cik0001137360-20230930
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PROSPECTUS |
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February 1,
2024 |
Biotech
ETF BBH
Digital
Transformation ETF DAPP
Energy
Income
ETF EINC
Environmental
Services ETF EVX
Gaming
ETF BJK
Green
Infrastructure ETF RNEW
Pharmaceutical
ETF PPH
Retail
ETF RTH
Robotics
ETF IBOT
Semiconductor
ETF SMH
Video
Gaming and eSports
ETF ESPO
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Principal
U.S. Listing Exchange for EINC and EVX: NYSE Arca, Inc. |
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Principal
U.S. Listing Exchange for BBH, DAPP, BJK, RNEW, PPH, RTH, IBOT, SMH and
ESPO: The NASDAQ Stock Market LLC. |
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The
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
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck® Biotech ETF (the “Fund”) seeks to replicate as
closely as possible, before fees and expenses, the price and yield performance
of the MVIS®
US Listed Biotech 25 Index (the “Biotech 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 |
0.35 |
% |
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Other
Expenses(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.35 |
% |
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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 February 1,
2025.
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 |
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1 |
$36 |
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3 |
$113 |
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5 |
$197 |
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10 |
$443 |
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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 18% 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 Biotech Index includes common stocks
and depositary receipts of U.S. exchange-listed companies in the biotechnology
industry. Such companies may include medium-capitalization companies and foreign
companies that are listed on a U.S. exchange. To be initially eligible for the
Biotech Index, companies must generate at least 50% of their revenues from
biotechnology. Biotechnology includes companies engaged primarily in research
(including research contractors) and development as well as production,
marketing and sales of drugs based on genetic analysis and diagnostic equipment
(excluding pharmacies). Of the largest 50 stocks in the biotechnology industry
by full market capitalization, the top 25 by free-float market capitalization
(i.e.,
includes only shares that are readily available for trading in the market) and
three month average daily trading volume are included in the Biotech Index. As
of December 31, 2023, the Biotech Index included 23 securities of companies with
a market capitalization range of between
approximately
$4.9 billion and $154.1 billion and a weighted average market capitalization of
$69.1 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 Biotech Index by investing in a portfolio of
securities that generally replicates the Biotech Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Biotech Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Biotech 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 Biotech Index concentrates in an industry or group of
industries. As of September 30, 2023, each of the biotechnology and life
sciences tools & services industries 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.
Biotechnology Industry
Risk. The
success of biotechnology companies is highly dependent on the development,
procurement and/or marketing of drugs. The values of biotechnology companies are
also dependent on the development, protection and exploitation of intellectual
property rights and other proprietary information, and the profitability of
biotechnology companies may be affected significantly by such things as the
expiration of patents or the loss of, or the inability to enforce, intellectual
property rights. The research and development and other costs associated with
developing or procuring new drugs, products or technologies and the related
intellectual property rights can be significant, and the results of such
research and expenditures are unpredictable and may not necessarily lead to
commercially successful products. In addition, the potential for an increased
amount of required disclosure or proprietary scientific information could
negatively impact the competitive position of these companies. Governmental
regulation may delay or inhibit the release of new products. The process for
obtaining regulatory approval by the Food and Drug Administration or other
governmental regulatory authorities is long and costly and there can be no
assurance that the necessary approvals will be obtained or maintained. Companies
in the biotechnology industry may also be subject to expenses and losses from
expensive insurance costs due to the risk of product liability lawsuits, and
extensive litigation based on intellectual property, product liability and
similar claims. Companies in the biotechnology industry may be adversely
affected by government regulation and changes in reimbursement rates. Health
care providers, principally hospitals, that transact with companies in the
biotechnology industry often rely on third-party payors, such as Medicare,
Medicaid and other government sponsored programs, private health insurance plans
and health maintenance organizations to reimburse all or a portion of the cost
of health care related products or
services.
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.
Life
Sciences Tools and Services Industry Risk. The
Fund will be sensitive to, and its performance may depend to a greater extent
on, the overall condition of the life sciences tools and services industry. The
profitability of life sciences tools and services companies may be adversely
affected by the loss or impairment of patent or intellectual property rights,
the advent of new technologies or competitors, large expenditures on research
and development of products or services that may not prove commercially
successful or may become obsolete quickly, and the imposition of regulations and
restrictions by the Food and Drug Administration, the Environmental Protection
Agency, state and local governments, and foreign regulatory authorities. In
addition, stock prices of these companies are at times extremely volatile,
particularly when their products are subject to regulatory approval and/or under
regulatory scrutiny. Life sciences tools and services companies may also be
particularly affected by risks that affect the broader health care sector,
including heavy dependence on patent protection, competition that may make it
difficult to raise prices or may result in price discounts, and thin
capitalization and limited product lines, markets, financial resources or
personnel. Companies that make medical equipment and supplies may be subject to
extensive litigation based on product liability claims. Meanwhile, healthcare
providers and services companies are particularly subject to the risks of
restrictions on government reimbursement for medical expenses, an increased
emphasis on outpatient services, rising costs of medical products, and public
health 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.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
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 medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
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.
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, will 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
such sector or sectors or industry or group of industries. 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, a
broad-based benchmark index and an additional 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: |
27.58% |
2Q
2020 |
Worst
Quarter: |
-18.19% |
1Q
2016 |
Average Annual Total
Returns for the Periods Ended December 31,
2023
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 |
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VanEck Biotech
ETF (return before taxes) |
3.87% |
8.63% |
6.81% |
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VanEck
Biotech ETF (return after taxes on
distributions) |
3.76% |
8.54% |
6.73% |
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VanEck
Biotech ETF (return after taxes on distributions and sale of Fund
Shares) |
2.37% |
6.82% |
5.51% |
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MVIS US
Listed Biotech 25 Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes) |
3.94% |
8.77% |
6.98% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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1
On February 1,
2024, the MSCI ACWI Net TR Index replaced the S&P 500 Index as the Fund's
broad-based benchmark index. The Fund changed its broad-based benchmark index as
it believes the MSCI ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
December
2011 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Digital Transformation ETF (the “Fund”) seeks to
track as closely as possible, before fees and expenses, the price and yield
performance of the MVIS®
Global Digital Assets Equity Index (the “Digital Transformation 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(a) |
0.01 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.51 |
% |
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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 February 1,
2025.
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 |
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1 |
$52 |
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|
3 |
$164 |
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5 |
$285 |
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10 |
$640 |
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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 of Digital
Transformation Companies. The Digital Transformation Index is a global index
that tracks the performance of Digital Transformation Companies. “Digital
Transformation Companies” are companies (i) that operate digital asset
exchanges, operate payment gateways (i.e., a merchant service that authorizes
direct payments processing for businesses), engage in and/or assist with the
digital asset mining operations, provide software services, equipment and
technology or services to digital asset operations, operate digital asset
infrastructure businesses, or facilitate commerce with the use of digital assets
(these items are collectively referred to herein as “digital asset projects”)
and/or (ii) that own a material amount of digital assets or otherwise generate
revenues related to digital asset projects.
The
Fund will not invest in digital assets (including cryptocurrencies) (i) directly
or (ii) indirectly through the use of digital asset derivatives. The
Fund also will not invest in initial coin offerings. Therefore the Fund is not
expected to track the price movement of any digital asset. The Fund may,
however, have indirect exposure to digital assets by virtue of its investments
in Digital Transformation Companies that use one or more digital assets as part
of their business activities or that hold digital assets as proprietary
investments.
To
be initially eligible for inclusion in the Digital Transformation Index, a
company must (i) generate at least 50% of its revenues from digital asset
projects; (ii) generate at least 50% of its revenues from projects that, when
developed, have the potential to generate at least 50% of their revenues from
digital assets or digital asset projects; and/or (iii) have at least 50% of its
assets invested in direct digital asset holdings or digital asset projects.
Companies that are current components of the Digital Transformation Index must
generate at least 25% of their revenues from digital assets projects and/or have
at least 25% of their assets invested in direct digital asset holdings or
digital asset projects in order to remain in the Digital Transformation Index.
The Digital Transformation Index currently includes a minimum of 20 Digital
Transformation Index components.
“Digital
assets” are assets issued and transferred using distributed ledger or blockchain
technology. As used herein, “digital assets” refers to all digital assets,
including both digital asset securities (i.e., digital assets that are
securities under U.S. securities laws) and cryptocurrencies. Many digital assets
and, consequently, many Digital Transformation Companies, rely on “blockchain”
technologies. A “blockchain” is a peer-to-peer shared, distributed ledger that
facilitates the process of recording transactions and tracking assets in a
business network. A blockchain stores transaction data in “blocks” that are
linked together to form a “chain.” As the number of transactions grow, so does
the blockchain. Blocks record and confirm the time and sequence of transactions,
which are then logged into the blockchain, within a discrete network governed by
rules agreed on by the network participants. Although initially associated with
digital commodities, it can be used to track tangible, intangible and digital
assets and companies in all business sectors.
Digital
Transformation Companies may include small- and medium-capitalization companies
and foreign and emerging market issuers, and the Fund may invest in depositary
receipts and securities denominated in foreign currencies. As of December 31,
2023, the Digital Transformation Index included 20 securities of companies with
a market capitalization range of between approximately $188.07 million and $42.8
billion and a weighted average market capitalization of $7.2 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 Digital Transformation Index by investing in a
portfolio of securities that generally replicates the Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Digital Transformation Index and does not
seek temporary defensive positions that are inconsistent with its investment
objective of seeking to track the Digital Transformation Index.
The
Fund is classified as a non-diversified fund under 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 Transformation Index concentrates in an industry or group of
industries. As of September 30, 2023, 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.
Digital
Transformation Companies Risk. The
technology relating to digital assets, including blockchain, is new and
developing and the risks associated with digital assets may not fully emerge
until the technology is widely used. Digital asset technologies are used by
companies to optimize their business practices, whether by using the technology
within their business or operating business lines involved in the operation of
the technology. The cryptographic keys necessary to transact a digital asset may
be subject to theft, loss, or destruction, which could adversely affect a
company’s business or operations. Competing platforms and technologies may be
developed, allowing consumers or investors use an alternative to digital assets.
Currently, there are relatively few companies for which digital assets
represents an attributable and significant revenue stream. Therefore, the values
of the companies included in the Index may not reflect their connection to
digital assets, but may be based on other business operations. In addition,
these companies may engage in other lines of business unrelated to digital
assets that could adversely affect their operating results. These companies may
not be able to develop digital asset technology applications or may not be able
to capitalize on those applications. Digital asset technologies may never be
fully implemented, which could adversely affect an investment in the Fund.
Companies that use digital asset technologies may be subject to cybersecurity
risk. In addition, certain features of digital asset technologies, such as
decentralization, open source protocol, and reliance on peer-to-peer
connectivity, may increase the risk of fraud or cyber-attack by potentially
reducing the likelihood of a coordinated response. A significant disruption of
Internet connectivity affecting large numbers of users or geographic areas could
impede the functionality of digital
asset
technologies and adversely affect companies included in the Index. Digital
Transformation Companies may be subject to the risks posed by conflicting
intellectual property claims, which may reduce confidence in the viability of a
digital asset. There may be risks posed by the lack of regulation for digital
assets and any future regulatory developments could affect the viability and
expansion of the use of digital assets. Because digital asset platforms may
operate across many national boundaries and regulatory jurisdictions, it is
possible that digital asset platforms may be subject to widespread and
inconsistent regulation. Digital asset systems built using third party products
may be subject to technical defects or vulnerabilities beyond a company’s
control. Because many digital assets do not have a standardized exchange, like a
stock market, there is less liquidity for such assets and greater possibility of
volatility, fraud or manipulation.
Certain
of the Fund’s investments, including investments in companies that hold material
amounts of digital assets, may be subject to the risks associated with investing
in digital assets, including cryptocurrencies and crypto tokens. Such companies
may be subject to the risk that: the technology that facilitates the transfer of
a digital asset could fail; the decentralized, open source protocol of the
applicable blockchain network could be affected by internet connectivity
disruptions, fraud, consensus failures or cybersecurity attacks; such network
may not be adequately maintained by its participants; because digital assets are
a new technological innovation with a limited history, they are highly
speculative assets and may experience extreme price volatility; future
regulatory actions or policies may limit the ability to sell, exchange or use a
digital asset; the price of a digital asset may be impacted by the transactions
of a small number of holders of such digital asset; and that a digital asset
will decline in popularity, acceptance or use, thereby impairing its
price.
Special
Risk Considerations of Investing in Canadian
Issuers. Investments in securities of Canadian issuers, including
issuers located outside of Canada that generate significant revenue from Canada,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. The Canadian economy is very
dependent on the demand for, and supply and price of, natural resources. The
Canadian market is relatively concentrated in issuers involved in the production
and distribution of natural resources. There is a risk that any changes in
natural resources sectors could have an adverse impact on the Canadian economy.
Additionally, the Canadian economy is heavily dependent on relationships with
certain key trading partners, including the United States, countries in the
European Union and China. Because the United States is Canada’s largest trading
partner and foreign investor, the Canadian economy is dependent on and may be
significantly affected by the U.S. economy. Reduction in spending on Canadian
products and services or changes in the U.S. economy may adversely impact the
Canadian economy. Trade agreements may further increase Canada’s dependency on
the U.S. economy, and uncertainty as to the future of such trade agreements may
cause a decline in the value of the Fund’s Shares. Past periodic demands by the
Province of Quebec for sovereignty have significantly affected equity valuations
and foreign currency movements in the Canadian market and such demands may have
this effect in the future. In addition, certain sectors of Canada’s economy may
be subject to foreign ownership limitations. This may negatively impact the
Fund’s ability to invest in Canadian issuers and to pursue its investment
objective.
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.
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.
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
Market Risk. 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 Risk. 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.
Risk
of 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 Risk 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 of 1986. 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 Risk. 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.
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, will 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
such sector or sectors or industry or group of industries. 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 year 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, a
broad-based benchmark index and an additional 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: |
88.98% |
4Q
2023 |
Worst
Quarter: |
-70.98% |
2Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
Since
Inception (4/12/2021) |
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VanEck
Digital Transformation ETF (return before taxes) |
280.64% |
-34.28% |
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|
VanEck
Digital Transformation ETF (return after taxes on
distributions) |
280.64% |
-35.11% |
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|
VanEck
Digital Transformation ETF (return after taxes on distributions and sale
of Fund Shares) |
166.14% |
-23.62% |
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|
MVIS Global
Digital Assets Equity Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes) |
268.09% |
-36.27% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
3.47% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
7.13% |
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1
On February 1,
2024, the MSCI ACWI Net TR Index replaced the S&P 500 Index as the Fund's
broad-based benchmark index. The Fund changed its broad-based benchmark index as
it believes the MSCI ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
April
2021 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Energy Income ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
North
America Energy Infrastructure Index (the “Energy Income 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 |
0.45% |
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Other
Expenses(a) |
0.01% |
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Total
Annual Fund Operating Expenses(a) |
0.46% |
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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 February 1,
2025.
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 |
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1 |
$47 |
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3 |
$148 |
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5 |
$258 |
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|
10 |
$579 |
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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 23% 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 Energy Income Index is a rules-based
index designed to give investors a means to track the overall performance of
North American companies involved in the midstream energy segment, which
includes master limited partnerships (“MLPs”) and corporations involved in oil
and gas storage and transportation. The Energy Income Index is entirely
comprised of companies involved in the midstream energy segment and includes
common stock of corporations and equity securities of MLPs and MLP affiliates.
“Oil and gas storage and transportation” companies may include those involved in
oil and gas pipelines, storage facilities, and other activities associated with
transporting, storing, and gathering natural gas, natural gas liquids, crude oil
or refined products. To be initially eligible for the Energy Income Index,
companies must generate at least 50% of their revenues from oil and gas storage
and transportation (as defined above). Such companies may include medium- and
large-capitalization companies and North American
issuers,
including Canadian issuers. As of December 31, 2023, the Energy Income Index
included 27 securities of companies with a market capitalization range of
approximately $785.6 million and $76.5 billion and a weighted average market
capitalization of $29.9 billion. The Energy Income Index is 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 Energy Income Index by investing in a
portfolio of securities that generally replicates the Energy Income Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Energy Income Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Energy Income
Index.
The
Fund is classified as a non-diversified fund under 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 Index concentrates in an industry or group of industries. As of September
30, 2023, the energy sector 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.
Oil
and Gas Companies Risk. The
profitability of oil and gas companies is related to worldwide energy prices,
including all sources of energy, and exploration and production costs. The price
of oil and gas, the earnings of oil and gas companies, and the value of such
companies’ securities can be extremely volatile. Such companies are also subject
to risks of changes in commodity prices, changes in the global supply of and
demand for oil and gas interest rates, exchange rates, the price of oil and gas,
the prices of competitive energy services, the imposition of import controls,
world events, friction with certain oil-producing countries and between the
governments of the United States and other major exporters of oil to the United
States, actions of OPEC, negative perception and publicity, depletion of
resources, development of alternative energy sources, energy conservation,
technological developments, labor relations and general economic conditions, as
well as market, economic and political risks of the countries where oil and gas
companies are located or do business, fluctuations caused by events relating to
international politics, including political instability, expropriation, social
unrest and acts of war, acts of terrorism, energy conservation, the success of
exploration projects and tax and other governmental regulatory policies. Oil and
gas companies operate in a highly competitive and cyclical industry, with
intense price competition. A significant portion of their revenues may depend on
a relatively small number of customers, including governmental entities and
utilities.
Oil
and gas companies are exposed to significant and numerous operating hazards. Oil
and gas equipment and services, as well as oil and gas exploration and
production, can be significantly affected by natural disasters and adverse
weather conditions in the regions in which they operate. The revenues of oil and
gas companies may be negatively affected by contract termination and
renegotiation. Oil and gas companies are subject to, and may be adversely
affected by, extensive federal, state, local and foreign laws, rules and
regulations. Oil and gas exploration and production companies may also be
adversely affected by environmental damage claims and other types of litigation.
Laws and regulations protecting the environment may expose oil and gas companies
to liability for the conduct of or conditions caused by others or for acts that
complied with all applicable laws at the time they were performed. The
international operations of oil and gas companies expose them to risks
associated with instability and changes in economic and political conditions,
social unrest and acts of war, foreign currency fluctuations, changes in foreign
regulations and other risks inherent to international business. Such companies
may also have significant capital investments or operations in, or engage in
transactions involving, emerging market countries, which may increase these
risks.
Midstream.
Midstream energy companies that provide crude oil, refined product and natural
gas services are subject to supply and demand fluctuations in the markets they
serve which may be impacted by a wide range of factors, including fluctuating
commodity prices, weather, increased conservation, increased governmental or
environmental regulation, depletion, rising interest rates, declines in domestic
or foreign production, accidents or catastrophic events, increasing operating
expenses and economic conditions.
Marine
Shipping.
Marine shipping energy companies and MLPs are primarily marine transporters of
natural gas, crude oil or refined petroleum products. Marine shipping companies
are exposed to many of the same risks as other energy companies. The highly
cyclical nature of the marine transportation industry may lead to volatile
changes in charter rates and vessel values, which may adversely affect the
revenues, profitability and cash flows of energy companies and MLPs with marine
transportation assets.
Geopolitical
Risk.
Global political and economic instability could affect the operations of energy
companies and MLPs in unpredictable ways, including through disruptions of
natural resource supplies and markets and the resulting volatility in
commodity
prices. Market disruptions arising out of geopolitical events could also prevent
the Fund from executing advantageous investment decisions in a timely
manner.
Special
Risk Considerations of Investing in Canadian Issuers. Investments
in securities of Canadian issuers, including issuers located outside of Canada
that generate significant revenue from Canada, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Canadian economy is very dependent on the demand for, and supply
and price of, natural resources. The Canadian market is relatively concentrated
in issuers involved in the production and distribution of natural resources.
There is a risk that any changes in natural resources sectors could have an
adverse impact on the Canadian economy. Additionally, the Canadian economy is
heavily dependent on relationships with certain key trading partners, including
the United States, countries in the European Union and China. Because the United
States is Canada’s largest trading partner and foreign investor, the Canadian
economy is dependent on and may be significantly affected by the U.S. economy.
Reduction in spending on Canadian products and services or changes in the U.S.
economy may adversely impact the Canadian economy. Trade agreements may further
increase Canada’s dependency on the U.S. economy, and uncertainty as to the
future of such trade agreements may cause a decline in the value of the Fund’s
Shares. Past periodic demands by the Province of Quebec for sovereignty have
significantly affected equity valuations and foreign currency movements in the
Canadian market and such demands may have this effect in the future. In
addition, certain sectors of Canada’s economy may be subject to foreign
ownership limitations. This may negatively impact the Fund’s ability to
invest in Canadian issuers and to pursue its investment
objective.
MLP
Risk.
Investments in common units of MLPs involve risks that differ from investments
in common stock including risks inherent in the structure of MLPs, including (i)
tax risks (described further below), (ii) risk related to limited control of
management or the general partner or managing member, (iii) limited rights to
vote on matters affecting the MLP, except with respect to extraordinary
transactions, (iv) conflicts of interest between the general partner or managing
member and its affiliates, on the one hand, and the limited partners or members,
on the other hand, including those arising from incentive distribution payments
or corporate opportunities, (v) dilution risks and risks related to the general
partner’s right to require unit-holders to sell their common units at an
undesirable time or price, resulting from regulatory changes or other reasons
and (vi) cash flow risks.
MLP
common units and other equity securities can be affected by factors affecting
the stock market in general, expectations of interest rates, investor sentiment
towards MLPs or the energy sector, changes in a particular issuer’s financial
condition, or unfavorable or unanticipated poor performance of a particular
issuer (in the case of MLPs, generally measured in terms of distributable cash
flow). MLPs holding credit-related investments are subject to interest rate risk
and the risk of default on payment obligations by debt issuers. Prices of common
units of individual MLPs and other equity securities also can be affected by
fundamentals unique to the partnership or company, including cash flow growth,
cash generating power and distribution coverage.
Certain
MLP securities may trade in relatively low volumes due to their smaller
capitalizations or other factors, which may cause them to have a high degree of
volatility and lack sufficient market liquidity to enable the Fund to effect a
sale at an advantageous time or price. Because many MLPs pay out most of their
operating cash flows, the MLPs rely on capital markets for access to equity and
debt financing to fund growth through organization. If market conditions limit
an MLP’s access to capital markets, the MLP’s growth prospects could diminish
and its costs of capital increase, which would decrease the value of the common
units held by the Fund.
MLP
Tax Risk.
MLPs are generally being treated as partnerships for U.S. federal income tax
purposes. Partnerships generally do not pay U.S. federal income tax at the
partnership level. Rather, each partner is allocated a share of the
partnership’s income, gains, losses, deductions and expenses, and takes that
share into account in calculating its own U.S. federal income tax liability. A
change in current tax law, or a change in the business of a given MLP, could
result in an MLP being treated as a corporation for U.S. federal income tax
purposes, reducing the distributions, after-tax returns, and value of the
investment to the Fund.
Changes
in tax laws or regulations could adversely affect the Fund or the MLPs in which
the Fund invests and could also negatively impact the amount and tax
characterization of dividends received by the Fund’s shareholders. For example,
Congress could take actions which would eliminate the tax benefits of
depreciation, depletion and amortization deductions realized by MLPs.
Alternatively, Congress could impose a tax on pass-through entities such as MLPs
or eliminate the use of pass-through taxation entirely. The tax benefits of
depreciation, depletion and amortization deductions realized by MLPs effectively
defer the income of the MLPs and, in turn, the taxable income of the Fund.
Without these benefits the Fund would be subject to current U.S. federal, state
and local corporate income taxes on a greater proportion of its allocable share
of the income and gains of MLPs in which it invests, and the Fund’s ability to
pay distributions treated as return-of-capital distributions (for tax
purposes).
Individuals
and certain other non-corporate entities are generally eligible for a 20%
deduction with respect to certain taxable income from MLPs through 2025.
However, the Fund (which is taxable as a regulated investment company) will not
be eligible to pass through such certain taxable income, if any, from MLPs or
the related 20% deduction to Fund shareholders. As a result, in comparison,
investors investing directly in MLPs would be eligible for the 20% deduction for
any such taxable income from these investments, while investors investing in
MLPs held indirectly through the Fund would not. An MLP’s distributions to the
Fund generally will not be taxable unless the cash amount (or, in certain cases,
the value of marketable securities) distributed exceeds the Fund’s basis in its
interest in the MLP. Distributions received by the Fund from an MLP will reduce
the Fund’s adjusted basis in
its
interest in the MLP, but not below zero. A reduced basis will generally result
in an increase in the amount of gain (or decrease in the amount of loss) that
will be recognized by the Fund for tax purposes on the sale of its interest in
the MLP. Cash distributions from an MLP to the Fund (and, in certain cases, the
value of marketable securities distributed by an MLP to the Fund) in excess of
the Fund’s basis in the MLP will generally be taxable to the Fund as capital
gain.
The tax treatment of all items allocated to the Fund each year by the
MLPs will not be known until the Fund receives a schedule K-1 for that year with
respect to each of its MLP investments.
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.
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.
Return
of Capital Risk. A
portion of the Fund’s distributions are expected to be treated as a return of
capital for tax purposes. Return of capital distributions are not taxable income
to you but reduce your tax basis in your Fund Shares. Such a reduction in tax
basis will generally result in larger taxable gains and/or lower tax losses on a
subsequent sale of Fund Shares. The Fund’s return of capital distributions are
not derived from the net income or earnings and profits of the Fund.
Shareholders should not assume that all Fund distributions are derived from the
net income or earnings and profits of the
Fund.
Liquidity
Risk Related to MLPs.
Although energy companies and MLPs trade on national securities exchanges,
certain MLP securities may trade less frequently than those of larger companies
due to their smaller capitalizations. At times, due to limited trading volumes
of certain MLPs, the prices of such MLPs may display abrupt or erratic
movements. Moreover, it may be more difficult for the Fund to buy and sell
significant amounts of such securities without an unfavorable impact on
prevailing market prices. The Fund’s investment in securities that are less
actively traded or over time experience decreased trading volume may restrict
its ability to take advantage of other market opportunities or to dispose of
securities at a fair price at the times when the Adviser believes it is
desirable to do so. This also may affect adversely the Fund’s ability to make
dividend distributions.
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.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
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 medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
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, will 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
such sector or sectors or industry or group of industries. 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
Pursuant
to an agreement and plan of reorganization between the VanEck ETF Trust (the
“Trust”), on behalf of the Fund, and Exchange Traded Concepts Trust, on behalf
of Yorkville High Income MLP ETF (the “Predecessor Fund”), on February 22, 2016,
the Fund acquired all of the assets and liabilities of the Predecessor Fund in
exchange for shares of beneficial interest of the Fund (the “Reorganization”).
As a result of the Reorganization, the Fund is the accounting successor of the
Predecessor Fund. The historical performance information shown below reflects,
for the period prior to the Reorganization, the historical performance of the
Predecessor Fund.
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, a
broad-based benchmark index and an additional index. Prior to
December 2, 2019, the Fund sought to replicate as closely as possible, before
fees and expenses, the price and yield performance of the Solactive High Income
MLP Index (the “Prior Index”). Therefore, performance information prior to
December 2, 2019 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: |
39.94% |
2Q
2020 |
Worst
Quarter: |
-49.42% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
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VanEck Energy
Income ETF (return before taxes) |
15.73% |
12.27% |
-5.70% |
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VanEck
Energy Income ETF (return after taxes on
distributions) |
15.06% |
11.73% |
-6.84% |
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VanEck
Energy Income ETF (return after taxes on distributions and sale of Fund
Shares) |
9.73% |
9.69% |
-4.34% |
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MVIS North
America Energy Infrastructure Index (reflects
no deduction for fees, expenses or taxes, except withholding
taxes)* |
16.64% |
12.65% |
-6.09% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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*Prior to
December 2, 2019, 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 December 2, 2019 reflects the
performance of the Fund while seeking to track the Prior Index. Prior to
December 2, 2019, index data reflects that of the Prior
Index.
From
December 2, 2019, the index data will reflect that of the MVIS®
North America Energy Infrastructure
Index.
1
On February 1, 2024, the MSCI ACWI Net TR Index replaced the S&P
500 Index as the Fund's broad-based benchmark index. The Fund changed its
broad-based benchmark index as it believes the MSCI ACWI Net TR Index is more
representative of global equities exposure.
See
“License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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
2016 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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®
Environmental Services ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the NYSE®
Arca Environmental Services Index (the “NYSE Arca Environmental Services 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 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
-0.09 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.55 |
% |
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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 0.55% of the Fund’s average daily net
assets per year until at least February 1,
2025. 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 |
$56 |
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3 |
$196 |
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5 |
$348 |
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10 |
$790 |
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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 22% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in common stocks and
American depositary receipts (“ADRs”) of companies involved in the environmental
services industry. The NYSE Arca Environmental Services Index is designed to
measure the performance of widely held, highly capitalized companies engaged in
business activities that may benefit from the global increase in demand for
consumer waste disposal, removal and storage of industrial by-products, and the
management of
associated
resources. Such companies may include small- and medium-capitalization
companies. As of December 31, 2023, the NYSE Arca Environmental Services Index
included 23 securities of companies with a market capitalization range of
between approximately $252.9 million and $72.1 billion and a weighted average
market capitalization of $25.9 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
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the NYSE Arca Environmental Services Index by
investing in a portfolio of securities that generally replicates the NYSE Arca
Environmental Services Index. Unlike many investment companies that try to
“beat” the performance of a benchmark index, the Fund does not try to “beat” the
NYSE Arca Environmental Services Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the NYSE Arca Environmental Services Index. The Fund will normally
invest at least 80% of its assets in securities that comprise the NYSE Arca
Environmental Services Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940 and, therefore, may invest a greater percentage of assets in a particular
issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the NYSE Arca Environmental Services Index concentrates in an industry or group
of industries. As of September 30, 2023, each of the industrials, basic
materials and environmental services industry 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.
Environmental
Services Industry Risk. Companies
in the environmental services industry are engaged in a variety of activities
related to environmental services and consumer and industrial waste management.
These companies may be adversely affected by a global decrease in demand for
consumer waste disposal, removal and storage of industrial by-products, and the
management of associated resources. Competitive pressures may have a significant
effect on the financial condition of such companies. These prices may fluctuate
substantially over short periods of time so the Fund may be more volatile than
other types of investments. Environmental services companies must comply with
various regulations and the terms of their operating permits and licenses.
Failure to comply, failure to renew permits and licenses or changes in
government regulations can adversely impact their operations. Waste management
companies are also affected by demand cycles, world events, increased
outsourcing and economic conditions. In addition, these companies are subject to
liability for environmental damage claims.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability and the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities.
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.
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.
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 may be adversely affected by environmental damages, product
liability claims and exchange rates.
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.
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.
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, will 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
such sector or sectors or industry or group of industries. 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, a
broad-based benchmark index and an additional 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: |
21.29% |
4Q
2020 |
Worst
Quarter: |
-27.52% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
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VanEck
Environmental Services ETF (return before taxes) |
13.13% |
13.34% |
9.62% |
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VanEck
Environmental Services ETF (return after taxes on
distributions) |
12.86% |
13.21% |
9.44% |
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VanEck
Environmental Services ETF (return after taxes on distributions and sale
of Fund Shares) |
7.94% |
10.70% |
7.88% |
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NYSE Arca
Environmental Services Index (reflects no deduction for
fees, expenses or taxes) |
12.82% |
13.59% |
10.00% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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1
On
February 1, 2024, the MSCI ACWI Net TR Index replaced the S&P 500 Index as
the Fund's broad-based benchmark index. The Fund changed its broad-based
benchmark index as it believes the MSCI ACWI Net TR Index is more representative
of global equities exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
October
2006 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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®
Gaming ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Global Gaming Index (the “Gaming 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 |
0.24 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.74 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
-0.02 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.72 |
% |
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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 0.65% of the Fund’s average
daily net assets per year until at least February 1,
2025. 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 |
$74 |
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3 |
$235 |
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5 |
$410 |
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10 |
$917 |
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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 15% 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. To be initially eligible for the Gaming
Index, companies must generate at least 50% of their revenues from gaming.
Gaming includes casinos and casino hotels, sports betting (including internet
gambling and racetracks) and lottery services as well as gaming services, gaming
technology and gaming equipment. Such companies may include small- and
medium-capitalization companies and foreign companies that are listed on a U.S.
or foreign exchanges. As of December 31, 2023, the Gaming Index included 33
securities of
companies
with a market capitalization range of between approximately $1.0 million and
$37.6 billion and a weighted average market capitalization of $17.6 billion.
These amounts are subject to change. As of September 30, 2023, a significant
portion of the Fund’s assets was invested in securities of Australian issuers.
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 Gaming Index by investing in a portfolio of
securities that generally replicates the Gaming Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Gaming Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Gaming Index.
The
Fund is classified as a non-diversified fund under 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 Gaming Index concentrates in an industry or group of industries. As of
September 30, 2023, the consumer discretionary and real estate 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.
Gaming
Industry Risk. Companies
in the gaming industry include those engaged in casino operations,
race track operations, sports and horse race betting operations, online gaming
operations and/or the provision of related equipment and technologies. Companies
in the gaming industry face intense competition, both domestically and
internationally. Companies in the gaming industry are also highly
regulated, and state and Federal legislative or regulatory changes and licensing
issues (as well as the laws of other countries) can significantly impact their
ability to operate in certain jurisdictions, the activities in which such
companies are allowed to engage and the profitability of companies in the
industry. Certain companies in the gaming industry are highly
leveraged and have recently experienced financial difficulty. As a result, the
securities of gaming companies owned by the Fund may react similarly to, and
move in unison with, one another. The gaming industry may also be
negatively affected by changes in economic conditions, consumer tastes and
discretionary income levels, intense competition, technological developments
that may cause these companies to become obsolete quickly, financial resources,
markets or personnel. In addition, the gaming industry is
characterized by the use of various forms of intellectual property, which are
dependent upon patented technologies, trademarked brands and proprietary
information. Companies operating in the gaming industry are subject to
the risk of significant litigation regarding intellectual property rights, which
may adversely affect and financially harm companies in which the Fund may
invest. Furthermore, certain jurisdictions may impose additional restrictions on
securities issued by gaming companies organized or operated in such
jurisdictions that may be held by the
Fund.
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.
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.
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.
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
Market Risk. 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 Risk. 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.
Risk
of 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 Risk 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 of 1986. 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 Risk. 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. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Special
Risk Considerations of Investing in Australian Issuers.
Investments in securities of Australian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also dependent on trading with key trading partners.
Special
Risk Considerations of Investing in Asian Issuers. Investments in securities of Asian issuers involve risks and
special considerations not typically associated with investments in the U.S.
securities markets. Many Asian economies have experienced rapid growth and
industrialization in recent years, but there is no assurance that this growth
rate will be maintained. Certain Asian economies have experienced over-extension
of credit, currency devaluations and restrictions, high unemployment, high
inflation, decreased exports and economic recessions. Geopolitical hostility,
political instability, as well as economic or environmental events in any one
Asian country can have a significant effect on the entire Asian region as well
as on major trading partners outside Asia, and any adverse effect on some or all
of the Asian countries and regions in which the Fund invests. The securities
markets in some Asian economies are relatively underdeveloped and may subject
the Fund to higher action costs or greater uncertainty than investments in more
developed securities markets. Such risks may adversely affect the value of the
Fund’s investments. Certain Asian countries have also developed increasingly
strained relationships with the U.S., and if these relations were to worsen,
they could adversely affect Asian issuers that rely on the U.S. for
trade.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be 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. The United Kingdom withdrew from the European Union on January
31, 2020, which has resulted in ongoing market volatility and caused additional
market disruption on a global basis. On December 30, 2020, the United Kingdom
and the European Union signed the EU-UK Trade and Cooperation Agreement, which
is an agreement on the terms governing certain aspects of the European Union's
and the United Kingdom's relationship post Brexit. Notwithstanding the EU-UK
Trade and Cooperation Agreement, following the transition period, there is
likely to be considerable uncertainty as to the United Kingdom’s post-transition
framework.
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.
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, will 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
such sector or sectors or industry or group of industries. 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, a
broad-based benchmark index and an additional 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: |
29.22% |
2Q
2020 |
Worst
Quarter: |
-38.32% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
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VanEck Gaming
ETF (return before taxes) |
12.00% |
6.41% |
0.15% |
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VanEck
Gaming ETF (return after taxes on distributions) |
11.52% |
6.05% |
-0.52% |
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VanEck
Gaming ETF (return after taxes on distributions and sale of Fund
Shares) |
7.38% |
4.97% |
-0.07% |
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MVIS Global
Gaming Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes) |
12.55% |
6.86% |
0.59% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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1
On February 1,
2024, the MSCI ACWI Net TR Index replaced the S&P 500 Index as the Fund's
broad-based benchmark index. The Fund changed its broad-based benchmark index as
it believes the MSCI ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
January
2008 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Green Infrastructure
ETF (the “Fund”) seeks to track as closely as possible, before
fees and expenses, the price and yield performance of the Indxx US Green
Infrastructure - MCAP Weighted Index (the “Green Infrastructure 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 |
0.45 |
% |
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Other
Expenses(a) |
0.01 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.46 |
% |
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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 February 1,
2025.
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 |
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1 |
$47 |
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3 |
$148 |
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5 |
$258 |
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|
10 |
$579 |
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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 October 18, 2022 (the
Fund's commencement of operations) through September 30, 2023, 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 of Green
Infrastructure Companies, as defined below. The Green Infrastructure Index is a
U.S. index that tracks the performance of Green Infrastructure Companies. “Green
Infrastructure Companies” are companies that seek to positively impact the
environment through the production, transmission, or distribution of green
energy and/or through the establishment of sustainable infrastructure to
facilitate the use of green energy. To be initially eligible for inclusion in
the Green Infrastructure Index, a company must generate at least 50% of its
revenues from green infrastructure activities, and must be listed and domiciled
in the U.S. Green infrastructure activities are comprised of the following
sub-themes: green transportation, green energy, green fuel, green infrastructure
and equipment, pollution control, waste management and green construction. These
sub-themes are subject to change in the discretion of Indxx, LLC (the “Index
provider”
or “Indxx”). The Green Infrastructure Index, which currently targets a selection
of 50 Index components, is modified market capitalization weighted and is
published by Indxx.
The
green energy sub-theme includes companies involved in generating power through
environmentally friendly sources that can replace or supplement traditional
fossil-fuel sources and that may reduce the global carbon footprint, including
power derived principally from bio fuels (such as ethanol), wind, solar, hydro
and geothermal sources. Green energy is also referred to as renewable or low
carbon energy because its sources are naturally replenished and it produces less
carbon emissions than fossil-fuel. Investments may be made in companies that
produce biogas, biomass or similar energy sources from household or other
wastes.
The
green transportation sub-theme includes companies focusing on the sustainable
use of energy resources by creating environmentally friendly travel solutions
and modifying the conventional transportation system to an eco-friendly one.
Investments may be made in companies that are involved in the manufacture of
ecofriendly transport solutions or in the provision of support for the
implementation of a green transport system, including hybrid/electric vehicles,
electric vehicle charging stations, lithium-ion batteries, and compressed
natural gas (“CNG”)/liquefied natural gas (“LNG” ) gas stations.
The
green fuel sub-theme includes companies involved in the production and
distribution of clean fuels such as biodiesel fuel, hydrogen fuel, fuel cell,
ethanol fuel, LNG, and CNG. Investments may be made in companies utilizing the
various technologies that support the production, use and storage of these power
sources.
The
green infrastructure and equipment sub-theme includes companies involved in the
transmission, distribution, and provision of infrastructure for the transmission
and distribution of electricity generated using clean energy sources, including
smart grid operators, manufacturers of smart meters, turbines, solar panels and
other equipment required for the successful deployment and maintenance of clean
energy.
The
pollution control sub-theme includes companies seeking to reduce the negative
effects of any kind of pollution, such as waste-water treatment, manufacture of
pollution control equipment like emission control systems for automobiles,
sedimentation tanks for sewer systems, and any other product or service that
reduces pollution or the harmful effects of pollution on air, water, or
soil.
The
waste management sub-theme includes companies that are involved in the safe
disposal, recycling or treatment of hazardous and non-hazardous wastes such as
industrial effluents and radioactive wastes.
The
green construction sub-theme includes companies that are engaged in the
development, management and maintenance of green buildings or engaged in the
construction of systems that help to efficiently use energy and other natural
resources with the aim of reducing the degradation of the environment. These
systems can be dams, green streets and alleys, green roofs, permeable pavements,
rainwater harvesting, man-made wetlands and sustainable drainage.
Green
infrastructure companies may include small- and medium-capitalization companies,
including micro-capitalization companies. As of December 31, 2023, the Green
Infrastructure Index included 45 securities of companies with a market
capitalization range of between approximately $643.6 million and $789.8 billion
and a weighted average market capitalization of $56.3 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 Green Infrastructure Index by investing in a
portfolio of securities that generally replicates the Green Infrastructure
Index. Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Green Infrastructure Index
and does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to track the Green Infrastructure Index.
The
Fund is classified as a non-diversified fund under 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 Green Infrastructure Index concentrates in an industry or group of
industries. As of September 30, 2023, the industrials, utilities, energy and
consumer discretionary 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.
Green
Infrastructure Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the green infrastructure companies. Green
infrastructure-related companies are subject to a variety of factors that may
adversely affect their business or operations including high interest costs,
costs associated with compliance with and changes in environmental and other
regulations, zoning laws, difficulty in raising capital, increased competition,
uncertainty concerning the availability of energy, including renewable energy,
at reasonable prices, economic conditions and world events,
taxation,
real estate values, overbuilding and labor relations. Infrastructure-related
securities may be issued by companies that are highly leveraged, less
creditworthy or financially distressed. These investments are considered to be
speculative and are subject to greater risk of loss, greater sensitivity to
interest rate and economic changes, valuation difficulties, and potential
illiquidity. The Fund’s investments may be dependent on supportive government
policies, including tax incentives and subsidies, and the support for such
policies may fluctuate over time.
Green
Energy Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of green or low carbon energy companies.
Renewable energy companies may be significantly affected by the competition from
new and existing market entrants, obsolescence of technology, short product
cycles, production spending, varying prices and profits, commodity price
volatility, changes in exchange rates, imposition of import controls, depletion
of resources, seasonal weather conditions, technological developments and
general economic conditions, market sentiment, fluctuations in energy prices and
supply and demand of renewable energy fuels, fluctuations in the price of oil
and gas, energy conservation efforts, the success of exploration projects, tax
and other government regulations (such as incentives and subsidies) and
international political events. Additionally, adverse weather conditions may
cause fluctuations in renewable energy generation and adversely affect the cash
flows associated with these assets.
Further,
renewable energy companies may be subject to risks associated with hazardous
materials and can be significantly and adversely affected by legislation
resulting in more strict government regulations and enforcement policies and
specific expenditures for environmental cleanup efforts. There are also risks
associated with a failure to enforce environmental law. If the government
reduces environmental regulations or their enforcement, companies that produce
products designed to provide a clean environment are less likely to prosper.
Renewable energy companies may be more volatile than companies operating in more
established industries. Certain valuation methods used to value renewable energy
companies have not been in widespread use for a significant period of time. As a
result, the use of these valuation methods may serve to further increase the
volatility of certain renewable and transitional energy company share prices. If
government subsidies and incentives for renewable energy sources are reduced or
eliminated, the demand for renewable energy may decline and cause corresponding
declines in the revenues and profits of renewable energy companies. In addition,
changes in government policies towards renewable energy technology also may have
an adverse effect on the Fund’s performance. Furthermore, the Fund may invest in
the shares of companies with a limited operating history, some of which may
never have operated profitably. Investment in young companies with a short
operating history is generally riskier than investing in companies with a longer
operating history. The Fund will carry greater risk and may be more volatile
than a portfolio composed of securities issued by companies operating in a wide
variety of different or more established industries. This industry is relatively
nascent and under-researched in comparison to more established and mature
sectors, and should therefore be regarded as having greater investment
risk.
Environmental
Services Industry Risk.
Companies in the environmental services industry are engaged in a variety of
activities related to environmental services and consumer and industrial waste
management. These companies may be adversely affected by a global decrease in
demand for consumer waste disposal, removal and storage of industrial
by-products, and the management of associated resources. Competitive pressures
may have a significant effect on the financial condition of such companies.
These prices may fluctuate substantially over short periods of time so the Fund
may be more volatile than other types of investments. Environmental services
companies must comply with various regulations and the terms of their operating
permits and licenses. Failure to comply, failure to renew permits and licenses
or changes in government regulations can adversely impact their operations.
Waste management companies are also affected by demand cycles, world events,
increased outsourcing and economic conditions. In addition, these companies are
subject to liability for environmental damage claims.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability and the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities.
Green
Investing Strategy Risk. The
Index’s green investing focus could cause the Fund to perform differently
compared to funds that do not have a sustainability focus. The Index’s green
investing focus may result in the Fund investing in securities or industry
sectors that underperform other securities or underperform the market as a
whole. The companies included in the Index may differ from companies included in
other indices that use similar sustainability screens. The Fund is also subject
to the risk that the companies identified by the Index provider do not operate
as expected when addressing sustainability issues. Additionally, the Index
Provider’s proprietary valuation model may not perform as intended, which may
adversely affect an investment in the Fund. Regulatory changes or
interpretations regarding the definitions and/or use of green criteria could
have a material adverse effect on the Fund’s ability to implement its green
strategy.
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 may 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.
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.
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.
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.
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.
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, will 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
such sector or sectors or industry or group of industries. 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 year 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-based benchmark 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 Year
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Best
Quarter: |
6.02% |
1Q
2023 |
Worst
Quarter: |
-8.20% |
3Q
2023 |
Average Annual
Total Returns for the Periods Ended December 31, 2023
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 |
Since
Inception (10/18/2022) |
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VanEck Green
Infrastructure ETF (return before taxes) |
2.86% |
-1.31% |
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|
VanEck
Green Infrastructure ETF (return after taxes on
distributions) |
2.63% |
-1.55% |
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VanEck
Green Infrastructure ETF (return after taxes on distributions and sale of
Fund Shares) |
1.82% |
-1.02% |
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Indxx US
Green Infrastructure - MCAP Weighted Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes) |
2.99% |
-1.12% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
25.04% |
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See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
October
2022 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Pharmaceutical ETF (the “Fund”) seeks to replicate
as closely as possible, before fees and expenses, the price and yield
performance of the MVIS®
US Listed Pharmaceutical 25 Index (the “Pharmaceutical 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 |
0.35 |
% |
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Other
Expenses(a) |
0.01 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.36 |
% |
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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 February 1,
2025.
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 |
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1 |
$37 |
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3 |
$116 |
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5 |
$202 |
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10 |
$456 |
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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 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 Pharmaceutical Index includes common
stocks and depositary receipts of U.S. exchange-listed companies in the
pharmaceutical industry. Such companies may include medium-capitalization
companies and foreign companies that are listed on a U.S. exchange. To be
initially eligible for the Pharmaceutical Index, companies must generate at
least 50% of their revenues from pharmaceuticals. Pharmaceuticals include
companies engaged primarily in research (including research contractors) and
development as well as production, marketing and sales of pharmaceuticals
(excluding pharmacies). Of the largest 50 stocks in the pharmaceutical industry
by full market capitalization, the top 25 by free-float market capitalization
(i.e., includes only shares that are readily available for trading in the
market) and three month average daily trading volume are included in the
Pharmaceutical Index. As of December 31, 2023, the Pharmaceutical Index included
25 securities of companies with a market
capitalization
range of between approximately $2.6 billion and $553.3 billion and a weighted
average market capitalization of $190.8 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 Pharmaceutical Index by investing in a
portfolio of securities that generally replicates the Pharmaceutical Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Pharmaceutical Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Pharmaceutical
Index.
The
Fund is classified as a non-diversified fund under 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 Pharmaceutical Index concentrates in an industry or group of industries. As
of September 30, 2023, the pharmaceutical industry and the health care sector
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.
Pharmaceutical
Industry Risk.
The success of companies in the pharmaceutical industry is highly dependent on
the development, procurement and marketing of drugs. The values of
pharmaceutical companies are also dependent on the development, protection and
exploitation of intellectual property rights and other proprietary information,
and the profitability of pharmaceutical companies may be significantly affected
by such things as the limited number of products, expiration of patents or the
loss of, or the inability to enforce, intellectual property rights. The research
and other costs associated with developing or procuring new drugs and the
related intellectual property rights can be significant, and the results of such
research and expenditures are unpredictable. In addition, pharmaceutical
companies may be susceptible to product obsolescence. Many pharmaceutical
companies face intense competition from new products and less costly generic
products. Moreover, the process for obtaining regulatory approval by the Food
and Drug Administration or other governmental regulatory authorities is long and
costly and there can be no assurance that the necessary approvals will be
obtained or maintained.
Companies
in the pharmaceutical industry may also be subject to expenses and losses from
extensive litigation based on intellectual property, product liability and
similar claims. Companies in the pharmaceutical industry may be adversely
affected by government regulation and changes in reimbursement rates. The
ability of many pharmaceutical companies to commercialize current and any future
products depends in part on the extent to which reimbursement for the cost of
such products and related treatments are available from third party payors, such
as Medicare, Medicaid and other government sponsored programs, private health
insurance plans and health maintenance organizations.
The
international operations of many pharmaceutical companies expose them to risks
associated with instability and changes in economic and political conditions,
foreign currency fluctuations, changes in foreign regulations and other risks
inherent to international business. Such companies also may be characterized by
thin capitalization and limited markets, financial resources or personnel, as
well as dependence on wholesale distributors. A pharmaceutical company’s
valuation can be adversely affected if one of its products proves unsafe,
ineffective or unprofitable. The stock prices of companies in the pharmaceutical
industry have been and will likely continue to be extremely volatile, in part
due to the prevalence of merger and acquisition activity in the pharmaceutical
industry. Some pharmaceutical companies are engaged in other lines of business
unrelated to pharmaceuticals, and they may experience problems with these lines
of business which could adversely affect their operating results. The operating
results of these companies may fluctuate as a result of these additional risks
and events in the other lines of business. In addition, a company’s ability to
engage in new activities may expose it to business risks with which it has less
experience than it has with the business risks associated with its traditional
businesses. Despite a company’s possible success in traditional pharmaceutical
activities, there can be no assurance that the other lines of business in which
these companies are engaged will not have an adverse effect on a company’s
business or financial condition.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because there may be less publicly available information concerning such
non-U.S. issuers or the accounting, auditing and financial reporting standards,
practices and requirements applicable to non-U.S. issuers may differ from those
applicable to U.S. issuers.
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.
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.
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.
Special
Risk Considerations of Investing in United Kingdom Issuers. Investments
in securities of United Kingdom issuers, including issuers located outside of
the United Kingdom that generate significant revenues from the United Kingdom,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. Investments in United Kingdom
issuers may subject the Fund to regulatory, political, currency, security and
economic risks specific to the United Kingdom. The British economy relies
heavily on the export of financials to the United States and other European
countries. The British economy, along with the United States and certain other
European Union economies, experienced a significant economic slowdown during the
recent financial crisis. In a referendum held on June 23, 2016, voters in the
United Kingdom voted to leave the European Union, creating economic and
political uncertainty in its wake. On January 31, 2020, the United Kingdom
officially withdrew from the European Union. On December 30, 2020, the European
Union and United Kingdom signed the EU-UK Trade and Cooperation Agreement, an
agreement on the terms governing certain aspects of the European Union’s and the
United Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition
framework.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be 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. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition
framework.
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.
Because all or a portion of the income received by the Fund from its
investments and/or the revenues received by the underlying issuer will generally
be denominated in foreign currencies, the Fund’s exposure to foreign currencies
and changes in the value of foreign currencies versus the U.S. dollar may result
in reduced returns for the Fund, and the value of certain foreign currencies may
be subject to a high degree of fluctuation. The Fund may also (directly or
indirectly) incur costs in connection with conversions between U.S. dollars and
foreign currencies.
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.
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.
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, will 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
such sector or sectors or industry or group of industries. 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, a
broad-based benchmark index and an additional 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: |
16.46% |
4Q
2022 |
Worst
Quarter: |
-15.01% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
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VanEck
Pharmaceutical ETF (return before taxes) |
6.89% |
10.22% |
6.37% |
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VanEck
Pharmaceutical ETF (return after taxes on
distributions) |
6.35% |
9.72% |
5.86% |
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VanEck
Pharmaceutical ETF (return after taxes on distributions and sale of Fund
Shares) |
4.44% |
8.04% |
5.01% |
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MVIS US
Listed Pharmaceutical 25 Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes)
|
6.20% |
9.79% |
6.17% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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1
On February 1, 2024, the MSCI ACWI
Net TR Index replaced the S&P 500 Index as the Fund's broad-based benchmark
index. The Fund changed its broad-based benchmark index as it believes the MSCI
ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van
Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
December
2011 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Retail ETF (the “Fund”) seeks to replicate as
closely as possible, before fees and expenses, the price and yield performance
of the MVIS®
US Listed Retail 25 Index (the “Retail 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 |
0.35 |
% |
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Other
Expenses(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.35 |
% |
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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 February 1,
2025.
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 |
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1 |
$36 |
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3 |
$113 |
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5 |
$197 |
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10 |
$443 |
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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 20% 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. To be initially eligible for the Retail
Index, companies must generate at least 50% of their revenues from retail.
Retail includes companies engaged primarily in retail distribution; wholesalers;
online, direct mail and TV retailers; multi-line retailers; specialty retailers,
such as apparel, automotive, computer and electronics, drug, home improvement
and home furnishing retailers; and food and other staples retailers. Of the
largest 50 stocks in the retail industry by full market capitalization, the top
25 by free-float market capitalization (i.e.,
includes only shares that are readily available for trading in the market) and
three month average daily trading volume are included in the Retail Index. Such
companies may include foreign companies that are listed on a U.S. exchange. As
of December 31, 2023, the Retail Index included 25 securities of companies with
a market capitalization range of between approximately $9.7 billion and $1,570.1
billion and a weighted average market capitalization of $437.5 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 Retail Index by investing in a portfolio of
securities that generally replicates the Retail Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Retail Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Retail Index.
The
Fund is classified as a non-diversified fund under 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 Retail Index concentrates in an industry or group of industries. As of
September 30, 2023, each of the consumer discretionary, consumer staples 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.
Retail
Companies Risk. Companies
involved in retail may be affected by the performance of the domestic and
international economy, interest rates, rates of inflation, exchange rates,
competition, consumer confidence and reputational damage. The success of
companies involved in retail depends heavily on disposable household income and
consumer spending, and changes in demographics and consumer preferences can
affect the success of retail companies. Certain retail companies have
historically been subject to significant seasonal and quarterly variations. The
success of retail companies may be strongly affected by fads, marketing
campaigns and other factors affecting supply and demand and a retail company’s
success can be tied to its ability to anticipate changing consumer tastes. These
companies may be subject to severe competition, which may have an adverse impact
on their profitability.
Certain
business segments of retail companies are highly cyclical, which may cause the
operating results of such retail companies to vary significantly. Retail
companies may be dependent on outside financing, which may be difficult to
obtain. Many of these companies are dependent on third party suppliers and
distribution systems and purchase merchandise both directly from brand owners
and indirectly from retailers and third party suppliers. Such companies may also
be dependent upon suppliers for the products used for their own brand name
merchandise. Reliance on third party suppliers subjects retail companies to
risks of delivery delays, price increases and receipt of nonconforming or poor
quality merchandise. Retail companies may be unable to protect their
intellectual property rights and may be liable for infringing the intellectual
property rights of others. Changes in labor laws and other labor issues, such as
increased labor costs, could adversely affect the financial performance of
retail companies. If retail companies do not maintain the security of
customer-related information, they could damage their reputations with
customers, incur substantial costs and become subject to litigation, all of
which could adversely affect the financial performance of such companies. The
international operations of certain retail companies expose them to risks
associated with instability and changes in economic and political conditions,
foreign currency fluctuations, changes in foreign regulations, tariffs and trade
disputes and other risks inherent to international business. Some of the
companies in the Retail Index are engaged in other lines of business unrelated
to retail, and they may experience problems with these lines of business which
could adversely affect their operating results. The operating results of these
companies may fluctuate as a result of these additional risks and events in the
other lines of business. In addition, a company’s ability to engage in new
activities may expose it to business risks with which it has less experience
than it has with the business risks associated with its traditional businesses.
Despite a company’s possible success in traditional retail activities, the other
lines of business in which these companies are engaged may have an adverse
effect on a company’s business or financial condition.
Retail
companies may also be exposed to online retail risk. Companies that operate in
the online marketplace are subject to fluctuating consumer demand. Unlike
traditional brick and mortar retailers, online marketplaces and retailers must
assume shipping costs or pass such costs to consumers. Consumer access to price
information for the same or similar products may cause companies that operate in
the online marketplace to reduce profit margins in order to compete. Due to the
nature of their business models, companies that operate in the online
marketplace may also be subject to heightened cybersecurity risk, including the
risk of theft or damage to vital hardware, software and information systems. The
loss or public dissemination of sensitive customer information or other
proprietary data may negatively affect the financial performance of such
companies to a greater extent than traditional brick and mortar retailers. As a
result of such companies being web-based and the fact that they process, store
and transmit large amounts of data, including personal information, for their
customers, failure to prevent or mitigate data loss or other security breaches,
including breaches of vendors’ technology and systems, could expose companies
that operate in the online marketplace or their customers to a risk of loss or
misuse of such information, adversely affect their operating results, result in
litigation or potential liability and otherwise harm their
businesses.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional
costs, the possibility that the liquidity of such securities could be impaired
because of future political and/or economic developments, taxation by foreign
governments, political instability, the possibility that foreign governmental
restrictions may be adopted which might adversely affect such securities and
that the selection of such securities may be more difficult because there may be
less publicly available information concerning such non-U.S. issuers or the
accounting, auditing and financial reporting standards, practices and
requirements applicable to non-U.S. issuers may differ from those applicable to
U.S. issuers.
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.
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.
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.
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.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
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 medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
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.
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, will 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
such sector or sectors or industry or group of industries. 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, a
broad-based benchmark index and an additional 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: |
25.61% |
2Q
2020 |
Worst
Quarter: |
-15.72% |
2Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
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VanEck Retail
ETF (return before taxes) |
20.02% |
15.97% |
13.26% |
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VanEck
Retail ETF (return after taxes on distributions) |
19.71% |
15.72% |
12.95% |
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VanEck
Retail ETF (return after taxes on distributions and sale of Fund
Shares) |
12.06% |
12.89% |
11.06% |
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MVIS US
Listed Retail 25 Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes) |
19.93% |
15.91% |
13.17% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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1
On February 1, 2024, the MSCI ACWI
Net TR Index replaced the S&P 500 Index as the Fund's broad-based benchmark
index. The Fund changed its broad-based benchmark index as it believes the MSCI
ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
December
2011 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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®
Robotics ETF (the “Fund”) seeks to track as closely
as possible, before fees and expenses, the price and yield performance of the
BlueStar®
Robotics Index (the “Robotics 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 |
0.47 |
% |
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Other
Expenses(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.47 |
% |
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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 February 1,
2025.
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 |
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1 |
$48 |
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3 |
$151 |
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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 April 6, 2023 (the Fund's
commencement of operations) through September 30, 2023, the Fund’s portfolio
turnover rate was 13% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in Robotics Companies.
The Robotics Index is published by MarketVector Indexes GmbH (the "Index
provider"), an indirectly wholly owned subsidiary of the Adviser. The Robotics
Index is comprised of equity securities, which may include depositary receipts
of global exchange-listed companies in the robotics industry. “Robotics
Companies” are companies that derive at least 50% of their revenue from: (i)
robotics manufacturing or industrial automation systems, (ii) additive
manufacturing or 3D printing (including 3D printing equipment, materials or
related software or services), (iii) robotics or manufacturing related software
and Computer Aided Design software (CAD) (i.e., the use of computer-based
software to aid in design processes to optimize the user's workflow and increase
productivity), (iv) machine vision technology, (v) robotic surgical systems, or
(vi) semiconductor manufacturing systems.
Additionally,
the Fund may invest up to 20% of its assets in companies that offer embedded
machine learning chips and generate at least 25% of their revenues from these
robotics sub-themes.
Robotics
Companies may include medium- and large-capitalization companies and the Fund
may invest in depositary receipts and securities denominated in foreign
currencies. As of December 31, 2023, the Robotics Index included 63 securities
of companies with a market capitalization range of between approximately $478.0
million and $1,223.1 billion and a weighted average market capitalization of
$123.7 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 Index provider reconstitutes
and rebalances the Robotics Index semiannually.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Robotics Index by investing in a portfolio of
securities that generally replicates the Robotics Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Robotics Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
track the Robotics Index.
The
Adviser anticipates that the Fund generally will use a replication strategy for
tracking the performance of the Robotics Index . A replication strategy is an
indexing strategy that involves investing in the securities of the Robotics
Index in approximately the same proportions as in the Robotics Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Robotics Index when a replication strategy might be detrimental or
disadvantageous to shareholders, including as a result of legal restrictions or
limitations (such as fundamental and non-fundamental investment restrictions and
tax diversification requirements) that apply to the Fund but not the Robotics
Index.
The
Fund is classified as a non-diversified fund under 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 Robotics Index concentrates in an industry or group of industries. As of
September 30, 2023 each of the information technology and industrials 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.
Risk
of Investing in Robotics Companies.
The Fund invests primarily in the securities of Robotics Companies and is
particularly sensitive to the risks to such companies. These risks include, but
are not limited to, small or limited markets for such securities, changes in
business cycles, world economic growth, technological progress, rapid
obsolescence, supply chain disruptions and government regulation. Robotics
Companies may rely on a combination of patents, copyrights, trademarks and trade
secret laws to establish and protect their proprietary rights in their products
and technologies. There can be no assurance that the steps taken by these
companies to protect their proprietary rights will be adequate to prevent the
misappropriation of their technology or that competitors will not independently
develop technologies that are substantially equivalent or superior to such
companies’ technology.
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.
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 may be adversely affected by environmental damages, product
liability claims and exchange rates.
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.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
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
medium-capitalization companies could trail the returns on investments in
securities of large-capitalization
companies.
Special
Risk Considerations of Investing in Japanese Issuers.
Investments in securities of Japanese issuers, including issuers located outside
of Japan that generate significant revenues from Japan, involve risks and
special considerations not typically associated with investments in the U.S.
securities markets. The Fund’s performance is expected to be closely tied to
social, political, and economic conditions within Japan and to be more volatile
than the performance of more geographically diversified funds. The risks of
investing in the securities of Japanese issuers include lack of natural
resources, fluctuations or shortages in the commodity markets, new trade
regulations, decreasing U.S. imports and changes in the U.S. dollar exchange
rates. Japan is located in a part of the world that has historically been prone
to natural disasters such as earthquakes, volcanoes and tsunamis and is
economically sensitive to environmental events. Any such event could result in a
significant adverse impact on the Japanese economy. In addition, such disasters,
and the resulting damage, could impair the long-term ability of issuers in which
the Fund invests to conduct their businesses in the manner normally
conducted.
Because
the Fund’s assets will be invested primarily in securities of Japanese issuers,
a significant portion of its assets will be denominated in Japanese yen. The
Fund’s exposure to the Japanese yen and changes in value of the Japanese yen
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
Japanese yen.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be 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. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition
framework.
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.
Semiconductor
Industry Risk. Competitive
pressures may have a significant effect on the financial condition of companies
in the semiconductor industry. The Fund is subject to the risk that companies
that are in the semiconductor industry may be similarly affected by particular
economic or market events. As product cycles shorten and manufacturing capacity
increases, these companies may become increasingly subject to aggressive
pricing, which hampers profitability. Semiconductor companies are vulnerable to
wide fluctuations in securities prices due to rapid product obsolescence. Many
semiconductor companies may not successfully introduce new products, develop and
maintain a loyal customer base or achieve general market acceptance for their
products, and failure to do so could have a material adverse effect on their
business, results of operations and financial condition. Reduced demand for
end-user products, underutilization of manufacturing capacity, and other factors
could adversely impact the operating results of companies in the semiconductor
industry. Semiconductor companies typically face high capital costs and such
companies may need additional financing, which may be difficult to obtain. They
also may be subject to risks relating to research and development costs and the
availability and price of components. Moreover, they may be heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights. Some of the companies involved in the semiconductor industry
are also engaged in other lines of business unrelated to the semiconductor
business, and they may experience problems with these lines of business, which
could adversely affect their operating results. The international operations
of
many semiconductor companies expose them to risks associated with instability
and changes in economic and political conditions, foreign currency fluctuations,
changes in foreign regulations, competition from subsidized foreign competitors
with lower production costs, tariffs and trade disputes, and other risks
inherent to international business. The semiconductor industry is highly
cyclical, which may cause the operating results of many semiconductor companies
to vary significantly. Companies in the semiconductor industry also may be
subject to competition from new market entrants. The stock prices of companies
in the semiconductor industry have been and will likely continue to be extremely
volatile compared to the overall market.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because there may be less publicly available information concerning such
non-U.S. issuers or the accounting, auditing and financial reporting standards,
practices and requirements applicable to non-U.S. issuers may differ from those
applicable to U.S. issuers.
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.
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 and may also result in the widening of bid-ask spreads. 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 April 6,
2023 and therefore does not have a performance history for the calendar year
ended December 31, 2023. Once available, the Fund’s performance
information will be accessible on the Fund’s website at www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily 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 |
April
2023 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Semiconductor ETF (the “Fund”) seeks to replicate
as closely as possible, before fees and expenses, the price and yield
performance of the MVIS®
US Listed Semiconductor 25 Index (the “Semiconductor 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 |
0.35 |
% |
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Other
Expenses(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.35 |
% |
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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 February 1,
2025.
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 |
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1 |
$36 |
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3 |
$113 |
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5 |
$197 |
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10 |
$443 |
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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 18% 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 Semiconductor Index includes common
stocks and depositary receipts of U.S. exchange-listed companies in the
semiconductor industry. Such companies may include medium-capitalization
companies and foreign companies that are listed on a U.S. exchange. To be
initially eligible for the Semiconductor Index, companies must generate at least
50% of their revenues from semiconductors. Semiconductors include companies
engaged primarily in the production of semiconductors and semiconductor
equipment. Of the largest 50 stocks in the semiconductor industry by full market
capitalization, the top 25 by free-float market capitalization (i.e., includes
only shares that are readily available for trading in the market) and three
month average daily trading volume are included in the Semiconductor Index. As
of December 31, 2023, the Semiconductor Index included 25 securities of
companies with a market capitalization range of between approximately $9.0
billion and $1,223.1 billion and a weighted average
market
capitalization of $405.4 billion. These amounts are subject to change. As of
September 30, 2023, [a significant portion of the Fund’s assets was invested in
securities of Taiwanese issuers.
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 Semiconductor Index by investing in a
portfolio of securities that generally replicates the Semiconductor Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Semiconductor Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Semiconductor
Index.
The
Fund is classified as a non-diversified fund under 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 Semiconductor Index concentrates in an industry or group of industries. As
of September 30, 2023, the semiconductor industry, including semiconductor
equipment, 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.
Semiconductor
Industry Risk. Competitive
pressures may have a significant effect on the financial condition of companies
in the semiconductor industry. The Fund is subject to the risk that companies
that are in the semiconductor industry may be similarly affected by particular
economic or market events. As product cycles shorten and manufacturing capacity
increases, these companies may become increasingly subject to aggressive
pricing, which hampers profitability. Semiconductor companies are vulnerable to
wide fluctuations in securities prices due to rapid product obsolescence. Many
semiconductor companies may not successfully introduce new products, develop and
maintain a loyal customer base or achieve general market acceptance for their
products, and failure to do so could have a material adverse effect on their
business, results of operations and financial condition. Reduced demand for
end-user products, underutilization of manufacturing capacity, and other factors
could adversely impact the operating results of companies in the semiconductor
industry. Semiconductor companies typically face high capital costs and such
companies may need additional financing, which may be difficult to obtain. They
also may be subject to risks relating to research and development costs and the
availability and price of components. Moreover, they may be heavily dependent on
intellectual property rights and may be adversely affected by loss or impairment
of those rights. Some of the companies involved in the semiconductor industry
are also engaged in other lines of business unrelated to the semiconductor
business, and they may experience problems with these lines of business, which
could adversely affect their operating results. The international operations of
many semiconductor companies expose them to risks associated with instability
and changes in economic and political conditions, foreign currency fluctuations,
changes in foreign regulations, competition from subsidized foreign competitors
with lower production costs, tariffs and trade disputes, and other risks
inherent to international business. The semiconductor industry is highly
cyclical, which may cause the operating results of many semiconductor companies
to vary significantly. Companies in the semiconductor industry also may be
subject to competition from new market entrants. The stock prices of companies
in the semiconductor industry have been and will likely continue to be extremely
volatile compared to the overall market.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because there may be less publicly available information concerning such
non-U.S. issuers or the accounting, auditing and financial reporting standards,
practices and requirements applicable to non-U.S. issuers may differ from those
applicable to U.S. issuers.
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.
Special
Risk Considerations of Investing in Taiwanese Issuers. Investments
in securities of Taiwanese issuers, including issuers located outside of Taiwan
that generate significant revenues from Taiwan, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. To the extent the Fund continues to invest in securities issued by
Taiwanese issuers, the Fund may be subject to the risk of investing in such
issuers. Investments in Taiwanese issuers may
subject the Fund to legal, regulatory, political, currency and
economic risks that are specific to Taiwan. Specifically, Taiwan’s geographic
proximity and history of political contention with China have resulted in
ongoing tensions between the two countries. These tensions may materially affect
the Taiwanese economy and its securities market. Taiwan’s economy is
export-oriented, so it depends on an open world trade regime and remains
vulnerable to fluctuations in the world economy.
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
Market Risk.
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 Risk.
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.
Risk
of 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 Risk 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 of 1986. 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 Risk.
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.
Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) 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.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
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 medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
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.
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, will 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, a
broad-based benchmark index and an additional 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: |
30.65% |
2Q
2020 |
Worst
Quarter: |
-24.40% |
2Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 |
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VanEck
Semiconductor ETF (return before taxes) |
73.21% |
33.16% |
24.93% |
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VanEck
Semiconductor ETF (return after taxes on
distributions) |
72.97% |
32.85% |
24.51% |
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VanEck
Semiconductor ETF (return after taxes on distributions and sale of Fund
Shares) |
43.52% |
27.82% |
21.69% |
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MVIS
US
Listed Semiconductor 25 Index (reflects no deduction for
fees, expenses or taxes, except withholding
taxes) |
73.45% |
33.23% |
24.96% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
7.93% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.03% |
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1
On February 1, 2024, the MSCI ACWI
Net TR Index replaced the S&P 500 Index as the Fund's broad-based benchmark
index. The Fund changed its broad-based benchmark index as it believes the MSCI
ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van
Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
December
2011 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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® Video Gaming and eSports ETF (the “Fund”) seeks to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the MVIS®
Global Video Gaming & eSports Index (the “eSports 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 |
0.09 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.59 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
-0.03 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.56 |
% |
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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 0.55% of the Fund’s average
daily net assets per year until at least February 1,
2025. 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 |
$57 |
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3 |
$186 |
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5 |
$326 |
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10 |
$735 |
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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 30% 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 eSports Index is a global index that
tracks the performance of the global video gaming and eSports (also known as
electronic sports) segment. To be initially eligible for the eSports Index, a
company is generally considered by the Index provider to be part of the global
video gaming and eSports segment if the company generates at least 50% of its
revenues from video gaming and/or eSports. These companies may include those
that develop video games and related software or hardware such as computer
processors and graphics cards used in video gaming systems and related hardware
such as controllers, headsets, and video
gaming
consoles. They may also include those that offer streaming services, develop
video games and/or hardware for use in eSports events and are involved in
eSports events such as league operators, teams, distributors and
platforms.
Video
gaming and eSports companies may include small- and medium-capitalization
companies and foreign and emerging market issuers, and the Fund may invest in
depositary receipts and securities denominated in foreign currencies. As of
December 31, 2023, the eSports Index included 25 securities of companies with a
market capitalization range of between approximately $2.9 billion and $1,223.1
billion and a weighted average market capitalization of $164.3
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 eSports Index by investing in a portfolio of
securities that generally replicates the eSports Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the eSports Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the eSports Index.
The
Fund is classified as a non-diversified fund under 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 eSports Index concentrates in an industry or group of industries. As of
September 30, 2023, each of the communication services, information technology
and consumer discretionary 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.
Video
Gaming and eSports Companies Risk. The
Fund will be sensitive to, and its performance may depend to a greater extent
on, the overall condition of video gaming and eSports companies. Video gaming
and eSports companies face intense competition, both domestically and
internationally, may have limited product lines, markets, financial resources,
or personnel, may have products that face rapid obsolescence, and are heavily
dependent on the protection of patent and intellectual property rights.
Pure-play companies (i.e.,
companies that focus only on a particular product or activity) may be dependent
on one or a small number of product or product franchises for a significant
portion of their revenue and profits. They may also be subject to shifting
consumer preferences, including preferences with respect to gaming console
platforms, and changes in consumer discretionary spending. Such factors may
adversely affect the profitability and value of video gaming and eSports
companies. These companies are also subject to increasing regulatory
constraints, particularly with respect to cybersecurity and privacy. In addition
to the costs of complying with such constraints, the unintended disclosure of
confidential information, whether because of an error or a cybersecurity event,
could adversely affect the profitability and value of these companies. Video
gaming and eSports companies may be subject to sophisticated intellectual
property infringement schemes and piracy efforts, particularly in foreign
markets, which may limit the revenue potential in such markets, and combatting
such infringement or piracy schemes may require significant expenses. Such
antipiracy programs may not be
effective.
Software
Industry Risk. Companies
in the software industry are subject to significant competitive pressures, such
as aggressive pricing, new market entrants, competition for market share, short
product cycles due to an accelerated rate of technological developments and the
potential for limited earnings and/or falling profit margins. Software companies
also face the risks that new services, equipment or technologies are not
accepted by consumers and businesses or will become rapidly obsolete. These
factors can affect the profitability of software companies and, as a result, the
value of their securities.
Internet
Software & Services Industry Risk. The
prices of the securities of companies in the internet software and services
industry may fluctuate widely due to competitive pressures, increased
sensitivity to short product cycles and aggressive pricing, heavy expenses
incurred for research and development of products or services that prove
unsuccessful, problems related to bringing products to market, and rapid
obsolescence of products. Many internet software and software services companies
rely on a combination of patents, copyrights, trademarks and trade secret laws
to establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by internet
software and software services companies to protect their proprietary rights
will sufficiently prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’ technology. Legislative or regulatory
changes and increased government supervision also may affect companies in the
internet software and services
industry.
Semiconductor
Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of companies in the semiconductor industry. The Fund is subject to the risk that
companies that are in the semiconductor industry may be similarly affected by
particular economic or market events. As product cycles shorten and
manufacturing capacity increases, these companies may become increasingly
subject to aggressive pricing, which hampers profitability. Semiconductor
companies are
vulnerable
to wide fluctuations in securities prices due to rapid product obsolescence.
Many semiconductor companies may not successfully introduce new products,
develop and maintain a loyal customer base or achieve general market acceptance
for their products, and failure to do so could have a material adverse effect on
their business, results of operations and financial condition. Reduced demand
for end-user products, underutilization of manufacturing capacity, and other
factors could adversely impact the operating results of companies in the
semiconductor industry. Semiconductor companies typically face high capital
costs and such companies may need additional financing, which may be difficult
to obtain. They also may be subject to risks relating to research and
development costs and the availability and price of components. Moreover, they
may be heavily dependent on intellectual property rights and may be adversely
affected by loss or impairment of those rights. Some of the companies involved
in the semiconductor industry are also engaged in other lines of business
unrelated to the semiconductor business, and they may experience problems with
these lines of business, which could adversely affect their operating results.
The international operations of many semiconductor companies expose them to
risks associated with instability and changes in economic and political
conditions, foreign currency fluctuations, changes in foreign regulations,
competition from subsidized foreign competitors with lower production costs,
tariffs and trade disputes, and other risks inherent to international business.
The semiconductor industry is highly cyclical, which may cause the operating
results of many semiconductor companies to vary significantly. Companies in the
semiconductor industry also may be subject to competition from new market
entrants. The stock prices of companies in the semiconductor industry have been
and will likely continue to be extremely volatile compared to the overall
market.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because there may be less publicly available information concerning such
non-U.S. issuers or the accounting, auditing and financial reporting standards,
practices and requirements applicable to non-U.S. issuers may differ from those
applicable to U.S. issuers.
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.
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.
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.
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.
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.
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.
Special
Risk Considerations of Investing in Asian Issuers. Investments in securities of Asian issuers involve risks and
special considerations not typically associated with investments in the U.S.
securities markets. Many Asian economies have experienced rapid growth and
industrialization in recent years, but there is no assurance that this growth
rate will be maintained. Certain Asian economies have experienced over-extension
of credit, currency devaluations and restrictions, high unemployment, high
inflation, decreased exports and economic recessions. Geopolitical hostility,
political instability, as well as economic or environmental events in any one
Asian country can have a significant effect on the entire Asian region as well
as on major trading partners outside Asia, and any adverse effect on some or all
of the Asian countries and regions in which the Fund invests. The securities
markets in some Asian economies are relatively underdeveloped and may subject
the Fund to higher action costs or greater uncertainty than investments in more
developed securities markets. Such risks may adversely affect the value of the
Fund’s investments. Certain Asian countries have also developed increasingly
strained relationships with the U.S., and if these relations were to worsen,
they could adversely affect Asian issuers that rely on the U.S. for
trade.
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 Japanese Issuers.
Investments in securities of Japanese issuers, including issuers
located outside of Japan that generate significant revenues from Japan, involve
risks and special considerations not typically associated with investments in
the U.S. securities markets. The Fund’s performance is expected to be closely
tied to social, political, and economic conditions within Japan and to be more
volatile than the performance of more geographically diversified funds. The
risks of investing in the securities of Japanese issuers include lack of natural
resources, fluctuations or shortages in the commodity markets, new trade
regulations, decreasing U.S. imports and changes in the U.S. dollar exchange
rates. Japan is located in a part of the world that has historically been prone
to natural disasters such as earthquakes, volcanoes and tsunamis and is
economically sensitive to environmental events. Any such event could result in a
significant adverse impact on the Japanese economy. In addition, such disasters,
and the resulting damage, could impair the long-term ability of issuers in which
the Fund invests to conduct their businesses in the manner normally
conducted.
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
Market Risk.
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 Risk.
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.
Risk
of 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 Risk 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 of 1986. 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 Risk.
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.
Because all or a portion of the income received by the Fund from its investments
and/or the revenues received by the underlying issuer will generally be
denominated in foreign currencies, the Fund’s exposure to foreign currencies and
changes in the value of foreign currencies versus the U.S. dollar may result in
reduced returns for the Fund, and the value of certain foreign currencies may be
subject to a high degree of fluctuation. The Fund may also (directly or
indirectly) incur costs in connection with conversions between U.S. dollars and
foreign currencies.
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.
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.
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, will 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, a
broad-based benchmark index and an additional 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: |
34.23% |
2Q
2020 |
Worst
Quarter: |
-18.50% |
2Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31,
2023
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 (10/16/18) |
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VanEck
Video Gaming and eSports ETF (return before
taxes) |
33.40% |
17.44% |
13.65% |
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VanEck
Video Gaming and eSports ETF (return after taxes on
distributions) |
33.10% |
17.09% |
13.32% |
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VanEck
Video Gaming and eSports ETF (return after taxes on distributions and sale
of Fund Shares) |
19.99% |
14.13% |
10.95% |
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MVIS
Global Video Gaming and eSports Index
(reflects no deduction for
fees, expenses or taxes) |
33.83% |
18.21% |
14.55% |
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MSCI
ACWI Net TR Index (reflects no deduction for fees, expenses or taxes,
except withholding taxes)1 |
22.20% |
11.72% |
9.29% |
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S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
26.29% |
15.69% |
12.62% |
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1
On February 1, 2024, the MSCI ACWI
Net TR Index replaced the S&P 500 Index as the Fund's broad-based benchmark
index. The Fund changed its broad-based benchmark index as it believes the MSCI
ACWI Net TR Index is more representative of global equities
exposure.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are 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 |
October
2018 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
February
2024 |
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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.
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 net asst
value, Shares of the Funds may trade at a price greater than net asset
(i.e.,
a “premium”) or less than net asset (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 net asset value, 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 (other than return of capital 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.
PRINCIPAL
INVESTMENT STRATEGIES
The
Adviser anticipates that, generally, each Fund will hold or gain exposure to all
of the securities that track and/or comprise its Index in proportion to their
weightings in such Index. However, to the extent it is not possible or
practicable to purchase all of those securities in those weightings, the Fund
may purchase a sample of securities in its Index. The Adviser may also 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/track (as applicable) 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 tax diversification requirements of the
Internal Revenue Code of 1986, temporarily invest in securities not included in
its Index that are expected to be highly correlated with the securities included
in its Index.
ADDITIONAL
INFORMATION ABOUT MLPs (Only
with respect to VanEck Energy Income ETF)
MLPs
are publicly traded partnerships engaged in the transportation, storage,
processing, refining, marketing, exploration, production and mining of minerals
and natural resources. By confining their operations to these specific
activities, their interests, or units, are able to trade on public securities
exchanges exactly like the shares of a corporation, without entity level
taxation. Partnerships eligible for inclusion in an Index are subject to further
liquidity screens before they may be included in an Index.
MLPs’
disclosures are regulated by the Securities and Exchange Commission and MLPs
must file Form 10-Ks, Form 10-Qs and notices of material changes like any
publicly traded corporation. MLPs also must comply with certain requirements
applicable to public companies under the Sarbanes-Oxley Act of
2002.
To
qualify as an MLP and to avoid being taxed as a corporation, a partnership must
receive at least 90% of its income from qualifying sources as set forth in
Section 7704(d) of the Internal Revenue Code of 1986. These qualifying sources
include natural resource-based activities such as the exploration, development,
mining, production, processing, refining, transportation, storage and marketing
of mineral or natural resources. An MLP consists of a general partner and
limited partners (or in the case of MLPs organized as limited liability
companies, a managing member and members). The general partner or managing
member typically controls the operations and management of the MLP and has an
ownership stake in the MLP. The limited partners or members, through their
ownership of limited partner or member interests, provide capital to the entity,
are intended to have no role in the operation and management of the entity, and
receive cash distributions. The MLPs themselves generally do not pay United
States federal income taxes, but investors (like the Fund) that hold interests
in MLPs are generally subject to tax on their allocable shares of the income and
gains of the MLPs. Thus, unlike investors in corporate securities, direct MLP
investors are generally not subject to double taxation (i.e.,
corporate level tax and tax on corporate dividends). Currently, most MLPs
operate in the energy and/or natural resources sectors.
General
partner or managing member interests receive cash distributions, typically in an
amount of up to 2% of available cash, which is contractually defined in the
partnership or limited liability company agreement. In addition, holders of
general partner or managing member interests typically receive incentive
distribution rights (“IDRs”), which provide them with an increasing share of the
entity’s aggregate cash distributions upon the payment of per common unit
distributions that exceed specified threshold levels above the minimum quarterly
distribution. Due to the IDRs, general partners of MLPs have higher distribution
growth prospects than their underlying MLPs, but quarterly incentive
distribution payments would also decline at a greater rate than the decline rate
in quarterly distributions to common and subordinated unit holders in the event
of a reduction in the MLP’s quarterly distribution. In addition, some MLPs
permit the holder of IDRs to reset, under specified circumstances, the incentive
distribution levels and receive compensation in exchange for the distribution
rights given up in the reset.
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 |
Biotech
ETF (BBH) |
Digital
Transformation ETF (DAPP) |
Energy
Income ETF (EINC) |
Environmental
Services ETF (EVX) |
Gaming
ETF (BJK) |
Green
Infrastructure ETF (RNEW) |
Pharmaceutical
ETF (PPH) |
Retail
ETF (RTH) |
Robotics
ETF (IBOT) |
Semiconductor
ETF (SMH) |
Video
Gaming and eSports ETF (ESPO) |
√
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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Biotechnology
Industry Risk |
√ |
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Cash
Transactions Risk |
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√ |
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√ |
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Communication
Services Sector Risk |
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√ |
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Consumer
Discretionary Sector Risk |
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√ |
√ |
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√ |
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√ |
Consumer
Staples Sector Risk |
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√ |
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Depositary
Receipts Risk |
√ |
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√ |
√ |
X |
√ |
√ |
√ |
√ |
√ |
Derivatives
Risk |
X |
X |
X |
X |
X |
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X |
X |
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X |
X |
Digital
Transformation Companies Risk |
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√ |
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Emerging
Market Issuers Risk |
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√ |
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√ |
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√ |
√ |
Energy
Sector Risk |
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√ |
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√ |
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Environmental
Services Industry Risk |
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√ |
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√ |
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Equity
Securities Risk |
√ |
√ |
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√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Financials
Sector Risk |
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√ |
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Foreign
Currency Risk |
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√ |
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√ |
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√ |
√ |
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Foreign
Securities Risk |
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√ |
√ |
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√ |
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√ |
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√ |
√ |
√ |
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Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund
Shares |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Gaming
Industry Risk |
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√ |
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Green
Energy Companies Risk |
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√ |
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Green
Infrastructure Companies Risk |
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√ |
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Green
Investing Strategy Risk |
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√ |
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Health
Care Sector Risk |
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√ |
√ |
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Risk |
Biotech
ETF (BBH) |
Digital
Transformation ETF (DAPP) |
Energy
Income ETF (EINC) |
Environmental
Services ETF (EVX) |
Gaming
ETF (BJK) |
Green
Infrastructure ETF (RNEW) |
Pharmaceutical
ETF (PPH) |
Retail
ETF (RTH) |
Robotics
ETF (IBOT) |
Semiconductor
ETF (SMH) |
Video
Gaming and eSports ETF (ESPO) |
√
Principal Risk | X Additional Non-Principal Risk |
Index-Related
Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Index
Tracking Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Industrials
Sector Risk |
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√ |
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√ |
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√ |
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Information
Technology Sector Risk |
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√ |
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√ |
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√ |
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Internet
Software & Services Industry Risk |
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√ |
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Issuer-Specific
Changes Risk |
√ |
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√ |
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√ |
√ |
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√ |
√ |
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Leverage
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
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Life
Sciences Tools and Services Industry Risk |
√ |
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Liquidity
Risk Related to MLPs |
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√ |
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Market
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Medium-Capitalization
Companies Risk |
√ |
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√ |
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√ |
√ |
√ |
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Micro-Capitalization
Companies Risk |
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√ |
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√ |
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MLP
Industry Specific Risks |
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X |
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MLP
Risk |
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√ |
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MLP
Tax Risk |
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√ |
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No
Guarantee of Active Trading Market Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Non-Diversified
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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Oil
and Gas Companies Risk |
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√ |
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Operational
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Participation
Notes |
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X |
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X |
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Passive
Management Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Pharmaceutical
Industry Risk |
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√ |
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Real
Estate Sector Risk |
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√ |
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Retail
Companies Risk |
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√ |
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Return
of Capital Risk |
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√ |
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Risk
of Investing in Robotics Companies |
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√ |
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Risk |
Biotech
ETF (BBH) |
Digital
Transformation ETF (DAPP) |
Energy
Income ETF (EINC) |
Environmental
Services ETF (EVX) |
Gaming
ETF (BJK) |
Green
Infrastructure ETF (RNEW) |
Pharmaceutical
ETF (PPH) |
Retail
ETF (RTH) |
Robotics
ETF (IBOT) |
Semiconductor
ETF (SMH) |
Video
Gaming and eSports ETF (ESPO) |
√
Principal Risk | X Additional Non-Principal Risk |
Semiconductor
Industry Risk |
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|
√ |
√ |
√ |
Shareholder
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
Small-
and Medium-Capitalization Companies Risk |
|
√ |
|
√ |
√ |
√ |
√ |
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√ |
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Software
Industry Risk |
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X |
√ |
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Special
Risk Considerations of Investing in Asian Issuers |
|
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|
√ |
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|
√ |
Special
Risk Considerations of Investing in Australian Issuers |
|
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√ |
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|
Special
Risk Considerations of Investing in Canadian 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 European Issuers |
|
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√ |
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√ |
|
√ |
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Special
Risk Considerations of Investing in Taiwanese Issuers |
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Risk Considerations of Investing in United Kingdom Issuers |
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Trading
Issues Risk |
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Utilities
Sector Risk |
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Video
Gaming and esports Companies Risk |
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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.
Biotechnology Industry
Risk.
The Fund will be sensitive to, and its performance may depend to a greater
extent on, the overall condition of the biotechnology industry. The success of
biotechnology companies is highly dependent on the development, procurement
and/or marketing of drugs. The values of biotechnology companies are also
dependent on the development, protection and exploitation of intellectual
property rights and other proprietary information, and the profitability of
biotechnology companies may be affected significantly by such things as the
expiration of patents or the loss of, or the inability to enforce, intellectual
property rights.The research and development and other costs associated with
developing or procuring new drugs, products or technologies and the related
intellectual property rights can be significant, and the results of such
research and expenditures are unpredictable and may not necessarily lead to
commercially successful products. In addition, the potential for an increased
amount of required disclosure of proprietary scientific information could
negatively impact the competitive position of these companies. Governmental
regulation may delay or inhibit the release of new products. There can be no
assurance that those efforts or costs will result in the development of a
profitable drug, product or technology. Moreover, the process for obtaining
regulatory approval by the Food and Drug Administration or other governmental
regulatory authorities is long and costly and there can be no assurance that the
necessary approvals will be obtained or maintained.
The
biotechnology industry is also subject to rapid and significant technological
change and competitive forces that may make drugs, products or technologies
obsolete or make it difficult to raise prices and, in fact, may result in price
discounting. Companies in the biotechnology industry may also be subject to
expenses and losses from expensive insurance costs due to the risk of product
liability lawsuits, and extensive litigation based on intellectual property,
product liability and similar claims. Failure of biotechnology companies to
comply with applicable laws and regulations can result in the imposition of
civil and/or criminal fines, penalties and, in some instances, exclusion of
participation in government sponsored programs such as Medicare and
Medicaid.
Companies
in the biotechnology industry may be adversely affected by government regulation
and changes in reimbursement rates. Health care providers, principally hospitals
that transact with companies in the biotechnology industry, often rely on third
party payors, such as Medicare, Medicaid and other government sponsored
programs, private health insurance plans and health maintenance organizations to
reimburse all or a portion of the cost of health care related products or
services. Biotechnology companies will continue to be affected by the efforts of
governments and third party payors to contain or reduce health care costs. For
example, certain foreign markets control pricing or profitability of
biotechnology products and technologies. In the United States, there have been,
and there will likely to continue to be, a number of federal and state proposals
to implement similar controls.
A
biotechnology company’s valuation can often be based largely on the potential or
actual performance of a limited number of products. A biotechnology company’s
valuation can also be greatly affected if one of its products proves unsafe,
ineffective or unprofitable. Such companies may also be characterized by thin
capitalization and limited markets, financial resources or personnel. The stock
prices of companies involved in the biotechnology industry, especially those of
smaller, less-seasoned companies, have been and will likely continue to be
extremely volatile, particularly when their products are up for regulatory
approval and/or under regulatory scrutiny. Some of the companies in the
biotechnology industry are engaged in other lines of business unrelated to
biotechnology, and they may experience problems with these lines of business
which could adversely affect their operating results. The operating results of
these companies may fluctuate as a result of these additional risks and events
in the other lines of business. In addition, a company’s ability to engage in
new activities may expose it to business risks with which it has less experience
than it has with the business risks associated with its traditional businesses.
Despite a company’s possible success in traditional biotechnology activities,
the other lines of business in which these companies are engaged may have an
adverse effect on a company’s business or financial condition.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because
there may be less publicly available information concerning such non-U.S.
issuers or the accounting, auditing and financial reporting standards, practices
and requirements applicable to non-U.S. issuers may differ from those applicable
to U.S. issuers.
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.
Digital
Transformation Companies Risk. The
technology relating to digital assets, including blockchain, is new and
developing and the risks associated with digital assets may not fully emerge
until the technology is widely used. Digital asset technologies are used by
companies to optimize their business practices, whether by using the technology
within their business or operating business lines involved in the operation of
the technology. The cryptographic keys necessary to transact a digital asset may
be subject to theft, loss, or destruction, which could adversely affect a
company’s business or operations. Competing platforms and technologies may be
developed, allowing consumers or investors use an alternative to digital assets.
Currently, there are relatively few companies for which digital assets
represents an attributable and significant revenue stream. Therefore, the values
of the companies included in the Index may not reflect their connection to
digital assets, but may be based on other business operations. In addition,
these companies may engage in other lines of business unrelated to digital
assets that could adversely affect their operating results. These companies may
not be able to develop digital asset technology applications or may not be able
to capitalize on those applications. Digital asset technologies may never be
fully implemented, which could adversely affect an investment in the Fund.
Companies that use digital asset technologies may be subject to cybersecurity
risk. In addition, certain features of digital asset technologies, such as
decentralization, open source protocol, and reliance on peer-to-peer
connectivity, may increase the risk of fraud or cyber-attack by potentially
reducing the likelihood of a coordinated response. A significant disruption of
Internet connectivity affecting large numbers of users or geographic areas could
impede the functionality of digital asset technologies and adversely affect
companies included in the Index. Digital Transformation Companies may be subject
to the risks posed by conflicting intellectual property claims, which may reduce
confidence in the viability of a digital asset. There may be risks posed by the
lack of regulation for digital assets and any future regulatory developments
could affect the viability and expansion of the use of digital assets. Because
digital asset platforms may operate across many national boundaries and
regulatory jurisdictions, it is possible that digital asset platforms may be
subject to widespread and inconsistent regulation. Digital asset systems built
using third party products may be subject to technical defects or
vulnerabilities beyond a company’s control. Because many digital assets do not
have a standardized exchange, like a stock market, there is less liquidity for
such assets and greater possibility of volatility, fraud or
manipulation.
Certain
of the Fund’s investments, including investments in companies that hold material
amounts of digital assets, may be subject to the risks associated with investing
in digital assets, including cryptocurrencies and crypto tokens. Such companies
may be subject to the risk that: the technology that facilitates the transfer of
a digital asset could fail; the decentralized, open source protocol of the
applicable blockchain network could be affected by internet connectivity
disruptions, fraud, consensus failures or cybersecurity attacks; such network
may not be adequately maintained by its participants; because digital assets are
a new technological innovation with a limited history, they are highly
speculative assets and may experience extreme price volatility; future
regulatory actions or policies may limit the ability to sell, exchange or use a
digital asset; the price of a digital asset may be impacted by the transactions
of a small number of holders of such digital asset; and that a digital asset
will decline in popularity, acceptance or use, thereby impairing its
price.
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
Market Risk.
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 Risk.
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.
Risk
of 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 Risk 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 of 1986. 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 Risk.
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.
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.
Environmental
Services Industry Risk.
Companies in the environmental services industry are engaged in a variety of
activities related to environmental services and consumer and industrial waste
management. These companies may be adversely affected by a global decrease in
demand for consumer waste disposal, removal and storage of industrial
by-products, and the management of associated resources. Competitive pressures
may have a significant effect on the financial condition of such companies.
These prices may fluctuate substantially over short periods of time so the Fund
may be more volatile than other types of investments. Environmental services
companies must comply with various regulations and the terms of their operating
permits
and
licenses. Failure to comply, failure to renew permits and licenses or changes in
government regulations can adversely impact their operations. Waste management
companies are also affected by demand cycles, world events, increased
outsourcing and economic conditions. In addition, these companies are subject to
liability for environmental damage claims.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability and the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities.
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. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) 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.
Gaming
Industry Risk. Companies
in the gaming industry include those engaged in casino operations,
race track operations, sports and horse race betting operations, online gaming
operations and/or the provision of related equipment and technologies. Companies
in the gaming industry face intense competition, both domestically and
internationally. Companies in the gaming industry are also highly
regulated, and state and Federal legislative or regulatory changes and licensing
issues (as well as the laws of other countries) can significantly impact their
ability to operate in certain jurisdictions, the activities in which such
companies are allowed to engage and the profitability of companies in the
industry. Certain companies in the gaming industry are highly
leveraged and have recently experienced financial difficulty. As a result, the
securities of gaming companies owned by the Fund may react similarly to, and
move in unison with, one another. The gaming industry may also be
negatively affected by changes in economic conditions, consumer tastes and
discretionary income levels, intense competition, technological developments
that may cause these companies to become obsolete quickly, financial resources,
markets or personnel. In addition, the gaming industry is
characterized by the use of various forms of intellectual property, which are
dependent upon patented technologies, trademarked brands and proprietary
information. Companies operating in the gaming industry are subject to
the risk of significant litigation regarding intellectual property rights, which
may adversely affect and financially harm companies in which the Fund may
invest. Furthermore, certain jurisdictions may impose additional restrictions on
securities issued by gaming companies organized or operated in such
jurisdictions that may be held by the Fund.
Green
Energy Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of green or low carbon energy companies.
Renewable energy companies may be significantly affected by the competition from
new and existing market entrants, obsolescence of technology, short product
cycles, production spending, varying prices and profits, commodity price
volatility, changes in exchange rates, imposition of import controls, depletion
of resources, seasonal weather conditions, technological developments and
general economic conditions, market sentiment, fluctuations in energy prices and
supply and demand of renewable energy fuels, fluctuations in the price of oil
and gas, energy conservation efforts, the success of exploration projects, tax
and other government regulations (such as incentives and subsidies) and
international political events. Additionally, adverse weather conditions may
cause fluctuations in renewable energy generation and adversely affect the cash
flows associated with these assets.
Further,
renewable energy companies may be subject to risks associated with hazardous
materials and can be significantly and adversely affected by legislation
resulting in more strict government regulations and enforcement policies and
specific expenditures for environmental cleanup efforts. There are also risks
associated with a failure to enforce environmental law. If the government
reduces environmental regulations or their enforcement, companies that produce
products designed to provide a clean environment are less likely to prosper.
Renewable energy companies may be more volatile than companies operating in more
established industries. Certain valuation methods used to value renewable energy
companies have not been in widespread use for a significant period of time. As a
result, the use of these valuation methods may serve to further increase the
volatility of certain renewable and transitional energy company share prices. If
government subsidies and incentives for renewable energy sources are reduced or
eliminated, the demand for renewable energy may decline and cause corresponding
declines in the revenues and profits of renewable energy companies. In addition,
changes in government policies towards renewable energy technology also may have
an adverse effect on the Fund’s performance. Furthermore, the Fund may invest in
the shares of companies with a limited operating history, some of which may
never have operated profitably. Investment in young companies with a short
operating history is generally riskier than investing in companies with a longer
operating history. The Fund will carry greater risk and may be more volatile
than a portfolio composed of securities issued by companies operating in a wide
variety of different or more established industries. This industry is relatively
nascent and under-researched in comparison to more established and mature
sectors, and should therefore be regarded as having greater investment
risk.
Green
Infrastructure Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the green infrastructure companies. Green
infrastructure-related companies are subject to a variety of factors that may
adversely affect their business or operations including high interest costs,
costs associated with compliance with and changes in environmental and other
regulations, zoning laws, difficulty in raising capital, increased competition,
uncertainty concerning the availability of energy, including renewable energy,
at reasonable prices, economic conditions and world events, taxation, real
estate values, overbuilding and labor relations. Infrastructure-related
securities may be issued by companies that are highly leveraged, less
creditworthy or financially distressed. These investments are considered to be
speculative and are subject to greater risk of loss, greater sensitivity to
interest rate and economic changes, valuation difficulties, and potential
illiquidity. The Fund’s investments may be dependent on supportive government
policies, including tax incentives and subsidies, and the support for such
policies may fluctuate over time.
Green
Investing Strategy Risk. The
Index’s green investing focus could cause the Fund to perform differently
compared to funds that do not have a sustainability focus. The Index’s green
investing focus may result in the Fund investing in securities or industry
sectors that underperform other securities or underperform the market as a
whole. The companies included in the Index
may
differ from companies included in other indices that use similar sustainability
screens. The Fund is also subject to the risk that the companies identified by
the Index provider do not operate as expected when addressing sustainability
issues. Additionally, the Index Provider’s proprietary valuation model may not
perform as intended, which may adversely affect an investment in the Fund.
Regulatory changes or interpretations regarding the definitions and/or use of
green criteria could have a material adverse effect on the Fund’s ability to
implement its green strategy.
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 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, will 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 of 1986 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.
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 such sector or
sectors or industry or group of industries. 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.
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 may 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.
Internet
Software & Services Industry Risk.
The prices of the securities of companies in the internet software and services
industry may fluctuate widely due to competitive pressures, increased
sensitivity to short product cycles and aggressive pricing, heavy expenses
incurred for research and development of products or services that prove
unsuccessful, problems related to bringing products to market, and rapid
obsolescence of products. Many internet software and software services companies
rely on a combination of patents, copyrights, trademarks and trade secret laws
to establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by internet
software and software services companies to protect their proprietary rights
will sufficiently prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’ technology. Legislative or regulatory
changes and increased government supervision also may affect companies in the
internet software and services industry.
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.
Life
Sciences Tools and Services Industry Risk. The
Fund will be sensitive to, and its performance may depend to a greater extent
on, the overall condition of the life sciences tools and services industry. The
profitability of life sciences tools and services
companies
may be adversely affected by the loss or impairment of patent or intellectual
property rights, the advent of new technologies or competitors, large
expenditures on research and development of products or services that may not
prove commercially successful or may become obsolete quickly, and the imposition
of regulations and restrictions by the Food and Drug Administration, the
Environmental Protection Agency, state and local governments, and foreign
regulatory authorities. In addition, stock prices of these companies are at
times extremely volatile, particularly when their products are subject to
regulatory approval and/or under regulatory scrutiny. Life sciences tools and
services companies may also be particularly affected by risks that affect the
broader health care sector, including heavy dependence on patent protection,
competition that may make it difficult to raise prices or may result in price
discounts, and thin capitalization and limited product lines, markets, financial
resources or personnel. Companies that make medical equipment and supplies may
be subject to extensive litigation based on product liability claims. Meanwhile,
healthcare providers and services companies are particularly subject to the
risks of restrictions on government reimbursement for medical expenses, an
increased emphasis on outpatient services, rising costs of medical products, and
public health conditions.
Liquidity
Risk Related to MLPs.
Although energy companies and MLPs trade on national securities exchanges,
certain MLP securities may trade less frequently than those of larger companies
due to their smaller capitalizations. At times, due to limited trading volumes
of certain MLPs, the prices of such MLPs may display abrupt or erratic
movements. Moreover, it may be more difficult for the Fund to buy and sell
significant amounts of such securities without an unfavorable impact on
prevailing market prices. The Fund’s investment in securities that are less
actively traded or over time experience decreased trading volume may restrict
its ability to take advantage of other market opportunities or to dispose of
securities at a fair price at the times when the Adviser believes it is
desirable to do so. This also may affect adversely the Fund’s ability to make
dividend distributions.
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.
Medium-Capitalization
Companies Risk. The
Fund may invest in medium-capitalization companies and, therefore will be
subject to certain risks associated with 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
medium-capitalization companies could trail the returns on investments in
securities of larger companies.
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.
MLP
Industry Specific Risks.
Energy companies and MLPs can be negatively impacted by market perception that
energy companies’ and MLPs’ performance and distributions are directly tied to
commodity prices. Furthermore, a significant decrease in the production of
natural gas, oil or other energy commodities, due to a decline in production
from existing facilities, import supply disruption or otherwise, would reduce
revenue and operating income of energy companies and MLPs and, therefore, the
ability of energy companies and MLPs to make distributions to partners. Changes
in demand for transportation of commodities over longer distances and supply of
vessels to carry those commodities may materially affect revenues, profitability
and cash flows. MLPs and other companies operating in the energy sector are also
subject to risks that are specific to the industry they serve.
Midstream.
Energy
companies and MLPs that operate midstream assets are subject to supply and
demand fluctuations in the markets they serve which may be impacted by a wide
range of factors including fluctuating commodity prices, weather, increased
conservation, increased governmental or environmental regulation, depletion,
rising interest rates, declines in domestic or foreign production, accidents or
catastrophic events, increasing operating expenses and economic conditions,
among others. Further, energy companies and MLPs that operate gathering and
processing assets are subject to natural declines in the production of the oil
and gas fields they serve. In addition, some gathering and processing contracts
subject the owner of such assets to direct commodity price risk. The development
of, demand for and/or supply of competing forms of energy may negatively impact
the revenues of midstream companies.
Downstream.
Downstream companies are businesses engaged in refining, marketing and other
“end-customer” distribution activities relating to refined energy sources, such
as: customer-ready natural gas, propane and gasoline; the production and
manufacturing of petrochemicals including olefins, polyolefins, ethylene and
similar co-products as well as intermediates and derivatives; and the
generation, transmission and distribution of power and electricity. In addition
to the other risks described herein, downstream companies may be more
susceptible to risks associated with reduced customer demand for the products
and services they provide.
Exploration
and Production.
Exploration and production energy companies and MLPs are particularly vulnerable
to declines in the demand for and prices of crude oil and natural gas.
Reductions in prices for crude oil and natural gas can cause a given reservoir
to become uneconomic for continued production earlier than it would if prices
were higher, resulting in the plugging and abandonment of, and cessation of
production from, that reservoir. In addition, lower commodity prices not only
reduce revenues but also can result in substantial downward adjustments in
reserve estimates. The accuracy of any reserve estimate is a function of the
quality of available data, the accuracy of assumptions regarding future
commodity prices and future exploration and development costs and engineering
and geological interpretations and judgments. Different reserve engineers may
make different estimates of reserve quantities and related revenue based on the
same data. Actual oil and gas prices, development expenditures and operating
expenses will vary from those assumed in reserve estimates, and these variances
may be significant. Any significant variance from the assumptions used could
result in the actual quantity of reserves and future net cash flow being
materially different from those estimated in reserve reports. In addition,
results of drilling, testing and production and changes in prices after the date
of reserve estimates may result in downward revisions to such estimates.
Substantial downward adjustments in reserve estimates could have a material
adverse effect on a given exploration and production company’s financial
position and results of operations. In addition, due to natural declines in
reserves and production, exploration and production companies must economically
find or acquire and develop additional reserves in order to maintain and grow
their revenues and distributions. Exploration and production energy companies
and MLPs seek to reduce cash flow volatility associated with commodity prices by
executing multiyear hedging strategies that fix the price of gas and oil
produced. There can be no assurance that the hedging strategies currently
employed by these energy companies and MLPs are currently effective or will
remain effective.
Marine
Shipping.
Marine shipping energy companies and MLPs are primarily marine transporters of
natural gas, crude oil or refined petroleum products. Marine shipping companies
are exposed to many of the same risks as other energy companies. In addition,
the highly cyclical nature of the marine transportation industry may lead to
volatile changes in charter rates and vessel values, which may adversely affect
the revenues, profitability and cash flows of such companies. Fluctuations in
charter rates result from changes in the supply and demand for vessel capacity
and changes in the supply and demand for certain energy commodities. Changes in
demand for transportation of commodities over longer distances and supply of
vessels to carry those commodities may materially affect revenues, profitability
and cash flows. The value of marine transportation vessels may fluctuate and
could adversely affect the value of shipping company securities in the Fund’s
portfolio. Declining marine transportation values could affect the ability of
shipping companies to raise cash by limiting their ability to refinance their
vessels, thereby adversely impacting such company’s liquidity. Shipping company
vessels are at risk of damage or loss because of events such as mechanical
failure, collision, human error, war, terrorism, piracy, cargo loss and bad
weather. In addition, changing economic, regulatory and political conditions in
some countries, including political and military conflicts, have from time to
time resulted in attacks on vessels, mining of waterways, piracy, terrorism,
labor strikes, boycotts and government requisitioning of vessels. These sorts of
events could interfere with shipping lanes and result in market disruptions and
a significant reduction in cash flow for the shipping companies.
Propane.
Propane energy companies and MLPs are distributors of propane to homeowners for
space and water heating. Energy companies and MLPs with propane assets are
subject to earnings variability based upon weather conditions in the markets
they serve, fluctuating commodity prices, customer conservation and increased
use of alternative fuels, increased governmental or environmental regulation,
and accidents or catastrophic events, among others.
Natural
Resource.
Energy companies and MLPs with coal, timber, fertilizer and other mineral assets
are subject to supply and demand fluctuations in the markets they serve, which
will be impacted by a wide range of domestic and foreign factors including
fluctuating commodity prices, the level of their customers’ coal stockpiles,
weather, increased conservation or use of alternative fuel sources, increased
governmental or environmental regulation, depletion, declines in production,
mining accidents or catastrophic events, health claims and economic conditions,
among others. In light of increased state and federal regulation, it has been
increasingly difficult to obtain and maintain the permits necessary to mine
coal. Further, such permits, if obtained, have increasingly contained more
stringent, and more difficult and costly to comply with, provisions relating to
environmental protection.
Geopolitical
Risk.
Global political and economic instability could affect the operations of MLPs
and energy companies in unpredictable ways, including through disruptions of
natural resource supplies and markets and the resulting volatility in commodity
prices. Market disruptions arising out of geopolitical events could also prevent
the Fund from executing advantageous investment decisions in a timely manner.
Energy infrastructure companies and MLPs are also subject to risks that are
specific to the industry they serve.
Pipeline.
Pipeline energy companies and MLPs are not subject to direct commodity price
exposure because they do not own the underlying energy commodity. However, the
energy sector can be hurt by market perception that energy companies’ and MLPs’
performance and distributions are directly tied to commodity prices. Also, a
significant decrease in the production of natural gas, oil, or other energy
commodities, due to a decline in production from existing facilities, import
supply disruption, or otherwise, would reduce revenue and operating income of
energy companies and MLPs and, therefore, the ability of energy companies and
MLPs to make distributions to partners.
A
sustained decline in demand for crude oil, natural gas and refined petroleum
products could adversely affect energy company and MLP revenues and cash flows.
Factors that could lead to a decrease in market demand include a recession or
other adverse economic conditions, an increase in the market price of the
underlying commodity, higher taxes or other regulatory actions that increase
costs, or a shift in consumer demand for such products. Demand may also be
adversely impacted by consumer sentiment with respect to global warming and/ or
by any state or federal legislation intended to promote the use of alternative
energy sources, such as bio-fuels.
A
significant slowdown in large energy companies’ disposition of energy
infrastructure assets and other merger and acquisition activity in the energy
industry could reduce the growth rate of cash flows received by the Fund from
energy companies and MLPs that grow through acquisitions.
MLP
Risk.
An investment in MLP units involves risks that differ from a similar investment
in equity securities, such as common stock, of a corporation. Holders of MLP
units have the rights typically afforded to limited partners in a limited
partnership. Holders of MLP units are subject to certain risks inherent in the
structure of MLPs, including (i) tax risks (described further below), (ii) the
limited ability to elect or remove management or the general partner or managing
member, (iii) limited voting rights, except with respect to extraordinary
transactions, (iv) conflicts of interest between the general partner or managing
member and its affiliates, on the one hand, and the limited partners or members,
on the other hand, including those arising from incentive distribution payments
or corporate opportunities, (v) dilution risks and risks related to the general
partner’s right to require unit-holders to sell their common units at an
undesirable time or price, resulting from regulatory changes or other reasons
and (vi) cash flow risks, as described in more detail in this Prospectus.
General partners typically have limited fiduciary duties to an MLP, which could
allow a general partner to favor its own interests over the MLP’s interests. In
addition, general partners of MLPs often have limited call rights that may
require unitholders to sell their common units at an undesirable time or price.
MLPs may issue additional common units without unitholder approval, which would
dilute the interests of existing unitholders, including the Fund’s ownership
interest.
MLP
common units and other equity securities can be affected by factors affecting
the stock market in general, expectations of interest rates, investor sentiment
towards MLPs or the energy sector, changes in a particular issuer’s financial
condition, or unfavorable or unanticipated poor performance of a particular
issuer (in the case of MLPs, generally measured in terms of distributable cash
flow). MLPs holding credit-related investments are subject to interest rate risk
and the risk of default on payment obligations by debt issuers. Certain MLP
securities may trade in lower volumes due to their smaller capitalizations, and
may be subject to more abrupt or erratic price movements and lower market
liquidity. MLP securities are generally considered interest-rate sensitive
investments. During periods of interest rate volatility, these investments may
not provide attractive returns. Prices of common units of individual MLPs and
other equity securities also can be affected by fundamentals unique to the
partnership or company, including cash flow growth, cash generating power and
distribution coverage.
The
Fund derives a significant portion of its cash flow from investments in equity
securities of MLPs. Therefore, the amount of cash that the Fund will have
available to pay or distribute will depend on the ability of the MLPs that the
Fund owns to make distributions to their partners and the tax character of those
distributions. Neither the Fund nor the Adviser has control over the actions of
underlying MLPs. MLPs are subject to various risks related to the underlying
operating companies they control, including dependence upon specialized
management skills and the risk that such companies may lack or have limited
operating histories. Certain MLPs in which the Fund may invest depend upon their
parent or sponsor entities for the majority of their revenues. If the parent or
sponsor entities fail to make payments or satisfy their obligations to an MLP,
the revenues and cash flows of that MLP and ability of that MLP to make
distributions to unit holders such as the Fund would be adversely affected. The
amount of cash that each individual MLP can distribute to its partners will
depend on the amount of cash it generates from operations, which will vary from
quarter to quarter depending on factors affecting the energy infrastructure
market generally and on factors affecting the particular business lines of the
MLP. Available cash will also depend on the MLPs’ level of operating costs
(including incentive distributions to the general partner), level of capital
expenditures, debt service requirements, acquisition costs (if any),
fluctuations in working capital needs and other factors. The Fund expects to
generate significant investment income, and the Fund’s investments may not
distribute the expected or anticipated levels of cash, resulting in the risk
that the Fund may not have the ability to make cash distributions as investors
expect from MLP- focused investments.
MLP
Tax Risk.
MLPs are generally being treated as partnerships for federal income tax
purposes. Partnerships generally do not pay U.S. federal income tax at the
partnership level. Rather, each partner of the MLP, in computing its U.S.
federal income tax liability, must include its allocable share of the MLP’s
income, gains, losses, deductions and tax credits. If, as a result of a change
in current law or a change in an MLP’s underlying business mix, an MLP were
treated as a corporation for federal income tax purposes, the MLP would be
obligated to pay federal income tax on its income at the corporate tax rate,
reducing the distributions, after-tax returns, and value of the investment to
the Fund.
Changes
in tax laws or regulations, or future interpretations of such laws or
regulations, could adversely affect the Fund or the MLPs in which the Fund
invests and could also negatively impact the amount and tax characterization of
dividends received by the Fund’s shareholders. For example, Congress could take
actions which would eliminate the tax benefits of depreciation, depletion and
amortization deductions realized by MLPs. Alternatively, Congress could impose a
tax on pass-through entities such as MLPs or eliminate the use of pass-through
taxation entirely.
Individuals
and certain other non-corporate entities are generally eligible for a 20%
deduction with respect to certain taxable income from MLPs through 2025.
However, the Fund (which is taxable as a regulated investment company) will not
be eligible for the 20% deduction and will not pass through the 20% deduction to
Fund shareholders. As a result, in comparison, investors investing directly in
MLPs would be eligible for the 20% deduction for any such taxable income from
these investments, while investors investing in MLPs held indirectly through the
Fund would not. An MLP’s distributions to the Fund generally will not be taxable
unless the cash amount (or, in certain cases, the value of marketable
securities) distributed exceeds the Fund’s basis in its interest in the MLP.
Distributions received by the Fund from an MLP will reduce the Fund’s adjusted
basis in its interest in the MLP, but not below zero. A reduced basis will
generally result in an increase in the amount of gain (or decrease in the amount
of loss) that will be recognized by the Fund for tax purposes on the sale of its
interest in the MLP.
U.S.
federal income tax audit rules for partnerships such as the MLPs in which the
Fund invests generally require that underpayments of tax be determined and paid
at the partnership level following any adjustment to the partnership’s items of
income, gain, loss, deduction or credit. If the Internal Revenue Service makes
audit adjustments, it may assess and collect any taxes (including any applicable
penalties and interest) resulting from such audit adjustments directly from the
partnership. A partnership such as an MLP may elect to either pay the taxes
directly to the Internal Revenue Service or pass through such tax liability to
unitholders including former unitholders, if eligible. Although MLPs generally
are accorded an election to require unitholders and former unitholders to take
such Internal Revenue Service audit adjustment into account and to pay any
resulting taxes (including applicable penalties or interest) therefrom in
accordance with their interests in the MLP during the tax year under audit,
there can be no assurance that such election would be made or would be
practical, permissible or effective in all circumstances. Both current and past
MLP unitholders, which may include the Fund, may bear some or all of any tax
liability resulting from such an audit adjustment relating to current or prior
years, plus additional tax, interest and penalties as well as incremental
accounting and legal expenses, whether or not such unitholders held units in the
partnership during the tax year actually under audit. If as a result of any such
audit adjustment an MLP in which the Fund was or is invested is required to
recognize taxable income or make payments of taxes, penalties and interest or
the Fund is so required, the Fund’s returns may be materially negatively
affected.
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-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.
Oil
and Gas Companies Risk.
The profitability of oil and gas companies is related to worldwide energy
prices, including all sources of energy, and exploration and production costs.
The price of oil and gas, the earnings of oil and gas companies, and the value
of such companies’ securities can be extremely volatile. Such companies are also
subject to risks of changes in commodity prices, changes in the global supply of
and demand for oil and gas (including reduced demand as a result of increases in
energy efficiency and energy conservation efforts), interest rates, exchange
rates, the prices of competitive energy services, the imposition of import
controls, world events, friction with certain oil-producing countries and
between the governments of the United States and other major exporters of oil to
the United States, actions of OPEC, negative perception and publicity, depletion
of resources, development of alternative energy sources, technological
developments, labor relations and general economic conditions, as well as
market, economic and political risks of the countries where oil and gas
companies are located or do business, fluctuations caused by events relating to
international politics, including political instability, expropriation, social
unrest and acts of war, acts of terrorism, energy conservation, the success of
exploration projects and tax and other governmental regulatory policies. Oil and
gas
companies
may have significant capital investments in, or engage in transactions
involving, emerging market countries, which may heighten these risks. These
companies may also be subject to contractual fixed pricing, which may increase
the cost of business and limit these companies’ earnings. Oil and gas companies
operate in a highly competitive and cyclical industry, with intense price
competition. Additionally, the price of oil may fluctuate on a seasonal basis. A
significant portion of their revenues may depend on a relatively small number of
customers, including governmental entities and utilities.
Oil
and gas companies are exposed to significant and numerous operating hazards. Oil
and gas companies’ operations are subject to hazards inherent in the oil and gas
industry, such as fire, explosion, blowouts, loss of well control and oil
spills. Companies that own or operate gas pipelines are subject to certain
risks, including pipeline and equipment leaks and ruptures, explosions, fires,
unscheduled downtime, transportation interruptions, discharges or releases of
toxic or hazardous gases and other environmental risks. Oil and gas equipment
and services, as well as oil and gas exploration and production, can be
significantly affected by natural disasters and adverse weather conditions in
the regions in which they operate. The revenues of oil and gas companies may be
negatively affected by contract termination and renegotiation. Oil and gas
companies are subject to, and may be adversely affected by, extensive federal,
state, local and foreign laws, rules and regulations. Oil and gas exploration
and production companies may also be adversely affected by environmental damage
claims and other types of litigation. Laws and regulations protecting the
environment may expose oil and gas companies to liability for the conduct of or
conditions caused by others or for acts that complied with all applicable laws
at the time they were performed. Changes to environmental protection laws,
including the implementation of policies with less stringent environmental
protection standards and those geared away from sustainable energy development,
could lead to fluctuations in supply, demand and prices of oil and gas. The
international operations of oil and gas companies expose them to risks
associated with instability and changes in economic and political conditions,
social unrest and acts of war, foreign currency fluctuations, changes in foreign
regulations and other risks inherent to international business. Such companies
may also have significant capital investments or operations in, or engage in
transactions involving, emerging market countries, which may increase these
risks.
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.
Pharmaceutical
Industry Risk. The
success of companies in the pharmaceutical industry is highly dependent on the
development, procurement and marketing of drugs. The values of pharmaceutical
companies are also dependent on the development, protection and exploitation of
intellectual property rights and other proprietary information, and the
profitability of pharmaceutical companies may be significantly affected by such
things as the expiration of patents or the loss of, or the inability to enforce,
intellectual property rights. There can be no assurance that the steps taken by
pharmaceutical companies to protect their proprietary rights will be adequate to
prevent misappropriation of their proprietary rights or that competitors will
not independently develop products that are substantially equivalent or superior
to such companies’ products. Pharmaceutical companies also rely on trade
secrets, know-how and technology, which are not protected by patents, to
maintain their competitive position. If any trade secret, know-how or other
technology not protected by a patent were disclosed to, or independently
developed by, a competitor, that company’s business and financial condition
could be materially adversely affected.
The
research and other costs associated with developing or procuring new drugs and
the related intellectual property rights can be significant, and the results of
such research and expenditures are unpredictable. There can be no assurance that
those efforts or costs will result in the development of a profitable drug.
Pharmaceutical companies may be susceptible to product obsolescence. Many
pharmaceutical companies face intense competition from new products and less
costly generic products.
Pharmaceutical
products are subject to approval of the Food and Drug Administration. The
research, design, testing, manufacturing, labeling, marketing, distribution and
advertising of pharmaceutical products are subject to extensive regulation by
governmental authorities in the United States and other countries. The process
for obtaining regulatory approval by the Food and Drug Administration or other
governmental regulatory authorities is long and costly and may require extensive
preclinical and clinical trials. There can be no assurance that the necessary
approvals will be obtained or maintained. In addition, the potential for an
increased amount of required disclosure of proprietary scientific information
could negatively impact the position of pharmaceutical companies. The
pharmaceutical industry is also subject to laws and regulations governing the
protection of the environment and occupational health and safety, including laws
regulating air emissions, wastewater discharges, the management and disposal of
hazardous materials and wastes, and the health and safety of employees. Failure
to comply with applicable domestic and/or foreign requirements can result in
civil and criminal fines or other enforcement actions, recall or seizure of
products, total or partial suspension of production, withdrawal of existing
product approvals or clearances, refusal to approve or clear new applications or
notifications, increased quality control costs, criminal prosecution, other
penalties and, in some instances, exclusion of participation in government
sponsored programs such as Medicare, Medicaid and other government sponsored
programs.
The
pharmaceutical industry is also subject to rapid and significant technological
change and competitive forces that may make drugs obsolete or make it difficult
to raise prices and, in fact, may result in price discounting. Companies in the
pharmaceutical industry may also be subject to expenses and losses from
extensive litigation based on intellectual property, product liability and
similar claims that are inherent in the development, manufacturing and marketing
of human therapeutic products. Product liability claims could delay or prevent
completion of companies’ clinical development programs as well as result in Food
and Drug Administration investigations of the safety and effectiveness of
companies’ products, manufacturing processes and facilities, and marketing
programs. Companies in the pharmaceutical industry may be adversely affected by
government regulation and changes in reimbursement rates. The ability of many
pharmaceutical companies to commercialize current and any future products
depends in part on the extent to which reimbursement for the cost of such
products and related treatments are available from third party payors, such as
Medicare, Medicaid and other government sponsored programs, private health
insurance plans and health maintenance organizations. Third party payors are
increasingly challenging the price and cost-effectiveness of medical products.
Significant uncertainty exists as to the reimbursement status of health care
products, and there can be no assurance that adequate third party coverage will
be available for pharmaceutical companies to obtain satisfactory price levels
for their products.
The
international operations of many pharmaceutical companies expose them to risks
associated with instability and changes in economic and political conditions,
foreign currency fluctuations, changes in foreign regulations and other risks
inherent to international business. Additionally, a pharmaceutical company’s
valuation can often be based largely on the potential or actual performance of a
limited number of products. A pharmaceutical company’s valuation can also be
greatly affected if one of its products proves unsafe, ineffective or
unprofitable. Such companies also may be characterized by thin capitalization
and limited markets, financial resources or personnel, as well as dependence on
wholesale distributors. The stock prices of companies in the pharmaceutical
industry have been and will likely continue to be extremely volatile, in part
due to the prevalence of merger and acquisition activity in the pharmaceutical
industry. Some pharmaceutical companies are engaged in other lines of business
unrelated to pharmaceuticals, and they may experience problems with these lines
of business which could adversely affect their operating results. The operating
results of these companies may fluctuate as a result of these additional risks
and events in the other lines of business. In addition, a company’s ability to
engage in new activities may expose it to business risks with which it has less
experience than it has with the business risks associated with its traditional
businesses. Despite a company’s possible
success
in traditional pharmaceutical activities, there can be no assurance that the
other lines of business in which these companies are engaged will not have an
adverse effect on a company’s business or financial condition.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. Investing in non-U.S. issuers involves risks beyond
those associated with investments in U.S. securities, including greater market
volatility, higher transactional costs, the possibility that the liquidity of
such securities could be impaired because of future political and/or economic
developments, taxation by foreign governments, political instability, the
possibility that foreign governmental restrictions may be adopted which might
adversely affect such securities and that the selection of such securities may
be more difficult because there may be less publicly available information
concerning such non-U.S. issuers or the accounting, auditing and financial
reporting standards, practices and requirements applicable to non-U.S. issuers
may differ from those applicable to U.S. issuers.
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.
Retail
Companies Risk. Companies
involved in retail may be affected by the performance of the domestic and
international economy, interest rates, rates of inflation, exchange rates,
competition, consumer confidence and reputational damage. The success of
companies involved in retail depends heavily on disposable household income and
consumer spending, and changes in demographics and consumer preferences can
affect the success of retail companies. Certain retail companies have
historically been subject to significant seasonal and quarterly variations. The
success of retail companies may be strongly affected by fads, marketing
campaigns and other factors affecting supply and demand and a retail company’s
success can be tied to its ability to anticipate changing consumer tastes. These
companies may be subject to severe competition, which may have an adverse impact
on their profitability.
Certain
business segments of retail companies are highly cyclical, which may cause the
operating results of such retail companies to vary significantly. Retail
companies may be dependent on outside financing, which may be difficult to
obtain. Many of these companies are dependent on third party suppliers and
distribution systems and purchase merchandise both directly from brand owners
and indirectly from retailers and third party suppliers. Such companies may also
be dependent upon suppliers for the products used for their own brand name
merchandise. Reliance on third party suppliers subjects retail companies to
risks of delivery delays, price increases and receipt of nonconforming or poor
quality merchandise. Retail companies may be unable to protect their
intellectual property rights and may be liable for infringing the intellectual
property rights of others. Changes in labor laws and other labor issues, such as
increased labor costs, could adversely affect the financial performance of
retail companies. If retail companies do not maintain the security of
customer-related information, they could damage their reputations with
customers, incur substantial costs and become subject to litigation, all of
which could adversely affect the financial performance of such companies. The
international operations of certain retail companies expose them to risks
associated with instability and changes in economic and political conditions,
foreign currency fluctuations, changes in foreign regulations, tariffs and trade
disputes and other risks inherent to international business. Some of the
companies in the Retail Index are engaged in other lines of business unrelated
to retail, and they may experience problems with these lines of business which
could adversely affect their operating results. The operating results of these
companies may fluctuate as a result of these additional risks and events in the
other lines of business. In addition, a company’s ability to engage in new
activities may expose it to business risks with which it has less experience
than it has with the business risks associated with its traditional businesses.
Despite a company’s possible success in traditional retail activities, the other
lines of business in which these companies are engaged may have an adverse
effect on a company’s business or financial condition.
Retail
companies may also be exposed to online retail risk. Companies that operate in
the online marketplace are subject to fluctuating consumer demand. Unlike
traditional brick and mortar retailers, online marketplaces and retailers must
assume shipping costs or pass such costs to consumers. Consumer access to price
information for the same or similar products may cause companies that operate in
the online marketplace to reduce profit margins in order to compete. Due to the
nature of their business models, companies that operate in the online
marketplace may also be subject to heightened cybersecurity risk, including the
risk of theft or damage to vital hardware, software and information systems. The
loss or public dissemination of
sensitive
customer information or other proprietary data may negatively affect the
financial performance of such companies to a greater extent than traditional
brick and mortar retailers. As a result of such companies being web-based and
the fact that they process, store and transmit large amounts of data, including
personal information, for their customers, failure to prevent or mitigate data
loss or other security breaches, including breaches of vendors’ technology and
systems, could expose companies that operate in the online marketplace or their
customers to a risk of loss or misuse of such information, adversely affect
their operating results, result in litigation or potential liability and
otherwise harm their businesses.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because there may be less publicly available information concerning such
non-U.S. issuers or the accounting, auditing and financial reporting standards,
practices and requirements applicable to non-U.S. issuers may differ from those
applicable to U.S. issuers.
Return
of Capital Risk.
A portion of the Fund’s distributions are expected to be treated as a return of
capital for tax purposes. Return of capital distributions are not taxable income
to you but reduce your tax basis in your Fund Shares. Such a reduction in tax
basis will generally result in larger taxable gains and/or lower tax losses on a
subsequent sale of Fund Shares. The Fund’s return of capital distributions are
not derived from the net income or earnings and profits of the Fund.
Shareholders should not assume that all Fund distributions are derived from the
net income or earnings and profits of the Fund.
Risk
of Investing in Robotics Companies.
The Fund invests primarily in the securities of Robotics Companies and is
particularly sensitive to the risks to such companies. These risks include, but
are not limited to, small or limited markets for such securities, changes in
business cycles, world economic growth, technological progress, rapid
obsolescence, supply chain disruptions and government regulation. Robotics
Companies may rely on a combination of patents, copyrights, trademarks and trade
secret laws to establish and protect their proprietary rights in their products
and technologies. There can be no assurance that the steps taken by these
companies to protect their proprietary rights will be adequate to prevent the
misappropriation of their technology or that competitors will not independently
develop technologies that are substantially equivalent or superior to such
companies’ technology.
Semiconductor
Industry Risk.
Competitive pressures may have a significant effect on the financial condition
of companies in the semiconductor industry. The Fund is subject to the risk that
companies that are in the semiconductor industry may be similarly affected by
particular economic or market events, which may, in certain circumstances, cause
the value of securities of all companies in the semiconductor industry of the
market to decrease. As product cycles shorten and manufacturing capacity
increases, these companies may become increasingly subject to aggressive
pricing, which hampers profitability. The Fund is also subject to the risk that
the securities of such issuers will underperform the market as a whole due to
legislative or regulatory changes. Additionally, semiconductor companies are
vulnerable to wide fluctuations in securities prices due to rapid product
obsolescence. Many semiconductor companies may not successfully introduce new
products, develop and maintain a loyal customer base or achieve general market
acceptance for their products, and failure to do so could have a material
adverse effect on their business, results of operations and financial condition.
Reduced demand for end-user products, underutilization of manufacturing
capacity, limited personnel, periods of production shortages, significant price
erosion, a limited number of products, wide fluctuations in securities prices
due to risks of rapid obsolescence of products, economic performance of the
customers of semiconductor companies and other factors could adversely impact
the operating results of companies in the semiconductor industry. Semiconductor
companies typically face high capital costs and such companies may need
additional financing, which may be difficult to obtain. In addition, their
capital equipment could suffer from rapid obsolescence. Some of the companies
involved in the semiconductor industry are also engaged in other lines of
business unrelated to the semiconductor business, and they may experience
problems with these lines of business, which could adversely affect their
operating results. The international operations of many semiconductor companies
expose them to risks associated with instability and changes in economic and
political conditions, foreign currency fluctuations, changes in foreign
regulations, competition from subsidized foreign competitors with lower
production costs, tariffs and trade disputes and other risks inherent to
international business. The semiconductor industry is highly cyclical, which may
cause the operating results of many semiconductor companies to vary
significantly. Companies in the semiconductor industry also may be subject to
competition from new market entrants, both domestically and internationally,
including competition from foreign competitors with lower production costs. The
stock prices of companies in the semiconductor industry have been and will
likely continue to be extremely volatile compared to the overall
market.
Semiconductor
manufacturing processes are highly complex, costly and potentially vulnerable to
impurities and other disruptions that can significantly increase costs and delay
product shipments to customers. Many semiconductor companies rely on a single
supplier or a limited number of suppliers for the parts and raw materials used
in their products, and if quality parts and materials are not delivered by the
suppliers on a timely basis, these companies will not be able to manufacture and
deliver their products on a timely schedule which could adversely affect their
financial condition.
Semiconductor
design and process methodologies are subject to rapid technological change
requiring large expenditures for research and development in order to improve
product performance and increase manufacturing yields. Semiconductor
companies
also may be subject to risks relating to research and development costs and the
availability and price of components. Many semiconductor companies have created
new technologies for the semiconductor sector and currently rely on a limited
number of customers as purchasers of their products and services. Semiconductor
companies rely on a combination of patents, trade secret laws and contractual
provisions to protect their technologies. Inability to adequately protect
proprietary rights may harm the competitive positions of many semiconductor
companies. Additionally, semiconductor companies may be subject to claims of
infringement of third party intellectual property rights, which could adversely
affect their business. Many semiconductor companies are dependent on their
ability to continue to attract and retain highly skilled technical and
managerial personnel to develop and generate their business.
Certain
companies in which the Fund may invest are non-U.S. issuers whose securities are
listed on U.S. exchanges. These securities involve risks beyond those associated
with investments in U.S. securities, including greater market volatility, higher
transactional costs, the possibility that the liquidity of such securities could
be impaired because of future political and/or economic developments, taxation
by foreign governments, political instability, the possibility that foreign
governmental restrictions may be adopted which might adversely affect such
securities and that the selection of such securities may be more difficult
because there may be less publicly available information concerning such
non-U.S. issuers or the accounting, auditing and financial reporting standards,
practices and requirements applicable to non-U.S. issuers may differ from those
applicable to U.S. 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.
Software
Industry Risk.
Companies in the software industry are subject to significant competitive
pressures, such as aggressive pricing, new market entrants, competition for
market share, short product cycles due to an accelerated rate of technological
developments and the potential for limited earnings and/or falling profit
margins. Software companies also face the risks that new services, equipment or
technologies are not accepted by consumers and businesses or will become rapidly
obsolete. These factors can affect the profitability of software companies and,
as a result, the value of their securities.
Patent
protection is integral to the success of many companies and their profitability
can be affected materially by, among other things, the cost of obtaining (or
failing to obtain) patent approvals, the cost of litigating patent infringement
and the loss of patent protection for products (which significantly increases
pricing pressures and can materially reduce profitability with respect to such
products). In addition, many software companies have limited operating
histories. Prices of software companies’ securities historically have been more
volatile than other securities, especially over the short term.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Governments
of many Asian countries have implemented significant economic reforms in order
to liberalize trade policy, promote foreign investment in their economies,
reduce government control of the economy and develop market mechanisms. There
can be no assurance these reforms will continue or that they will be effective.
Despite recent reform and privatizations, significant regulation of investment
and industry is still pervasive in many Asian countries and may restrict foreign
ownership of domestic corporations and repatriation of assets, which may
adversely affect the Fund’s investments. Governments in some Asian countries are
authoritarian in nature, have been installed or removed as a result of military
coups or have periodically used force to suppress
civil
dissent. Disparities of wealth, the pace and success of democratization, and
ethnic, religious and racial disaffection have led to social turmoil, violence
and labor unrest in some countries. Unanticipated or sudden political or social
developments may result in sudden and significant investment losses. Investing
in certain Asian countries involves risk of loss due to expropriation,
nationalization, or confiscation of assets and property or the imposition of
restrictions on foreign investments and on repatriation of capital invested. In
addition, several countries in Asia may be impacted by the occurrence of global
events such as war, terrorism, environmental disasters, natural disasters or
events, country instability, and infectious disease epidemics and
pandemics.
Special
Risk Considerations of Investing in Australian Issuers. Investments
in securities of Australian issuers, including issuers located outside of
Australia that generate significant revenues from Australia, involve risks
and special considerations not typically associated with investments in the U.S.
securities markets. Investments in Australian issuers may subject the Fund to
regulatory, political, currency, security, and economic risk specific to
Australia. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also becoming increasingly dependent on its growing services industry. The
Australian economy is dependent on trading with key trading partners, including
the United States, China, Japan, Singapore and certain European countries.
Reduction in spending on Australian products and services, or changes in any of
the economies, may cause an adverse impact on the Australian
economy.
Additionally,
Australia is located in a part of the world that has historically been prone to
natural disasters, such as hurricanes, droughts and bushfires, and is
economically sensitive to environmental events. Any such event may adversely
impact the Australian economy, causing an adverse impact on the value of the
Fund.
Special
Risk Considerations of Investing in Canadian Issuers. Investments
in securities of Canadian issuers, including issuers located outside of Canada
that generate significant revenue from Canada, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Canadian economy is very dependent on the demand for, and supply
and price of, natural resources. The Canadian market is relatively concentrated
in issuers involved in the production and distribution of natural resources.
There is a risk that any changes in natural resources sectors could have an
adverse impact on the Canadian economy. Additionally, the Canadian economy is
heavily dependent on relationships with certain key trading partners, including
the United States, countries in the European Union and China. Because the United
States is Canada’s largest trading partner and foreign investor, the Canadian
economy is dependent on and may be significantly affected by the U.S. economy.
Reduction in spending on Canadian products and services or changes in the U.S.
economy may adversely impact the Canadian economy. Trade agreements may further
increase Canada’s dependency on the U.S. economy, and uncertainty as to the
future of such trade agreements may cause a decline in the value of the Fund’s
Shares. Past periodic demands by the Province of Quebec for sovereignty have
significantly affected equity valuations and foreign currency movements in the
Canadian market and such demands may have this effect in the future. In
addition, certain sectors of Canada’s economy may be subject to foreign
ownership limitations. This may negatively impact the Fund’s ability to
invest in Canadian issuers and to pursue its investment objective.
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 European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or
exports,
changes in governmental or European Union regulations on trade, changes in the
exchange rate of the euro, the default or threat of default by a European Union
member country on its sovereign debt, and/or an economic recession in a European
Union member country may have a significant adverse effect on the economies of
other European Union countries and on major trading partners outside Europe. If
any member country exits the Economic and Monetary Union, the departing country
would face the risks of currency devaluation and its trading partners and banks
and others around the world that hold the departing country’s debt would face
the risk of significant losses. The European financial markets have previously
experienced, and may continue to experience, volatility and have been adversely
affected, and may in the future be 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. The United
Kingdom withdrew from the European Union on January 31, 2020, which has resulted
in ongoing market volatility and caused additional market disruption on a global
basis. On December 30, 2020, the United Kingdom and the European Union signed
the EU-UK Trade and Cooperation Agreement, which is an agreement on the terms
governing certain aspects of the European Union's and the United Kingdom's
relationship post Brexit. Notwithstanding the EU-UK Trade and Cooperation
Agreement, following the transition period, there is likely to be considerable
uncertainty as to the United Kingdom’s post-transition framework.
Responses
to the financial problems by European governments, central banks and others,
including austerity measures and reforms, may not work, may result in social
unrest and may limit future growth and economic recovery or have other
unintended consequences. The governments of European Union countries may be
subject to change and such countries may experience social and political unrest.
Unanticipated or sudden political or social developments may result in sudden
and significant investment losses. The occurrence of terrorist incidents,
outbreaks of war or ongoing regional armed conflict throughout Europe also could
impact financial markets. Further defaults or restructurings by governments and
other entities of their debt could have additional adverse effects on economies,
financial markets and asset valuations around the world. In addition, one or
more countries may abandon the euro and/or withdraw from the European Union. The
impact of these actions, especially if they occur in a disorderly fashion, is
not clear but could be significant and far-reaching.
Special
Risk Considerations of Investing in Japanese Issuers.
Investments in securities of Japanese issuers, including issuers located outside
of Japan that generate significant revenues from Japan, involve risks and
special considerations not typically associated with investments in the U.S.
securities markets. The Fund’s performance is expected to be closely tied to
social, political, and economic conditions within Japan and to be more volatile
than the performance of more geographically diversified funds. The risks of
investing in the securities of Japanese issuers include lack of natural
resources, fluctuations or shortages in the commodity markets, new trade
regulations, decreasing U.S. imports and changes in the U.S. dollar exchange
rates. Japan is located in a part of the world that has historically been prone
to natural disasters such as earthquakes, volcanoes and tsunamis and is
economically sensitive to environmental events. Any such event could result in a
significant adverse impact on the Japanese economy. In addition, such disasters,
and the resulting damage, could impair the long-term ability of issuers in which
the Fund invests to conduct their businesses in the manner normally
conducted.
Special
Risk Considerations of Investing in Taiwanese Issuers.
Investments in securities of Taiwanese issuers, including issuers located
outside of Taiwan that generate significant revenues from Taiwan, involve risks
and special considerations not typically associated with investments in the U.S.
securities markets. To the extent the Fund continues to invest in securities
issued by Taiwanese issuers, the Fund may be subject to the risk of investing in
such issuers. Investments in Taiwanese issuers may subject the Fund to legal,
regulatory, political, currency and economic risks that are specific to Taiwan.
Specifically, Taiwan’s geographic proximity and history of political contention
with China have resulted in ongoing tensions between the two countries. These
tensions may materially affect the Taiwanese economy and its securities market.
Taiwan’s economy is export-oriented, so it depends on an open world trade regime
and remains vulnerable to fluctuations in the world economy.
Special
Risk Considerations of Investing in United Kingdom Issuers. Investments
in securities of United Kingdom issuers, including issuers located outside of
the United Kingdom that generate significant revenues from the United Kingdom,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. Investments in United Kingdom
issuers may subject the Fund to regulatory, political, currency, security and
economic risks specific to the United Kingdom. The British economy relies
heavily on the export of financials to the United States and other European
countries. A prolonged slowdown in the financials sector may have a negative
impact on the British economy. In the past, the United Kingdom has been a target
of terrorism. Acts of terrorism in the United Kingdom or against British
interests abroad may cause uncertainty in the British financial markets and
adversely affect the performance of the issuers to which the Fund has exposure.
The British economy, along with the United States and certain other European
Union economies, experienced a significant economic slowdown during the recent
financial crisis. In a referendum held on June 23, 2016, voters in the United
Kingdom voted to leave the European Union, creating economic and political
uncertainty in its wake. On January 31, 2020, the United Kingdom officially
withdrew from the European Union. On December 30, 2020, the European Union and
United Kingdom signed the EU-UK Trade and Cooperation Agreement, an agreement on
the terms governing certain aspects of the European Union’s and the United
Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition framework.
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.
Video
Gaming and eSports Companies Risk.
The Fund will be sensitive to, and its performance may depend to a greater
extent on, the overall condition of video gaming and eSports companies. Video
gaming and eSports companies face intense competition, both domestically and
internationally, may have limited product lines, markets, financial resources,
or personnel, may have products that face rapid obsolescence, and are heavily
dependent on the protection of patent and intellectual property rights.
Pure-play companies (i.e.,
companies that focus only on a particular product or activity) may be dependent
on one or a small number of product or product franchises for a significant
portion of their revenue and profits. They may also be subject to shifting
consumer preferences, including preferences with respect to gaming console
platforms, and changes in consumer discretionary spending. Such factors may
adversely affect the profitability and value of video gaming and eSports
companies. These companies are also subject to increasing regulatory
constraints, particularly with respect to cybersecurity and privacy. In addition
to the costs of complying with such constraints, the unintended disclosure of
confidential information, whether because of an error or a cybersecurity event,
could adversely affect the profitability and value of these companies. Video
gaming and eSports companies may be subject to sophisticated intellectual
property infringement schemes and piracy efforts, particularly in foreign
markets, which may limit the revenue potential in such markets, and combatting
such infringement or piracy schemes may require significant expenses. Such
antipiracy programs may not be effective.
Video
gaming and eSports companies may have significant exposure to the following
industries, and therefore may be subject to the risks associated with such
industries.
Risk
of Investing in the Software Industry.
Companies in the software industry are subject to significant competitive
pressures, such as aggressive pricing, new market entrants, competition for
market share, short product cycles due to an accelerated rate of technological
developments and the potential for limited earnings and/or falling profit
margins. Software companies also face the risks that new services, equipment or
technologies are not accepted by consumers and businesses or will become rapidly
obsolete. These factors can affect the profitability of software companies and,
as a result, the value of their securities. Patent protection is integral to the
success of many companies and their profitability can be affected materially by,
among other things, the cost of obtaining (or failing to obtain) patent
approvals, the cost of litigating patent infringement and the loss of patent
protection for products (which significantly increases pricing pressures and can
materially reduce profitability with respect to such products). In addition,
many software companies have limited operating histories. Prices of software
companies’ securities historically have been more volatile than other
securities, especially over the short term.
Risk
of Investing in the Internet Software & Services Industry.
The prices of the securities of companies in the internet software and services
industry may fluctuate widely due to competitive pressures, increased
sensitivity to short product cycles and aggressive pricing, heavy expenses
incurred for research and development of products or services that prove
unsuccessful, problems related to bringing products to market, and rapid
obsolescence of products. Many internet software and software services companies
rely on a combination of patents, copyrights, trademarks and trade secret laws
to establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by internet
software and software services companies to protect their proprietary rights
will sufficiently prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such companies’ technology. Legislative or regulatory
changes and increased government supervision also may affect companies in the
internet software and services industry.
Risk
of Investing in the Semiconductor Industry.
Competitive pressures may have a significant effect on the financial condition
of companies in the semiconductor industry. Video gaming and eSports companies
are subject to the risk that companies that are in the semiconductor industry
may be similarly affected by particular economic or market events. As product
cycles shorten and manufacturing capacity increases, these companies may become
increasingly subject to aggressive pricing, which hampers profitability.
Semiconductor companies are vulnerable to wide fluctuations in securities prices
due to rapid product obsolescence. Many semiconductor companies may not
successfully introduce new products, develop and maintain a loyal customer base
or achieve general market acceptance for their products, and failure to do so
could have a material adverse effect on their business, results of operations
and financial condition. Reduced demand for end-user products, underutilization
of manufacturing capacity, and other factors could adversely impact the
operating results of companies in the semiconductor industry. Semiconductor
companies typically face high capital costs and such companies may need
additional financing, which may be difficult to obtain. They also may be subject
to risks relating to research and development costs and the availability and
price of components.
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 a Fund’s Index may be used by a Fund in seeking performance that
corresponds to its respective Index and in managing cash flows, and may count
towards compliance with the Fund’s 80% policy. 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. None of the Funds employs a temporary defensive
strategy to protect against potential stock 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 a 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 Funds’
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. A Fund could also lose money in the event of a decline in the value of any
cash collateral or in the value of the 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 the Fund will not be considered qualified dividend income.
Unlike
many conventional mutual funds which are only bought and sold at closing net
asset values, the Shares of the Funds have been designed to be tradable in a
secondary market on an intra-day basis and to be created and redeemed
principally in-kind, except VanEck Gaming ETF and VanEck Video Gaming and
eSports ETF, whose Shares are created and redeemed partially 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 net
asset value 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 each Fund (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, 2023, [the
Adviser managed approximately $89.47 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 annual report for
the period ended September 30, 2023.
For
the services provided to each of VanEck Environmental Services ETF, VanEck
Gaming ETF, and VanEck Video Gaming and eSports ETF 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. Until at
least February 1, 2025, 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) from exceeding 0.55% (with respect
to VanEck Environmental Services ETF and VanEck Video Gaming and eSports ETF)
and 0.65% (with respect to VanEck Gaming ETF) of its average daily net assets
per year.
Each
of VanEck Environmental Services ETF, VanEck Gaming ETF, and VanEck Video Gaming
and eSports 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.
Pursuant
to the Investment Management Agreement, the Adviser is responsible for all
expenses of the VanEck Biotech ETF, VanEck Digital Transformation ETF, VanEck
Energy Income, VanEck Green Infrastructure ETF, VanEck Pharmaceutical ETF,
VanEck Retail ETF, VanEck Robotics ETF and VanEck Semiconductor ETF including
the costs of transfer agency, custody, fund administration, legal, audit and
other services, except for the fee payment under the Investment Management
Agreement, acquired fund fees and expenses, interest expense, offering costs,
trading expenses, taxes and extraordinary expenses. For its services to the
VanEck Biotech ETF, VanEck Pharmaceutical ETF, VanEck Retail ETF and VanEck
Semiconductor ETF, each Fund has agreed to pay the Adviser an annual unitary
management fee equal to 0.35% of its average daily net assets. For its services
to the VanEck Digital Transformation ETF, the Fund has agreed to pay the Adviser
an annual unitary management fee equal to 0.50% of its average daily net assets.
For its services to the VanEck Robotics ETF, the Fund has agreed to pay the
Adviser an annual unitary management fee equal to 0.47% of its average daily net
assets. For its services to the VanEck Energy Income ETF and VanEck Green
Infrastructure ETF, each Fund has agreed to pay the Adviser an annual unitary
management fee equal to 0.45% of its average daily net assets. Offering costs
excluded from the annual unitary management fee are: (a) legal fees pertaining
to a Fund’s Shares offered for sale; (b) SEC and state registration fees; and
(c) initial fees paid for Shares of a Fund to be listed on an exchange.
Notwithstanding the foregoing, the Adviser has agreed to pay all such offering
costs until at least February 1, 2025 with respect to each of VanEck
Biotech ETF, VanEck Digital Transformation ETF, VanEck Energy Income ETF, VanEck
Green Infrastructure ETF, VanEck Pharmaceutical ETF, VanEck Retail ETF, VanEck
Robotics ETF and VanEck Semiconductor ETF.
Manager
of Managers Structure.
With respect to VanEck Green Infrastructure ETF, VanEck Robotics ETF and VanEck
Video Gaming and eSports ETF, the Adviser and the Trust may rely on an exemptive
order (the “Order”) from the Securities and Exchange Commission that permits the
Adviser to enter into investment sub-advisory agreements with unaffiliated
sub-advisers without obtaining shareholder approval. The Adviser, subject to the
review and approval of the Board of Trustees, may select one or more
sub-advisers for the Fund and supervise, monitor and evaluate the performance of
each sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Funds and
their shareholders. The Adviser thus would have the responsibility (subject to
the oversight of the Board of Trustees) to recommend the hiring and replacement
of sub-advisers as well as the discretion to terminate any sub-adviser and
reallocate a Fund’s assets for management among any other sub-adviser(s) and
itself. This means that the Adviser would be able to reduce the sub-advisory
fees and retain a larger portion of the
management
fee, or increase the sub-advisory fees and retain a smaller portion of the
management fee. The Adviser would compensate each sub-adviser out of its
management fee.
Administrator,
Custodian and Transfer Agent. Van
Eck Associates Corporation is the administrator for the Funds (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
each Fund’s 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 managers currently responsible for the day-to-day management of each
Fund’s portfolio are Peter H. Liao, CFA and Griffin Driscoll.
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.
Driscoll is deputy portfolio manager of the Funds. He has been employed with the
Adviser since 2018 and has over 6 years' experience in the financial markets.
Mr. Driscoll received his Bachelor of Science in Finance from Providence
College.
Each
of Messrs. Driscoll and Liao serve as a portfolio manager of other funds of the
Trust. Messrs. Driscoll and Liao also serve as portfolio managers for certain
other investment companies and pooled investment vehicles advised by the
Adviser. See the Funds’ SAI for additional information about the portfolio
managers’ compensation, other accounts managed by the portfolio managers and
their respective ownership of Shares of each Fund.
DETERMINATION
OF NAV
The
net asset value (“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 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 the an Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on the 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 Securities and Exchange
Commission.
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 may earn 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.” Dividends paid by
the Fund that are properly reported as exempt-interest dividends will not be
subject to regular federal income tax. Distributions from a Fund’s net
investment income (other than net tax-exempt income, if applicable), including
net short-term capital gains, if any, are taxable to you as ordinary income. Any
long-term capital gains distributions you receive from a Fund are taxable as
long-term capital gains.
Net
investment income, if any, is typically distributed to shareholders quarterly
for VanEck Energy Income ETF and VanEck Pharmaceutical ETF. Net investment
income, if any, is typically distributed to shareholders at least annually for
all other Funds while net realized capital gains, if any, are also 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 of 1986. 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 (except for VanEck Energy Income ETF and VanEck Pharmaceutical
ETF, which expects to distribute net investment income, if any, at least
quarterly), 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 the Fund. Distributions
of net investment income, including net short-term gains, if any, are generally
taxable as ordinary income. Whether distributions of capital gains represent
long-term or short-term capital gains is determined by how long the Fund owned
the investments that generated them, rather than how long you have owned your
Shares. Distributions of net short-term capital gains in excess of net long–term
capital losses, if any, are generally taxable as ordinary income. Distributions
of net long-term capital gains in excess of net short-term capital losses, if
any, that are properly reported as capital gain dividends are generally taxable
as long-term capital gains. Long-term capital gains of a non-corporate
shareholder are generally taxable at a maximum rate of 15% or 20%, depending on
whether the shareholder’s income exceeds certain threshold amounts.
The
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.
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 VanEck Gaming ETF’s and VanEck Video Gaming and eSports
ETF’s assets will consist of securities that are foreign-listed companies and/or
foreign-domiciled companies.
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.
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.
A person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The IRS, however, may assert that a
loss realized upon an exchange of primarily securities for Creation Units cannot
be deducted currently under the rules governing “wash sales,” or on the basis
that there has been no significant change in economic position. Persons
exchanging securities for Creation Units or redeeming Creation Units should
consult their own tax adviser with respect to whether wash sale rules apply and
when a loss might be deductible and the tax treatment of any creation or
redemption transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units held as capital assets is generally
treated as long-term capital gain or loss if the Shares (or securities
surrendered) have been held for more than one year and as a short-term capital
gain or loss if the Shares (or securities surrendered) have been held for one
year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from 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 a Fund to non-U.S. shareholders are generally subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty to the extent derived from investment income and short-term
capital gains. Dividends paid by a Fund from net tax-exempt income or long-term
capital gains are generally not subject to such withholding tax.
Properly-reported dividends are generally exempt from U.S. federal withholding
tax where they (i) are paid in respect of a Fund’s “qualified net interest
income” (generally, a Fund’s U.S. source interest income, other than certain
contingent interest and interest from obligations of a corporation or
partnership in which a Fund is at least a 10% shareholder, reduced by expenses
that are allocable to such income); or (ii) are paid in respect of a Fund’s
“qualified short-term capital gains” (generally, the
excess
of a Fund’s net short-term capital gain over a Fund’s long-term capital loss for
such taxable year). However, depending on its circumstances, a Fund may report
all, some or none of its potentially eligible dividends as such qualified net
interest income or as qualified short-term capital gains and/or treat such
dividends, in whole or in part, as ineligible for this exemption from
withholding.
Any
capital gain realized by a Non-U.S. shareholder upon a sale of Shares of 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 of 1986 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 1986) 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 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.
While
some parts of the FATCA rules have not been finalized, 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.
The
Biotech Index, Digital Transformation Index, Energy Income Index, Gaming Index,
Pharmaceutical Index, Retail Index, Robotics Index, Semiconductor Index and
eSports Index are published by MarketVector IndexesTM
GmbH (“MarketVector”), which is an indirectly wholly owned subsidiary of the
Adviser. The Environmental Services Index is published by ICE Data Indices, LLC
(“ICE Data”). The Green Infrastructure Index is published by Indxx, LLC
(“Indxx”).
MarketVector,
ICE Data and Indxx do not sponsor, endorse, or promote the Funds and bear no
liability with respect to the Funds or any security.
The
Biotech Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
companies involved in the biotech industry. Biotechnology includes research
(including research contractors), development as well as production, marketing
and sales of drugs based on genetic analysis and diagnostic equipment (excluding
pharmacies).
To
be initially eligible for the Biotech Index, (i) companies must generate at
least 50% of their revenues from biotechnology (as defined above) and (ii)
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
Biotech Index includes common stocks and depositary receipts of U.S.-listed
companies that meet the eligibility requirements described above.
The
Biotech Index is the exclusive property of MarketVector, which has contracted
with Solactive AG to maintain and calculate the Biotech Index. Solactive AG uses
its best efforts to ensure that the Biotech Index is calculated correctly.
Irrespective of its obligations towards MarketVector, Solactive AG has no
obligation to point out errors in the Biotech Index to third parties. VanEck
Biotech ETF is not sponsored, endorsed, sold or promoted by MarketVector and
MarketVector makes no representation regarding the advisability of investing in
the VanEck Biotech ETF.
The
Biotech Index is reconstituted semi-annually and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Biotech Index or the implementation of certain rules at its sole discretion.
The
Digital Transformation Index is a rules based, modified capitalization weighted,
float adjusted index intended to give investors a means of tracking the overall
performance of the global digital asset segment. These companies may include
those that operate digital asset exchanges, payment gateways, digital asset
mining operations, software services, equipment and technology or services to
the digital asset industry, digital asset infrastructure businesses, or
companies facilitating commerce with the use of digital assets. They may also
include companies which own a material amount of digital assets, or otherwise
generate revenues related to digital asset operations. This also includes
companies that have projects with the potential to generate revenues from the
digital assets industry when developed.
The
Digital Transformation Index is composed beginning with only common stocks and
stocks with similar characteristics from financial markets that a global
universe of equity securities from financial markets that are freely investable
for foreign investors and that provide real-time and historical component and
currency pricing. Only companies with a free-float of at least 10% of
outstanding shares are initially eligible for the Index. Additionally, to be
initially eligible for inclusion in the Index, companies must have a full market
capitalization greater than $150 million, a three-month average-daily-trading
volume of at least $1 million at the current review and also at the previous two
reviews, and at least 250,000 shares traded per month over the last six months
at the current review and also at the previous two reviews. Companies may also
become initially eligible for inclusion in the Index pursuant to the Index
Provider’s ongoing maintenance rules.
To
be initially eligible for inclusion in the Digital Transformation Index, a
company must (i) generate at least 50% of its revenues from digital assets
projects; (ii) generate at least 50% of its revenues from projects that, when
developed, have the potential to generate at least 50% of their revenues from
digital assets or digital asset projects; and/or (iii) have at least 50% of its
assets invested in direct digital asset holdings or digital asset projects.
Companies that are current components of the Digital Transformation Index must
generate at least 25% of their revenues from digital assets projects and/or have
at least 25% of their assets invested in direct digital asset holdings or
digital asset projects in order to remain in the Index. Index component weights
are based upon free-float market capitalization and individual components are
limited to a maximum of an 8% weighting in the Digital Transformation Index. The
Digital Transformation Index currently includes a minimum of 20 Index
components.
The
Digital Transformation Index is the exclusive property of MarketVector, which
has contracted with Solactive AG to maintain and calculate the Digital
Transformation Index. Solactive AG uses its best efforts to ensure that the
Digital Transformation Index is calculated correctly. Irrespective of its
obligations towards MarketVector, Solactive AG has no obligation to point out
errors in the Digital Transformation Index to third parties. The VanEck Digital
Transformation ETF is not sponsored, endorsed, sold or promoted by MarketVector
and MarketVector makes no representation regarding the advisability of investing
in the VanEck Digital Transformation ETF.
The
Digital Transformation Index is reconstituted and rebalanced quarterly.
MarketVector
may delay or change a scheduled rebalancing or reconstitution of the Digital
Transformation Index or the implementation of certain rules at its sole
discretion.
The
Energy Income Index is a rules-based, modified capitalization weighted, float
adjusted index intended to give investors a means to track the overall
performance of North American companies involved in the energy
infrastructure/midstream energy segment, which includes MLPs and corporations
involved in oil and gas storage and transportation. “Oil and gas storage and
transportation” companies may include those involved in oil and gas pipelines,
storage facilities, and other activities associated with transporting, storing,
and gathering natural gas, natural gas liquids, crude oil or refined
products.
To
be initially eligible for the Energy Income Index, (i) companies must generate
at least 50% of their revenues from oil and gas storage and transportation (as
defined above), and (ii) 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 the
review occurs. Stocks must have a three month average daily trading volume value
of at least $1 million at a review and also at the previous two reviews to be
eligible for the Index and such stocks must have traded at least 250,000 shares
each month over the last six months at a review and also at the previous two
reviews.
The
Energy Income Index is calculated and maintained by Solactive AG on behalf of
MarketVector.
The
Energy Income Index is reconstituted semi-annually and rebalanced quarterly and
will limit exposure to companies taxed as partnerships to 24% at each quarterly
review. MarketVector may delay or change a scheduled rebalancing or
reconstitution of the Energy Income Index or the implementation of certain rules
at its sole discretion.
The
NYSE Arca Environmental Services Index is a rules based, modified equal dollar
weighted index intended to give investors a means of tracking the overall
performance of the common stocks and depositary receipts of U.S. exchange-listed
companies involved in environmental services. The NYSE Arca Environmental
Services Index is designed to measure the performance of widely held, highly
capitalized companies engaged in business activities that may benefit from the
global increase in demand for consumer waste disposal, removal and storage of
industrial by-products, and the management of associated resources.
To
be eligible for the NYSE Arca Environmental Services Index, stocks must have a
minimum market capitalization of $100 million, trading price over three months
of greater than $3.00, and minimum three-month average daily traded value of $1
million. Components will be removed from the NYSE Arca Environmental Services
Index during the quarterly review if the market capitalization falls below $75
million or the three-month average daily traded value falls below
$750,000.
The
NYSE Arca Environmental Services Index is weighted based on the market
capitalization of each of the component securities, which are applied in
conjunction with the scheduled quarterly adjustments to the NYSE Arca
Environmental Services Index: (1) the top four components, ranked by market
capitalization, are equally weighted to collectively represent 40% of the NYSE
Arca Environmental Services Index by weight; (2) the bottom five components,
ranked by market capitalization, are equally weighted to collectively represent
10% of the NYSE Arca Environmental Services Index by weight; and (3) the
remaining components are equally weighted to collectively to represent 50% of
the NYSE Arca Environmental Services Index by weight.
The
NYSE Arca Environmental Services Index is reviewed quarterly so that the NYSE
Arca Environmental Services Index components continue to represent the universe
of companies involved in environmental services relating to consumer and
industrial waste management. ICE Data, as the NYSE Arca Environmental Services
Index Provider, may at any time change the number of securities comprising the
group by adding or deleting one or more securities, or replacing one more
securities contained in the group with one or more substitute securities of its
choice, if in the discretion of ICE Data such addition, deletion or substitution
is necessary or appropriate to maintain the quality and/or character of the NYSE
Arca Environmental Services Index. Such index constituent changes are reviewed
by the ICE Data Governance Committee to ensure that they are made objectively,
without bias and in accordance with applicable law and regulation and ICE Data’s
policies and procedures. Changes to the NYSE Arca Environmental Services Index
components and/or the component share weights typically take effect after the
close of trading one business day prior to the last business day of each
calendar quarter in connection with the quarterly index rebalance. ICE Data may
delay or change a scheduled rebalancing or reconstitution of the NYSE Arca
Environmental Services Index or the implementation of certain rules at its sole
discretion.
The
Gaming Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
companies involved in the casino and gaming industry. Gaming includes casinos
and casino hotels, sports betting (including internet gambling and racetracks)
and lottery services as well as gaming services, gaming technology and gaming
equipment.
To
be initially eligible for the Gaming Index, (i) companies must generate at least
50% of their revenues from gaming (as defined above) and (ii) 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
Gaming Index includes common stocks and depositary receipts of companies that
meet the eligibility requirements described above. The Gaming Index is the
exclusive property of MarketVector, which has contracted with Solactive AG to
maintain and calculate the Gaming Index. Solactive AG uses its best efforts to
ensure that the Gaming Index is calculated correctly. Irrespective of its
obligations towards MarketVector, Solactive AG has no obligation to point out
errors in the Gaming Index to third parties. VanEck Gaming ETF is not sponsored,
endorsed, sold or promoted by MarketVector and MarketVector makes no
representation regarding the advisability of investing in the VanEck Gaming ETF.
The
Gaming Index is reconstituted and rebalanced quarterly. MarketVector may delay
or change a scheduled rebalancing or reconstitution of the Gaming Index or the
implementation of certain rules at its sole discretion.
The
Green Infrastructure Index is a rules based, modified market capitalization
weighted index intended to give investors a means of tracking the overall
performance of companies engaged in business activities that seek to establish a
sustainable infrastructure to facilitate the holistic use of green energy and
positively impact the environment.
To
be initially eligible for the Green Infrastructure Index, (i) companies must
generate at least 50% of their revenues from green infrastructure (as defined
above) and (ii) stocks must have a market capitalization of greater than $500
million as of the nearest Friday falling at least one month before the scheduled
reconstitution date. Only securities which are listed and domiciled in the
United States are eligible.
The
Green Infrastructure Index follows an annual reconstitution and semi-annual
rebalancing schedule.
Indxx
may delay or change a scheduled rebalancing or reconstitution of the Green
Infrastructure Index or the implementation of certain rules at its sole
discretion.
The
Pharmaceutical Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of companies involved in the pharmaceutical industry.
Pharmaceuticals include companies engaged primarily in research (including
research contractors) and development as well as production, marketing and sales
of pharmaceuticals (excluding pharmacies).
To
be initially eligible for the Pharmaceutical Index, (i) companies must generate
at least 50% of their revenues from pharmaceuticals (as defined above) and (ii)
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
Pharmaceutical Index includes common stocks and depositary receipts of
U.S.-listed companies that meet the eligibility requirements described above.
The
Pharmaceutical Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Pharmaceutical Index.
Solactive AG uses its best efforts to ensure that the Pharmaceutical Index is
calculated correctly. Irrespective of its obligations towards MarketVector,
Solactive AG has no obligation to point out errors in the Pharmaceutical Index
to third parties. VanEck Pharmaceutical ETF is not sponsored, endorsed, sold or
promoted by MarketVector and MarketVector makes no representation regarding the
advisability of investing in the VanEck Pharmaceutical ETF.
The
Pharmaceutical Index is reconstituted semi-annually and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Pharmaceutical Index or the implementation of certain rules at its sole
discretion.
The
Retail Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
companies involved in the retail industry. Retail includes companies engaged
primarily in retail distribution; wholesalers; online, direct mail retailers;
multi-line retailers; specialty retailers, such as apparel, automotive, computer
and electronics, drug, home improvement and home furnishing retailers; and food
and other staples retailers.
To
be initially eligible for the Retail Index, (i) companies must generate at least
50% of their revenues from retail (as defined above) and (ii) 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 Retail Index includes
common stocks and depositary receipts of U.S.-listed companies that meet the
eligibility requirements described above.
The
Retail Index is the exclusive property of MarketVector, which has contracted
with Solactive AG to maintain and calculate the Retail Index. Solactive AG uses
its best efforts to ensure that the Retail Index is calculated correctly.
Irrespective of its obligations towards MarketVector, Solactive AG has no
obligation to point out errors in the Retail Index to third parties. VanEck
Retail ETF is not sponsored, endorsed, sold or promoted by MarketVector and
MarketVector makes no representation regarding the advisability of investing in
the VanEck Retail ETF.
The
Retail Index is reconstituted semi-annually and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Retail Index or the implementation of certain rules at its sole discretion.
The
Robotics Index is a rules based, fixed tier modified capitalization weighted,
float adjusted index comprised of equity securities,which may include depositary
receipts, of global publicly traded companies in the robotics industry. The
Robotics Index is comprised of companies that derive at least 50% of their
revenue from:
Tier
1
•robotics
and manufacturing or industrial automation systems,
•additive
manufacturing or 3D printing (including 3D printing equipment, materials or
related software or services.
Tier
2
•robotics
or manufacturing related software and Computer Aided Design software,
•machine
vision technology.
Tier
3
•robotic
surgical systems, or
•semiconductor
manufacturing systems.
•Additionally,
the Robotics Index includes companies that offer embedded machine learning chips
and, generate at least 25% of their revenues from these robotics sub-themes.
The
Index will be weighted as follows:
a.Tier
1 – 50% weight,
b.Tier
2 – 25% weight, and
c.Tier
3 – 25% weight.
Stocks
must have a market capitalization of at least $500 million to be included in the
Robotics Index, and a market capitalization of at least $250 million to remain
in the Robotics Index. The Robotics Index is reconstituted and rebalanced
semiannually.
MarketVector
may delay or change a scheduled rebalancing or reconstitution of the Robotics
Index or the implementation of certain rules at its sole
discretion.
The
Semiconductor Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of companies involved in the semiconductor industry. Semiconductors
include companies engaged primarily in the production of semiconductors and
semiconductor equipment.
To
be initially eligible for the Semiconductor Index, (i) companies must generate
at least 50% of their revenues from semiconductors (as defined above) and (ii)
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
Semiconductor Index includes common stocks and depositary receipts of
U.S.-listed companies that meet the eligibility requirements described above.
The
Semiconductor Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Semiconductor Index.
Solactive AG uses its best efforts to ensure that the Semiconductor Index is
calculated correctly. Irrespective of its obligations towards MarketVector,
Solactive AG has no obligation to point out errors in the Semiconductor Index to
third parties. VanEck Semiconductor ETF is not sponsored, endorsed, sold or
promoted by MarketVector and MarketVector makes no representation regarding the
advisability of investing in the VanEck Semiconductor ETF.
The
Semiconductor Index is reconstituted semi-annually and rebalanced quarterly.
MarketVector Indexes may delay or change a scheduled rebalancing or
reconstitution of the Semiconductor Index or the implementation of certain rules
at its sole discretion.
The
eSports Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
companies involved in video gaming and eSports. These companies may include
those that develop video games and related software or hardware such as computer
processors and graphics cards used in video gaming systems and related hardware
such as controllers, headsets, and video gaming consoles. They may also include
those that offer streaming services, develop video games and/or hardware for use
in eSports events and are involved in eSports events such as league operators,
teams, distributors and platforms.
The
eSports Index begins with only common stocks and stocks with similar
characteristics from financial markets that a global universe of equity
securities from financial markets that are freely investable for foreign
investors and that provide real-time and historical component and currency
pricing with exceptions. Only companies with a free-float of at least 10% are
initially eligible for the eSports Index. Additionally, to be initially eligible
for inclusion in the eSports Index, companies must have a full market
capitalization greater than $150 million, a three-month average-daily-trading
volume of at least $1 million at the current review and also at the previous two
reviews, and at least 250,000 shares traded per month over the last six months
at the current review and also at the previous two reviews. To be initially
eligible for inclusion in the eSports Index, a company must generate at least
50% of their revenue from video gaming and/or eSports. A buffer rule allows
current eSports Index constituents to remain in the eSports Index if the
percentage of their revenue derived from video gaming and/or eSports remains at
or above 25%. Index component weights are based upon free-float market
capitalization and individual components are limited to a maximum of an 8%
weighting in the eSports Index.
The
eSports Index is the exclusive property of MarketVector which has contracted
with Solactive AG to maintain and calculate the eSports Index. Solactive AG uses
its best efforts to ensure that the eSports Index is calculated correctly.
Irrespective of its obligations towards MarketVector, Solactive AG has no
obligation to point out errors in the eSports Index to third parties. VanEck
Video Gaming and eSports ETF is not sponsored, endorsed, sold or promoted by
MarketVector and MarketVector makes no representation regarding the advisability
of investing in the VanEck Video Gaming and eSports ETF.
The
eSports Index is reconstituted and rebalanced quarterly. MarketVector may delay
or change a scheduled rebalancing or reconstitution of the eSports Index or the
implementation of certain rules at its sole discretion.
The
Adviser has entered into a licensing agreement with MarketVector to use each of
the Biotech Index, Digital Transformation Index, Energy Income Index, Gaming
Index, Pharmaceutical Index, Retail Index, Robotics Index, Semiconductor Index
and eSports Index (each a “MarketVectorTM
Index,” and together, the “MarketVectorTM
Indexes”). The Index Provider is an indirectly wholly owned subsidiary of the
Adviser. Each of VanEck Biotech ETF, VanEck Digital Transformation ETF, VanEck
Energy Income ETF, VanEck Gaming ETF, VanEck Pharmaceutical ETF, VanEck Retail
ETF, VanEck Robotics ETF, VanEck Semiconductor ETF and VanEck Video Gaming and
eSports ETF (each an “MarketVectorTM
Index ETF,” and together, the “MarketVectorTM
Index ETFs”) is entitled to use its Index pursuant to a sublicensing arrangement
with the Adviser.
Shares
of the MarketVectorTM
Index ETFs are not sponsored, endorsed, sold or promoted by MarketVector.
MarketVector makes no representation or warranty, express or implied, to the
owners of the Shares of the MarketVectorTM
Index ETFs or any member of the public regarding the advisability of investing
in securities generally or in the Shares of the MarketVectorTM
Index ETFs particularly or the ability of the MarketVectorTM
Indexes to track the performance of its respective securities markets. Each of
the MarketVectorTM
Indexes is determined and composed by MarketVector without regard to the Adviser
or the Shares of the MarketVectorTM
Index ETFs. MarketVector has no obligation to take the needs of the Adviser or
the owners of the Shares of the MarketVectorTM
Index ETFs into consideration in determining or composing the respective Index.
MarketVector is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Shares of the
MarketVectorTM
Index ETFs to be issued or in the determination or calculation of the equation
by which the Shares of the MarketVectorTM
Index ETFs are to be converted into cash. MarketVector has no obligation or
liability in connection with the administration, marketing or trading of the
Shares of the MarketVectorTM
Index ETFs.
The
MarketVectorTM
Indexes are the exclusive property of MarketVector, which has contracted with
Solactive AG to maintain and calculate the MarketVectorTM
Indexes. Solactive AG uses its best efforts to ensure that the
MarketVectorTM
Indexes are calculated correctly. Irrespective of its obligations towards the
MarketVector, Solactive AG has no obligation to point out errors in the
MarketVectorTM
Indexes to third parties including but not limited to investors and/or financial
intermediaries of the financial instrument.
The
Fund is not sponsored, promoted, sold or supported in any other manner by
Solactive AG nor does Solactive AG offer any express or implicit guarantee or
assurance either with regard to the results of using the
MarketVectorTM
Indexes and/or its trade mark or its price at any time or in any other respect.
The MarketVectorTM
Indexes are calculated and maintained by Solactive AG. Solactive AG uses its
best efforts to ensure that the MarketVectorTM
Indexes are calculated correctly. Irrespective of its obligations towards
MarketVector, Solactive AG has no obligation to point out errors in the
MarketVectorTM
Indexes to third parties including but not limited to investors and/or financial
intermediaries of the MarketVectorTM
Index ETFs. Neither publication of the MarketVectorTM
Indexes by Solactive AG nor the licensing of the MarketVectorTM
Indexes or its trade mark for the purpose of use in connection with the
MarketVectorTM
Index ETFs constitutes a recommendation by Solactive AG to invest capital in the
MarketVectorTM
Index ETFs nor does it in any way represent an assurance or opinion of Solactive
AG with regard to any investment in the MarketVectorTM
Index ETFs. Solactive AG is not responsible for fulfilling the legal
requirements concerning the accuracy and completeness of the prospectus of the
MarketVectorTM
Index ETFs.
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
INDEX ETFS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
MARKETVECTORTM
INDEXES,
OR MARKETVECTORTM
INDEX ETFS OR ANY DATA INCLUDED THEREIN. MARKETVECTOR MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
MARKETVECTORTM
INDEXES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MARKETVECTOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
The
Adviser has entered into a licensing agreement with ICE Data, to use the NYSE
Arca Environmental Services Index. VanEck Environmental Services ETF is entitled
to use the NYSE Arca Environmental Services Index pursuant to a sub-licensing
arrangement with the Adviser.
Source
ICE Data, is used with permission. “NYSE” and “NYSE Arca” are service/
trademarks of ICE Data or its affiliates. Such trademarks have been licensed,
along with the NYSE Arca Environmental Services Index for use by the Adviser in
connection with the VanEck Environmental Services ETF (the “Product”). Neither
the Adviser (the “Licensee”) nor the Product, as applicable, is sponsored,
endorsed, sold or promoted by ICE Data, its affiliates or its Third Party
Suppliers (“ICE Data and its Suppliers”). ICE Data and its Suppliers make no
representations or warranties regarding the advisability of investing in
securities generally, in the Product particularly, the Licensee or the ability
of the NYSE Arca Environmental Services Index to track general stock market
performance. ICE Data’s only relationship to the Licensee is the licensing of
certain trademarks and trade names and the NYSE Arca Environmental Services
Index or components thereof. The NYSE Arca Environmental Services Index is
determined, composed and calculated by ICE Data without regard to the Licensee
or the Product or its holders. ICE Data has no obligation to take the needs of
the Licensee or the holders of the Product into consideration in determining,
composing or calculating the NYSE Arca Environmental Services Index. ICE Data is
not responsible for and has not participated in the determination of the timing
of,
prices
of, or quantities of the Product to be issued or in the determination or
calculation of the equation by which the Product is to be priced, sold,
purchased, or redeemed. Except for certain custom index calculation services,
all information provided by ICE Data is general in nature and not tailored to
the needs of the Licensee or any other person, entity or group of persons. ICE
Data has no obligation or liability in connection with the administration,
marketing, or trading of the Product. ICE Data is not an investment advisor.
Inclusion of a security within an index is not a recommendation by ICE Data to
buy, sell, or hold such security, nor is it considered to be investment
advice.
ICE
DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY
INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM (“INDEX DATA”). ICE
DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH
RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND
THE INDEX DATA, WHICH ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR
OWN RISK.
The
S&P 500®
Index included in certain Funds’ performance tables is a product of S&P Dow
Jones Indices LLC and/or its affiliates and has been licensed for use by the
Adviser. Copyright © 2024 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
Adviser has entered into a licensing agreement with Indxx to use the Green
Infrastructure Index. The VanEck Green Infrastructure ETF is entitled to use the
Green Infrastructure Index pursuant to a sub-licensing arrangement with the
Adviser.
Shares
of the VanEck Green Infrastructure ETF are not sponsored, endorsed, sold or
promoted by Indxx. Indxx makes no representation or warranty, express or
implied, to the owners of Shares of the VanEck Green Infrastructure ETF or any
member of the public regarding the advisability of investing in securities
generally or in the Shares of the VanEck Green Infrastructure ETF particularly
or the ability of the Green Infrastructure Index to track the performance of its
respective securities market. The Green Infrastructure Index is determined and
composed by Indxx without regard to the Adviser or the Shares of the VanEck
Green Infrastructure ETF. Indxx has no obligation to take the needs of the
Adviser or the owners of Shares of the VanEck Green Infrastructure ETF into
consideration in determining and composing the Green Infrastructure
Index.
Indxx
is not responsible for and has not participated in the determination of the
timing of prices at, or quantities of the Shares of the VanEck Green
Infrastructure ETF to be issued or in the determination or calculation of the
equation by which the Shares of the VanEck Green Infrastructure ETF are to be
converted into cash. Indxx has no obligation or liability in connection with the
administration, marketing or trading of the Shares of the VanEck Green
Infrastructure ETF.
“Indxx”
is a service mark of Indxx and has been licensed for use for certain purposes by
the Adviser.
INDXX
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY ANY
PERSON OR ENTITY FROM THE USE OF THE GREEN INFRASTRUCTURE INDEX(ES), TRADING
BASED ON THE GREEN INFRASTRUCTURE INDEX(ES), OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE PRODUCTS, OR FOR ANY OTHER USE. INDXX EXPRESSLY DISCLAIMS
ALL WARRANTIES AND CONDITIONS, EXPRESS, STATUTORY, OR IMPLIED INCLUDING
WARRANTIES AND CONDITIONS OF MERCHANTABILITY, TITLE, OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE GREEN INFRASTRUCTURE INDEX(ES) OR ANY DATA
INCLUDED THEREIN.
INDXX
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF ANY DATA SUPPLIED BY
IT OR ANY DATA INCLUDED THEREIN. INDXX MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS
TO RESULTS TO BE OBTAINED BY THE VANECK GREEN INFRASTRUCTURE ETF, ITS
SHAREHOLDERS OR AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
DATA SUPPLIED BY INDXX OR ANY DATA INCLUDED THEREIN. INDXX MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DATA SUPPLIED BY
INDXX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL INDXX HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
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 years ended September 30, 2022
and September 30, 2023 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 September 30, 2022 was audited by another independent registered public
accounting firm.
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For
a share outstanding throughout each year: |
|
Biotech
ETF |
|
Year
Ended September 30, |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
|
Net
asset value, beginning of year |
$ |
140.61 |
|
|
$ |
201.99 |
|
|
$ |
162.01 |
|
|
$ |
118.04 |
|
|
$ |
136.11 |
|
|
|
|
Net
investment income (a) |
0.70 |
|
0.69 |
|
0.42 |
|
0.59 |
|
0.39 |
|
|
|
Net
realized and unrealized gain (loss) on investments |
15.14 |
|
(61.67) |
|
40.17 |
|
43.85 |
|
(17.91) |
|
|
|
Total
from investment operations |
15.84 |
|
(60.98) |
|
40.59 |
|
44.44 |
|
(17.52) |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.75) |
|
(0.40) |
|
(0.61) |
|
(0.47) |
|
(0.55) |
|
|
|
Net
asset value, end of year |
$ |
155.70 |
|
|
$ |
140.61 |
|
|
$ |
201.99 |
|
|
$ |
162.01 |
|
|
$ |
118.04 |
|
|
|
|
Total
return (b) |
11.24 |
|
% |
(30.24) |
|
% |
25.13 |
|
% |
37.71 |
|
% |
(12.84) |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses (c) |
0.35 |
|
% |
0.35 |
|
% |
0.38 |
|
% |
0.39 |
|
% |
0.40 |
|
% |
|
|
Net
expenses (c) |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
|
|
Net
investment income |
0.44 |
|
% |
0.42 |
|
% |
0.23 |
|
% |
0.40 |
|
% |
0.31 |
|
% |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$451 |
|
|
$414 |
|
|
$590 |
|
|
$485 |
|
|
$318 |
|
|
|
|
Portfolio
turnover rate (d) |
18 |
|
% |
24 |
|
% |
41 |
|
% |
40 |
|
% |
24 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)Periods
after September 30, 2021 reflect a unitary management fee
structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each period: |
|
|
|
|
|
|
|
Digital
Transformation ETF |
|
Year
Ended September 30, |
Period
Ended September 30, 2021 (a) |
|
2023 |
|
2022 |
|
Net
asset value, beginning of period |
$ |
4.95 |
|
|
$ |
22.81 |
|
|
$ |
35.25 |
|
|
Net
investment income (b) |
0.15 |
|
0.26 |
|
— |
(c) |
Net
realized and unrealized gain (loss) on investments |
0.36 |
|
(16.24) |
|
(12.44) |
|
Total
from investment operations |
0.51 |
|
(15.98) |
|
(12.44) |
|
Distributions
from: |
|
|
|
|
|
|
Net
investment income |
— |
|
|
(1.88) |
|
|
— |
|
|
Net
asset value, end of period |
$ |
5.46 |
|
|
$ |
4.95 |
|
|
$ |
22.81 |
|
|
Total
return (d) |
10.29 |
|
% |
(76.33) |
|
% |
(35.30) |
|
%(e) |
Ratios
to average net assets |
|
|
|
|
|
|
Expenses |
0.51 |
|
% |
0.50 |
|
% |
0.58 |
|
%(f) |
Expenses
excluding interest and taxes |
0.50 |
|
% |
0.50 |
|
% |
N/A |
|
Net
investment income |
2.81 |
|
% |
2.28 |
|
% |
0.02 |
|
%(f) |
Supplemental
data |
|
|
|
|
|
|
Net
assets, end of period (in millions) |
$43 |
|
|
$30 |
|
|
$46 |
|
|
Portfolio
turnover rate (g) |
57 |
|
% |
74 |
|
% |
49 |
|
%(e) |
|
|
|
|
|
|
|
(a)For
the period April 13, 2021 (commencement of operations) through September 30,
2021.
(b)Calculated
based upon average shares outstanding
(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)Not
Annualized
(f)Annualized
(g)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each period: |
|
Energy
Income ETF(a) |
|
Year
Ended September 30, |
|
Period
Ended September 30, 2020(b) |
|
Year
Ended November 30, |
|
|
|
|
2023 |
|
2022 |
|
2021 |
|
|
2019 |
|
2018 |
|
|
|
Net
asset value, beginning of year |
$ |
56.84 |
|
|
$ |
54.25 |
|
|
$ |
34.29 |
|
|
$ |
51.20 |
|
|
$ |
58.32 |
|
|
$ |
68.49 |
|
|
|
|
Net
investment income (loss) (c) |
1.51 |
|
|
1.17 |
|
|
1.15 |
|
|
0.76 |
|
|
(0.39) |
|
|
0.09 |
|
|
|
|
Net
realized and unrealized gain (loss) on investments |
9.04 |
|
3.67 |
|
21.90 |
|
(15.58) |
|
(1.42) |
|
(4.44) |
|
|
|
Total
from investment operations |
10.55 |
|
4.84 |
|
23.05 |
|
(14.82) |
|
(1.81) |
|
(4.35) |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(1.34) |
|
(1.02) |
|
(1.37) |
|
— |
|
|
(1.77) |
|
— |
|
|
|
Return
of capital |
(1.18) |
|
(1.23) |
|
(1.72) |
|
(2.09) |
|
(3.54) |
|
(5.82) |
|
|
|
Total
distributions |
(2.52) |
|
(2.25) |
|
(3.09) |
|
(2.09) |
|
(5.31) |
|
(5.82) |
|
|
|
Net
asset value, end of year |
$ |
64.87 |
|
|
$ |
56.84 |
|
|
$ |
54.25 |
|
|
$ |
34.29 |
|
|
$ |
51.20 |
|
|
$ |
58.32 |
|
|
|
|
Total
return (d) |
18.70 |
|
% |
8.79 |
|
% |
68.88 |
|
% |
(29.74) |
|
%(e) |
(3.66) |
|
% |
(7.16) |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
0.46 |
|
% |
0.48 |
|
% |
0.46 |
|
% |
0.45 |
|
%(f)(g) |
1.41 |
|
%(h) |
0.73 |
|
%(i) |
|
|
Expenses
excluding interest and taxes |
0.45 |
|
% |
0.45 |
|
% |
0.45 |
|
% |
0.45 |
|
%(f)(g) |
1.41 |
|
%(h) |
0.73 |
|
%(i) |
|
|
Net
investment income (loss) |
2.41 |
|
% |
1.95 |
|
% |
2.43 |
|
% |
2.17 |
|
%(f)(j) |
(0.68) |
|
%(h) |
0.13 |
|
%(i) |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$37 |
|
|
$31 |
|
|
$24 |
|
|
$20 |
|
|
$52 |
|
|
$45 |
|
|
|
|
Portfolio
turnover rate (k) |
23 |
|
% |
21 |
|
% |
24 |
|
% |
24 |
|
%(e) |
106 |
|
% |
34 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)On
April 15, 2020, the Fund effected a 1 for 3 reverse share split. Per share data
has been adjusted to reflect the reverse share split.
(b)The
Fund changed its fiscal year-end from November 30 to September 30.
(c)Calculated
based upon average shares outstanding
(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)Not
Annualized
(f)Annualized
(g)Includes
income tax expense of 1.56% and Adviser reimbursement of (1.56%). If the Adviser
had not reimbursed the Fund, the ratio would have been higher.
(h)Includes
income tax expense of 0.59% related to the Fund’s tax status as a C-Corporation
prior to its reorganization as a regulated investment company.
(i)Includes
income tax benefit of 0.11% related to the Fund’s tax status as a C-Corporation
prior to its reorganization as a regulated investment company.
(j)Includes
income tax expense of 1.56% and Adviser reimbursement of (1.56%). If the Adviser
had not reimbursed the Fund, the ratio would have been lower.
(k)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each year: |
|
Environmental
Services ETF |
|
Year
Ended September 30, |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
|
Net
asset value, beginning of year |
$ |
130.61 |
|
|
$ |
143.18 |
|
|
$ |
99.41 |
|
|
$ |
104.25 |
|
|
$ |
96.64 |
|
|
|
|
Net
investment income (a) |
1.24 |
|
|
0.56 |
|
|
0.36 |
|
|
0.46 |
|
|
0.46 |
|
|
|
|
Net
realized and unrealized gain (loss) on investments |
12.12 |
|
(12.76) |
|
43.80 |
|
(4.83) |
|
7.47 |
|
|
|
Total
from investment operations |
13.36 |
|
(12.20) |
|
44.16 |
|
(4.37) |
|
7.93 |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.56) |
|
(0.37) |
|
(0.39) |
|
(0.47) |
|
(0.32) |
|
|
|
Net
asset value, end of year |
$ |
143.41 |
|
|
$ |
130.61 |
|
|
$ |
143.18 |
|
|
$ |
99.41 |
|
|
$ |
104.25 |
|
|
|
|
Total
return (b) |
10.25 |
|
% |
(8.56) |
|
% |
44.50 |
|
% |
(4.23) |
|
% |
8.30 |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses |
0.64 |
|
% |
0.62 |
|
% |
0.71 |
|
% |
0.85 |
|
% |
0.81 |
|
% |
|
|
Net
expenses |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
|
|
Net
investment income |
0.85 |
|
% |
0.39 |
|
% |
0.27 |
|
% |
0.47 |
|
% |
0.47 |
|
% |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$77 |
|
|
$68 |
|
|
$67 |
|
|
$31 |
|
|
$36 |
|
|
|
|
Portfolio
turnover rate (c) |
22 |
|
% |
35 |
|
% |
21 |
|
% |
38 |
|
% |
20 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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: |
|
Gaming
ETF |
|
Year
Ended September 30, |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
|
Net
asset value, beginning of year |
$ |
32.74 |
|
|
$ |
48.32 |
|
|
$ |
39.14 |
|
|
$ |
36.61 |
|
|
$ |
39.76 |
|
|
|
|
Net
investment income (a) |
0.42 |
|
|
0.25 |
|
|
0.16 |
|
|
0.51 |
|
|
1.07 |
|
|
|
|
Net
realized and unrealized gain (loss) on investments |
6.95 |
|
(15.48) |
|
9.24 |
|
3.25 |
|
(3.09) |
|
|
|
Total
from investment operations |
7.37 |
|
(15.23) |
|
9.40 |
|
3.76 |
|
(2.02) |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.17) |
|
(0.35) |
|
(0.22) |
|
(1.23) |
|
(1.13) |
|
|
|
Net
asset value, end of year |
$ |
39.94 |
|
|
$ |
32.74 |
|
|
$ |
48.32 |
|
|
$ |
39.14 |
|
|
$ |
36.61 |
|
|
|
|
Total
return (b) |
22.55 |
|
% |
(31.72) |
|
% |
24.06 |
|
% |
10.03 |
|
% |
(4.73) |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses |
0.74 |
|
% |
0.65 |
|
% |
0.62 |
|
% |
0.92 |
|
% |
0.94 |
|
% |
|
|
Net
expenses |
0.72 |
|
% |
0.65 |
|
% |
0.62 |
|
% |
0.65 |
|
% |
0.66 |
|
% |
|
|
Net
expenses excluding interest and taxes |
0.65 |
|
% |
0.63 |
|
% |
0.62 |
|
% |
0.65 |
|
% |
0.65 |
|
% |
|
|
Net
investment income |
0.99 |
|
% |
0.63 |
|
% |
0.32 |
|
% |
1.41 |
|
% |
2.92 |
|
% |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$50 |
|
|
$61 |
|
|
$118 |
|
|
$55 |
|
|
$24 |
|
|
|
|
Portfolio
turnover rate (c) |
15 |
|
% |
16 |
|
% |
20 |
|
% |
29 |
|
% |
20 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 period: |
|
Green
Infrastructure ETF |
|
Period
Ended September 30, 2023(a) |
Net
asset value, beginning of period |
$ |
25.50 |
|
|
Net
investment income (b) |
0.24 |
|
|
Net
realized and unrealized loss on investments |
(1.67) |
|
Total
from investment operations |
(1.43) |
|
Distributions
from: |
|
|
Net
investment income |
(0.06) |
|
Net
asset value, end of period |
$ |
24.01 |
|
|
Total
return (c) |
(5.62) |
|
%(d) |
Ratios
to average net assets |
|
|
Expenses |
0.46 |
|
%(e) |
Expenses
excluding interest and taxes |
0.45 |
|
%(e) |
Net
investment income |
0.99 |
|
%(e) |
Supplemental
data |
|
|
Net
assets, end of period (in millions) |
$2 |
|
|
Portfolio
turnover rate (f) |
12 |
|
%(d) |
|
|
|
(a)For
the period October 19, 2022 (commencement of operations) through September 30,
2023.
(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: |
|
Pharmaceutical
ETF |
|
Year
Ended September 30, |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
|
Net
asset value, beginning of year |
$ |
67.25 |
|
|
$ |
72.68 |
|
|
$ |
62.08 |
|
|
$ |
56.93 |
|
|
$ |
64.37 |
|
|
|
|
Net
investment income (a) |
1.47 |
|
1.32 |
|
1.29 |
|
1.06 |
|
|
1.04 |
|
|
|
|
Net
realized and unrealized gain (loss) on investments |
12.65 |
|
|
(5.44) |
|
|
10.46 |
|
|
5.14 |
|
(7.37) |
|
|
|
Total
from investment operations |
14.12 |
|
|
(4.12) |
|
|
11.75 |
|
6.20 |
|
(6.33) |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(1.56) |
|
|
(1.31) |
|
|
(1.15) |
|
(1.05) |
|
(1.11) |
|
|
|
Net
asset value, end of year |
$ |
79.81 |
|
|
$ |
67.25 |
|
|
$ |
72.68 |
|
|
$ |
62.08 |
|
|
$ |
56.93 |
|
|
|
|
Total
return (b) |
21.14 |
|
% |
(5.91) |
|
% |
19.10 |
|
% |
11.02 |
|
% |
(9.88) |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses (c) |
0.36 |
|
% |
0.36 |
|
% |
0.40 |
|
% |
0.42 |
|
% |
0.43 |
|
% |
|
|
Net
expenses (c) |
0.36 |
|
% |
0.36 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.36 |
|
% |
|
|
Net
expenses excluding interest and taxes (c) |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
|
|
Net
investment income |
1.91 |
|
% |
1.74 |
|
% |
1.85 |
|
% |
1.74 |
|
% |
1.77 |
|
% |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$430 |
|
|
$524 |
|
|
$319 |
|
|
$235 |
|
|
$142 |
|
|
|
|
Portfolio
turnover rate (d) |
22 |
|
% |
23 |
|
% |
20 |
|
% |
18 |
|
% |
21 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)Periods
after September 30, 2021 reflect a unitary management fee
structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each year: |
|
Retail
ETF |
|
Year
Ended September 30, |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
|
Net
asset value, beginning of year |
$ |
154.84 |
|
|
$ |
174.75 |
|
|
$ |
148.87 |
|
|
$ |
114.49 |
|
|
$ |
111.44 |
|
|
|
|
Net
investment income (a) |
1.56 |
|
1.52 |
|
1.54 |
|
1.22 |
|
|
1.31 |
|
|
|
|
Net
realized and unrealized gain (loss) on investments |
13.17 |
|
|
(19.92) |
|
|
25.34 |
|
|
34.25 |
|
2.72 |
|
|
|
Total
from investment operations |
14.73 |
|
|
(18.40) |
|
|
26.88 |
|
35.47 |
|
4.03 |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(1.84) |
|
|
(1.51) |
|
|
(1.00) |
|
(1.09) |
|
(0.98) |
|
|
|
Net
asset value, end of year |
$ |
167.73 |
|
|
$ |
154.84 |
|
|
$ |
174.75 |
|
|
$ |
148.87 |
|
|
$ |
114.49 |
|
|
|
|
Total
return (b) |
9.58 |
|
% |
(10.69) |
|
% |
18.13 |
|
% |
31.22 |
|
% |
3.82 |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses (c) |
0.35 |
|
% |
0.35 |
|
% |
0.42 |
|
% |
0.47 |
|
% |
0.48 |
|
% |
|
|
Net
expenses (c) |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
|
|
Net
investment income |
0.94 |
|
% |
0.86 |
|
% |
0.92 |
|
% |
0.96 |
|
% |
1.25 |
|
% |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$155 |
|
|
$150 |
|
|
$240 |
|
|
$182 |
|
|
$71 |
|
|
|
|
Portfolio
turnover rate (d) |
20 |
|
% |
14 |
|
% |
12 |
|
% |
12 |
|
% |
9 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)Periods
after September 30, 2021 reflect a unitary management fee
structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each period: |
|
|
|
Robotics ETF |
|
Period
Ended September 30, 2023(a) |
Net
asset value, beginning of period |
$ |
34.39 |
|
|
Net
investment income (b) |
0.08 |
|
|
Net
realized and unrealized gain on investments |
0.67 |
|
Total
from investment operations |
0.75 |
|
Net
asset value, end of period |
$ |
35.14 |
|
|
Total
return (c) |
2.18 |
|
%(d) |
Ratios
to average net assets |
|
|
Expenses |
0.47 |
|
%(e) |
Net
investment income |
0.43 |
|
%(e) |
Supplemental
data |
|
|
Net
assets, end of period (in millions) |
$3 |
|
|
Portfolio
turnover rate (f) |
13 |
|
%(d) |
|
|
|
(a)For
the period April 6, 2023 (commencement of operations) through September 30,
2023.
(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: |
|
Semiconductor
ETF (a) |
|
Year
Ended September 30, |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
|
Net
asset value, beginning of year |
$ |
92.56 |
|
|
$ |
128.13 |
|
|
$ |
87.22 |
|
|
$ |
59.57 |
|
|
$ |
53.21 |
|
|
|
|
Net
investment income (b) |
1.11 |
|
1.07 |
|
0.86 |
|
0.94 |
|
|
0.88 |
|
|
|
|
Net
realized and unrealized gain (loss) on investments |
52.52 |
|
|
(35.85) |
|
|
40.80 |
|
|
27.77 |
|
6.30 |
|
|
|
Total
from investment operations |
53.63 |
|
|
(34.78) |
|
|
41.66 |
|
28.71 |
|
7.18 |
|
|
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(1.20) |
|
|
(0.79) |
|
|
(0.75) |
|
(1.06) |
|
(0.82) |
|
|
|
Net
asset value, end of year |
$ |
144.99 |
|
|
$ |
92.56 |
|
|
$ |
128.13 |
|
|
$ |
87.22 |
|
|
$ |
59.57 |
|
|
|
|
Total
return (c) |
58.49 |
|
% |
(27.40) |
|
% |
47.94 |
|
% |
48.60 |
|
% |
14.09 |
|
% |
|
|
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
expenses (d) |
0.35 |
|
% |
0.35 |
|
% |
0.36 |
|
% |
0.37 |
|
% |
0.39 |
|
% |
|
|
Net
expenses (d) |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
|
|
Net
investment income |
0.88 |
|
% |
0.85 |
|
% |
0.72 |
|
% |
1.31 |
|
% |
1.68 |
|
% |
|
|
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (in millions) |
$9,394 |
|
|
$5,632 |
|
|
$5,938 |
|
|
$2,646 |
|
|
$1,361 |
|
|
|
|
Portfolio
turnover rate (e) |
18 |
|
% |
22 |
|
% |
20 |
|
% |
14 |
|
% |
19 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)On
May 5, 2023, the Fund effected a 2 for 1 share split. Per share data has been
adjusted to reflect the share split.
(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)Periods
after September 30, 2021 reflect a unitary management fee
structure.
(e)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a share outstanding throughout each period: |
|
Video
Gaming and eSports ETF |
|
Year
Ended September 30, |
Period
Ended September 30, 2019(a) |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
Net
asset value, beginning of period |
$ |
40.66 |
|
|
$ |
65.05 |
|
|
$ |
61.36 |
|
|
$ |
33.74 |
|
|
$ |
30.88 |
|
|
Net
investment income (b) |
0.44 |
|
0.31 |
|
0.04 |
|
0.03 |
|
|
0.12 |
|
|
Net
realized and unrealized gain (loss) on investments |
10.91 |
|
|
(22.47) |
|
|
3.73 |
|
|
27.67 |
|
2.75 |
|
Total
from investment operations |
11.35 |
|
|
(22.16) |
|
|
3.77 |
|
27.70 |
|
2.87 |
|
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
Net
investment income |
(0.39) |
|
(0.05) |
|
(0.08) |
|
(0.08) |
|
(0.01) |
|
Net
realized capital gains |
— |
|
(2.18) |
|
— |
|
— |
|
— |
|
Total
distributions |
(0.39) |
|
(2.23) |
|
(0.08) |
|
(0.08) |
|
(0.01) |
|
Net
asset value, end of period |
$ |
51.62 |
|
|
$ |
40.66 |
|
|
$ |
65.05 |
|
|
$ |
61.36 |
|
|
$ |
33.74 |
|
|
Total
return (c) |
28.11 |
|
% |
(35.42) |
|
% |
6.15 |
|
% |
82.25 |
|
% |
9.31 |
|
%(d) |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
Gross
expenses |
0.59 |
|
% |
0.56 |
|
% |
0.55 |
|
% |
0.58 |
|
% |
0.99 |
|
%(e) |
Net
expenses |
0.56 |
|
% |
0.56 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
%(e) |
Net
expenses excluding interest and taxes |
0.55 |
|
% |
0.55 |
|
% |
N/A |
|
N/A |
|
N/A |
|
Net
investment income |
0.89 |
|
% |
0.52 |
|
% |
0.06 |
|
% |
0.06 |
|
% |
0.38 |
|
%(e) |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (in millions) |
$243 |
|
|
$262 |
|
|
$631 |
|
|
$522 |
|
|
$39 |
|
|
Portfolio
turnover rate (f) |
30 |
|
% |
35 |
|
% |
33 |
|
% |
25 |
|
% |
27 |
|
%(d) |
|
|
|
|
|
|
|
|
|
|
|
(a)For
the period October 16, 2018 (commencement of operations) through September 30,
2019.
(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.
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 the Exchange is satisfied by
the fact that the prospectus is available at the Exchange upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
In
addition, certain affiliates of the 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 Securities and Exchange Commission regulations, including that such
investment companies enter into an agreement with such Fund.
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 Funds.
Dechert
LLP serves as counsel to the Trust, including the Funds. PricewaterhouseCoopers
LLP serves as the Trust’s independent registered public accounting firm and
audits the Funds' financial statements annually.
ADDITIONAL
INFORMATION
This
Prospectus does not contain all the information included in the Registration
Statement filed with the Securities and Exchange Commission 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
Securities and Exchange Commission’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 Securities and Exchange
Commission, 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 February 1, 2024,
as may be supplemented from time to time. Additional information about 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 the Fund’s performance during its last fiscal year.
Call
VanEck at 800.826.2333 to request, free of charge, the annual or semi-annual
reports, the SAI, or other information about the 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
Securities and Exchange Commission’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].
|
|
|
|
|
|
|
|
Transfer
Agent: State Street Bank and Trust Company SEC Registration Number:
333-123257 1940 Act Registration Number: 811-10325 |
800.826.2333 vaneck.com |
THEMAPRO |