence of trading markets, governmental control and
heavy regulation of labor and industry. Additionally, certain countries in
Africa generally have less developed capital markets than traditional emerging
market countries and, consequently, the risks of investing in foreign securities
are magnified in such countries. There may also be a high concentration of
trading volume in a small number of issuers, investors and financial
intermediaries representing a limited number of sectors or industries. Brokers
may be fewer in number and less well capitalized than brokers in more developed
regions. Moreover, trading on securities markets may be suspended
altogether.
Certain
economies in African countries depend to a significant degree upon exports of
primary commodities such as agricultural products, gold, silver, copper,
diamonds and oil. These economies therefore are vulnerable to changes in
commodity prices, which in turn may be affected by a variety of factors.
Additionally, certain issuers 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. As a result, an issuer may sustain
damage to its reputation if it is identified as an issuer which operates in, or
had dealings with, such countries. The Fund, as an investor in such issuers,
will be indirectly subject to those risks.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. For example, there may be prohibitions or substantial
restrictions on foreign investing in the capital markets of certain countries in
Africa or in certain sectors or industries of such countries. Moreover, certain
countries in Africa may require governmental approval or special licenses prior
to investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer and may limit such
foreign investment to a certain class of securities of an issuer that may have
less advantageous rights than the classes available for purchase by
domiciliaries of those countries and/or impose additional taxes on foreign
investors. A delay in obtaining a government approval or a license would delay
investments in a particular country, and, as a result, the Fund may not be able
to invest in certain securities while approval is pending. The government of a
particular country may also withdraw or decline to renew a license that enables
the Fund to invest in such country.
The
governments of certain countries in Africa may exercise substantial influence
over many aspects of the private sector and may own or control many companies.
Future government actions could have a significant effect on the economic
conditions in such countries, which could have a negative impact on private
sector companies. There is also the possibility of diplomatic developments that
could adversely affect investments in certain countries in Africa. Some
countries in Africa may be affected by a greater degree of public corruption and
crime.
Some
investors have suffered losses due to the inability of the newly privatized
entities to adjust quickly to a competitive environment or to changing
regulatory and legal standards. Additionally, certain African countries, such as
South Africa, are characterized by a two-tiered economy, with one rivaling
developed countries and the other exhibiting many characteristics of developing
countries. This accounts for an uneven distribution of wealth and income and
high rates of unemployment. Although economic reforms have been enacted to
promote growth and foreign investments, there can be no assurance that these
programs will achieve the desired results.
Investing
in certain African countries involves risks of less uniformity in accounting and
reporting requirements, less reliable securities valuation, and greater risk
associated with custody of securities than investing in developed countries.
Less information may be available about companies in which the Fund invests
because many African companies are not subject to uniform accounting, auditing
and financial reporting standards, or to other regulatory practices and
requirements required of U.S. companies. These factors, among others, make
investing in issuers located or operating in countries in Africa significantly
riskier than investing in issuers located or operating in more developed
countries, and any one of them could cause a decline in the value of the Fund’s
Shares.
There
may be a risk of loss due to the imposition of restrictions on repatriation of
capital invested. In addition, certain African countries have currencies pegged
to the U.S. dollar. If such currency pegs are abandoned, such abandonment could
cause sudden and significant currency adjustments, which could impact the Fund’s
investment returns in those countries. There may be limitations or delays in the
convertibility or repatriation of certain African currencies, which would
adversely affect the U.S. dollar value and/or liquidity of the Fund’s
investments denominated in such African currencies, may impair the Fund’s
ability to achieve its investment objective and/or may impede the Fund’s ability
to satisfy redemption requests in a timely manner. For these or other reasons,
the Fund could seek to suspend redemptions of Creation Units, including in the
event that an emergency exists in which it is not reasonably practicable for the
Fund to dispose of its securities or to determine its net asset value. The Fund
could also, among other things, limit or suspend creations of Creation Units.
During the period that creations or redemptions are affected, the Fund’s shares
could trade at a significant premium or discount to their net asset value. In
the case of a period during which creations are suspended, the Fund could
experience substantial redemptions, which may exacerbate the discount to net
asset value at which the Fund’s shares trade, cause the Fund to experience
increased transaction costs, and cause the Fund to make greater taxable
distributions to shareholders of the Fund. When the Fund holds illiquid
investments, its portfolio may be harder to value. Political and social unrest
in certain regions of Africa may negatively affect the value of an investment in
the Fund.
Special
Risk Considerations of Investing in Brazilian Issuers. Investments
in securities of Brazilian issuers, including issuers located outside of Brazil
that generate significant revenues from Brazil, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such risks include, among others, a high level of price volatility in
the Brazilian markets, chronic structural public sector deficits, a rising
unemployment rate and disparities of wealth. The Brazilian economy has been
characterized by frequent, and occasionally drastic, interventions by the
Brazilian government, including the imposition of wage and price controls,
exchange controls, limiting imports, blocking access to bank accounts and other
measures. The Brazilian government has often changed monetary, taxation, credit,
trade and other policies to influence the core of Brazil’s economy.
Additionally, Brazilian accounting, auditing and financial standards and
requirements differ from those in the United States, and this may affect the tax
consequences with respect to and valuation of investments in the
Fund.
Actions
taken by the Brazilian government concerning the economy may have significant
effects on Brazilian companies and on market conditions and prices of Brazilian
securities. Brazil’s economy may be subject to sluggish economic growth due to,
among other things, weak consumer spending, political turmoil, high rates of
inflation and low commodity prices. Brazil suffers from chronic structural
public sector deficits. Additionally, the process of privatizing certain
entities by the Brazilian government may cause privatized entities to suffer
losses due to, among other things, the inability to adjust to a competitive
environment.
The
market for Brazilian securities is directly influenced by the flow of
international capital, and economic and market conditions of certain countries,
especially emerging market countries. As a result, adverse economic conditions
or developments in other emerging market countries have at times significantly
affected the availability of credit in the Brazilian economy and resulted in
considerable outflows of funds and declines in the amount of foreign currency
invested in Brazil. In addition, currency devaluations and economic or political
developments in any Central and South American country could have a significant
adverse effect on the entire region, including Brazil.
Investments
in Brazilian securities may be subject to certain restrictions on foreign
investment. Brazilian law provides that whenever a serious imbalance in Brazil’s
balance of payments exists or is anticipated, the Brazilian government may
impose temporary restrictions on the remittance to foreign investors of the
proceeds of their investment in Brazil and on the conversion of the Brazilian
real into foreign currency. The likelihood of such restrictions may be affected
by the extent of Brazil’s foreign currency revenues, the size of Brazil’s debt
service burden relative to the economy as a whole, and political constraints to
which Brazil may be subject. Brazilian investment and repatriation controls
could also affect the Fund’s ability to operate and to qualify for the favorable
tax treatment afforded to regulated investment companies for U.S. federal income
tax purposes.
Brazil
has historically experienced high rates of inflation, a high level of debt, and
high crime rates, each of which may constrain economic growth. Brazil suffers
from high levels of corruption, crime and income disparity. The Brazilian
economy and Brazilian companies may also be adversely affected by significant
public health concerns and associated declines in tourism.
The
Brazilian economy is heavily dependent upon commodity prices and international
trade. The Brazilian securities markets are smaller, less liquid and more
volatile than U.S. securities markets and the market for Brazilian securities is
influenced by economic and market conditions of certain countries, especially
emerging market countries in Central and South America. Unanticipated political
or social developments may result in sudden and significant investment losses.
An increase in prices for commodities, such as petroleum, the depreciation of
the Brazilian real and future governmental measures seeking to maintain the
value of the Brazilian real in relation to the U.S. dollar, may trigger
increases in inflation in Brazil and may slow the rate of growth of the
Brazilian economy. Conversely, appreciation of the Brazilian real relative to
the U.S. dollar may lead to the deterioration of Brazil’s current account and
balance of payments as well as limit the growth of exports.
Because
the Fund’s assets will be invested primarily in securities of Brazilian issuers,
the income received by the Fund will be principally in Brazilian real. The
Fund’s exposure to the Brazilian real and changes in value of the Brazilian real
versus the U.S. dollar may result in reduced returns for the Fund. Moreover, the
Fund may incur costs in connection with conversions between U.S. dollars and
Brazilian real.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China that
generate significant revenues from China, involve certain risks and
considerations not typically associated with investments in U.S securities.
These risks include among others (i) more frequent (and potentially widespread)
trading suspensions and government interventions with respect to Chinese issuers
resulting in a lack of liquidity and in price volatility, (ii) currency
revaluations and other currency exchange rate fluctuations or blockage, (iii)
the nature and extent of intervention by the Chinese government in the Chinese
securities markets, whether such intervention will continue and the impact of
such intervention or its discontinuation, (iv) the risk of nationalization or
expropriation of assets, (v) the risk that the Chinese government may decide not
to continue to support economic reform programs, (vi) limitations on the use of
brokers, (vii) higher rates of inflation, (viii) greater political, economic and
social uncertainty, (ix) market volatility caused by any potential regional or
territorial conflicts or natural or other disasters, and (x) the risk of
increased trade tariffs, embargoes, sanctions, investment restrictions and other
trade limitations. Certain securities are, or may in the future become
restricted, and the Fund may be forced to sell such securities and incur a loss
as a result. In addition, the economy of China differs, often unfavorably, from
the U.S. economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, interest
rates, allocation of resources and capital reinvestment, among others. The
Chinese central government has historically exercised substantial control over
virtually every sector of the Chinese economy through administrative regulation
and/or state ownership and actions of the Chinese central and local government
authorities continue to have a substantial effect on economic conditions in
China. In addition, the Chinese government has from time to time taken actions
that influence the prices at which certain goods may be sold, encourage
companies to invest or concentrate in particular industries, induce mergers
between companies in certain industries and induce private companies to publicly
offer their securities to increase or continue the rate of economic growth,
control the rate of inflation or otherwise regulate economic expansion. The
Chinese government may do so in the future as well, potentially having a
significant adverse effect on economic conditions in China.
Special
Risk Considerations of Investing in Egyptian Issuers. Investments
in securities of Egyptian issuers, including issuers located outside of Egypt
that generate significant revenue from Egypt, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, the imposition of capital
controls, expropriation and/or nationalization of assets, confiscatory taxation,
regional conflict, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil unrest and social instability as a result of
religious, ethnic and/or socioeconomic unrest. Poor living standards,
disparities of wealth and limitations on political freedom have contributed to
the unstable environment. Unanticipated or sudden political or social
developments may result in sudden and significant investment losses. Issuers in
Egypt are subject to less stringent
requirements
regarding accounting, auditing, financial reporting and record keeping than are
issuers in more developed markets, and therefore, all material information may
not be available or reliable. These factors, among others, make investing in
issuers located or operating in Egypt significantly riskier than investing in
issuers located or operating in more developed countries, and any one of them
could cause a decline in the value of the Fund’s Shares.
The
securities markets in Egypt are underdeveloped and may be less correlated to
global economic cycles than those markets located in more developed countries.
Securities markets in Egypt are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations, uncertainty regarding the existence of
trading markets, governmental control and heavy regulation of labor and
industry. These risks could cause the Fund’s shares to trade at a significant
premium or discount to its net asset value. Moreover, trading on securities
markets may be suspended altogether, including the possibility that securities
markets may be closed for an extended period of time due to political and civil
unrest.
The
government in Egypt may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
Egypt. These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in Egypt. For example,
there may be prohibitions or substantial restrictions on foreign investing in
Egypt’s capital markets or in certain sectors or industries. Moreover, Egypt may
require governmental approval or special licenses prior to investments by
foreign investors and may limit the amount of investments by foreign investors
in a particular industry and/or issuer and may limit such foreign investment to
a certain class of securities of an issuer that may have less advantageous
rights than the classes available for purchase by domiciliaries of Egypt and/or
impose additional taxes on foreign investors. There may be a risk of loss due to
the imposition of restrictions on repatriation of capital invested.
Egypt
entered into a bilateral investment treaty with the United States, designed to
encourage and protect U.S. investment in Egypt. However, there may be a risk of
loss due to expropriation and/or nationalization of assets, confiscation of
assets and property or the imposition of restrictions on foreign investments and
on repatriation of capital invested, particularly if the bilateral investment
treaty with the United States is not fully implemented or fails in its purpose.
Other diplomatic developments could adversely affect investments in Egypt,
particularly as Egypt is involved in negotiations for various regional
conflicts.
Egypt’s
economy is dependent on trade with certain key trading partners, including the
United States. Reduction in spending by these economies on Egyptian products and
services or negative changes in any of these economies may cause an adverse
impact on Egypt’s economy. The Egyptian economy is also heavily dependent on
tourism, export of oil and gas, and shipping services revenues from the Suez
Canal. Tourism receipts are vulnerable to terrorism, spillovers from conflicts
in the region, and potential political instability. Political unrest and
terrorist attacks has, in the past, and may, in the future, hurt tourism. As
Egypt produces and exports oil and gas, any acts of terrorism or armed conflict
causing disruptions of oil and gas exports could affect the Egyptian economy
and, thus, adversely affect the financial condition, results of operations or
prospects of companies in which a may invest. Furthermore, any acts of terrorism
or armed conflict in Egypt or regionally could divert demand for the use of the
Suez Canal, thereby reducing revenues from the Suez Canal.
In
addition, there may be limitations or delays in the convertibility or
repatriation of the Egyptian pound which would adversely affect the U.S. dollar
value and/or liquidity of the Fund’s investments denominated in the Egyptian
pound, may impair the Fund’s ability to achieve its investment objective and/or
may impede the Fund’s ability to satisfy redemption requests in a timely manner.
When the Fund holds illiquid investments, its portfolio may be harder to
value.
In
Egypt, the marketability of quoted shares is limited due to the restricted
opening hours of stock exchanges, a narrow range of investors and a relatively
high proportion of market value being concentrated in the hands of a relatively
small number of shareholders. In addition, because Egyptian stock exchanges on
which the Fund’s portfolio securities may trade are open when the Exchange is
closed, the Fund may be subject to heightened risk associated with market
movements.
Special
Risk Considerations of Investing in Indian Issuers.
Investments in securities of Indian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, greater government control
over the economy, political and legal uncertainty, competition from low-cost
issuers of other emerging economies in Asia, currency fluctuations or blockage
of foreign currency exchanges and the risk of nationalization or expropriation
of assets. Large portions of many Indian companies remain in the hands of
individuals and corporate governance standards of Indian companies may be weaker
and less transparent, which may increase the risk of loss and unequal treatment
of investors. In addition, religious and border disputes persist in India. India
has experienced civil unrest and hostilities with neighboring countries,
including Pakistan, and the Indian government has confronted separatist
movements in several Indian states. India has also experienced acts of terrorism
that have targeted foreigners, which have had a negative impact on tourism, an
important sector of the Indian economy. India has tested nuclear arms, and the
threat of deployment of such weapons could hinder development of the Indian
economy and escalating tensions could impact the broader region.
The
Indian securities markets are smaller and less liquid than securities markets in
more developed economies and are subject to greater price volatility. Issuers in
India are subject to less stringent requirements regarding accounting, auditing
and financial reporting than are issuers in more developed markets, and
therefore, all material information may not be available or reliable. India also
has less developed clearance and settlement procedures, and there have been
times when settlements have been unable to
keep
pace with the volume of securities and have been significantly delayed. Indian
stock exchanges have experienced problems such as temporary exchange closures,
broker defaults, settlement delays and strikes by brokers that have affected the
market price and liquidity of the securities of Indian companies. In addition,
the governing bodies of the Indian stock exchanges have from time to time
restricted securities from trading, limited price movements and restricted
margin requirements. Further, from time to time, disputes have occurred between
listed companies and the Indian stock exchanges and other regulatory bodies
that, in some cases, have had a negative effect on market sentiment. In
addition, inflation in India may be at very high levels. High inflation may lead
to the adoption of corrective measures designed to moderate growth, regulate
prices of staples and other commodities and otherwise contain inflation. Such
measures could inhibit economic activity in India. Additionally, each of the
factors described below could have a negative impact on the Fund’s performance
and increase the volatility of the Fund.
Economic
Risk. The
Indian government has exercised and continues to exercise significant influence
over many aspects of the economy, and the number of public sector enterprises in
India is substantial. Accordingly, Indian government actions in the future could
have a significant effect on the Indian economy. The Indian government has
experienced chronic structural public sector deficits. High amounts of debt and
public spending could have an adverse impact on India’s economy. Services are
the major source of economic growth, accounting for half of India’s output with
less than one quarter of its labor force. Additionally, the Indian economy may
be dependent upon agriculture. About two-thirds of the workforce is in
agriculture. The Fund’s investments may be susceptible to adverse weather
changes including the threat of monsoons and other natural disasters. Despite
strong growth, the World Bank and others express concern about the combined
state and federal budget deficit.
Regulatory
Risk.
A foreign portfolio investor (“FPI”) in India is subject to certain restrictions
on buying, selling or otherwise dealing in securities.
The
Subsidiary, a wholly owned subsidiary located in the Republic of Mauritius, is
registered as an FPI with the Securities and Exchange Board of India in order to
obtain the ability to make and dispose of investments. There can be no assurance
that the Subsidiary will continue to qualify for the FPI license. Loss of the
FPI registration could adversely impact the ability of the Fund to make
investments in India.
The
Securities and Exchange Board of India imposes certain limitations on
participation in an FPI. The Fund may compulsorily redeem units held by such
investor(s) or take other actions in order to comply with applicable Indian
law.
The
Subsidiary’s investments will be made in accordance with investment restrictions
prescribed under the FPI Regulations. If new policy announcements or regulations
in India are made, including potential policies with retroactive effect which
require changes in the structure or operations of the Fund, the performance of
the Fund may be adversely impacted.
In
addition, FPIs that are domiciled in countries which are classified as
“high-risk” jurisdictions or that are monitored by the Financial Action Task
Force may be subject to additional compliance requirements and/or increased
monitoring by the designated depository participant and/or the Securities and
Exchange Board of India. These policies are constantly evolving and could have
an adverse impact on the Fund.
Investment
and Repatriation Restrictions.
The Central Government and the Reserve Bank of India impose certain limits on
the foreign ownership of Indian securities. These restrictions and/or controls
may at times limit or prevent foreign investment in securities of issuers
located or operating in India and may inhibit the Fund’s ability to pursue its
investment objective.
In
the case of an ultimate beneficial owner who has direct or indirect common
shareholding/beneficial ownership/beneficial interest of more than 50% in an FPI
and an offshore derivative instrument (“ODI”) subscriber entity or two or more
FPIs/ODI subscribers, the participation through ODIs would be aggregated with
the direct holding of FPIs or the other concerned ODI subscribers while
determining whether the above investment cap in an Indian company has been
triggered.
Special
Risk Considerations of Investing in Indonesian Issuers.
Investments in securities of Indonesian issuers, including issuers located
outside of Indonesia that generate significant revenues from Indonesia, involve
risks and special considerations not typically associated with investments in
the U.S. securities markets. Such heightened risks include, among others,
expropriation and/or nationalization of assets, restrictions on and government
intervention in international trade, confiscatory taxation, currency
devaluations, high rates of inflation, corruption, political instability,
including authoritarian and/or military involvement in governmental decision
making, sectarian and separatist violence, armed conflict, acts of terrorism,
the impact on the economy as a result of civil war, and social instability as a
result of religious, ethnic and/or socioeconomic unrest. In addition, the
Indonesian economy is dependent upon trade with other nations, including China,
Japan, Singapore and the United States. Adverse conditions or changes in
relationships with Indonesia’s major trading partners may significantly impact
the Indonesian economy. Indonesia is particularly vulnerable to the effects of
an economic slowdown in China, which has been a major source of demand growth
for Indonesia’s commodity exports. Indonesia is also vulnerable to economic
weakness in Japan, which remains one of Indonesia’s largest single export
markets. Indonesia has experienced acts of terrorism that have targeted
foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indonesian economy.
Indonesia
has, in the past, applied prudent macroeconomic efforts and policy reforms that
have led to growth in recent years, but many economic development problems
remain, including poverty and unemployment, corruption, inadequate
infrastructure, a complex regulatory environment and unequal resource
distribution among regions. Additionally, Indonesia has faced violent separatist
movements, as well as outbreaks of violence amongst religious and ethnic groups.
A history of discrimination, official persecution, and populist violence
continues to heighten the risk of economic disruption in Indonesia.
Indonesia
is considered an emerging market and its securities markets are characterized by
a small number of company listings and are underdeveloped and often considered
to be less correlated to global economic cycles than those markets located in
more developed countries. As a result, securities markets in Indonesia are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on investment by foreigners, limit the supply of
securities available for investment by the Fund. This will affect the rate at
which the Fund is able to invest in Indonesian securities, the purchase and sale
prices for such securities and the timing of purchases and sales. Moreover,
trading on securities markets may be suspended altogether.
The
government in Indonesia may restrict or control to varying degrees the ability
of foreign investors to invest in securities of issuers located or operating in
Indonesia. These restrictions and/or controls may at times limit or prevent
foreign investment in securities of issuers located or operating in Indonesia.
Moreover, governmental approval or special licenses may be required prior to
investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer and may limit such
foreign investment to a certain class of securities of an issuer that may have
less advantageous rights than the classes available for purchase by
domiciliaries of Indonesia and/or impose additional taxes on foreign investors.
Indonesia’s securities laws are unsettled and judicial enforcement of contracts
with foreign entities is inconsistent and, as a result of pervasive corruption,
is subject to the risk that cases will not be judged impartially. Indonesia has
employed a program of monetary loosening through reductions in interest rates
and implemented a number of reforms to encourage investment. Although
Indonesia’s central bank has continued to utilize monetary policies to promote
growth, there can be no guarantee such efforts will be sufficient or that
additional stimulus policies will not be necessary in the future.
Indonesia
is located in a part of the world that has historically been prone to natural
disasters such as tsunamis, earthquakes, volcanoes, and typhoons, and is
economically sensitive to environmental events. Natural disasters may become
more frequent and severe as a result of global climate change. Any such event
could result in a significant adverse impact on Indonesia’s economy. Given the
particular vulnerability of Indonesia to the effects of climate change,
disruptions in international efforts to address climate-related issues may have
a disproportionate impact on a fund’s investments in the country. These factors,
among others, make investing in issuers located or operating in Indonesia
significantly riskier than investing in issuers located or operating in more
developed countries, and any one of them could cause a decline in the value of
the Fund’s Shares.
Special
Risk Considerations of Investing in Israeli Issuers. Investments
in securities of Israeli issuers, including issuers located outside of Israel
that generate significant revenues from Israel, involve risks and special
considerations that are not typically associated with investments in the U.S.
securities markets. Israel’s economy depends on imports of certain key items
such as crude oil, natural gas, coal, grains, raw materials and military
equipment. Israel’s relations with the Palestinian Authority and its neighboring
countries such as Lebanon, Syria and Iran have at times been strained due to
territorial disputes, historical animosities or security concerns, which may
cause uncertainty in the Israeli markets and adversely affect the overall
economy. The Israeli economy is also dependent upon external trade with other
economies, notably the United States, China, Japan, Canada, and the European
Union. Reduction in spending on Israeli products and services or changes in any
of these other economies may adversely impact the Fund.
Israel
has experienced a history of hostile relations with several countries in the
Middle-East region. Israel and its citizens have also been the target of
periodic acts of terrorism that have the potential to disrupt economic activity
in the country, and certain terrorist groups are committed to violence against
Israel. U.S.-designated terrorist groups, such as Hezbollah and Hamas, operate
in close proximity to Israel’s borders and frequently threaten Israel with
attack. Current hostilities and the potential for future hostilities may
diminish the value of companies whose principal operations or headquarters are
located in Israel. Actual hostilities or the threat of future hostilities may
cause significant volatility in the share price of companies based in or having
significant operations in Israel. Due to political or civil unrest in Israel,
the Israeli securities market may be closed for extended periods of time or
trading on the Israeli securities market may be suspended altogether. In
addition, the Israeli government may restrict or control to varying degrees the
ability of foreign investors to invest in securities of issuers located or
operating in Israel. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
Israel and may inhibit the Fund’s ability to track the Index. There may also be
less information concerning the securities of Israeli companies available to the
public than the securities of U.S. companies. There is also potential difficulty
in obtaining or enforcing a court judgment, and the unique characteristics of
securities of Israeli companies and the Israeli securities market may have a
negative impact on the Fund.
The
Fund’s investments in the securities of Israeli issuers may experience more
rapid and extreme changes in value than funds with investments solely in
securities of U.S. companies or funds that invest across a larger spectrum of
the foreign market. This is because the securities market in Israel is
relatively small, with a limited number of companies representing a smaller
number of industries. Israeli issuers are not subject to the same degree of
regulation as U.S. issuers. Furthermore, shares and dividends of
Israeli
Companies are often Israeli new shekel-denominated. Changes in the relationship
of the Israeli new shekel to the U.S. dollar and other currencies could have a
negative impact on the Fund. The government of Israel may change the way in
which Israeli companies are taxed, or may impose taxes on foreign investments.
Such actions could have a negative impact on the overall market for Israeli
securities and on the Fund.
Special
Risk Considerations of Investing in Nigerian Issuers. Investments
in securities of Nigerian issuers,
including issuers located outside of Nigeria that generate significant revenues
from Nigeria, involve risks and special considerations not typically associated
with investments in the U.S. securities markets. The economic development of
Nigeria has been significantly hindered by military rule, mismanagement,
corruption and ethnic conflict. The Nigerian economy is heavily dependent on oil
production and sales and prices of oil in global markets, and the industry makes
up a significant portion of Nigeria’s economic output. The Nigerian government
has implemented capital controls restricting the free flow of capital to and
from international markets, which has led to bouts of speculative demand and
elevated arbitrage pressures.
Nigeria
has privatized certain industries, which may lose money or be re-nationalized.
Religious and social conflict is present in Nigeria, often resulting in the
outbreak of violence. Nigeria also suffers from the prevalence of organized
crime and corruption, which makes it more difficult for citizens and companies
to do business in Nigeria and has a significant impact on the Nigerian economy.
The persistence of organized crime and corruption may continue to drag on
economic growth in the country.
Special
Risk Considerations of Investing in South African Issuers.
Investments in securities of South African issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. South Africa’s economy exhibits characteristics of both a developed
country and a developing country and has historically experienced extremely
uneven distribution of wealth and income and high rates of unemployment. This
may cause civil and social unrest, which could adversely impact the South
African economy. Although economic reforms such as privatization have been
enacted to promote growth and foreign investments, there can be no assurance
that these programs will achieve the desired results. The securities markets in
South Africa are subject to greater risks associated with market volatility,
lower market capitalization, lower trading volume, illiquidity, inflation,
greater price fluctuations, uncertainty regarding the existence of trading
markets, governmental control and heavy regulation of labor and industry. In
addition, South Africa’s currency has at times been at risk of devaluation due
to inadequate foreign currency reserve. While economic reforms have been enacted
in recent periods, there can be no assurance that these reforms will achieve the
intended results. Furthermore, adverse social and economic conditions in a
neighboring country may have a significant adverse effect on South Africa.
Additionally, the agriculture and mining sectors of South Africa’s economy
account for a large portion of its exports, and thus the South African economy
is susceptible to fluctuations in these commodity markets. South Africa is
located in a part of the world that has historically been prone to natural
disasters, such as droughts, and is economically sensitive to environmental
events. Any such event may adversely impact South Africa’s economy or business
operations of companies in South Africa, causing an adverse impact on the value
of the Fund.
Special
Risk Considerations of Investing in Vietnamese Issuers. Investments
in securities of Vietnamese issuers, involve risks and special considerations
not typically associated with investments in the U.S. securities markets. Such
heightened risks include, among others, expropriation and/or nationalization of
assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, and social instability as a result of
religious, ethnic and/or socioeconomic unrest. Vietnam is dependent on trading
relationships with certain key trading partners, including the United States,
China and Japan, and as a result may be adversely affected if demand for
Vietnam’s exports in those nations decline or if there are regional disputes
involving those countries. Vietnam may be heavily dependent upon international
trade and, consequently, Vietnam may be negatively affected by trade barriers,
exchange controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. The economy may also be adversely affected by economic conditions in the
countries with which it trades. Vietnam is also subject to certain environmental
risks, including typhoons and floods, as well as rapid environmental degradation
due to industrialization and lack of regulation, which may negatively impact the
value of investments in Vietnam.
The
securities markets in Vietnam are underdeveloped and are often considered to be
less correlated to global economic cycles than those markets located in more
developed countries. As a result, securities markets in Vietnam are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, greater price fluctuations, uncertainty
regarding the existence of trading markets, governmental control, heavy
regulation of labor and industry and inflation. Vietnam has experienced, and may
in the future experience, a high inflation rate, which is at least partially a
result of the country’s large trade deficit. Due to governmental focus on
economic growth at the expense of currency stability, the inflation rate may
continue at a high level and economic stability could be threatened. Moreover,
trading on securities markets may be suspended altogether. The Vietnamese
economy also suffers from excessive intervention by the Communist government.
Many companies listed on the exchanges are still partly state-owned and have a
degree of state influence in their operations. State owned and operated
companies tend to be less efficient than privately owned companies, due to lack
of market competition.
Regulations
in Vietnam may require the Fund to execute trades of securities of Vietnamese
companies through a single broker. As a result, the Adviser will have less
flexibility to choose among brokers on behalf of the Fund than is typically the
case for investment
managers.
In addition, because the process of purchasing securities in Vietnam requires
that payment to the local broker occur prior to receipt of securities, failure
of the broker to deliver the securities will adversely affect the
Fund.
The
government in Vietnam may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
Vietnam. These restrictions and/or controls may at times limit or prevent
foreign investment in securities of issuers located or operating in Vietnam.
Moreover, Vietnam may require governmental approval or special licenses prior to
investments by foreign investors and may also require governmental approval in
connection with the repatriation of capital by foreign investors. The Vietnamese
government may limit the amount of investments by foreign investors in a
particular industry and/or issuer and may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domiciliaries of Vietnam and/or
impose additional taxes on foreign investors. In addition, there is the risk
that if Vietnam’s balance of payments declines, Vietnam may impose temporary
restrictions on foreign capital remittances. Additionally, investments in
Vietnam may require the Fund to adopt special procedures, seek local government
approvals or take other actions, each of which may involve additional costs to
the Fund. These factors, among others, make investing in issuers located or
operating in Vietnam significantly riskier than investing in issuers located or
operating in more developed countries, and any one of them could cause a decline
in the value of the Fund’s Shares.
In
addition, pursuant to the methodology of the Index provider used to calculate
and maintain the Vietnam Index, a company may be removed from the Vietnam Index
at a quarterly rebalancing as a result of reaching its limitation on foreign
ownership. Consequently, the Fund may be forced to sell securities at
inopportune times or for prices other than at current market values or may elect
not to sell such securities on the day that they are removed from the Vietnam
Index, due to market conditions or otherwise. Due to these factors, the
variation between the Fund’s annual return and the return of the Vietnam Index
may increase.
Real
Estate Sector Risk.
Companies in the real estate sector include companies that invest in real
estate, such as REITs and real estate management and development companies. The
Fund will be sensitive to changes in, and its performance will depend to a
greater extent on, the overall condition of the real estate sector. Companies
that invest in real estate are subject to the risks of owning real estate
directly as well as to risks that relate specifically to the way that such
companies operate, including management risk (such companies are dependent upon
the management skills of a few key individuals and may have limited financial
resources). Adverse economic, business or political developments affecting real
estate could have a major effect on the values of the Fund’s investments.
Investing in real estate is subject to such risks as decreases in real estate
values, overbuilding, increased competition and other risks related to local or
general economic conditions, increases in operating costs and property taxes,
changes in zoning laws, casualty or condemnation losses, possible environmental
liabilities, regulatory limitations on rent, possible lack of availability of
mortgage financing, market saturation, fluctuations in rental income and the
value of underlying properties and extended vacancies of properties. Certain
real estate securities have a relatively small market capitalization, which may
tend to increase the volatility of the market price of these securities. Real
estate securities have limited diversification and are, therefore, subject to
risks inherent in operating and financing a limited number of projects. Real
estate securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants.
Risk
of Investing in Other Funds.
The Fund may invest in shares of other funds, including ETFs. As a result, the
Fund will indirectly be exposed to the risks of an investment in the underlying
funds. Shares of other funds have many of the same risks as direct investments
in common stocks or bonds. In addition, the market value of such funds’ shares
is expected to rise and fall as the value of the underlying securities rise and
fall. If the shares of such funds are traded on a secondary market, the market
value of such funds’ shares may differ from the net asset value of the
particular fund. As a shareholder in a fund, the Fund will bear its ratable
share of the underlying fund’s expenses. At the same time, the Fund will
continue to pay its own investment management fees and other expenses. As a
result, the Fund and its shareholders will be absorbing duplicate levels of fees
with respect to investments in other funds, including ETFs. The expenses of such
underlying funds will not, however, be counted towards the Fund’s expense cap.
The Fund is subject to the conditions set forth in provisions of the Investment
Company Act of 1940 that limit the amount that the Fund and its affiliates, in
the aggregate, can invest in the outstanding voting securities of any one
investment company.
Trading
Issues Risk.
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 relevant 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 requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Issuers in the
utilities sector are subject to a variety of factors that may adversely affect
their business or operations, including high interest costs in connection with
capital construction and improvement programs, difficulty in raising capital in
adequate amounts on reasonable terms in periods of high inflation and unsettled
capital markets, and the effects of economic slowdowns and surplus capacity.
Companies in the utilities sector are subject to extensive regulation, including
governmental regulation of rates charged to customers, and may face difficulty
in obtaining regulatory approval of new technologies. The effects of a U.S.
national energy policy and lengthy delays and greatly increased costs and other
problems
associated
with the design, construction, licensing, regulation and operation of nuclear
facilities for electric generation, including, among other considerations, the
problems associated with the use of radioactive materials and the disposal of
radioactive wastes, may adversely affect companies in the utilities sector.
Certain companies in the utilities sector may be inexperienced and may suffer
potential losses resulting from a developing deregulatory environment.
Technological innovations may render existing plants, equipment or products
obsolete. Companies in the utilities sector may face increased competition from
other providers of utility services. The potential impact of terrorist
activities on companies in the utilities sector and its customers and the impact
of natural or man-made disasters may adversely affect the utilities sector.
Issuers in the utilities sector also may be subject to regulation by various
governmental authorities and may be affected by the imposition of special
tariffs and changes in tax laws, regulatory policies and accounting
standards.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
Each
Fund may invest in securities not included in its respective Index, money market
instruments, including repurchase agreements or other funds which invest
exclusively in money market instruments, convertible securities, structured
notes (notes on which the amount of principal repayment and interest payments
are based on the movement of one or more specified factors, such as the movement
of a particular stock or stock index) and/or certain derivatives, which the
Adviser believes will help a Fund track its Index. Depositary receipts not
included in an Index may be used by a Fund in seeking performance that
corresponds to its Index and in managing cash flows, and may count towards
compliance with a Fund’s 80% policy. Certain Funds may also utilize
participation notes to seek performance that corresponds to its respective
Index. Each Fund may also invest, to the extent permitted by the Investment
Company Act of 1940, in other affiliated and unaffiliated funds, such as open-
end or closed-end management investment companies, including other ETFs. A Fund
will not invest as part of a temporary defensive strategy to protect against
potential securities market declines.
BORROWING
MONEY
Each
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. Each Fund has entered or intends to enter into a credit facility
to borrow money for temporary, emergency or other purposes, including the
funding of shareholder redemption requests, trade settlements and as necessary
to distribute to shareholders any income required to maintain such Fund’s status
as a regulated investment company. To the extent that a Fund borrows money, it
may be leveraged; at such times, the Fund will appreciate or depreciate in value
more rapidly than its Index. Leverage generally has the effect of increasing the
amount of loss or gain a Fund might realize, and may increase volatility in the
value of such Fund’s investments.
LENDING
PORTFOLIO SECURITIES
Each
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, a 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 a 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. A Fund may
pay fees to the party arranging the loan of securities. In addition, a 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. Each
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 a Fund. Substitute payments
for dividends received by a Fund for securities loaned out by a Fund will not be
considered qualified dividend income.
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ADVANTAGED PRODUCT STRUCTURE |
Unlike
many conventional mutual funds which are only bought and sold at closing NAVs,
the Shares of each Fund have been designed to be tradable in a secondary market
on an intra-day basis and to be created and redeemed in-kind, except for VanEck
Africa Index ETF, VanEck Brazil Small-Cap ETF, VanEck Digital India ETF, VanEck
Egypt Index ETF, VanEck India Growth Leaders ETF and VanEck Vietnam ETF, whose
Shares are created and redeemed partially or principally for cash, in Creation
Units at each day’s market close. These in-kind arrangements are designed to
mitigate the adverse effects on a Fund’s portfolio that could arise from
frequent cash purchase and redemption transactions that affect the NAV of the
Fund. Moreover, in contrast to conventional mutual funds, where frequent
redemptions can have an adverse tax impact on taxable shareholders because of
the need to sell portfolio securities which, in turn, may generate taxable gain,
the in-kind redemption mechanism of certain Funds, to the extent used, generally
is not expected to lead to a tax event for shareholders whose Shares are not
being redeemed.
A
description of each Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Funds’
SAI.
Board
of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight
of the management of the Funds, 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 Funds’ SAI.
Investment
Adviser.
Under the terms of an investment management agreement between the Trust and Van
Eck Associates Corporation with respect to the Funds (the “Investment Management
Agreement”), Van Eck Associates Corporation serves as the adviser to each Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
day-to-day investment management of the Funds. As of December 31, 2022, the
Adviser managed approximately $69.03 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 is available in the Trust’s semi- annual report
for the period ended June 30, 2022.
For
the services provided to each Fund under the Investment Management Agreement,
each Fund pays the Adviser monthly fees based on a percentage of each Fund’s
average daily net assets at the annual rate of 0.50%. From time to time, the
Adviser may waive all or a portion of its fee. With respect to all Funds except
VanEck Digital India ETF and VanEck India Growth Leaders ETF, until at least May
1, 2024, the Adviser has agreed to waive fees and/or pay Fund expenses to the
extent necessary to prevent the operating expenses of each Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses of the Fund) from exceeding 0.57% (with respect to VanEck
Indonesia Index ETF), 0.59% (with respect to VanEck Brazil Small-Cap ETF and
VanEck Israel ETF), 0.76% (with respect to VanEck Vietnam ETF), 0.78% (with
respect to VanEck Africa Index ETF) and 0.94% (with respect to VanEck Egypt
Index ETF) of its average daily net assets per year.
Until
at least May 1, 2024, the Adviser has agreed to waive fees and/or pay Fund and
Subsidiary expenses with respect to VanEck India Growth Leaders ETF to the
extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses of the Fund and the Subsidiary) from exceeding 0.75% of
its average daily net assets per year.
For
its services to VanEck Digital India ETF, the Fund has agreed to pay the Adviser
an annual unitary management fee equal to 0.75% 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.
Each
Fund (except VanEck Digital India ETF) 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.
Administrator,
Custodian and Transfer Agent. Van
Eck Associates Corporation is the administrator for the Funds (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
the Funds’ assets and provides transfer agency and fund accounting services to
the Funds. 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 manager currently responsible for the day-to-day management of each
Fund’s portfolio is Peter H. Liao, CFA. Mr. Liao has been employed by the
Adviser as an analyst since the summer of 2004 and has been a portfolio manager
since 2006. Mr. Liao graduated from New York University in 2004 with a Bachelor
of Arts in Economics and Mathematics. Mr. Liao also serves as portfolio manager
for certain other investment companies and pooled investment vehicles advised by
the Adviser.
See
the Funds' SAI for additional information about the portfolio manager’s
compensation, other accounts managed and ownership of Shares.
DETERMINATION
OF NAV
The
NAV per Share for each 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 each
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of each 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
certain Funds invest, 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 a Fund calculates its NAV, the Board of Trustees
has designated the Adviser as the valuation designee pursuant to Rule 2a-5 under
the Investment Company Act of 1940 to perform fair valuation for such security
or asset in accordance with the Trust’s and Adviser’s valuation policies and
procedures approved by the Board of Trustees. Each 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, each Fund that holds foreign equity securities
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,
a 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.
In addition, fair value pricing could result in a difference between the prices
used to calculate a Fund’s NAV and the prices used by such Fund’s respective
Index. This may adversely affect a Fund’s ability to track its Index. With
respect to securities that are principally traded on foreign exchanges, the
value of a 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 Funds’ Shares in the secondary market generally differ
from the Funds’ daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by each Fund,
economic conditions and other factors. Information regarding the intraday value
of the Funds’ Shares (“IIV”) may be disseminated throughout each trading day by
an 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 each 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 Funds’ 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 each 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. Each 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 a 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 Funds are listed on an 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 a Fund’s Shares based
on the Fund’s trading volume and market liquidity, and is
generally
lower if the Funds have high trading volume and market liquidity, and generally
higher if the Funds have 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 a Fund’s Shares, this spread
can increase significantly. 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. 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 Funds’ SAI.
Each
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 a 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 a 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 an Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on an
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of a 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 Funds impose 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 a Fund’s portfolio securities after the close of the primary markets
for a Fund’s portfolio securities and the reflection of that change in a Fund’s
NAV (“market timing”). The Board of Trustees considered the nature of each 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 Funds
reserve the right to reject orders that may be disruptive to the management of
or otherwise not in the Funds’ best interests, and that each 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 Funds at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains.
As a shareholder of a Fund, you are entitled to your share of such Fund’s
distributions of net investment income and net realized capital gains on its
investments. Each Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
Each
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. Each Fund realizes capital
gains or losses whenever it sells securities. Net capital gains are distributed
to shareholders as “capital gain distributions.”
Net
investment income, if any, and net capital gains, if any, are
typically distributed to shareholders at
least annually. Dividends may be declared and paid more frequently to improve
index tracking or to comply with the distribution requirements of the Internal
Revenue Code. In addition, in situations where a Fund acquires investment
securities after the beginning of a dividend period, a 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 a 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 a 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 a Fund, including the possible application of foreign, state and
local taxes. Unless your investment in a 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, each Fund expects to distribute net investment income, if any,
at least annually, and any net realized long-term or short-term capital gains,
if any, annually. Each 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 a 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 a 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
Funds may receive dividends, the distribution of which a Fund may report as
qualified dividends. In the event that a 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 a Fund’s
distributions will be eligible for qualified dividend treatment.
Distributions
in excess of a 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 a 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.
Each
Fund may make investments in companies classified as passive foreign investment
companies (“PFICs”) for U.S. federal income tax purposes. Investments in PFICs
are subject to special tax rules which may result in adverse tax consequences to
the Fund and its shareholders. Each Fund generally intends to elect to “mark to
market” these investments at the end of each taxable year. By making this
election, a Fund will recognize as ordinary income any increase in the value of
such shares as of the close of the taxable year over their adjusted basis and as
ordinary loss any decrease in such investment (but only to the extent of prior
income from such investment under the mark to market rules). Gains realized with
respect to a disposition of a PFIC that a Fund has elected to mark to market
will be ordinary income. By making the mark to market election, a Fund may
recognize income in excess of the distributions that it receives from its
investments. Accordingly, a Fund may need to borrow money or dispose of some of
its investments in order to meet its distribution requirements. If a Fund does
not make the mark to market election with respect to an investment in a PFIC,
the Fund could become subject to U.S. federal income tax with respect to certain
distributions from, and gain on the dispositions of, the PFIC which cannot be
avoided by distributing such amounts to the Fund’s shareholders.
Dividends,
interest and gains from non-U.S. investments of a 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 a 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. It is expected
that more than 50% of each Fund’s assets will consist of foreign
securities.
Backup
Withholding.
Each 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.
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares.
Currently, any capital gain or loss realized upon a sale of Shares is generally
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as a short term capital gain or loss if held for one year or
less. However, any capital loss on a sale of Shares held for six months or less
is treated as long-term capital loss to the extent that capital gain dividends
were paid with respect to such Shares. The ability to
deduct
capital losses may be limited. To the extent that a 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.
To the extent a person 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 a
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 Funds 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 Funds 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 Funds’ “qualified net interest income” (generally,
the Funds’ 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 Funds’ “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 Funds 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 a 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 Internal Revenue 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. A
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 a 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 Internal
Revenue 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”), a 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 Internal Revenue Service (“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.
A
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 a Fund to comply with the FATCA rules. If a 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 Funds, 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 a Fund. It is not a substitute for
personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in a Fund under all applicable tax laws. Changes
in applicable tax authority could materially affect the conclusions discussed
above and could adversely affect the Funds, and such changes often
occur.
Mauritian
Tax Status.
The Subsidiary is wholly owned by VanEck India Growth Leaders ETF (for purposes
of this section, the “Fund”) and is a tax resident of Mauritius. The Subsidiary
is regulated by the Financial Services Commission in Mauritius (“FSC”), which
has issued a Category 1 Global Business License (which has been renamed the
“Global Business License” effective January 1, 2019) to the Subsidiary to
conduct the business of “investment holding” under the Financial Services Act
2007 (“FSA 07”). The Subsidiary has applied for a tax residence certificate
(“TRC”) from the Mauritius Revenue Authority (the “MRA”) through the FSC to be
able to benefit from the network of tax treaties in Mauritius. The TRC is issued
by the MRA subject to the subsidiary meeting certain tests and conditions and is
renewable on an annual basis.
The
Subsidiary will be taxed in Mauritius on income derived from its investments in
the portfolio companies at the rate of 15%.
Prior
to certain changes made by the Finance (Miscellaneous Provisions) Act 2018 (“FA
18”) to the Mauritius Income Tax Act 1995 (“ITA 95”), effective January 1, 2019,
a company holding a Category 1 Global Business License was entitled to claim a
deemed tax credit on foreign source income at a rate which was the higher
of:
(a)the
actual foreign tax paid (including if the Mauritius company holds more than 5%
of the issued capital of a company effecting a dividend distribution, a
proportionate share of the foreign tax paid by such company) on such income;
or
(b)a
deemed foreign tax representing 80% of the Mauritius tax on such
income.
The
ITA 95 defines “foreign source income” as income which is not derived from
Mauritius. This includes, in the case of a corporation holding a Category 1
Global Business License, income derived from transactions with “non-residents.”
For a person other than an individual, the term “non-resident” has been defined
based upon criteria such as economic interests and place of
incorporation.
Effective
January 1, 2019, the regime of deemed tax credit on foreign source income
available to corporations holding a Category 1 Global Business License has been
abolished and a partial exemption regime has been introduced whereby a
corporation holding a Global Business License will be granted an exemption of
80% on specified income subject to meeting certain additional substance
requirements as discussed below. The exemption will apply on the
following:
•foreign
source dividend, provided the dividend has not been allowed as a deduction in
the source country;
•foreign
source interest income;
•profit
attributable to a permanent establishment of a resident company in a foreign
company;
•foreign
source income derived by a collective investment scheme, closed-end funds, CIS
manager, administrator, investment adviser or asset manager licensed or approved
by the FSC; and
•income
derived by companies engaged in ship and aircraft leasing.
No
actual foreign tax credit will be allowed on foreign source income where the 80%
exemption has been claimed.
As
the holder of a Category 1 Global Business License, which was issued on or
before October 16, 2017, the Subsidiary was grandfathered until June 30, 2021.
Accordingly, the regime of deemed tax credit on foreign source income continued
to apply to the Subsidiary until June 30, 2021.
Under
the ITA 95, dividends paid to shareholders that do not otherwise derive income
from Mauritius are not subject to Mauritius income tax. Moreover, there are no
withholding taxes on dividends paid by a Mauritian resident company to its non-
resident and resident shareholders. Distributions paid to shareholders following
a redemption of shares are not subject to Mauritius income tax provided that the
shareholder does not hold its shares in the course of trading
activities.
There
is no Mauritius capital gains tax on the disposal of shares. However, following
changes to the India-Mauritius tax treaty in 2016, the rights to tax capital
gains on the alienation of shares in an Indian Company has shifted to India. Any
gain arising from the alienation of shares acquired before April 1, 2017 will be
grandfathered. However, capital gains arising from the alienation of shares
acquired after March 31, 2017 and disposed post April 1, 2019 will be taxed at
full domestic rate in India.
Profits
made from the disposal of securities in the course of trading activities may be
liable to income tax at the applicable rate. Under ITA 95, interests paid by a
corporation holding a Global Business License out of its foreign source income
to non-residents that do not conduct any business in Mauritius are not subject
to Mauritius income tax.
Substance
Requirements.
In determining whether a corporation holding a Global Business License is
managed and controlled from Mauritius, the FSC shall have regard to such matters
as it deems necessary in the circumstances and in particular but without
limitation to whether that corporation:
(a)has
at least 2 directors, resident in Mauritius, of sufficient caliber to exercise
independence of mind and judgment;
(b)maintains,
at all times, its principal bank account in Mauritius;
(c)keeps
and maintains, at all times, its accounting records at its registered office in
Mauritius;
(d)prepares
its statutory financial statements and causes such financial statements to be
audited in Mauritius; and
(e)provides
for meetings of directors to include at least 2 directors from
Mauritius.
In
addition to the requirements mentioned above, when determining whether a
corporation holding a Global Business License is managed and controlled from
Mauritius, the FSC will also consider whether a corporation meets at least one
of the following criteria:
(a)the
corporation has or shall have office premises in Mauritius;
(b)the
corporation employs or shall employ on a full-time basis, at the
administrative/technical level, at least one person who shall be resident in
Mauritius;
(c)the
corporation’s constitution contains a clause whereby all disputes arising out of
the constitution shall be resolved by way of arbitration in
Mauritius;
(d)the
corporation holds, or is expected to hold, within the next 12 months, assets
(excluding cash held in a bank account or shares/interests in another
corporation holding a Global Business License) that are worth at least $100,000
in Mauritius;
(e)the
corporation’s shares are listed on a securities exchange licensed by the
Commission;
(f)the
corporation has, or is expected to have, a yearly expenditure in Mauritius that
can be reasonably expected from any similar corporation that is controlled and
managed from Mauritius.
Moreover,
section 71 of FSA 07 has been amended by FA 18 such that a corporation holding a
Global Business License must at all times:
(a)carry
out the core income generating activities in or from Mauritius by:
• employing
either directly or indirectly a reasonable number of suitably qualified persons
to carry out the core activities; and
• having
a minimum level of expenditure, which is proportionate to its level of
activities;
(b)be
managed and controlled from Mauritius; and
(c)be
administered by a management company.
The
Subsidiary may not continue to meet the substance requirements of Mauritius and
may face adverse tax consequences as a result.
Compliance
with the Foreign Account Tax Compliance Act (“FATCA”).
On September 27, 2013, the Government of Mauritius and the Government of the
United States signed an Agreement for the Exchange of Information Relating to
Taxes (the “Agreement”) to set the legal framework to enable the exchange of tax
information between the two countries. That was followed by the signing of
another agreement known as the Inter-Governmental Agreement (the “Model 1 IGA”)
to improve international tax compliance and to implement FATCA. The Agreement
provides for the exchange of tax information (upon request, spontaneous and
automatic) between Mauritius and the United States. The Model 1 IGA provides for
the automatic reporting and exchange of information in relation to financial
accounts held with Mauritius Financial Institutions by U.S. account holders and
the reciprocal exchange of information regarding U.S. accounts held by Mauritius
residents. According to the Model 1 IGA, Mauritius Financial Institutions are
not subject to 30% withholding tax on US source income provided they comply with
the requirements of FATCA. The Agreement
for
the Exchange of Information Relating to Taxes (United States of America—FATCA
Implementation) Regulations 2014 (the “FATCA Regulations”), which gives effect
to both the Agreement and the Model 1 IGA, became operational on August 29,
2014.
Compliance
with the Convention on Mutual Administrative Assistance in Tax
Matters.
On June 23, 2015, the Government of Mauritius signed the Convention on Mutual
Administrative Assistance in Tax Matters (the “Convention”), which was developed
jointly by the Organization for Economic Cooperation and Development (“OECD”)
and the Council of Europe, and amended Section 76 of the ITA 95 to enable the
implementation of the common reporting standard (“CRS”). Under CRS, financial
institutions in Mauritius have to report annually to the MRA on the financial
accounts held by non-residents for eventual exchange with relevant treaty
partners. Amendments may be brought to Mauritius laws to introduce the
obligations adopted by Mauritius pursuant to the Convention. Different and
potentially obligatory disclosure requirements may be imposed in respect of
investors as a result of CRS, local legislation implementing CRS and/or other
legislation similar to CRS.
Additional
Disclosure Obligations.
As a result of FATCA, CRS or any other legislation under which disclosure may be
necessary or desirable which may apply to the Subsidiary, investors may be
required to provide the Board of Directors of the Subsidiary (the “Subsidiary
Board”) with all information and documents as the Subsidiary Board may require.
The Subsidiary may disclose such information regarding the investors as may be
required by the Government of Mauritius pursuant to FATCA, CRS or applicable
laws or regulations in connection therewith (including, without limitation, the
disclosure of certain non-public personal information regarding the investors to
the extent required).
Prevention
of Money Laundering and Terrorist Financing in Mauritius.
Mauritius made significant alterations to laws related to anti-money laundering
following its Eastern and Southern Africa Anti-Money Laundering Group
(“ESAAMLG”) mutual evaluation in 2018 which highlighted certain deficiencies in
its anti-money laundering (“AML”)/counter financing of terrorism (“CFT”) regime.
The primary statute governing money laundering offenses is the Financial
Intelligence and Anti-Money Laundering Act 2002 (“FIAMLA”) was amended by the
Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation
(Miscellaneous Provisions) Act 2019 (the “AML-CFT Act 2019”) to enhance the
regulatory regime for combating money laundering and terrorism financing in
Mauritius, and to bring the legislation in line with the recommendations made in
the ESAAMLG Mutual Evaluation Report for Mauritius 2018 (the
“Report”).
Also,
the FIAMLA Regulations 2003 were replaced with the Financial Intelligence and
Anti-Money Laundering Regulations 2018 (the “Regulations”) which came into force
on October 1, 2018. The amendments are focused to address the shortcomings
identified in the Report. The Regulations were subsequently amended in 2019,
further to the coming into force of the AML-CFT Act 2019. This improved the
framework regarding customer due diligence, politically exposed persons,
correspondent banking, money or value transfer services, new technologies, wire
transfers, reliance on third parties, internal controls, foreign branches and
subsidiaries. Additional details and clarifications were included in the
Regulations concerning enhanced due diligence to be conducted and the risk-based
approach to be used for high-risk customers and politically exposed
persons.
On
July 9, 2020, the Government of Mauritius has further strengthened its framework
against money laundering and the financing of terrorism by passing the
Anti-Money Laundering and Combating the Financing of Terrorism (Miscellaneous
Provisions) Act 2020 (the “AML-CFT Act 2020”), which amends 19 existing pieces
of legislation including FIAMLA. The aim of the AML-CFT Act 2020 is to align
Mauritius with the recommendations of the Financial Action Task Force and the EU
Commission. The AML-CFT Act 2020 states that the Beneficial Ownership
Information (“BO information”) of companies (including branches), limited
liability partnerships, limited partnerships and foundations, must be provided
to the Registrar of Companies (“RoC”) upon the incorporation and registration of
any such entity, and, later on, at the time of making certain mandatory filings.
This disclosure exercise also applies to existing entities that shall be obliged
to provide their BO information when requested by a regulatory authority. These
measures will give the enforcement authorities prompt access to up-to-date BO
information on the entities in Mauritius.
Stringent
reporting standards on suspicious transactions have also been imposed across
multiple sectors, including governmental agencies and parastatal organizations.
A reporting person now has only five days from the discovery of a suspicious
transaction, or from the reasonable belief that a suspicious transaction has
been made, to file a “Suspicious Transaction Report” to the Financial
Intelligence Unit (“FIU”).
The
regulators of all banking and non-banking financial institutions will now
possess enhanced supervisory and investigatory powers. Within the purview of
AML-CFT Act 2020, the regulators are also mandated to adhere to stricter
risk-based control and oversight. The RoC and the FSC have already increased the
frequency of their inspections of registered entities and/or licensees’ books
and records.
The
following fines may be imposed following non-compliance and breaches of AML-CFT
laws and Rules:
▪The
FIAMLA: A fine up to Indian Rupees 10 million (approx. US$252,845) and a
sentence of imprisonment of up to five years for non-compliance, and a fine of
up to INR 1 million (approx. US$25,285) and imprisonment of up to five years for
failure to file a ‘Suspicious Transaction Report’ to the FIU in the time
prescribed;
▪The
Prevention of Corruption Act: A fine of up to Indian Rupees 10 million (approx.
US$252,845) may be imposed upon an entity found to have committed a corruption
offense.
Consequently,
to ensure compliance with the AML-CFT laws, the FSC issued an Anti-Money
Laundering and Countering the Financing of Terrorism Handbook 2020 (the “FSC
Handbook”) which is supplemented by the Mauritius Code on the Prevention of
Money Laundering and Terrorist Financing issued by the FSC (the “FSC Code”) and
which consolidates the FSC’s guidance on anti-money laundering, financing of
terrorism and financing of proliferation of weapons of mass destruction.
According
to the FSC Handbook and the FSC Code, the Subsidiary will need to carry out a
due diligence selection process, based on generally accepted industry norms,
prior to accepting investors. This will include but may not be limited to: (a)
applying the “know your client” principle by making sure that investors provide
valid proof of identification; (b) maintaining records of identification
information; (c) determining that potential investors are not known or suspected
terrorists by checking their names against a list of known or suspected
terrorists; (d) informing investors that information they provide may be used to
verify their identity; and (e) monitoring investors’ money transactions, that
is, the level of subscriptions. To ensure compliance with the AML-CFT laws, an
investor in the Subsidiary will be required to provide certain
information/documents for the purpose of verifying the identity of the investor
and source of funds and obtain confirmation that the subscription monies do not
represent, directly or indirectly, the proceeds of any crime. The request for
information may be exempted where an investor (other than an agent acting on
behalf of underlying principals) is a regulated financial services business
based in Mauritius or in an equivalent jurisdiction (that is subject to the
supervision of a public authority) or in the case of public companies listed on
recognized stock/investment exchanges.
By
way of example, an individual will be required to produce a copy of a passport
or identification card duly certified by a public authority such as a notary
public, the police or an accountant together with evidence of his address, such
as a utility bill or bank statement. In the case of corporate applicants, this
may require production of a certified copy of the certificate of incorporation
(and any change of name) and the memorandum and articles of association (or
equivalent), and of the names and residential and business addresses of all
directors and beneficial owners, the passport copies and utility bills of
directors and controllers as well as due diligence on source of funds of the
corporate entity. The details given above are by way of example only and the
Subsidiary may request such information and documentation as it considers
necessary to verify the identity of an investor.
In
the event of delay or failure by an investor to produce any information required
for verification purposes, the Mauritius Administrator may refuse to accept the
application and the subscription monies relating thereto, or may refuse to
process a redemption requests until proper information has been provided.
Investors should note specifically that the Mauritius Administrator reserves the
right to request such information as may be necessary in order to verify the
identity of the investor for shares and the owner of the account to which the
redemption proceeds will be paid. Redemption proceeds will not be paid to a
third-party account.
Each
investor acknowledges that the Mauritius Administrator shall be held harmless
against loss arising as a result of the failure to process an application for
shares or redemption requests if such information and documentation as requested
by the Mauritius Administrator has not been provided by the
investor.
In
compliance with the FSC Handbook and the FSC Code, the Subsidiary will appoint a
Money Laundering Reporting Officer (“MLRO”). The duties of the MLRO will include
receiving and evaluating internal ‘Suspicious Transactions Reports’ and, where
appropriate, filing these with the FIU. Persons connected with the Subsidiary
are required to report any suspicions of money laundering, terrorist financing
or other suspicious transactions to the MLRO. If requested by any relevant
authority including, without limitation, the FIU, the MLRO may pass on
information about any investor to any such regulatory authority. It is a term of
subscription that any shareholder will be deemed to have consented to the
passing on of such information to any such authority.
Indian
Tax Status.
The taxation of the Subsidiary in India is governed by the provisions of the ITA
1961, the Treaty and the 2016 Protocol (defined below).
In
order to claim the beneficial provisions of the Treaty (discussed below), the
Subsidiary must be a tax resident of Mauritius and should obtain a TRC
pertaining to the relevant period from the FSC. Further, the Subsidiary should
be eligible for the benefits under the Treaty if it is incorporated in Mauritius
and has been issued a TRC by the MRA.
Additionally,
under the amendments to the ITA 1961 brought in through the Finance Act, 2013,
the Subsidiary may have to provide to the tax authorities such other documents
and information, as may be prescribed.
Under
amendments to the Income Tax Rules, 1962 dated May 1, 2013, persons seeking to
avail of Treaty benefits are required to furnish their return of income
(irrespective of whether such income is liable to tax in India or not) from
assessment years 2013-2014 onwards in the manner prescribed under the ITA 1961.
For purposes of filing tax returns, a permanent account number or PAN
(i.e.,
a taxpayer identification number) is required.
India-Mauritius
Double Tax Avoidance Treaty.
On May 10, 2016, India and Mauritius entered into a protocol (the “2016
Protocol”) amending the double-tax Treaty between the two countries. The 2016
Protocol went into effect on July 19, 2016.
Taxation
of capital gains arising to the Subsidiary.
Subject to the discussion below regarding Grandfathered Investments, the 2016
Protocol allows India to tax capital gains from alienation of shares of an
Indian resident company acquired by a Mauritian tax resident. Taxation of
capital gains arising to the Subsidiary should be as under:
(a)Capital
gains from the sale of listed equity shares or units of equity oriented mutual
funds made off the floor of the stock exchange or zero coupon bonds, held for 12
months or less are taxable as short-term capital gains at the rate of 30%
(excluding the applicable surcharge and health and education cess). For those
securities held for more than 12 months, capital gains shall be taxed at the
rate of 10% (excluding the applicable surcharge and health and education
cess);
(b)Capital
gains from the sale of unlisted securities (other than those covered above) held
for 36 months (for securities other than shares) and 24 months (for shares) or
less are taxable at the rate of 30% (excluding the applicable surcharge and
health and education cess), and those held for more than 36 months (for
securities other than shares) and 24 months (for shares) shall be taxed at the
rate of 10% (excluding the applicable surcharge and health and education
cess);
(c)Capital
gains from the sale of listed Indian equity shares or units of equity oriented
mutual funds made on the floor of the stock exchange and subject to Securities
Transaction Tax (“STT”) and held for 12 months or less are taxable at the rate
of 15% (excluding the applicable surcharge and health and education cess) and
those held for more than 12 months shall be taxed at the rate of 10% (excluding
the applicable surcharge and health and education cess) for gains exceeding
100,000 Indian rupees; and
(d)Capital
gains arising from the transfer of foreign currency convertible bonds and
depositary receipts outside India between non-resident investors should not be
subject to tax in India.
Taxation
of capital gains arising to the Subsidiary from Grandfathered
Investments.
Under the 2016 Protocol, gains made on shares of an Indian company acquired by a
Mauritius resident entity before April 1, 2017 are grandfathered (“Grandfathered
Investments”) and continue to be exempt from Indian capital gains tax
irrespective of the date on which such shares are sold. If the Subsidiary
qualifies as a Mauritius resident entity under Mauritius income tax laws, has a
valid TRC and is eligible for benefits under the Treaty, the Subsidiary will not
be subject to Indian tax on capital gains derived from Grandfathered
Investments. Even if the gains earned by the Subsidiary are considered business
profits, such capital gains are not taxable in India if the Subsidiary does not
have a PE in India.
Taxation
of Dividends.
Dividends paid by Indian companies on or after April 1, 2020 will no longer be
subject to dividend distribution tax in the hands of the Indian company, but
instead be subject to tax in the hands of the shareholder. The dividend income
paid to non-Indian shareholders is taxable under Indian law at 20%. Under the
Treaty, the rate of withholding on dividends applicable to the Subsidiary as a
resident of Mauritius can be reduced to:
(a)5%
if the Subsidiary holds directly at least 10% of the capital of the company
paying the dividends;
(b)15%
in all other cases; and
(c)The
Subsidiary is currently subject to 20% withholding on dividends.
Taxation
of Interest.
Interest income from loans provided or debt securities held in India will be
taxed at the rate of 7.5% under the Treaty (from the financial year which begins
after the Protocol comes into force) provided the Subsidiary qualifies as the
beneficial owner of the interest income unless the ITA 1961 provides a more
beneficial tax rate, in which case such beneficial rate of withholding will be
applicable. For instance, interest income with respect to investment in certain
rupee denominated bonds payable to an FPI on or after June 1, 2013 and before
July 1, 2023 should be taxable at the rate of 5% (exclusive of applicable
surcharge and cess). The Finance Act, 2020 also provides a lower withholding tax
rate of 5% on the interest payable to an FPI in respect of the investment made
in municipal debt security, during the period beginning from April 1, 2020 and
ending on July 1, 2023.
In
the event that the benefits of the Treaty are not available to the Subsidiary,
or the Subsidiary is held to have a permanent establishment in India, its income
from India will be taxed in accordance with the rules under ITA 1961. In light
of the particularized nature of tax consequences, you are advised to consult
your own tax adviser with respect to the specific tax consequences of purchasing
interests in the Fund.
Securities
Transaction Tax
All
transactions entered on a recognized stock exchange in India are subject to the
STT in accordance with the ITA 1961. The Subsidiary will be liable to pay STT in
respect of dealings in Indian securities purchased or sold on the Indian stock
exchanges. The applicable rates of STT are set out below:
|
|
|
|
|
|
|
|
|
| Transactions/
Particulars |
Payable
by Purchaser |
Payable
by Seller |
| Purchase/sale
of an equity share in a company or unit of an equity oriented mutual fund
- delivery based transaction in recognized stock exchange |
0.1% |
0.1% |
| Sale
of equity share in a company or unit of an equity oriented mutual fund -
transaction in a recognized stock exchange, settled otherwise than by
actual delivery |
N.A. |
0.025% |
| Sale
of unlisted shares under an offer for sale to the public |
N.A |
0.2% |
| Sale
of an option in securities |
N.A |
0.05% |
| Sale
of an option in securities, where option is exercised |
0.125% |
N.A. |
| Sale
of futures in securities |
N.A. |
0.01% |
| Sale
of unit of an equity oriented fund to a mutual fund |
N.A. |
0.001% |
GAAR.
GAAR became effective April 1, 2017. Under the Finance Act, 2012, upon
declaration of an arrangement as an ‘impermissible avoidance agreement’, the tax
authorities can disregard entities in a structure, reallocate income and
expenditure between parties to the arrangement, alter the tax residence of such
entities and the legal situs of assets involved, treat debt as equity and vice
versa.
An
‘impermissible avoidance arrangement’ is an arrangement entered into with the
main purpose of obtaining a tax benefit and satisfying one or more of the
following: (a) non-arm’s length dealings; (b) misuse or abuse of the provisions
of the domestic income tax provisions; (c) lack of commercial substance; or (d)
arrangement similar to that employed for non-bona fide purposes.
If
the Indian Tax authorities deem the Subsidiary’s structure to be an
“impermissible avoidance arrangement,” then the Subsidiary may not be able to
claim benefits under the Treaty. Inability of the Subsidiary to claim the tax
benefits under the Treaty could have an adverse impact on the tax liabilities of
the Subsidiary, and the performance of the Fund would be adversely
impacted.
Taxation
of Indirect Transfer of Indian Assets.
Under ITA 1961, Indian capital gains tax can be imposed on income arising from
the transfer of shares in a company registered outside India which derives,
directly or indirectly, its value substantially from the assets located in
India. Under the provisions of Finance Act, 2017, assets or capital assets held
by non-residents by way of investment, directly or indirectly, in a Category I
or Category II FPI were exempted from applicability of the indirect transfer
provisions (described in the foregoing paragraph). Pursuant to implementation of
the FPI Regulations in 2019, under which there are only two categories of FPIs,
the Finance Act, 2020 has restricted the exemption (discussed in the foregoing
paragraph) to Category I FPIs under the FPI Regulations.
Taxation
under indirect transfer provisions (if and as applicable) may be subject to
relief under an applicable tax treaty, subject to compliance with the applicable
requirements under the treaty and the furnishing of requisite documents to the
Indian income tax authorities, including a TRC.
The
levels and bases of taxation and any relevant reliefs from taxation referred to
in this document may change, any reliefs referred to are the ones which
currently apply and their value may differ from investor to
investor.
Taxation
of Shareholders
For
investors in the Fund who are tax residents outside India and who do not carry
on any business activities in India, there should be no Indian income tax
implications on distributions received from the Fund. However, where shares in
the Fund are sold by the investors, gains from such transfer could be subject to
tax in India as outlined under the heading “Taxation of Indirect Transfer of
Indian Assets” above, subject to applicable tax treaty relief.
Please
note that the above description is based on current provisions of Mauritius and
Indian law, and any change or modification made by subsequent legislation,
regulation, or administrative or judicial decision could increase the Indian tax
liability of the Subsidiary and thus reduce the return to Fund
shareholders.
The
Africa Index, Brazil Small-Cap Index, Digital India Index, Egypt Index,
Indonesia Index, Israel Index and Vietnam Index are published by MarketVector
IndexesTM
("MarketVector"),
which is an indirectly wholly owned subsidiary of the Adviser.
The
India Index is published by MarketGrader.com Corp. (“MarketGrader”), an
independent global equity research and Index provider.
MarketVector
and MarketGrader are each referred to herein as an “Index provider” and
collectively, the “Index providers.” The Index providers do not sponsor,
endorse, or promote the Funds and bear no liability with respect to the Funds or
any security.
The
Africa Index is a rules-based, modified-capitalization-weighted, float-adjusted
index and is intended to give investors a means of tracking the overall
performance of the publicly traded companies in Africa. The Africa Index
includes local listings of companies that are incorporated in or doing
substantial business in Africa. A GDP capping scheme is applied.
To
be initially eligible for the Africa Index, (i) companies must be incorporated
in Africa or have at least 50% of their revenues/related assets in Africa and
(ii) their stocks must have a market capitalization of greater than $150 million
as of the end of the month prior to the month in which a rebalancing date
occurs.
The
Africa Index is the exclusive property of MarketVector (a wholly owned
subsidiary of the Adviser), which has contracted with Solactive AG to maintain
and calculate the Africa Index. Solactive AG uses its best efforts to ensure
that the Africa Index is calculated correctly. Irrespective of its obligations
towards MarketVector, Solactive AG has no obligation to point out errors in the
Africa Index to third parties. VanEck Africa Index ETF is not sponsored,
endorsed, sold or promoted by MarketVector and MarketVector makes no
representation regarding the advisability of investing in VanEck Africa Index
ETF.
The
Africa Index is reconstituted and rebalanced quarterly. MarketVector may delay
or change a scheduled rebalancing or reconstitution of the Africa Index or the
implementation of certain rules at its sole discretion.
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MVIS®
BRAZIL SMALL-CAP INDEX |
The
Brazil Small-Cap Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of publicly traded small-capitalization companies that are
incorporated in or doing substantial business in Brazil.
To
be initially eligible for the Brazil Small-Cap Index, (i) companies must be
incorporated in Brazil or have at least 50% of their revenues/related assets in
Brazil and (ii) their stocks must have a market capitalization of greater than
$150 million as of the end of the month prior to the month in which a
rebalancing date occurs.
The
Brazil Small-Cap Index is the exclusive property of MarketVector (a wholly owned
subsidiary of the Adviser), which has contracted with Solactive AG to maintain
and calculate the Brazil Small-Cap Index. Solactive AG uses its best efforts to
ensure that the Brazil Small-Cap Index is calculated correctly. Irrespective of
its obligations towards MarketVector, Solactive AG has no obligation to point
out errors in the Brazil Small-Cap Index to third parties. VanEck Brazil
Small-Cap ETF is not sponsored, endorsed, sold or promoted by MarketVector and
MarketVector makes no representation regarding the advisability of investing in
VanEck Brazil Small-Cap ETF.
The
Brazil Small-Cap Index is reconstituted semi-annually and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Brazil Small-Cap Index or the implementation of certain rules at its sole
discretion.
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MVIS®
DIGITAL INDIA INDEX |
The
Digital India Index is a rules based, modified market capitalization weighted,
float adjusted index intended to give investors a means of tracking the overall
performance of the companies involved in and supporting the digitalization of
India. Companies involved in and supporting digitalization of India include, but
are not limited to, the following categories, as defined by the Index provider:
software, hardware, information technology services and consulting,
communications equipment and infrastructure, telecommunication services,
internet applications, e-commerce sites including online financial services and
electronic payment processing. The Index provider may add additional categories
to this list as the field of digitalization evolves.
To
be initially eligible for the Digital India Index, companies must: (i) be an
Indian company and be listed on an eligible stock exchange (as determined by
MarketVector) and (ii) generate at least 50% of their revenues from one or more
of the digitalization categories listed above. In addition, Indian companies
that are ranked within the top 10 telecommunication services companies by annual
revenue are eligible for inclusion in the Digital India Index because such
companies are involved with and/or support the digitization of the Indian
economy. To be eligible for inclusion in the Digital India Index, all stocks
must have a market capitalization of greater than $150 million as of the end of
the month prior to the month in which a rebalancing date occurs. Indian
companies that are current components of the Digital India Index must (i)
generate at least 25% of their revenues from one or more of the digitalization
categories listed above or (ii) continue to rank within the top 10
telecommunication services companies by annual revenue in order to remain in the
Digital India Index.
The
Digital India Index is the exclusive property of MarketVector (a wholly owned
subsidiary of the Adviser), which has contracted with Solactive AG to maintain
and calculate the Digital India Index. Solactive AG uses its best efforts to
ensure that the Digital India Index is calculated correctly. Irrespective of its
obligations towards MarketVector, Solactive AG has no obligation to point out
errors in the Digital India Index to third parties. The VanEck Digital India ETF
is not sponsored, endorsed, sold or promoted by MarketVector and MarketVector
makes no representation regarding the advisability of investing in the VanEck
Digital India ETF.
The
Digital India Index is reconstituted and rebalanced quarterly. MarketVector may
delay or change a scheduled rebalancing or reconstitution of the Digital India
Index or the implementation of certain rules at its sole
discretion.
The
Egypt Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
publicly traded companies that are incorporated in or doing substantial business
in Egypt.
To
be initially eligible for the Egypt Index, (i) companies must be incorporated in
Egypt or have at least 50% of their revenues/related assets in Egypt and (ii)
their stocks must have a market capitalization of greater than $150 million as
of the end of the month prior to the month in which a rebalancing date
occurs.
The
Egypt Index is the exclusive property of MarketVector (a wholly owned subsidiary
of the Adviser), which has contracted with Solactive AG to maintain and
calculate the Egypt Index. Solactive AG uses its best efforts to ensure that the
Egypt Index is calculated correctly. Irrespective of its obligations towards
MarketVector, Solactive AG has no obligation to point out errors in the Egypt
Index to third parties. VanEck Egypt Index ETF is not sponsored, endorsed, sold
or promoted by MarketVector and MarketVector makes no representation regarding
the advisability of investing in VanEck Egypt Index ETF.
The
Egypt Index is reconstituted and rebalanced quarterly. MarketVector may delay or
change a scheduled rebalancing or reconstitution of the Egypt Index or the
implementation of certain rules at its sole discretion.
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| MARKETGRADER
INDIA ALL-CAP GROWTH LEADERS INDEX |
The
India Index is a modified market capitalization weighted, float adjusted index
designed to track Indian companies that the MarketGrader has determined exhibit
favorable fundamental characteristics according to MarketGrader’s proprietary
scoring methodology. MarketGrader creates a numerical score based on indicators
measuring four fundamental characteristics for companies that are eligible for
index inclusion, derived from public company filings and stock prices. The four
fundamental characteristics are growth, value, profitability and cash flow. The
resulting score is an aggregate of these indicators.
To
be initially eligible for the India Index, companies must be domiciled in India
and listed on an eligible stock exchange, as determined by MarketGrader. From
this universe of companies, the top-ranked names according to MarketGrader’s
proprietary score are included, and then weighted according to their free-float
market capitalization.
The
India Index is rebalanced semi-annually. MarketGrader may delay or change a
scheduled rebalancing or reconstitution of the India Index or the implementation
of certain rules at its sole discretion.
The
Indonesia Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of publicly traded companies that are incorporated in or doing
substantial business in Indonesia.
To
be initially eligible for the Indonesia Index, (i) companies must be
incorporated in Indonesia or have at least 50% of their revenues/related assets
in Indonesia and (ii) their stocks must have a market capitalization of greater
than $150 million as of the end of the month prior to the month in which a
rebalancing date occurs.
The
Indonesia Index is the exclusive property of MarketVector (a wholly owned
subsidiary of the Adviser), which has contracted with Solactive AG to maintain
and calculate the Indonesia Index. Solactive AG uses its best efforts to ensure
that the Indonesia Index is calculated correctly. Irrespective of its
obligations towards MarketVector, Solactive AG has no obligation to point out
errors in the Indonesia Index to third parties. VanEck Indonesia Index ETF is
not sponsored, endorsed, sold or promoted by MarketVector and MarketVector makes
no representation regarding the advisability of investing in the VanEck
Indonesia Index ETF.
The
Indonesia Index is reconstituted and rebalanced quarterly. MarketVector may
delay or change a scheduled rebalancing or reconstitution of the Indonesia Index
or the implementation of certain rules at its sole discretion.
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BLUESTAR
ISRAEL GLOBAL INDEX® |
The
Israel Index is a rules based, modified capitalization, float adjusted weighted
index comprised of equity securities, which may include depositary receipts, of
publicly traded companies that are generally considered by MarketVector to be
Israeli companies. MarketVector considers a range of factors such as domicile,
country of company formation/founding, primary location of management,
operations and/or research and development facilities, tax status, location of
revenues and employees, among other things, when determining whether a company
will be included in the Israel Index.
For
a company to be considered part of the Israel Index, it must meet at least one
quantitative criterion and/or at least two qualitative criteria, below, as
decided upon by the BlueStar Index Advisory Committee. If a company meets this
requirement, it will be considered an Israeli company and part of the universe
of Israeli global equities.
Quantitative
criteria:
1) The
company’s tax status is in Israel.
2) The
company is headquartered in Israel.
3) The
company generates at least 50% of its revenues or at least 50% of its operating
expenses are derived from operations in Israel.
Qualitative
criteria:
1)The
company was founded or formed in Israel.
2)The
company is listed on the Tel Aviv Stock Exchange.
3)The
company has major management, operational, logistical, or R&D facilities in
Israel.
4)The
company has a majority of its board of directors or at least two executives
domiciled in Israel.
5)The
company’s business results would be materially altered without its Israel based
assets. These assets may include, but are not limited to: intellectual and human
capital, or licenses to Israeli technology that materially affect revenue or
R&D.
6)The
company is a subsidiary or non-Israel operating branch of an Israeli company
that meets at least one of the quantitative criteria described
above.
The
Israel Index is the exclusive property of MarketVector and is calculated and
maintained by Standard & Poor’s based on a methodology developed by
MarketVector in consultation with Standard & Poor’s. The Israel Index is
calculated on a real-time and end-of-day basis. Information on the Israel Index
is freely available on the website of MarketVector at
https://marketvector.com/.
The
Israel Index is rebalanced and reconstituted semi-annually. MarketVector may
delay or change a scheduled rebalancing or reconstitution of the Israel Index or
the implementation of certain rules at its sole discretion.
|
|
|
|
MARKETVECTORTM
VIETNAM LOCAL INDEX |
The
Vietnam Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
publicly traded companies that are incorporated in Vietnam.
To
be initially eligible for the Index, (i) companies must be incorporated in
Vietnam and (ii) their stocks must have a market capitalization of greater than
$150 million as of the end of the month prior to the month in which a
rebalancing date occurs.
The
Vietnam Index is the exclusive property of MarketVector (a wholly owned
subsidiary of the Adviser), which has contracted with a third party calculation
agent to maintain and calculate the Vietnam Index. The calculation agent uses
its best efforts to ensure that the Vietnam Index is calculated correctly.
Irrespective of its obligations towards MarketVector, the calculation agent has
no obligation to point out errors in the Vietnam Index to third parties. The
VanEck Vietnam ETF is not sponsored, endorsed, sold or promoted by MarketVector
and MarketVector makes no representation regarding the advisability of investing
in the VanEck Vietnam Fund.
The
Vietnam Index is reconstituted and rebalanced quarterly. MarketVector may delay
or change a scheduled rebalancing or reconstitution of the Vietnam Index or the
implementation of certain rules at its sole discretion.
|
|
|
| LICENSE
AGREEMENTS AND DISCLAIMERS |
The
Adviser has entered into a licensing agreement with MarketVector to use each of
the Africa Index, Brazil Small-Cap Index, Digital India Index, Egypt Index,
Indonesia Index, Israel Index and Vietnam Index (each a
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of VanEck Africa Index ETF, VanEck Brazil Small-Cap ETF, VanEck Digital India
ETF, VanEck Egypt Index ETF, VanEck Indonesia Index ETF, VanEck Israel ETF and
VanEck Vietnam ETF (each an “MarketVectorTM
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MARKETVECTOR
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
MARKETVECTORTM
INDEXES
OR ANY DATA INCLUDED THEREIN AND MARKETVECTOR SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. MARKETVECTOR MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF
SHARES OF THE MARKETVECTORTM
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OR MARKETVECTORTM
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POSSIBILITY OF SUCH DAMAGES.
The
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the India Index. The VanEck India Growth Leaders ETF is entitled to use the
India Index pursuant to a sub-licensing arrangement with the
Adviser.
VanEck
India Growth Leaders ETF is not sponsored, endorsed, sold or promoted by
MarketGrader. MarketGrader's only relationship to Van Eck Associates Corporation
(“Licensee”) is the licensing of the India Index which is determined, composed
and calculated by the Index provider and Solactive AG, as Index Calculation
Agent, without regard to Licensee. MarketGrader has no obligation to take the
needs of Licensee or the owners of the VanEck India Growth Leaders ETF into
consideration in determining, composing or calculating the India Index.
MARKETGRADER SHALL NOT BE A PARTY TO THE TRANSACTION CONTEMPLATED HEREBY, AND IS
NOT PROVIDING ANY ADVICE, RECOMMENDATION, REPRESENTATION OR WARRANTY REGARDING
THE ADVISABILITY OF THIS TRANSACTION OR THE VANECK INDIA GROWTH LEADERS ETF OR
THE ABILITY OF THE INDIA INDEX TO TRACK INVESTMENT PERFORMANCE. MARKETGRADER
HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, STATUTORY OR IMPLIED,
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UNDER
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The
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Solactive AG nor does Solactive AG offer any express or implicit guarantee or
assurance either with regard to the results of using the India Index and/or the
Index Price at any time or in any other respect. The India Index is calculated
and published by Solactive AG. Solactive AG uses its best efforts to ensure that
the India Index is calculated correctly. Irrespective of its obligations towards
MarketGrader, Solactive AG has no obligation to point out errors in the India
Index to third parties including but not limited to investors and/or financial
intermediaries of the financial instrument. Neither publication of the India
Index by Solactive AG nor the licensing of the India Index or for the purpose of
use in connection with the financial instrument constitutes a recommendation by
Solactive AG to invest capital in said financial instrument nor does it in any
way represent an assurance or opinion of Solactive AG with regard to any
investment in this financial instrument.
The
S&P 500®
Index included in each Fund’s performance table is a product of S&P Dow
Jones Indices LLC and/or its affiliates and has been licensed for use by the
Adviser. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P
Global, Inc., and/or its affiliates. All rights reserved. Redistribution or
reproduction in whole or in part are prohibited without written permission of
S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones
Indices LLC’s indices please visit www.spdji.com. S&P®
is a registered trademark of S&P Global and Dow Jones®
is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P
Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor
their third party licensors make any representation or warranty, express or
implied, as to the ability of any index to accurately represent the asset class
or market sector that it purports to represent and neither S&P Dow Jones
Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third
party licensors shall have any liability for any errors, omissions, or
interruptions of any index or the data included therein.
S&P
DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR
THE COMPLETENESS OF EACH INDEX OR ANY DATA RELATED THERETO, OR ANY COMMUNICATION
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL
NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF EACH INDEX, OR WITH RESPECT TO ANY DATA
RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER
SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF
PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY,
OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR
ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND THE ADVISER, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
The
financial highlights tables which follow are intended to help you understand the
Funds’ financial performance for the past five years or as indicated. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information for the fiscal year ended December 31, 2022 has
been audited by PricewaterhouseCoopers LLP, the Trust's independent registered
public accounting firm, whose report, along with the Funds' financial
statements, is included in the Funds' Annual Report, which is available upon
request. The information for periods prior to the fiscal year ended December 31,
2022 was audited by another independent registered public accounting firm.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
Index ETF |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
20.06 |
|
|
$ |
20.17 |
|
|
$ |
20.50 |
|
|
$ |
20.08 |
|
|
$ |
24.81 |
|
|
|
|
| Net
investment income (a) |
0.60 |
|
0.53 |
|
0.52 |
|
1.09 |
|
0.57 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(4.27) |
|
0.20 |
(b) |
(0.05) |
|
0.62 |
|
(4.96) |
|
|
|
| Total
from investment operations |
(3.67) |
|
0.73 |
|
0.47 |
|
1.71 |
|
(4.39) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.58) |
|
(0.84) |
|
(0.80) |
|
(1.29) |
|
(0.34) |
|
|
|
| Net
asset value, end of year |
$ |
15.81 |
|
|
$ |
20.06 |
|
|
$ |
20.17 |
|
|
$ |
20.50 |
|
|
$ |
20.08 |
|
|
|
|
| Total
return (c) |
(18.34) |
|
% |
3.69 |
|
% |
2.29 |
|
% |
8.52 |
|
% |
(17.70) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.98 |
|
% |
0.77 |
|
% |
0.92 |
|
% |
0.90 |
|
% |
0.91 |
|
% |
|
|
| Net
expenses |
0.98 |
|
% |
0.77 |
|
% |
0.79 |
|
% |
0.79 |
|
% |
0.78 |
|
% |
|
|
| Net
expenses excluding interest and taxes |
0.75 |
|
% |
0.77 |
|
% |
0.78 |
|
% |
0.78 |
|
% |
0.78 |
|
% |
|
|
| Net
investment income |
3.29 |
|
% |
2.50 |
|
% |
3.00 |
|
% |
5.13 |
|
% |
2.44 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$46 |
|
|
$59 |
|
|
$52 |
|
|
$50 |
|
|
$55 |
|
|
|
|
| Portfolio
turnover rate (d) |
33 |
|
% |
37 |
|
% |
37 |
|
% |
46 |
|
% |
23 |
|
% |
|
|
(a)Calculated
based upon average shares outstanding
(b)The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
Small-Cap ETF |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
16.35 |
|
|
$ |
21.44 |
|
|
$ |
27.50 |
|
|
$ |
20.09 |
|
|
$ |
23.33 |
|
|
|
|
| Net
investment income (a) |
0.44 |
|
0.48 |
|
0.33 |
|
0.58 |
|
0.68 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(2.59) |
|
(5.08) |
|
(6.04) |
|
7.42 |
|
(3.34) |
|
|
|
| Payment
from Adviser |
— |
|
— |
|
— |
|
0.11 |
(b) |
— |
|
|
|
|
| Total
from investment operations |
(2.15) |
|
(4.60) |
|
(5.71) |
|
8.11 |
|
(2.66) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.56) |
|
(0.49) |
|
(0.35) |
|
(0.70) |
|
(0.58) |
|
|
|
| Return
of capital |
— |
(c) |
— |
|
— |
|
— |
|
— |
|
|
|
| Total
distributions |
(0.56) |
|
(0.49) |
|
(0.35) |
|
(0.77) |
|
(0.58) |
|
|
|
| Net
asset value, end of year |
$ |
13.64 |
|
|
$ |
16.35 |
|
|
$ |
21.44 |
|
|
$ |
27.50 |
|
|
$ |
20.09 |
|
|
|
|
|
Total
return (d)
|
(13.30) |
|
% |
(21.38) |
|
% |
(20.75) |
|
% |
40.81 |
|
%(b) |
(11.66) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.83 |
|
%(e) |
0.84 |
|
%(e) |
0.84 |
|
% |
0.73 |
|
% |
0.73 |
|
% |
|
|
| Net
expenses |
0.59 |
|
%(e) |
0.59 |
|
%(e) |
0.60 |
|
% |
0.63 |
|
% |
0.60 |
|
% |
|
|
| Net
expenses excluding interest and taxes |
0.59 |
|
%(e) |
0.59 |
|
%(e) |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
|
|
| Net
investment income |
2.71 |
|
%(e) |
2.32 |
|
%(e) |
1.73 |
|
% |
2.52 |
|
% |
3.25 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$25 |
|
|
$32 |
|
|
$55 |
|
|
$98 |
|
|
$88 |
|
|
|
|
| Portfolio
turnover rate (f) |
42 |
|
% |
56 |
|
% |
31 |
|
% |
38 |
|
% |
45 |
|
% |
|
|
(a)Calculated
based upon average shares outstanding
(b)For
the year ended December 31, 2019, 0.55% of total return, representing $0.11 per
share, consisted of a payment from the Adviser.
(c)Amount
represents less than $0.005 per share.
(d)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(e)The
ratios presented do not reflect the Fund’s proportionate share of income and
expenses from the Fund’s investment in underlying funds.
(f)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital
India
ETF |
|
|
|
|
|
|
|
|
|
|
|
Period
Ended December 31, |
|
|
|
|
|
|
|
|
|
2022(a) |
|
|
|
|
|
|
|
|
|
|
|
| Net
asset value, beginning of period |
$36.25 |
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income (b) |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
| Net
realized and unrealized loss on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(8.33) |
|
|
|
|
|
|
|
|
|
|
|
| Total
from investment operations |
(8.19) |
|
|
|
|
|
|
|
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.27) |
|
|
|
|
|
|
|
|
|
|
|
| Net
asset value, end of period |
$27.79 |
|
|
|
|
|
|
|
|
|
|
|
| Total
return (c) |
(22.56) |
%(d) |
|
|
|
|
|
|
|
|
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Expenses |
0.76 |
%(e) |
|
|
|
|
|
|
|
|
|
|
| Expenses
excluding interest |
0.75 |
%(e) |
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
0.53 |
%(e) |
|
|
|
|
|
|
|
|
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of period (in millions) |
$1 |
|
|
|
|
|
|
|
|
|
|
|
| Portfolio
turnover rate (f) |
22 |
%(d) |
|
|
|
|
|
|
|
|
|
|
(a)For
the period February 16, 2022 (commencement of operations) through December 31,
2022.
(b)Calculated
based upon average shares outstanding
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Annualized
(f)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
Index ETF |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
27.09 |
|
|
$ |
25.62 |
|
|
$ |
29.20 |
|
|
$ |
28.28 |
|
|
$ |
32.89 |
|
|
|
|
| Net
investment income (a) |
0.61 |
|
0.75 |
|
0.61 |
|
0.59 |
|
0.60 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(7.02) |
|
1.38 |
|
(3.56) |
|
0.93 |
(b) |
(4.73) |
|
|
|
| Total
from investment operations |
(6.41) |
|
2.13 |
|
(2.95) |
|
1.52 |
|
(4.13) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.27) |
|
(0.66) |
|
(0.63) |
|
(0.60) |
|
(0.48) |
|
|
|
| Net
asset value, end of year |
$ |
20.41 |
|
|
$ |
27.09 |
|
|
$ |
25.62 |
|
|
$ |
29.20 |
|
|
$ |
28.28 |
|
|
|
|
| Total
return (c) |
(23.67) |
|
% |
8.36 |
|
% |
(10.09) |
|
% |
5.42 |
|
% |
(12.56) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
1.35 |
|
% |
1.10 |
|
% |
1.11 |
|
% |
1.11 |
|
% |
1.19 |
|
% |
|
|
| Net
expenses |
1.24 |
|
% |
1.02 |
|
% |
0.98 |
|
% |
1.01 |
|
% |
0.98 |
|
% |
|
|
| Net
expenses excluding interest and taxes |
0.94 |
|
% |
0.94 |
|
% |
0.94 |
|
% |
0.94 |
|
% |
0.94 |
|
% |
|
|
| Net
investment income |
2.92 |
|
% |
2.92 |
|
% |
2.43 |
|
% |
1.88 |
|
% |
1.73 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$23 |
|
|
$22 |
|
|
$19 |
|
|
$31 |
|
|
$33 |
|
|
|
|
| Portfolio
turnover rate (d) |
66 |
|
% |
73 |
|
% |
27 |
|
% |
76 |
|
% |
41 |
|
% |
|
|
(a)Calculated
based upon average shares outstanding
(b)The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
India
Growth Leaders ETF(a) |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
| Net
asset value, beginning of year |
$ |
42.93 |
|
|
$ |
32.94 |
|
|
$ |
32.76 |
|
|
$ |
42.36 |
|
|
$ |
68.40 |
|
|
|
|
|
|
| Net
investment income (loss) (b) |
0.59 |
|
0.08 |
|
0.15 |
|
0.50 |
|
(0.02) |
|
|
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(10.34) |
|
9.91 |
|
0.11 |
(c) |
(9.68) |
|
(25.97) |
|
|
|
|
|
| Total
from investment operations |
(9.75) |
|
9.99 |
|
0.26 |
|
(9.18) |
|
(25.99) |
|
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.56) |
|
— |
|
(0.08) |
|
(0.42) |
|
(0.05) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
asset value, end of year |
$ |
32.62 |
|
|
$ |
42.93 |
|
|
$ |
32.94 |
|
|
$ |
32.76 |
|
|
$ |
42.36 |
|
|
|
|
|
|
| Total
return (d) |
(22.67) |
|
% |
30.30 |
|
% |
0.80 |
|
% |
(21.65) |
|
% |
(38.00) |
|
% |
|
|
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.80 |
|
% |
1.00 |
|
% |
1.24 |
|
% |
0.86 |
|
% |
0.83 |
|
% |
|
|
|
|
| Net
expenses |
0.80 |
|
% |
0.90 |
|
% |
1.05 |
|
% |
0.86 |
|
% |
0.83 |
|
% |
|
|
|
|
| Net
expenses excluding interest and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| taxes |
0.73 |
|
% |
0.83 |
|
% |
0.85 |
|
% |
0.83 |
|
% |
0.80 |
|
% |
|
|
|
|
| Net
investment income (loss) |
1.64 |
|
% |
0.22 |
|
% |
0.55 |
|
% |
1.35 |
|
% |
(0.03) |
|
% |
|
|
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$51 |
|
|
$78 |
|
|
$68 |
|
|
$122 |
|
|
$187 |
|
|
|
|
|
|
| Portfolio
turnover rate (e) |
102 |
|
% |
67 |
|
% |
133 |
|
% |
51 |
|
% |
39 |
|
% |
|
|
|
|
(a)Consolidated
Financial Highlights
(b) Calculated
based upon average shares outstanding
(c) The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(d) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(e) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indonesia
Index ETF |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
19.93 |
|
|
$ |
20.49 |
|
|
$ |
22.68 |
|
|
$ |
21.85 |
|
|
$ |
24.75 |
|
|
|
|
| Net
investment income (a) |
0.45 |
|
0.27 |
|
0.36 |
|
0.40 |
|
0.36 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(2.41) |
|
(0.61) |
|
(2.21) |
|
0.90 |
|
(2.78) |
|
|
|
| Total
from investment operations |
(1.96) |
|
(0.34) |
|
(1.85) |
|
1.30 |
|
(2.42) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.63) |
|
(0.22) |
|
(0.34) |
|
(0.47) |
|
(0.48) |
|
|
|
| Net
asset value, end of year |
$ |
17.34 |
|
|
$ |
19.93 |
|
|
$ |
20.49 |
|
|
$ |
22.68 |
|
|
$ |
21.85 |
|
|
|
|
| Total
return (b) |
(9.88) |
|
% |
(1.65) |
|
% |
(8.20) |
|
% |
5.97 |
|
% |
(9.79) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.67 |
|
% |
0.82 |
|
% |
0.97 |
|
% |
0.80 |
|
% |
0.75 |
|
% |
|
|
| Net
expenses |
0.57 |
|
% |
0.57 |
|
% |
0.57 |
|
% |
0.57 |
|
% |
0.57 |
|
% |
|
|
| Net
investment income |
2.24 |
|
% |
1.38 |
|
% |
2.03 |
|
% |
1.78 |
|
% |
1.61 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$33 |
|
|
$54 |
|
|
$36 |
|
|
$41 |
|
|
$45 |
|
|
|
|
| Portfolio
turnover rate (c) |
25 |
|
% |
36 |
|
% |
13 |
|
% |
10 |
|
% |
14 |
|
% |
|
|
(a)Calculated
based upon average shares outstanding
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Israel
ETF |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
48.77 |
|
|
$ |
44.82 |
|
|
$ |
35.03 |
|
|
$ |
28.05 |
|
|
$ |
30.37 |
|
|
|
|
| Net
investment income (a) |
0.61 |
|
0.27 |
|
0.08 |
|
0.19 |
|
0.27 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(13.19) |
|
4.30 |
|
9.79 |
|
7.27 |
|
(2.38) |
|
|
|
| Total
from investment operations |
(12.58) |
|
4.57 |
|
9.87 |
|
7.46 |
|
(2.11) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.48) |
|
(0.62) |
|
(0.08) |
|
(0.48) |
|
(0.21) |
|
|
|
| Net
asset value, end of year |
$ |
35.71 |
|
|
$ |
48.77 |
|
|
$ |
44.82 |
|
|
$ |
35.03 |
|
|
$ |
28.05 |
|
|
|
|
| Total
return (b) |
(25.79) |
|
% |
10.20 |
|
% |
28.14 |
|
% |
26.64 |
|
% |
(6.94) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.64 |
|
% |
0.71 |
|
% |
0.80 |
|
% |
0.94 |
|
% |
1.02 |
|
% |
|
|
| Net
expenses |
0.59 |
|
% |
0.59 |
|
% |
0.60 |
|
% |
0.62 |
|
% |
0.60 |
|
% |
|
|
| Net
expenses excluding interest and taxes |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
|
|
| Net
investment income |
1.48 |
|
% |
0.57 |
|
% |
0.24 |
|
% |
0.60 |
|
% |
0.85 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$59 |
|
|
$80 |
|
|
$75 |
|
|
$58 |
|
|
$46 |
|
|
|
|
| Portfolio
turnover rate (c) |
12 |
|
% |
32 |
|
% |
22 |
|
% |
14 |
|
% |
23 |
|
% |
|
|
(a)Calculated
based upon average shares outstanding
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vietnam
ETF |
|
Year
Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
| Net
asset value, beginning of year |
$ |
21.36 |
|
|
$ |
17.52 |
|
|
$ |
16.05 |
|
|
$ |
14.84 |
|
|
$ |
17.45 |
|
|
| Net
investment income (a) |
0.18 |
|
0.11 |
|
0.08 |
|
0.14 |
|
0.17 |
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
| investments |
(9.68) |
|
3.83 |
|
1.46 |
|
1.19 |
|
(2.66) |
|
| Total
from investment operations |
(9.50) |
|
3.94 |
|
1.54 |
|
1.33 |
|
(2.49) |
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.11) |
|
(0.10) |
|
(0.06) |
|
(0.12) |
|
(0.12) |
|
| Return
of capital |
— |
|
— |
|
(0.01) |
|
— |
|
|
— |
|
|
| Total
distributions |
(0.11) |
|
(0.10) |
|
(0.07) |
|
(0.12) |
|
(0.12) |
|
| Net
asset value, end of year |
$ |
11.75 |
|
|
$ |
21.36 |
|
|
$ |
17.52 |
|
|
$ |
16.05 |
|
|
$ |
14.84 |
|
|
| Total
return (b) |
(44.47) |
|
% |
22.52 |
|
% |
9.72 |
|
% |
8.86 |
|
% |
(14.15) |
|
% |
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
| Expenses |
0.66 |
|
%(c) |
0.59 |
|
%(c) |
0.61 |
|
% |
0.66 |
|
% |
0.68 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
| Expenses
excluding interest and taxes |
0.60 |
|
%(c) |
0.58 |
|
%(c) |
0.60 |
|
% |
0.63 |
|
% |
0.64 |
|
% |
| Net
investment income |
1.13 |
|
%(c) |
0.58 |
|
%(c) |
0.55 |
|
% |
0.89 |
|
% |
0.98 |
|
% |
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$413 |
|
|
$591 |
|
|
$457 |
|
|
$443 |
|
|
$318 |
|
|
| Portfolio
turnover rate (d) |
57 |
|
% |
57 |
|
% |
33 |
|
% |
33 |
|
% |
49 |
|
% |
(a)Calculated
based upon average shares outstanding
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)The
ratios presented do not reflect the Fund’s proportionate share of income and
expenses from the Fund’s investment in underlying funds.
(d)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
| PREMIUM/DISCOUNT
INFORMATION |
Information
regarding how often the closing trading price of the Shares of each 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 Investment Company Act of 1940. 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 an Exchange is satisfied by
the fact that the prospectus is available at an 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 Funds 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 Investment Company
Act of 1940 and other applicable law. See the Funds’ SAI for more information
concerning the Trust’s form of organization. Section 12(d)(1) of the Investment
Company Act of 1940 restricts investments by investment companies in the
securities of other investment companies, including Shares of a Fund. Registered
investment companies are permitted to invest in the Funds beyond the limits set
forth in Section 12(d)(1) subject to certain terms and conditions set forth in
SEC regulations, including that such investment companies enter into an
agreement with the Funds.
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the Funds’ shareholders and the Trust, the Funds, the
Adviser and/or the Trustees. Further, shareholders are not intended third party
beneficiaries of any contracts entered into by (or on behalf of) any 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 Funds. 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 Funds’ Shares. The Funds’
Registration Statement, including this Prospectus, the Funds’ 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 Funds, which has been filed with the SEC, provides more information
about the Funds. The SAI for the Funds is incorporated herein by reference and
is legally part of this Prospectus. Additional information about the Funds’
investments is available in each Fund’s annual and semi-annual reports to
shareholders. In each 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 Funds’ annual
and semi-annual reports may be obtained without charge by writing to the Funds
at Van Eck Securities Corporation, the Funds’ 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 Funds in writing to 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling 800.826.2333.
The
Funds’ SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
For
more detailed information about the Funds, see the SAI dated May 1, 2023, as may
be supplemented from time to time. Additional information about each of the
Funds’ investments is or will be available in each Fund’s annual and semi-annual
reports to shareholders. In each Fund’s annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected each 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 Funds or to make shareholder
inquiries. You may also obtain the SAI or a Fund’s annual or semi-annual
reports, by visiting the VanEck website at www.vaneck.com.
Reports
and other information about the Funds 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 |
800.826.2333
vaneck.com |
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