ck0001137360-20231116
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PROSPECTUS
November 16,
2023 |
Morningstar
Wide Moat Growth
ETF MGRO
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Principal
U.S. Listing Exchange for the Fund: Cboe BZX Exchange,
Inc. |
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. |
800.826.2333 vaneck.com
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VANECK
MORNINGSTAR WIDE MOAT GROWTH
ETF |
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck Morningstar Wide
Moat Growth ETF (the “Fund”) seeks to track as closely as
possible, before fees and expenses, the price and yield performance of the
Morningstar®
US Broad Growth Wide Moat Focus IndexSM
(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
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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) |
0.19 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.64 |
% |
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Fee
Waivers and Expense Reimbursement(b) |
-0.15 |
% |
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Total
Annual Fund Operating Expenses after Fee Waivers and Expense
Reimbursement(b) |
0.49 |
% |
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(a)
“Other Expenses” are based
on estimated amounts for the current fiscal
year.
(b) 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 0.49% 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 |
$50 |
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3 |
$190 |
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PORTFOLIO
TURNOVER
The
Fund will pay transaction costs, such as commissions, when it purchases and
sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs and may result in
higher taxes when Fund Shares are held in a taxable account. These costs, which
are not reflected in annual fund operating expenses or in the example, may
affect the Fund’s performance. Because the Fund is newly organized, no portfolio
turnover figures are available.
PRINCIPAL INVESTMENT
STRATEGIES
Under
normal circumstances, the Fund invests at least 80% of its total assets in
securities that comprise the Fund’s benchmark index. The Index is comprised of
equity securities of companies that Morningstar, Inc. (“Morningstar” or the
“Index provider”) determines (a) have sustainable competitive advantages based
on a proprietary methodology that considers quantitative and qualitative factors
(“wide moat companies”) and (b) are attractively priced and weighted according
to a modified equal
weighting scheme that tilts exposure in favor of pure growth companies.
According to Morningstar, growth companies tend to have fast growth (high growth
rates for earnings, sales, book value, and cash flow) and high price ratios
(based on metrics like earnings, book value and sales, or low dividend
yields).
Wide moat companies are selected from the universe of companies represented in
the
Morningstar®
US Market IndexSM
(the “Parent Index”), a broad market index representing 97% of U.S. market
capitalization. Wide moat companies included in the Parent Index are those that
Morningstar believes will maintain their competitive advantage(s) for at least
20 years. The quantitative factors
used by Morningstar to identify competitive advantages
currently include historical and projected returns on invested capital relative
to cost of capital. The qualitative factors used by Morningstar to identify
competitive advantages currently include customer switching cost (i.e., the
costs of customers switching to competitors), cost advantages, intangible assets
(e.g., intellectual property and brands), network effects (i.e., whether
products or services become more valuable as the number of customers grows) and
efficient scale (i.e., whether the company effectively serves a limited market
that potential rivals have little incentive to enter into). The Index targets a
select group of equity securities of wide moat companies from the Parent Index:
those that, according to Morningstar’s equity research team, are attractively
priced based on pre-defined factors as of each index review. Morningstar selects
companies to be included in the Index as determined by the ratio of the issuer’s
common stock price to Morningstar’s estimate of fair value. Morningstar’s fair
value estimates are calculated using standardized, proprietary valuation models.
Morningstar also considers a company’s style characteristics. Wide moat
companies are divided into three groups that represent their style
characteristics along the growth/value spectrum: pure growth, blend, and pure
value. Pure value companies are excluded from the Index. Morningstar determines
a company’s style orientation with a 10-factor model incorporating backward- and
forward-looking metrics such as earnings, dividends, sales, cash flow and book
value. The Fund’s 80% investment policy is non-fundamental and may be changed
without shareholder approval upon 60 days’ prior written notice to
shareholders.
As
of September 30, 2023, the Index included 36 securities of companies with a full
market capitalization range of between approximately $5.9 billion and $2,345.9
billion and a weighted average full market capitalization of $175.4
billion.
These
amounts are subject to change. The Index is divided into two sub-portfolios and
each is reconstituted and rebalanced semi-annually on alternating quarters. Each
sub-portfolio follows the same eligibility and selection rules and the
differences in components between the sub-portfolios are a result of the timing
of the review of each sub-portfolio.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the 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 Index and does not seek temporary defensive positions that are
inconsistent with its investment objective of seeking to track the
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 Index concentrates in an
industry or group of industries. As of September 30, 2023, each of the information technology, consumer
discretionary, industrials, health care and financials sectors represented a
significant portion of the
Index.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in
the Fund is not a deposit with a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
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.
Growth
Style Investing Risk.
The
Fund’s growth strategy could cause it to perform differently compared to funds
that do not have a growth focus. The Fund’s growth strategy may result in the
Fund investing in securities or industry sectors that underperform value
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
growth screens. The Fund is also subject to the risk that the growth companies
identified by the Index provider do not operate as expected. Additionally, the
Index provider’s proprietary valuation model may not perform as intended, which
may adversely affect an investment in the Fund.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these
companies.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector may be adversely affected by environmental damages, product
liability claims and exchange rates.
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.
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.
Large-
and Medium-Capitalization Companies Risk.
The Fund may invest in large- and medium-capitalization companies and therefore
will be subject to certain risks associated with large- and
medium-capitalization companies. Large-cap companies could fall out of favor
with the market and underperform securities of small- or medium- capitalization
companies. Larger, more established companies may be slow to respond to
challenges and may grow more slowly than smaller companies. Medium-cap 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, medium-capitalization companies often have greater
price volatility, lower trading volume and less liquidity than larger more
established companies. They also 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.
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.
New
Fund Risk.
The Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund’s small asset base, certain of the Fund’s expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
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 Fund has not yet commenced operations and therefore does
not have a performance history. Once available, the Fund’s
performance information will be accessible on the Fund’s website at
www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily and jointly responsible for the
day-to-day management of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
Liao |
Portfolio
Manager |
November
2023 |
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Griffin
Driscoll |
Deputy
Portfolio Manager |
November
2023 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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SUMMARY
INFORMATION ABOUT PURCHASES AND SALES OF FUND SHARES, TAXES AND
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES |
PURCHASE
AND SALE OF FUND SHARES
Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through a broker or dealer at a market price. Shares of the Fund
are listed on the Exchange, and because Shares trade at market prices rather
than net asset value, Shares of the Fund may trade at a price greater than net
asset value (i.e.,
a “premium”) or less than net asset value (i.e.,
a “discount”).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares of the Fund (bid) and the
lowest price a seller is willing to accept for Shares (ask) when buying or
selling Shares in the secondary market (the “bid-ask spread”).
Recent
information, including information about the Fund’s 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
The
Fund expects to distribute net investment income and any net realized long-term
or short-term capital gains annually. The Fund may also pay a special
distribution at any time to comply with U.S. federal tax requirements.
Distributions
from the Fund’s net investment income, including any net short-term capital
gains, if any, are taxable to you as ordinary income.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
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ADDITIONAL
INFORMATION ABOUT THE FUND’S INVESTMENT STRATEGIES AND
RISKS |
PRINCIPAL
INVESTMENT STRATEGIES
Under
normal circumstances, the Fund invests at least 80% of its total assets in
securities that comprise the Fund’s benchmark index. The Index is comprised of
equity securities of companies that Morningstar, Inc. (“Morningstar” or the
“Index provider”) determines (a) have sustainable competitive advantages based
on a proprietary methodology that considers quantitative and qualitative factors
(“wide moat companies”) and (b) are attractively priced and weighted according
to a modified equal
weighting scheme that tilts exposure in favor of pure growth companies.
According to Morningstar, growth companies tend to have fast growth (high growth
rates for earnings, sales, book value, and cash flow) and high price ratios
(based on metrics like earnings, book value and sales, or low dividend
yields).
Wide moat companies are selected from the universe of companies represented in
the Morningstar®
US Market IndexSM
(the “Parent Index”), a broad market index representing 97% of U.S. market
capitalization. Wide moat companies included in the Parent Index are those that
Morningstar believes will maintain their competitive advantage(s) for at least
20 years. The quantitative factors
used by Morningstar to identify competitive advantages
currently include historical and projected returns on invested capital relative
to cost of capital. The qualitative factors used by Morningstar to identify
competitive advantages currently include customer switching cost (i.e., the
costs of customers switching to competitors), cost advantages, intangible assets
(e.g., intellectual property and brands), network effects (i.e., whether
products or services become more valuable as the number of customers grows) and
efficient scale (i.e., whether the company effectively serves a limited market
that potential rivals have little incentive to enter into). The Index targets a
select group of equity securities of wide moat companies from the Parent Index:
those that, according to Morningstar’s equity research team, are attractively
priced based on pre-defined factors as of each index review. Morningstar selects
companies to be included in the Index as determined by the ratio of the issuer’s
common stock price to Morningstar’s estimate of fair value. Morningstar’s fair
value estimates are calculated using standardized, proprietary valuation models.
Morningstar also considers a company’s style characteristics. Wide moat
companies are divided into three groups that represent their style
characteristics along the growth/value spectrum: pure growth, blend, and pure
value. Pure value companies are excluded from the Index. Morningstar determines
a company’s style orientation with a 10-factor model incorporating backward- and
forward-looking metrics such as earnings, dividends, sales, cash flow and book
value. The Fund’s 80% investment policy is non-fundamental and may be changed
without shareholder approval upon 60 days’ prior written notice to
shareholders.
As
of September 30, 2023, the Index included 36 securities of companies with a full
market capitalization range of between approximately $5.9 billion and $2,345.9
billion and a weighted average full market capitalization of $175.4
billion.
These
amounts are subject to change. The Index is divided into two sub-portfolios and
each is reconstituted and rebalanced semi-annually on alternating quarters. Each
sub-portfolio follows the same eligibility and selection rules and the
differences in components between the sub-portfolios are a result of the timing
of the review of each sub-portfolio.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the 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 Index and does not seek temporary defensive positions that are
inconsistent with its investment objective of seeking to track the
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 Index concentrates in an industry or group of industries.
As
of September 30, 2023, each of the information technology, consumer
discretionary, industrials, health care and financials sectors represented a
significant portion of the Index.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
The
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees of the
Trust (the “Board of Trustees”) 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 FUND
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund’s
“Summary Information” section followed by additional risk information.
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not
a deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore, you should
consider carefully the following risks before investing in the Fund, each of
which could significantly and adversely affect the value of an investment in the
Fund.
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.
Growth
Style Investing Risk.
The
Fund’s growth strategy could cause it to perform differently compared to funds
that do not have a growth focus. The Fund’s growth strategy may result in the
Fund investing in securities or industry sectors that underperform value
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
growth screens. The Fund is also subject to the risk that the growth companies
identified by the Index provider do not operate as expected. Additionally, the
Index provider’s proprietary valuation model may not perform as intended, which
may adversely affect an investment in the Fund.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
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 Discretionary Sector Risk. The Fund will
be sensitive to, and its performance will depend to a greater extent on, the
overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector 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.
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.
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.
Large-
and Medium-Capitalization Companies Risk.
The Fund may invest in large- and medium-capitalization companies and therefore
will be subject to certain risks associated with large- and
medium-capitalization companies. Large-cap companies could fall out of favor
with the market and underperform securities of small- or medium- capitalization
companies. Larger, more established companies may be slow to respond to
challenges and may grow more slowly than smaller companies. Medium-cap 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, medium-capitalization companies often have greater
price volatility, lower trading volume and less liquidity than larger more
established companies. They also 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.
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. 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.
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.
New
Fund Risk.
The Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund’s small asset base, certain of the Fund’s expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
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.
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. 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.
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.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
The
Fund may invest in securities not included in the 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 the Fund track the Index. Depositary receipts not
included in the Fund’s Index may be used by the Fund in seeking performance that
corresponds to the Index and in managing cash flows, and may count towards
compliance with the Fund’s 80% policy. The 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. The Fund does not have a temporary defensive
strategy to protect against potential stock market declines.
BORROWING
MONEY
The
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. The Fund is expected to enter into a credit facility to borrow
money for temporary, emergency or other purposes, including the funding of
shareholder redemption requests, trade settlements and as necessary to
distribute to shareholders any income required to maintain the Fund’s status as
a regulated investment company. To the extent that the Fund borrows money, it
may be leveraged; at such times, the Fund will appreciate or depreciate in value
more rapidly than the Index. Leverage generally has the effect of increasing the
amount of loss or gain the Fund might realize, and may increase volatility in
the value of the Fund’s investments.
LENDING
PORTFOLIO SECURITIES
The
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, the Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Fund’s
bank lending agent equal to at least 102% of the value of the portfolio
securities being loaned. This collateral is marked-to-market on a daily basis.
Although the Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower fail to return the borrowed securities (e.g.,
the Fund would have to buy replacement securities and the loaned securities may
have appreciated beyond the value of the collateral held by the Fund) or become
insolvent. The Fund may pay fees to the party arranging the loan of securities.
In addition, the Fund will bear the risk that it may lose money because the
borrower of the loaned securities fails to return the securities in a timely
manner or at all. The Fund could also lose money in the event of a decline in
the value of any cash collateral or in the value of investments made with the
cash collateral. These events could trigger adverse tax consequences for the
Fund. Substitute payments for dividends received by the Fund for securities
loaned out by the Fund will not be considered qualified dividend
income.
ADDITIONAL
NON-PRINCIPAL RISKS
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.
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.
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.
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TAX
ADVANTAGED PRODUCT STRUCTURE |
Unlike
many conventional mutual funds which are only bought and sold at closing NAVs,
the Shares of the Fund have been designed to be tradable in a secondary market
on an intra-day basis and to be redeemed principally in-kind in Creation Units
at each day’s market close. These in-kind arrangements are designed to mitigate
the adverse effects on the Fund’s portfolio that could arise from frequent cash
redemption transactions that affect the NAV of the Fund. Moreover, in contrast
to conventional mutual funds, where frequent redemptions can have an adverse tax
impact on taxable shareholders because of the need to sell portfolio securities
which, in turn, may generate taxable gain, the in-kind redemption mechanism of
the Fund, to the extent used, generally is not expected to lead to a tax event
for shareholders whose Shares are not being redeemed.
A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities is available in the Fund’s SAI.
Board
of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight
of the management of the Fund, including general supervision of the Adviser and
other service providers, but is not involved in the day-to-day management of the
Trust. A list of the Trustees and the Trust officers, and their present
positions and principal occupations, is provided in the Fund’s SAI.
Investment
Adviser.
Under the terms of an investment management agreement between the Trust and Van
Eck Associates Corporation with respect to the Fund (the “Investment Management
Agreement”), Van Eck Associates Corporation serves as the adviser to the Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
day-to-day investment management of the Fund.
As of September 30, 2023 the Adviser managed approximately $76.42 billion in
assets. The Adviser has been an investment adviser since 1955 and also acts as
adviser or sub-adviser to mutual funds, other ETFs, other pooled investment
vehicles and separate accounts. The Adviser’s principal business address is 666
Third Avenue, 9th Floor, New York, New York 10017. A
discussion regarding the Board of Trustees’ approval of the Investment
Management Agreement will be available in the Trust’s annual report for the
period ending December 31, 2023.
For
the services provided to the Fund under the Investment Management Agreement, the
Fund pays the Adviser monthly fees based on a percentage of the Fund’s average
daily net assets at the annual rate of 0.45%. 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 the Fund (excluding acquired fund fees and
expenses, interest expense, trading expenses, taxes and extraordinary expenses)
from exceeding 0.49% of its average daily net assets per year.
The
Fund is responsible for all of its expenses, including the investment advisory
fees, costs of transfer agency, custody, legal, audit and other services,
interest, taxes, any distribution fees or expenses, offering fees or expenses
and extraordinary expenses.
Manager
of Managers Structure.
The Adviser and the Trust may rely on an exemptive order (the “Order”) from the
SEC that permits the Adviser to enter into investment sub-advisory agreements
with unaffiliated sub-advisers without obtaining shareholder approval. The
Adviser, subject to the review and approval of the Board of Trustees, may select
one or more sub- advisers for the Fund and supervise, monitor and evaluate the
performance of each sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Fund and
its shareholders. The Adviser thus would have the responsibility (subject to the
oversight of the Board of Trustees) to recommend the hiring and replacement of
sub-advisers as well as the discretion to terminate any sub-adviser and
reallocate the Fund’s assets for management among any other sub-adviser(s) and
itself. This means that the Adviser would be able to reduce the sub-advisory
fees and retain a larger portion of the management fee, or increase the
sub-advisory fees and retain a smaller portion of the management fee. The
Adviser would compensate each sub-adviser out of its management
fee.
Administrator,
Custodian and Transfer Agent.
Van Eck Associates Corporation is the administrator for the Fund (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
the Fund’s assets and provides transfer agency and fund accounting services to
the Fund. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
Distributor.
Van Eck Securities Corporation is the distributor of the Shares (the
“Distributor”). The Distributor will not distribute Shares in less than a
specified number of Shares, each called a “Creation Unit,” and does not maintain
a secondary market in the Shares. The Shares are traded in the secondary
market.
The
portfolio managers who currently share joint responsibility for the day-to-day
management of the Fund’s portfolio are 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.
Liao serves as portfolio manager for certain other investment companies and
pooled investment vehicles advised by the Adviser.
Mr.
Driscoll is deputy portfolio manager of the Fund. 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.
See
the Fund’s SAI for additional information about the portfolio managers’
compensation, other accounts managed by the portfolio managers and their
respective ownership of Shares.
DETERMINATION
OF NAV
The
net
asset value (“NAV”)
per Share for the Fund is computed by dividing the value of the net assets of
the Fund (i.e.,
the value of its total assets less total liabilities) by the total number of
Shares outstanding. Expenses and fees, including the management fee, are accrued
daily and taken into account for purposes of determining NAV. The NAV of the
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of the Fund’s portfolio securities are based on the securities’ closing
prices on the markets on which the securities trade, when available. Due to the
time differences between the United States and certain countries in which the
Fund invests, securities on these exchanges may not trade at times when Shares
of the Fund will trade. In the absence of a last reported sales price, or if no
sales were reported, and for other assets for which market quotes are not
readily available, values may be based on quotes obtained from a quotation
reporting system, established market makers or by an outside independent pricing
service. Debt instruments with remaining maturities of more than 60 days are
valued at the evaluated mean price provided by an outside independent pricing
service. If an outside independent pricing service is unable to provide a
valuation, the instrument is valued at the mean of the highest bid and the
lowest asked quotes obtained from one or more brokers or dealers selected by the
Adviser. Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values obtained
from yield data related to investments or securities with similar
characteristics and may use a computerized grid matrix of securities and its
evaluations in determining what it believes is the fair value of the portfolio
securities. Short-term debt instruments having a maturity of 60 days or less are
valued at amortized cost. Any assets or liabilities denominated in currencies
other than the U.S. dollar are converted into U.S. dollars at the current market
rates on the date of valuation as quoted by one or more sources. If a market
quotation for a security or other asset is not readily available or the Adviser
believes it does not otherwise accurately reflect the market value of the
security or asset at the time the Fund calculates its NAV, the security or asset
will be fair valued by the Adviser in accordance with the Trust’s valuation
policies and procedures. The Fund may also use fair value pricing in a variety
of circumstances, including but not limited to, situations when the value of a
security in the Fund’s portfolio has been materially affected by events
occurring after the close of the market on which the security is principally
traded (such as a corporate action or other news that may materially affect the
price of a security) or trading in a security has been suspended or halted. In
addition, the Fund currently expects that it will fair value certain of the
foreign equity securities held by the Fund, if any, each day the Fund calculates
its NAV, except those securities principally traded on exchanges that close at
the same time the Fund calculates its NAV.
Accordingly,
the Fund’s NAV may reflect certain portfolio securities’ fair values rather than
their market prices at the time the exchanges on which they principally trade
close. Fair value pricing involves subjective judgments and it is possible that
a fair value determination for a security or other asset is materially different
than the value that could be realized upon the sale of such security or asset.
In addition, fair value pricing could result in a difference between the prices
used to calculate the Fund’s NAV and the prices used by the Fund’s Index. This
may adversely affect the Fund’s ability to track its Index. With respect to
securities that are principally traded on foreign exchanges, the value of the
Fund’s portfolio securities may change on days when you will not be able to
purchase or sell your Shares.
INTRADAY
VALUE
The
trading prices of the Fund’s Shares in the secondary market generally differ
from the Fund’s daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by the Fund,
economic conditions and other factors. Information regarding the intraday value
of the Fund’s Shares (“IIV”) may be disseminated throughout each trading day by
the Exchange or by market data vendors or other information providers. The IIV
is based on the current market value of the securities and/or cash required to
be deposited in exchange for a Creation Unit. The IIV does not necessarily
reflect the precise composition of the current portfolio of securities held by
the Fund at a particular point in time or the best possible valuation of the
current portfolio. Therefore, the IIV should not be viewed as a “real-time”
update of the Fund’s NAV, which is computed only once a day. The IIV is
generally determined by using current market quotations and/or price quotations
obtained
from broker-dealers and other market intermediaries that may trade in the
portfolio securities held by the Fund and valuations based on current market
rates. The quotations and/or valuations of certain Fund holdings may not be
updated during U.S. trading hours if such holdings do not trade in the United
States. The Fund is not involved in, or responsible for, the calculation or
dissemination of the IIV and makes no warranty as to its accuracy.
RULE
144A AND OTHER UNREGISTERED SECURITIES
An
AP (i.e.,
a person eligible to place orders with the Distributor to create or redeem
Creation Units of the Fund) that is not a “qualified institutional buyer,” as
such term is defined under Rule 144A of the Securities Act of 1933, as amended
(the “Securities Act”), will not be able to receive, as part of a redemption,
restricted securities eligible for resale under Rule 144A or other unregistered
securities.
BUYING
AND SELLING EXCHANGE-TRADED SHARES
The
Shares of the Fund are expected to be listed on the Exchange. If you buy or sell
Shares in the secondary market, you will incur customary brokerage commissions
and charges and may pay some or all of the “spread,” which is any difference
between the bid price and the ask price. The spread varies over time for the
Fund’s Shares based on the Fund’s trading volume and market liquidity, and is
generally lower if the Fund has high trading volume and market liquidity, and
generally higher if the Fund has little trading volume and market liquidity
(which is often the case for funds that are newly launched or small in size). In
times of severe market disruption or low trading volume in the Fund’s Shares,
this spread can increase significantly. 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 Fund’s SAI.
The
Exchange is open for trading Monday through Friday and is closed on weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because
non-U.S. exchanges may be open on days when the Fund does not price its Shares,
the value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell the Fund’s
Shares.
The
right of redemption by an AP may be suspended or the date of payment postponed
(1) for any period during which the Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on the
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of the Fund or
determination of its NAV is not reasonably practicable; or (4) in such other
circumstance as is permitted by the SEC.
Market
Timing and Related Matters.
The Fund imposes no restrictions on the frequency of purchases and redemptions.
Frequent purchases and redemptions of Fund Shares may attempt to take advantage
of a potential arbitrage opportunity presented by a lag between a change in the
value of the Fund’s portfolio securities after the close of the primary markets
for the Fund’s portfolio securities and the reflection of that change in the
Fund’s NAV (“market timing”). The Board of Trustees considered the nature of the
Fund (i.e.,
a fund whose Shares are expected to trade intraday), that the Adviser monitors
the trading activity of APs for patterns of abusive trading, that the Fund
reserves the right to reject orders that may be disruptive to the management of
or otherwise not in the Fund’s best interests, and that the Fund may fair value
certain of its securities. Given this structure, the Board of Trustees
determined that it is not necessary to impose restrictions on the frequency of
purchases and redemptions for the Fund at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains.
As a shareholder of the Fund, you are entitled to your share of the Fund’s
distributions of net investment income and net realized capital gains on its
investments. The Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
The
Fund typically earns income dividends from stocks and interest from debt
securities. These amounts, net of expenses, are typically passed along to Fund
shareholders as dividends from net investment income. The Fund realizes capital
gains or losses whenever it sells securities. Net capital gains are distributed
to shareholders as “capital gain distributions.” Distributions from the Fund’s
net investment income, including net short-term capital gains, if any, are
taxable to you as ordinary income. Any long-term capital gains distributions you
receive from the Fund are taxable as long-term capital gains.
Net
investment income
and net realized capital gains, if any, are typically distributed to
shareholders annually.
Dividends may be declared and paid more frequently to improve index tracking or
to comply with the distribution requirements of the Code. In addition, in
situations where the Fund acquires investment securities after the beginning of
a dividend period, the Fund may elect to distribute at least
annually amounts
representing the full dividend yield net of expenses on the underlying
investment securities, as if the Fund owned the underlying investment securities
for the entire dividend period. If the Fund so elects, some portion of each
distribution may result in a return of capital, which, for tax purposes, is
treated as a return of your investment in Shares. You will be notified regarding
the portion of the distribution which represents a return of
capital.
Distributions
in cash may be reinvested automatically in additional Shares of the Fund only if
the broker through which you purchased Shares makes such option
available.
TAX
INFORMATION
As
with any investment, you should consider how your Fund investment will be taxed.
The tax information in this Prospectus is provided as general information. You
should consult your own tax professional about the tax consequences of an
investment in the Fund, including the possible application of foreign, state and
local taxes. Unless your investment in the Fund is through a tax-exempt entity
or tax-deferred retirement account, such as a 401(k) plan, you need to be aware
of the possible tax consequences when: (i) the Fund makes distributions, (ii)
you sell Shares in the secondary market or (iii) you create or redeem Creation
Units.
Taxes
on Distributions. As
noted above, the Fund expects to distribute net investment income, if any, at
least
annually, and any
net realized long-term or short-term capital gains, if any, annually. The Fund
may also pay a special distribution at any time to comply with U.S. federal tax
requirements.
In
general, your distributions are subject to U.S. federal income tax when they are
paid, whether you take them in cash or reinvest them in the Fund. Distributions
of net investment income, including net short-term gains, if any, are generally
taxable as ordinary income. Whether distributions of capital gains represent
long-term or short-term capital gains is determined by how long the Fund owned
the investments that generated them, rather than how long you have owned your
Shares. Distributions of net short-term capital gains in excess of net long-term
capital losses, if any, are generally taxable as ordinary income. Distributions
of net long- term capital gains in excess of net short-term capital losses, if
any, that are properly reported as capital gain dividends are generally taxable
as long-term capital gains. Long-term capital gains of a non-corporate
shareholder are generally taxable at a maximum rate of 15% or 20%, depending on
whether the shareholder’s income exceeds certain threshold amounts.
The
Fund may receive dividends, the distribution of which the Fund may report as
qualified dividends. In the event that the Fund receives such a dividend and
reports the distribution of such dividend as a qualified dividend, the dividend
may be taxed at the maximum capital gains rates of 15% or 20%, provided holding
period and other requirements are met at both the shareholder and the Fund
level. There can be no assurance that any significant portion of the Fund’s
distributions will be eligible for qualified dividend treatment.
Distributions
in excess of the Fund’s current and accumulated earnings and profits are treated
as a tax-free return of your investment to the extent of your basis in the
Shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce the Fund’s NAV per Share and
may be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of
capital.
Dividends,
interest and gains from non-U.S. investments of the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may, in some cases, reduce or
eliminate such taxes.
If
more than 50% of the Fund’s total assets at the end of its taxable year consist
of foreign securities, the Fund may elect to “pass through” to its investors
certain foreign income taxes paid by the Fund, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor’s pro rata share of the Fund’s foreign income taxes, and (ii)
either deduct (in calculating U.S. taxable income) or credit (in calculating
U.S. federal income), subject to certain holding period and other limitations,
the investor’s pro rata share of the Fund’s foreign income taxes.
Backup
Withholding. The
Fund may be required to withhold a percentage of your distributions and proceeds
if you have not provided a taxpayer identification number or social security
number or otherwise established a basis for exemption from backup withholding.
The backup withholding rate for individuals is currently 24%. This is not an
additional tax and may be refunded, or credited against your U.S. federal income
tax liability, provided certain required information is furnished to the
Internal Revenue Service (“IRS”).
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares.
Currently, any capital gain or loss realized upon a sale of Shares is generally
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as a short-term capital gain or loss if held for one year or
less. However, any capital loss on a sale of Shares held for six months or less
is treated as long-term capital loss to the extent that capital gain dividends
were paid with respect to such Shares. The ability to deduct capital losses may
be limited. To the extent that the Fund shareholder’s Shares are redeemed for
cash, this is normally treated as a sale for tax purposes.
Taxes
on Creations and Redemptions of Creation Units.
A person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The IRS, however, may assert that a
loss realized upon an exchange of primarily securities for Creation Units cannot
be deducted currently under the rules governing “wash sales,” or on the basis
that there has been no significant change in economic position. Persons
exchanging securities for Creation Units or redeeming Creation Units should
consult their own tax adviser with respect to whether wash sale rules apply and
when a loss might be deductible and the tax treatment of any creation or
redemption transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units held as capital assets is generally
treated as long-term capital gain or loss if the Shares (or securities
surrendered) have been held for more than one year and as a short-term capital
gain or loss if the Shares (or securities surrendered) have been held for one
year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax.
An additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Non-U.S.
Shareholders.
Dividends paid by the Fund to Non-U.S. shareholders are generally subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty to the extent derived from investment income and short-term
capital gains. Dividends paid by the Fund from net tax-exempt income or
long-term capital gains are generally not subject to such withholding tax.
Properly-reported dividends are generally exempt from U.S. federal withholding
tax where they (i) are paid in respect of the Fund’s “qualified net interest
income” (generally, the Fund’s U.S. source interest income, other than certain
contingent interest and interest from obligations of a corporation or
partnership in which the Fund is at least a 10% shareholder, reduced by expenses
that are allocable to such income); or (ii) are paid in respect of the Fund’s
“qualified short-term capital gains” (generally, the excess of the Fund’s net
short-term capital gain over the Fund’s long-term capital loss for such taxable
year). However, depending on its circumstances, the Fund may report all, some or
none of its potentially eligible dividends as such qualified net interest income
or as qualified short-term capital gains and/or treat such dividends, in whole
or in part, as ineligible for this exemption from withholding.
Any
capital gain realized by a Non-U.S. shareholder upon a sale of Shares of the
Fund will generally not be subject to U.S. federal income or withholding tax
unless (i) the gain is effectively connected with the shareholder’s trade or
business in the United States, or in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met or (ii) the Fund is or has been a U.S. real property holding corporation, as
defined below, at any time within the five-year period preceding the date of
disposition of the Fund’s Shares or, if shorter, within the period during which
the Non-U.S. shareholder has held the Shares. Generally, a corporation is a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests, as defined in the Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. The
Fund may be, or may prior to a Non-U.S. shareholder’s disposition of Shares
become, a U.S. real property holding corporation. If the Fund is or becomes a
U.S. real property holding corporation, so long as the Fund’s Shares are
regularly traded on an established securities market, only a Non-U.S.
shareholder who holds or held (at any time during the shorter of the five year
period preceding the date of disposition or the holder’s holding period) more
than 5% (directly or indirectly as determined under applicable attribution rules
of the Code) of the Fund’s Shares will be subject to United States federal
income tax on the disposition of Shares.
As
part of the Foreign Account Tax Compliance Act, (“FATCA”), the Fund may be
required to withhold 30% tax on certain types of U.S. sourced income
(e.g.,
dividends, interest, and other types of passive income) paid to (i) foreign
financial institutions (“FFIs”), including non-U.S. investment funds, unless
they agree to collect and disclose to the IRS information regarding their direct
and indirect U.S. account holders and (ii) certain nonfinancial foreign entities
(“NFFEs”), unless they certify certain information regarding their direct and
indirect U.S. owners. To avoid possible withholding, FFIs will need to enter
into agreements with the IRS which state that they will provide the IRS
information, including the names, account numbers and balances, addresses and
taxpayer
identification
numbers of U.S. account holders and comply with due diligence procedures with
respect to the identification of U.S. accounts as well as agree to withhold tax
on certain types of withholdable payments made to non-compliant foreign
financial institutions or to applicable foreign account holders who fail to
provide the required information to the IRS, or similar account information and
required documentation to a local revenue authority, should an applicable
intergovernmental agreement be implemented. NFFEs will need to provide certain
information regarding each substantial U.S. owner or certifications of no
substantial U.S. ownership, unless certain exceptions apply, or agree to provide
certain information to the IRS.
The
Fund may be subject to the FATCA withholding obligation, and also will be
required to perform due diligence reviews to classify foreign entity investors
for FATCA purposes. Investors are required to agree to provide information
necessary to allow the Fund to comply with the FATCA rules. If the Fund is
required to withhold amounts from payments pursuant to FATCA, investors will
receive distributions that are reduced by such withholding amounts.
Non-U.S.
shareholders are advised to consult their tax advisors with respect to the
particular tax consequences to them of an investment in the Fund, including the
possible applicability of the U.S. estate tax.
The
foregoing discussion summarizes some of the consequences under current U.S.
federal income tax law of an investment in the Fund. It is not a substitute for
personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in the Fund under all applicable tax laws. Changes
in applicable tax authority could materially affect the conclusions discussed
above and could adversely affect the Fund, and such changes often
occur.
The
Index is published by Morningstar. The Morningstar®
name and logo are registered trademarks of Morningstar. Morningstar®
US Broad Growth Wide Moat Focus IndexSM
is a service mark of Morningstar.
Morningstar
does not sponsor, endorse, or promote the Fund and bears no liability with
respect to the Fund or any security.
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MORNINGSTAR®
US BROAD GROWTH WIDE MOAT FOCUS INDEXSM |
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The
Index is a rules-based index intended to offer exposure to companies that
Morningstar determines to have sustainable competitive advantages based on a
proprietary methodology that considers quantitative and qualitative factors
(“wide moat companies”). Wide moat companies are selected from the universe of
companies represented in the Parent Index, a broad market index representing 97%
of U.S. market capitalization. Securities in this eligible universe are further
screened for liquidity and size. The Index targets a select group of equity
securities of wide moat companies: those that according to Morningstar’s equity
research team are attractively priced based on the issuer’s common stock price
as compared to Morningstar’s equity research team’s estimate of fair value at
the time of each Index review. Morningstar’s equity research team’s fair value
estimates are calculated using a standardized, proprietary valuation model.
Morningstar also considers a company’s style characteristics. Wide moat
companies are divided into three groups that represent their style
characteristics along the growth/value spectrum: pure growth, blend, and pure
value. Pure value companies are excluded from the Index and pure growth and
blend companies that have been identified as attractively priced are weighted
according to a modified equal weighting scheme that tilts exposure in favor of
pure growth companies.
A
selection committee, comprising members of Morningstar’s equity research team,
makes the final determination of whether a company is a wide moat company. Only
those companies with one or more of the identifiable competitive advantages, as
determined by Morningstar’s equity research team and agreed to by the selection
committee, are wide moat companies. The quantitative factors used to identify
competitive advantages include historical and projected returns on invested
capital relative to cost of capital. The qualitative factors used to identify
competitive advantages include customer switching cost (i.e., the costs of
customers switching to competitors), cost advantages, intangible assets (e.g.,
intellectual property and brands), network effects (i.e., whether products or
services become more valuable as the number of customers grows) and efficient
scale (i.e., whether the company effectively serves a limited market that
potential rivals have little incentive to enter into).
Morningstar’s
equity research team uses a standardized, proprietary valuation model to assign
fair values to potential Index constituents’ common stock. Morningstar’s equity
research team estimates the issuer’s future free cash flows and then calculates
an enterprise value using weighted average costs of capital as the discount
rate. Morningstar’s equity research team then assigns each issuer’s common stock
a fair value by adjusting the enterprise value to account for net debt and other
adjustments.
A
buffer rule is applied to the current Index constituents. Those that are ranked
in the top 150% of the number of stocks eligible for the Index, as measured by
current market price/fair value will remain in the Index at the time of
reconstitution and those that fall outside of the top 150% are excluded from the
Index. The maximum weight of an individual sector in the Index is capped at 10%
more than its corresponding weight in the Parent Index at the time of
reconstitution, or 40%, whichever is higher.
The
Index employs a staggered rebalance methodology. The Index is divided into two
sub-portfolios, each is reconstituted and rebalanced semi-annually on
alternating quarters. Each sub-portfolio follows the same eligibility and
selection rules and differences in components are a result of the timing of each
review. At each reconstitution date, eligible securities are ranked by float
market capitalization, and those securities ranking in the bottom three percent
(by count) based on lowest float market capitalization are not eligible for
inclusion. If a company has more than one eligible share class and is an
existing Index constituent, the share class of the existing constituent is
considered for selection. If not an existing Index constituent, the company’s
most liquid share class is considered for selection. Each sub-portfolio will
contain 30 securities at its semi-annual reconstitution. Due to the staggered
rebalance methodology, constituents and weightings may vary between
sub-portfolios. Each sub-portfolio is reweighted to 50% of the total Index every
six months. Adjustments to one sub-portfolio are performed after the close of
business on the third Friday of March and September and adjustments to the other
sub-portfolio are performed after the close of business on the third Friday of
June and December and are effective on the following Monday. If the Monday is a
market holiday, reconstitution and rebalancing occurs on the Tuesday immediately
following.
Rebalancing
data, including constituent weights and related information, is posted on
Morningstar’s website at the end of each quarter-end month. Target weights of
the constituents are not otherwise adjusted between quarters except in the event
of certain types of corporate actions.
Morningstar
may delay or change a scheduled rebalancing or reconstitution of the Index or
the implementation of certain rules at its sole discretion.
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LICENSE
AGREEMENT AND DISCLAIMERS |
The
Adviser has entered into a licensing agreement with Morningstar to use the
Index. The Fund is entitled to use the Index pursuant to a sub-licensing
arrangement with the Adviser.
Shares
of the Fund are not sponsored, endorsed, sold or promoted by Morningstar.
Morningstar makes no representation or warranty, express or implied, to the
shareholders of the Fund or any member of the public regarding the advisability
of investing in securities generally or in the Fund in particular or the ability
of the Index to track general stock market performance. Morningstar’s only
relationship to the Adviser is the licensing of certain service marks and
service names of Morningstar and of the Index, which is determined, composed and
calculated by Morningstar without regard to the Adviser or the Fund. Morningstar
has no obligation to take the needs of the Adviser or the shareholders of the
Fund into consideration in determining, composing or calculating the Index.
Morningstar is not responsible for and has not participated in the determination
of the prices and amount of the Fund or the timing of the issuance or sale of
the Fund or in the determination or calculation of the equation by which the
Fund is converted into cash. Morningstar has no obligation or liability in
connection with the administration, marketing or trading of the
Fund.
MORNINGSTAR
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA
INCLUDED THEREIN AND MORNINGSTAR SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. MORNINGSTAR MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, SHAREHOLDERS OF THE FUND,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED
THEREIN. MORNINGSTAR 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 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL MORNINGSTAR HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The
Fund has not yet commenced operations as of the date of this Prospectus and
therefore does not have a financial history.
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PREMIUM/DISCOUNT
INFORMATION |
The
Fund has not yet commenced operations and, therefore, does not have information
about the differences between the Fund’s daily market price on the Exchange and
its NAV. Information regarding how often the closing trading price of the
Shares of the Fund was above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the Fund for the most recently completed calendar year
and the most recently completed calendar quarter(s) since that year (or the life
of the Fund, if shorter) can be found at www.vaneck.com.
CONTINUOUS
OFFERING
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act may occur at any point. Broker dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 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 Fund and the Adviser may purchase and resell
Fund Shares pursuant to this Prospectus.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on March 15, 2001. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of shareholders will not be held except as required by the Investment Company
Act of 1940 and other applicable law. See the Fund’s SAI for more information
concerning the Trust’s form of organization. Section 12(d)(1) of the Investment
Company Act of 1940 restricts investments by investment companies in the
securities of other investment companies, including Shares of the Fund.
Registered investment companies are permitted to invest in the Fund beyond the
limits set forth in Section 12(d)(1) subject to certain terms and conditions set
forth in SEC regulations, including that such investment companies enter into an
agreement with the Fund.
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the Fund’s shareholders and the Trust, the Fund, the Adviser
and/or the Trustees. Further, shareholders are not intended third party
beneficiaries of any contracts entered into by (or on behalf of) the Fund,
including contracts with the Adviser or other parties who provide services to
the Fund.
Dechert
LLP serves as counsel to the Trust, including the Fund. PricewaterhouseCoopers
LLP serves as the Trust’s independent registered public accounting firm and will
audit the Fund’s financial statements annually.
ADDITIONAL
INFORMATION
This
Prospectus does not contain all the information included in the Registration
Statement filed with the SEC with respect to the Fund’s Shares. The Fund’s
Registration Statement, including this Prospectus, the Fund’s SAI and the
exhibits are available on the EDGAR database at the SEC’s website
(http://www.sec.gov), and copies may be obtained, after paying a duplicating
fee, by electronic request at the following email address:
[email protected].
The
SAI for the Fund, which has been filed with the SEC, provides more information
about the Fund. The SAI for the Fund is incorporated herein by reference and is
legally part of this Prospectus. Additional information about the Fund’s
investments is available in the Fund’s annual and semi-annual reports to
shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year. The SAI and the Fund’s annual
and semi-annual reports may be obtained without charge by writing to the Fund at
Van Eck Securities Corporation, the Fund’s Distributor, at 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling the Distributor at the following
number: Investor Information: 800.826.2333.
Shareholder
inquiries may be directed to the Fund in writing to 666 Third Avenue, 9th Floor,
New York, New York 10017 or by calling 800.826.2333.
The
Fund’s SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
[THIS
PAGE INTENTIONALLY LEFT BLANK]
For
more detailed information about the Fund, see the SAI dated November 16, 2023,
as
may be supplemented from time to time. Additional information about the Fund’s
investments is or will be available in the Fund’s annual and semi-annual reports
to shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year.
Call
VanEck at 800.826.2333 to request, free of charge, the annual or semi-annual
reports, the SAI, or other information about the Fund or to make shareholder
inquiries. You may also obtain the SAI or the Fund’s annual or semi-annual
reports, by visiting the VanEck website at www.vaneck.com.
Reports
and other information about the Fund are available on the EDGAR Database on the
SEC’s internet site at http://www.sec.gov. In addition, copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following email address: [email protected].
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Transfer
Agent: State Street Bank and Trust Company
SEC
Registration Number: 333-123257
Investment
Company Act of 1940 Registration Number: 811-10325
MGROPRO |
800.826.2333
www.vaneck.com |