ck0001137360-20230430
|
|
|
|
|
|
|
| |
|
|
PROSPECTUS |
|
September 1,
2023
|
BDC
Income ETF BIZD
Dynamic
High Income ETF INC
Emerging
Markets High Yield Bond ETF HYEM
Fallen
Angel High Yield Bond ETF ANGL
Green
Bond ETF GRNB
IG
Floating Rate ETF FLTR
International
High Yield Bond ETF IHY
J.P.
Morgan EM Local Currency Bond ETF EMLC
Moody's
Analytics BBB Corporate Bond ETF MBBB
Moody's
Analytics IG Corporate Bond ETF MIG
Mortgage
REIT Income ETF MORT
Preferred
Securities ex Financials ETF PFXF
|
|
|
|
| |
Principal
U.S. Listing Exchange for BIZD, INC, HYEM, GRNB, FLTR, IHY, EMLC, MORT,
PFXF: NYSE Arca, Inc. |
|
Principal
U.S. Listing Exchange for ANGL: The NASDAQ Stock Market LLC. |
|
Principal
U.S. Listing Exchange for MBBB, MIG: 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
INVESTMENT
OBJECTIVE
VanEck® BDC Income ETF (the “Fund”) seeks to replicate as
closely as possible, before fees and expenses, the price and yield performance
of the MVIS®
US Business Development Companies Index (the “BDC Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.40 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.02 |
% |
|
|
Acquired
Fund Fees and Expenses(b) |
10.75 |
% |
|
|
|
| |
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
11.17 |
% |
|
|
|
| |
(a)
Van
Eck Associates Corporation (the “Adviser”) will pay all expenses of the Fund,
except for the fee payment under the investment management agreement, acquired
fund fees and expenses, interest expense, offering costs, trading expenses,
taxes and extraordinary expenses. Notwithstanding the foregoing, the Adviser has
agreed to pay the offering costs until at least September 1,
2024.
(b)
“Acquired Fund Fees and
Expenses” include fees and expenses incurred indirectly by the Fund as a result
of investments in other investment companies, including business development
companies (“BDCs”). Because acquired fund fees and expenses are not borne
directly by the Fund, they will not be reflected in the expense information in
the Fund’s financial statements and the information presented in the table will
differ from that presented in the Fund’s financial highlights included in the
Fund’s reports to shareholders.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$1,083 |
| |
| 3 |
$3,051 |
| |
| 5 |
$4,785 |
| |
| 10 |
$8,265 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The
Fund will pay transaction costs, such as commissions, when it purchases and
sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs and may result in
higher taxes when Fund Shares are held in a taxable account. These costs, which
are not reflected in annual fund operating expenses or in the example, may
affect the Fund’s performance. During the most recent fiscal year, the Fund’s
portfolio turnover rate was 28% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The BDC Index is comprised of BDCs. To be
eligible for the BDC Index and qualify as a BDC, a company must be organized
under the laws of, and have its principal place of business in, the United
States, be registered with the Securities and Exchange Commission and have
elected to be regulated as a BDC under the Investment
Company Act of 1940.
BDCs are vehicles whose
principal
business is to invest in, lend capital to or provide services to privately-held
U.S. companies or thinly traded U.S. public companies. Small- and
medium-capitalization BDCs are eligible for inclusion in the BDC Index. As of
June 30, 2023, the BDC Index included 25 securities of companies with a market
capitalization range of between approximately $416 million to $10.2 billion and
a weighted average market capitalization of $4.3 billion. This 80% investment
policy is non-fundamental and may be changed without shareholder approval upon
60 days’ prior written notice to shareholders.
The
Investment Company Act of 1940 places limits on the percentage of the total
outstanding stock of a BDC that may be owned by the Fund; however, an Securities
and Exchange Commission rule applicable to the Fund permits it to invest in BDCs
in excess of this limitation if certain conditions are met.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the BDC Index by investing in a portfolio of
securities that generally replicates the BDC Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the BDC Index and does not take temporary defensive positions
that are inconsistent with its investment objective of seeking to replicate the
BDC Index.
The
Fund will concentrate its investments in a particular industry or group of
industries to the extent that the BDC Index concentrates in an industry or group
of industries. As of April 30, 2023, the financials sector represented
a significant portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Risk
of Investing in BDCs. BDCs
generally invest in less mature U.S. private companies or thinly traded U.S.
public companies which involve greater risk than well-established
publicly-traded companies. While the BDCs that comprise the Index are expected
to generate income in the form of dividends, certain BDCs during certain periods
of time may not generate such income. The Fund will indirectly bear its
proportionate share of any management fees and other operating expenses incurred
by the BDCs and of any performance-based or incentive fees payable by the BDCs
in which it invests, in addition to the expenses paid by the Fund. A BDC’s
incentive fee may be very high, vary from year to year and be payable even if
the value of the BDC’s portfolio declines in a given time period. Incentive fees
may create an incentive for a BDC’s manager to make investments that are risky
or more speculative than would be the case in the absence of such compensation
arrangements, and may also encourage the BDC’s manager to use leverage to
increase the return on the BDC’s investments. The use of leverage by BDCs
magnifies gains and losses on amounts invested and increases the risks
associated with investing in BDCs. A BDC may make investments
with a larger amount of risk of volatility and loss of principal than other
investment options and may also be highly speculative and
aggressive.
Investment
Restrictions Risk. The
Fund is subject to the conditions set forth in certain provisions of the
Investment Company Act of 1940 and Securities and Exchange Commission
regulations thereunder that limit the amount that the Fund and its affiliates,
in the aggregate, can invest in the outstanding voting securities of an
unaffiliated investment company or business development company. The Fund and
its affiliates may not actively acquire “control” of an investment company or
business development company, which is presumed once ownership of an investment
company’s outstanding voting securities exceeds 25%. Also, to comply with
provisions of the Investment Company Act of 1940 and regulations thereunder, the
Adviser may be required to vote shares of an investment company or business
development company in the same general proportion as shares held by other
shareholders of the investment company or business development
company.
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.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less
management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies. Returns on investments in securities of small- and
medium-capitalization companies could trail the returns on investments in
securities of larger companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Floating Rate Risk. The
Fund invests in floating-rate securities, which are instruments in which the
interest rate payable on an obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such a security
will generally decline in a falling interest rate environment, causing the Fund
to experience a reduction in the income it receives from the
security.
Floating
Rate LIBOR Risk.
Certain
floating-rate securities pay interest based on the London Inter-bank Offered
Rate ("LIBOR"). Due to the uncertainty regarding the future utilization of LIBOR
and the nature of any replacement rate, the potential effect of a transition
away from LIBOR on a fund or the financial instruments in which the Fund invests
cannot yet be determined.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance
may
also deviate from the performance of the Index due to the impact of withholding
taxes, late announcements relating to changes to the Index and high turnover of
the Index. When markets are volatile, the ability to sell securities at fair
value prices may be adversely impacted and may result in additional trading
costs and/or increase the index tracking risk. The Fund may also need to rely on
borrowings to meet redemptions, which may lead to increased expenses. For tax
efficiency purposes, the Fund may sell certain securities, and such sale may
cause the Fund to realize a loss and deviate from the performance of the Index.
In light of the factors discussed above, the Fund’s return may deviate
significantly from the return of the Index. Changes to the composition of the
Index in connection with a rebalancing or reconstitution of the Index may cause
the Fund to experience increased volatility, during which time the Fund’s index
tracking risk may be heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart
that follows shows how the Fund performed for the calendar years shown. The
table below the bar chart shows the Fund’s average annual returns (before and
after taxes). The bar chart and table provide an indication of the risks of
investing in the Fund by comparing the Fund’s performance from year to year and
by showing how the Fund’s average annual returns for the one year, five year,
ten year and/or since inception periods, as applicable, compared with the Fund’s
benchmark index and a broad measure of market performance. All
returns assume reinvestment of dividends and distributions. The
Fund’s past performance (before and after taxes) is not necessarily indicative
of how the Fund will perform in the future. Updated performance
information is available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total annual return
as of June 30,
2023 was 11.73%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
34.34% |
2Q
2020 |
Worst
Quarter: |
-42.78% |
1Q
2020 |
Average Annual Total
Returns for the Periods Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Since
Inception
(2/11/2013) |
|
| VanEck BDC
Income ETF (return before taxes) |
-8.78% |
7.64% |
5.71% |
|
| VanEck BDC
Income ETF (return after taxes on
distributions) |
-12.55% |
3.19% |
1.85% |
|
| VanEck BDC
Income ETF (return after taxes on distributions and sale of Fund
Shares) |
-5.14% |
3.87% |
2.55% |
|
|
MVIS
US Business Development Companies Index
(reflects no deduction for
fees, expenses or taxes) |
-8.57% |
7.08% |
5.76% |
|
|
S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
9.42% |
11.99% |
|
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily responsible for the day-to-day
management of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Peter
H. Liao |
Portfolio
Manager |
February
2013 |
|
| Griffin
Driscoll |
Deputy
Portfolio Manager |
August
2023 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
The
VanEck® Dynamic High Income ETF (the "Fund") seeks to
provide high current income with consideration for capital
appreciation.
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”).
You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees (fees
paid directly from your investment) |
None |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.10 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.00 |
% |
|
|
Acquired
Fund Fees and Expenses(b)(c) |
0.33 |
% |
|
|
Total
Annual Fund Operating Expenses(a) |
0.43 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)
Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
(b)
“Acquired Fund Fees and Expenses” include fees and expenses incurred
indirectly by the Fund as a result of investments in other investment companies,
including VanEck exchange-traded funds and funds which invest exclusively in
money market instruments. Because Acquired Fund Fees and Expenses are not borne
directly by the Fund, they will not be reflected in the expense information in
the Fund’s financial statements and the information presented
in the table will differ from that presented in the Fund’s financial highlights
included in the Fund’s reports to shareholders.
(c)
“Acquired Fund Fees and
Expenses” are based on estimated amounts for the current fiscal
year.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR
|
EXPENSES |
|
| 1 |
$44 |
| |
| 3 |
$138 |
| |
|
|
| |
|
|
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the period from November 1,
2022 (the Fund's commencement of operations) through April 30, 2023, the Fund’s
portfolio turnover rate was 8% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund is an actively managed exchange-traded fund
(“ETF”) that seeks to achieve its investment objective by investing, under
normal circumstances, in exchange-traded products (“ETPs”) that are registered
under the applicable federal securities laws and that invest in securities that
generate income. The Fund may also invest in U.S. Treasury securities under
normal circumstances. While the Adviser currently anticipates that the ETPs that
the Fund may invest in will primarily be ETFs managed by the Adviser, Van Eck
Absolute Return Advisers Corporation or their affiliates ("VanEck ETFs"), the
Fund may also invest in affiliated and
unaffiliated
ETPs, which could include ETFs and closed-end funds that invest in income
generating asset classes. The Fund does not have any limits on its investments
in below-investment grade securities (“junk” bonds), and the Fund will have
indirect exposure to below investment grade securities through its investments
in ETPs.
The
Adviser considers various inputs to guide asset allocation decisions and select
investments that the Adviser believes will offer income and enhanced
risk-adjusted returns. The term “risk-adjusted returns” does not imply that the
Adviser employs low-risk strategies or that an investment in the Fund should be
considered a low-risk or no risk investment. The Adviser seeks to maximize
risk-adjusted returns through an optimization process that incorporates both the
yield and observed risks of each ETP. Additionally, the Adviser may utilize
relative momentum and other discretionary factors of each underlying ETP to
allocate the Fund’s portfolio to ETPs with the highest expected risk-adjusted
returns. The term “relative momentum” means the speed at which the total returns
of an ETP are changing compared to other ETPs. Based on these inputs, the
Adviser selects the income generating asset classes that the Fund will invest in
and determines the relative weights each class will represent in the Fund. The
Fund may engage in active and frequent trading of portfolio
securities.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940 and, therefore, may invest a greater percentage of its assets in a
particular issuer.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Fund of Funds Risk. The
performance of the Fund is dependent on the performance of the underlying funds.
The Fund will be subject to the risks of the underlying funds’ investments. The
Fund will pay indirectly a proportional share of the fees and expenses of the
underlying funds in which it invests, including their investment advisory and
administration fees, while continuing to pay its own management fee. As a
result, the Fund’s shareholders will indirectly bear the expenses of the
underlying funds, absorbing duplicative levels of fees.
Risk
of Investing in ETPs.
The Fund may be subject to the following risks as a result of its investments in
ETPs:
Dividend
Paying Securities Risk.
There
can be no assurance that securities that pay dividends will continue to have a
high dividend yield, strong financial health or attractive valuation for any
period of time. Securities that pay dividends, as a group, may be out of favor
with the market and may underperform the overall equity market or stocks of
companies that do not pay dividends. In addition, changes in the dividend
policies of the companies held by an ETP or the capital resources available for
such companies' dividend payments may adversely affect the ETP.
Risk
of Investing in Foreign Securities.
Investments in the securities of foreign issuers involve risks beyond
those associated with investments in U.S. securities.
These additional risks include greater market volatility, the availability of
less reliable financial information, higher transactional and custody costs,
taxation by foreign governments, decreased market liquidity and political
instability. Because certain foreign securities markets may be limited in size,
the activity of large traders may have an undue influence on the prices of
securities that trade in such markets. An ETP invests in securities of issuers
located in countries whose economies are heavily dependent upon trading with key
partners. Any reduction in this trading may have an adverse impact on the ETP’s
investments.
Risk
of Investing in Emerging Market Issuers. Investments
in securities of emerging market issuers are exposed to a number of risks that
may make these investments volatile in price or difficult to trade. Emerging
markets are more likely than developed markets to experience problems with the
clearing and settling of trades, as well as the holding of securities by local
banks, agents and depositories. Political risks may include unstable
governments, nationalization, restrictions on foreign ownership, laws that
prevent investors from getting their money out of a country and legal systems
that do not protect property rights as well as the laws of the United States.
Market risks may also include economies that concentrate in only a few
industries, securities issues that are held by only a few investors, liquidity
issues and limited trading capacity in local exchanges and the possibility that
markets or issues may be manipulated by foreign nationals who have inside
information. The frequency, availability and quality of financial information
about investments in emerging markets varies. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited. All of these
factors can make emerging market securities more volatile and potentially less
liquid than securities issued in more developed markets.
Foreign
Currency Risk.
Because
all or a portion of the income received by an ETP from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the ETP's exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the ETP, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. Moreover, an ETP may incur costs in connection with
conversions between U.S. dollars and foreign
currencies.
Risk
of Investing in Mortgage REITs.
Mortgage
real estate investment trusts (“REITs”) are exposed to the risks specific to the
real estate market as well as the risks that relate specifically to the way in
which mortgage REITs are organized and operated. Mortgage REITs receive
principal and interest payments from the owners of the mortgaged properties.
Accordingly, mortgage REITs are subject to the credit risk of the borrowers.
Credit risk refers to the possibility that the borrower will be unable and/or
unwilling to make timely interest payments and/or repay the principal on the
loan to a mortgage REIT when due. To the extent that a mortgage REIT invests in
mortgage-backed securities offered by private issuers, such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers, the mortgage REIT may be subject to
additional risks. Timely payment of interest and principal of non-governmental
issuers may be supported by various forms of private insurance or guarantees,
including individual loan, title, pool and hazard insurance purchased by the
issuer. However, there can be no assurance that the private insurers can or will
meet their obligations under such policies. Unexpected high rates of default on
the mortgages held by a mortgage pool may adversely affect the value of a
mortgage-backed security and could result in losses to a mortgage REIT. The risk
of such defaults is generally higher in the case of mortgage pools that include
subprime mortgages. To the extent that a mortgage REIT’s portfolio is exposed to
lower-rated, unsecured or subordinated instruments, the risk of loss may
increase, which may have a negative impact on an ETP. Mortgage REITs also are
subject to the risk that the value of mortgaged properties may be less than the
amounts owed on the properties. If a mortgage REIT is required to foreclose on a
borrower, the amount recovered in connection with the foreclosure may be less
than the amount owed to the mortgage REIT. Mortgage REITs typically use leverage
and many are highly leveraged, which exposes them to leverage risk and the risks
generally associated with debt financing. Leverage risk refers to the risk that
leverage created from borrowing may impair a mortgage REIT’s liquidity, cause it
to liquidate positions at an unfavorable time and increase the volatility of the
values of securities issued by the mortgage REIT.
Preferred
Securities Risk.
Preferred securities are essentially contractual obligations that entail rights
to distributions declared by the issuer’s board of directors but may permit the
issuer to defer or suspend distributions for a certain period of time. If an ETP
owns a preferred security whose issuer has deferred or suspended distributions,
the ETP may be required to account for the distribution that has been deferred
or suspended for tax purposes, even though it may not have received this income
in cash. Further, preferred securities may lose substantial value if
distributions are deferred, suspended or not declared. Preferred securities may
also permit the issuer to convert preferred securities into the issuer’s common
stock. Preferred securities that are convertible to common stock may decline in
value if the common stock into which preferred securities may be converted
declines in value. Preferred securities are subject to greater credit risk than
traditional fixed income securities because the rights of holders of preferred
securities are subordinated to the rights of the bond and debt holders of an
issuer.
CLO
Risk. The
risks of investing in CLO securities include both the economic risks of the
underlying loans combined with the risks associated with the CLO structure
governing the priority of payments. The degree of such risk will generally
correspond to the specific tranche in which the Fund is invested. The Fund
intends to invest primarily in investment grade-rated tranches of CLOs rated
between and inclusive of AAA/Aaa and BBB-/Baa3; however, this rating does not
constitute a guarantee of credit quality and may be downgraded, and in stressed
market environments it is possible that even senior CLO debt tranches could
experience losses due to actual defaults, increased sensitivity to defaults due
to collateral default and the disappearance of the subordinated/equity tranches,
market anticipation of defaults, as well as negative market sentiment with
respect to CLO securities as an asset class. The Fund’s portfolio managers may
not be able to accurately predict how specific CLO securities or the portfolio
of underlying loans for such CLO securities will react to changes or stresses in
the market, including changes in interest rates. The most common risks
associated with investing in CLO securities are liquidity risk, interest rate
risk, credit risk, call risk, and the risk of default of the underlying asset.
Credit
Risk.
Debt securities are subject to credit risk. Credit risk refers to the
possibility that the issuer or guarantor of a security will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt or to otherwise honor its obligations and/or default completely on
securities. Debt securities are subject to varying degrees of credit risk,
depending on the issuer’s financial condition and on the terms of the
securities, which may be reflected in credit ratings. There is a possibility
that the credit rating of a debt security may be downgraded after purchase or
the perception of an issuer’s credit worthiness may decline, which may adversely
affect the value of the security.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities. During an economic downturn or substantial period
of rising interest rates, high yield security issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. In the event of a default, an ETP may incur
additional expenses to seek recovery. The secondary market for securities that
are high yield securities may be less liquid than the markets for higher quality
securities and high yield securities issued by non-corporate issuers may be less
liquid than high yield securities issued
by
corporate issuers, which, in either instance, may have an adverse effect on the
market prices of and an ETP’s ability to arrive at a fair value for certain
securities. The illiquidity of the market also could make it difficult for an
ETP to sell certain securities in connection with a rebalancing of its index, if
applicable. In addition, periods of economic uncertainty and change may result
in an increased volatility of market prices of high yield securities and a
corresponding volatility in an ETP’s net asset value. In addition, adverse
publicity and investor perceptions may decrease the values and liquidity of high
yield securities.
Interest
Rate Risk. Debt
securities, such as bonds, are also subject to interest rate risk. Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. When the general level of interest rates
goes up, the prices of most debt securities go down. When the general level of
interest rates goes down, the prices of most debt securities go up. Many factors
can cause interest rates to rise, including central bank monetary policy, rising
inflation rates and general economic conditions. A low interest rate environment
increases the risk associated with rising interest rates, including the
potential for periods of volatility and increased redemptions.
Measures
taken by the Federal Reserve Board may affect the money supply and as a result
of these measures, an ETF may face a heightened interest rate risk.
In
addition, debt securities with longer durations tend to be more sensitive to
interest rate changes, usually making them more volatile than debt securities
with shorter durations. To the extent an ETP invests a substantial portion of
its assets in debt securities with longer-term maturities, rising interest rates
may cause the value of an ETP’s investments to decline significantly.
In
addition, in response to the COVID-19 pandemic, as with other serious economic
disruptions, governmental authorities and regulators are enacting significant
fiscal and monetary policy changes, including providing direct capital infusions
into companies, creating new monetary programs and lowering interest rates
considerably. These actions present heightened risks to debt instruments, and
such risks could be even further heightened if these actions are unexpectedly or
suddenly reversed or are ineffective in achieving their desired
outcomes.
Call
Risk.
An ETP may invest in callable debt securities. If interest rates fall, it is
possible that issuers of callable securities will “call” (or prepay) their debt
securities before their maturity date. If a call were exercised by the issuer
during or following a period of declining interest rates, the ETP is likely to
have to replace such called security with a lower yielding security or
securities with greater risks or other less favorable features. If that were to
happen, it would decrease the ETP’s net investment income. An ETP also may fail
to recover additional amounts (i.e., premiums) paid for securities with higher
interest rates, resulting in an unexpected capital loss.
Concentration
Risk. Certain
of the ETPs may be concentrated in a particular sector or sectors or industry or
group of industries. To the extent that an ETP is concentrated in a particular
sector or sectors or industry or group of industries, the ETP will be subject to
the risk that economic, political or other conditions that have a negative
effect on those sectors and/or industry or groups of industries may negatively
impact the ETP to a greater extent than if the ETP’s assets were invested in a
wider variety of sectors or industries.
U.S.
Treasury Securities Risk.
Direct obligations of the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Income
Risk. The
Fund’s income may fluctuate and may decline during periods of falling interest
rates.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
Active
Management Risk.
In managing the Fund’s portfolio, the Adviser will apply investment techniques
and risk analyses in making investment decisions for the Fund, but there can be
no guarantee that these will produce the desired results. Investment decisions
made by the Adviser in seeking to achieve the Fund’s investment objective may
cause a decline in the value of the
investments
held by the Fund and, in turn, cause the Fund’s shares to lose value or
underperform other funds with similar investment objectives.
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.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Market
Risk. The
prices of the securities the Fund or
an
ETP may invest in are subject to the risks associated with investing in the
securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment in
the Fund or an ETP may lose money.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. 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.
Affiliated
Fund Risk. In
managing the Fund, the Adviser has the ability to select underlying funds which
it believes will achieve the Fund’s investment objective. The Adviser may be
subject to potential conflicts of interest in selecting underlying funds because
the Adviser may, due to its own financial interest or other business
considerations, have an incentive to invest in funds managed by the Adviser or
its affiliates rather than investing in funds managed or sponsored by
others.
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.
PERFORMANCE
The Fund commenced operations on November 1,
2022 and therefore does not have a performance history for the full calendar
year ended December 31, 2022. Once available, the Fund’s
performance information will be accessible on the Fund’s website at
www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily and jointly responsible for the
day-to-day management of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| David
Schassler |
Portfolio
Manager |
November
2022 |
|
| John
Lau |
Deputy
Portfolio Manager |
November
2022 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
Emerging Markets High Yield Bond ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of ICE BofA Diversified High Yield US Emerging
Markets Corporate Plus Index (the “Emerging Markets High Yield Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.40 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.00 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.40 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$41 |
| |
| 3 |
$128 |
| |
| 5 |
$224 |
| |
| 10 |
$505 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 21% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Emerging Markets High Yield Index is
comprised of U.S. dollar denominated bonds issued by non-sovereign emerging
market issuers that have a below investment grade rating and that are issued in
the major domestic and Eurobond markets.
In
order to qualify for inclusion in the Emerging Markets High Yield Index, an
issuer must have risk exposure to countries other than members of the FX Group
of Ten, all Western European countries and territories of the United States and
Western European countries.
The
FX Group of Ten includes all Euro members, Australia, Canada, Japan, New
Zealand, Norway, Sweden, Switzerland, the United Kingdom (“UK”) and the United
States. As of June 30, 2023, the Emerging Markets High Yield Index included 560
below investment grade bonds of 337 issuers and the weighted average maturity of
the Emerging Markets High Yield Index was 5.15 years. As of the same date,
approximately 67% of the Emerging Markets High Yield Index was comprised of Rule
144A securities. Such bonds may include quasi-sovereign bonds. The Fund’s 80%
investment policy is non-fundamental and may be changed without shareholder
approval upon 60 days’ prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Emerging Markets High Yield Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Emerging Markets High Yield Index and does
not take temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the Emerging Markets High Yield Index. Because
of the practical difficulties and expense of purchasing all of the securities in
the Emerging Markets High Yield Index, the Fund does not purchase all of the
securities in the Emerging Markets High Yield Index. Instead, the Adviser
utilizes a “sampling” methodology in seeking to achieve the Fund’s objective. As
such, the Fund may purchase a subset of the bonds in the Emerging Markets High
Yield Index in an effort to hold a portfolio of bonds with generally the same
risk and return characteristics of the Emerging Markets High Yield
Index.
The Fund may
concentrate its investments in a particular industry or group of industries to
the extent that the Emerging Markets High Yield Index concentrates in an
industry or group of industries. As of April 30, 2023, each of the financials
and energy sectors represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities, resulting in increased volatility of their market
prices and a corresponding volatility in the Fund’s net asset value. During an
economic downturn or substantial period of rising interest rates, high yield
security issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery. The
secondary market for high yield securities may be less liquid than the markets
for higher quality securities, and high yield securities issued by non-corporate
issuers may be less liquid than high yield securities issued by corporate
issuers. Illiquidity may have an adverse effect on the market prices of and the
Fund’s ability to arrive at a fair value for certain securities when it seeks to
do so. In addition, periods of economic uncertainty and change may result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition
framework.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Special
Risk Considerations of Investing in Latin American Issuers.
Investments in securities of Latin American issuers involve special
considerations not typically associated with investments in securities of
issuers located in the United States. The economies of certain Latin American
countries have, at times, experienced high interest rates, economic volatility,
inflation, currency devaluations and high unemployment rates. In addition,
commodities (such as oil, gas and minerals) represent a significant percentage
of the region’s exports and many economies in this region are particularly
sensitive to fluctuations in commodity prices. Adverse economic events in one
country may have a significant adverse effect on other countries of this
region.
Most
Latin American countries have experienced severe and persistent levels of
inflation, including, in some cases, hyperinflation. This has, in turn, led to
high interest rates, extreme measures by governments to keep inflation in check,
and a generally debilitating effect on economic growth. Although inflation in
many Latin American countries has lessened, there is no guarantee it will remain
at lower levels.
The
political history of certain Latin American countries has been characterized by
political uncertainty, intervention by the military in civilian and economic
spheres, and political corruption. Such events could reverse favorable trends
toward market and economic reform, privatization, and removal of trade barriers,
and could result in significant disruption in securities markets in the
region.
The
economies of Latin American countries are generally considered emerging markets
and can be significantly affected by currency devaluations. Certain Latin
American countries may also have managed currencies which are maintained at
artificial levels relative to the U.S. dollar rather than at levels determined
by the market. This type of system can lead to sudden and large adjustments in
the currency which, in turn, can have a disruptive and negative effect on
foreign investors. Certain Latin American countries also restrict the free
conversion of their currency into foreign currencies, including the U.S. dollar.
There is no significant foreign exchange market for many Latin American
currencies and it would, as a result, be difficult for the Fund to engage in
foreign currency transactions designed to protect the value of the Fund’s
interests in securities denominated in such currencies.
Finally,
a number of Latin American countries are among the largest debtors of developing
countries. There have been moratoria on, and a rescheduling of, repayment with
respect to these debts. Such events can restrict the flexibility of these debtor
nations in the international markets and result in the imposition of onerous
conditions on their economies.
Special
Risk Considerations of Investing in Brazilian Issuers. Investments
in securities of Brazilian issuers, including issuers located outside of Brazil
that generate significant revenues from Brazil, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Brazilian economy has been characterized by frequent, and
occasionally drastic, interventions by the Brazilian government, including the
imposition of wage and price controls, exchange controls, limiting imports,
blocking access to bank accounts and other measures. The Brazilian government
has often changed monetary, taxation, credit, trade and other policies to
influence the core of Brazil’s economy. Actions taken by the Brazilian
government concerning the economy may have significant effects on Brazilian
companies and on market conditions and prices of Brazilian securities. Brazil’s
economy may be subject to sluggish economic growth due to, among other things,
weak consumer spending, political turmoil, high rates of inflation and low
commodity prices. Brazil suffers from chronic structural public sector deficits.
The Brazilian government has privatized certain entities, which have suffered
losses due to, among other things, the inability to adjust to a competitive
environment.
The
market for Brazilian securities is directly influenced by the flow of
international capital, and economic and market conditions of certain countries,
especially emerging market countries. As a result, adverse economic conditions
or developments in other emerging market countries have at times significantly
affected the availability of credit in the Brazilian economy and resulted in
considerable outflows of funds and declines in the amount of foreign currency
invested in Brazil.
Investments
in Brazilian securities may be subject to certain restrictions on foreign
investment. Brazilian law provides that whenever a serious imbalance in Brazil’s
balance of payments exists or is anticipated, the Brazilian government may
impose temporary restrictions on the remittance to foreign investors of the
proceeds of their investment in Brazil and on the conversion of the Brazilian
real into foreign currency.
Brazil
has historically experienced high rates of inflation, a high level of debt, and
high crime rates, each of which may constrain economic growth. Brazil suffers
from high levels of corruption, crime and income disparity. The Brazilian
economy is also heavily
dependent
upon commodity prices and international trade. Unanticipated political or social
developments may result in sudden and significant investment losses. An increase
in prices for commodities, such as petroleum, the depreciation of the Brazilian
real and future governmental measures seeking to maintain the value of the
Brazilian real in relation to the U.S. dollar, may trigger increases in
inflation in Brazil and may slow the rate of growth of the Brazilian economy.
Conversely, appreciation of the Brazilian real relative to the U.S dollar may
lead to the deterioration of Brazil’s current account of balance of payments as
well as limit the growth of exports.
Special
Risk Considerations of Investing in Middle Eastern Issuers. Investments
in securities of Middle Eastern issuers, including issuers located outside of
the Middle East that generate significant revenues from the Middle East, involve
risks and special considerations not typically associated with investments in
the U.S. securities markets. Many Middle Eastern countries have little or no
democratic tradition, and the political and legal systems in such countries may
have an adverse impact on the Fund. Many economies in the Middle East are highly
reliant on income from the sale of oil and natural gas or trade with countries
involved in the sale of oil and natural gas, and their economies are therefore
vulnerable to changes in the market for oil and natural gas and foreign currency
values. As global demand for oil and natural gas fluctuates, many Middle Eastern
economies may be significantly impacted.
In
addition, many Middle Eastern governments have exercised and continue to
exercise substantial influence over many aspects of the private sector. In
certain cases, a Middle Eastern country’s government may own or control many
companies,including some of the largest companies in the country. Accordingly,
governmental actions in the future could have a significant effect on economic
conditions in Middle Eastern countries. This could affect private sector
companies and the Fund,as well as the value of securities in the Fund’s
portfolio.
Certain
Middle Eastern markets are in the earliest stages of development. As a result,
there may be a high concentration of market capitalization and trading volume in
a small number of issuers representing a limited number of industries, as well
as a high concentration of investors and financial intermediaries. Brokers in
Middle Eastern countries typically are fewer in number and less capitalized than
brokers in the U.S.
The
legal systems in certain Middle Eastern countries also may have an adverse
impact on the Fund. For example, the potential liability of a shareholder in a
U.S. corporation with respect to acts of the corporation generally is limited to
the amount of the shareholder’s investment. However, the notion of limited
liability is less clear in certain Middle Eastern countries. The Fund therefore
may be liable in certain Middle Eastern countries for the acts of a corporation
in which it invests for an amount greater than its actual investment in that
corporation. Similarly, the rights of investors in Middle Eastern issuers may be
more limited than those of shareholders of a U.S. corporation. It may be
difficult or impossible to obtain or enforce a legal judgment in a Middle
Eastern country. Some Middle Eastern countries prohibit or impose substantial
restrictions on investments in their capital markets, particularly their equity
markets, by foreign entities such as the Fund. For example, certain countries
may require governmental approval prior to investment by foreign persons or
limit the amount of investment by foreign persons in a particular issuer.
Certain Middle Eastern countries may also limit investment by foreign persons to
only a specific class of securities of an issuer that may have less advantageous
terms (including price) than securities of the issuer available for purchase by
nationals of the relevant Middle Eastern country.
The
manner in which foreign investors may invest in companies in certain Middle
Eastern countries, as well as limitations on those investments, may have an
adverse impact on the operations of the Fund. For example, in certain of these
countries, the Fund may be required to invest initially through a local broker
or other entity and then have the shares that were purchased re-registered in
the name of the Fund. Re-registration in some instances may not be possible on a
timely basis. This may result in a delay during which the Fund may be denied
certain of its rights as an investor, including rights as to dividends or to be
made aware of certain corporate actions. There also may be instances where the
Fund places a purchase order but is subsequently informed, at the time of
re-registration, that the permissible allocation of the investment to foreign
investors has already been filled and, consequently, the Fund may not be able to
invest in the relevant company.
Substantial
limitations may exist in certain Middle Eastern countries with respect to the
Fund’s ability to repatriate investment income or capital gains. The Fund could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investment.
Certain
Middle Eastern countries may be heavily dependent upon international trade and,
consequently, have been and may continue to be negatively affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade. These countries also have been and may continue to be adversely
impacted by economic conditions in the countries with which they trade. In
addition,certain issuers located in Middle Eastern countries in which the Fund
invests may operate in, or have dealings with, countries subject to sanctions
and/or embargoes imposed by the U.S. government and the United Nations, and/or
countries identified by the U.S. government as state sponsors of terrorism. As a
result, an issuer may sustain damage to its reputation if it is identified as an
issuer which operates in, or has dealings with, such countries. The Fund, as an
investor in such issuers, will be indirectly subject to those
risks.
Certain
Middle Eastern countries have strained relations with other Middle Eastern
countries due to territorial disputes,historical animosities, international
alliances, defense concerns or other reasons, which may adversely affect the
economies of these Middle
Eastern
countries. Certain Middle Eastern countries experience significant unemployment,
as well as widespread underemployment. There has also been a recent increase in
recruitment efforts and an aggressive push for territorial control by terrorist
groups in the region, which has led to an outbreak of warfare and hostilities.
Warfare in Syria has spread to surrounding areas, including many portions of
Iraq and Turkey. Such hostilities may continue into the future or may escalate
at any time due to ethnic, racial, political, religious or ideological tensions
between groups in the region or foreign intervention or lack of intervention,
among other factors.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Market Risk.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist
measures imposed or negotiated by the countries with which it trades. They also
have been, and may continue to be, adversely affected by economic conditions in
the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions Risk.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Risk
of Available Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging
market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws Risk.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be
limited.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
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.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary
receipts,
the purchase of depositary receipts may negatively affect the Fund’s ability to
track the performance of the Index and increase tracking error, which may be
exacerbated if the issuer of the depositary receipt discontinues issuing new
depositary receipts or withdraws existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times,
bid/ask spreads on the exchange and the
resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector
or sectors or industry or group of industries to reflect the Index’s allocation
to such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar years shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. Prior to May 13,
2015, the Fund sought to replicate as closely as possible, before fees and
expenses, the price and yield performance of an index called the BofA Merrill
Lynch Diversified High Yield US Emerging Markets Corporate Plus Index (the
“Prior Index”). Therefore, performance information prior to May 13, 2015
reflects the performance of the Fund while seeking to track the Prior
Index. All returns assume reinvestment of dividends and
distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total annual return
as of June 30,
2023 was 2.41%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
15.00% |
2Q
2020 |
Worst
Quarter: |
-15.16% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years* |
Past
Ten Years |
|
| VanEck
Emerging Markets High Yield Bond ETF (return before
taxes) |
-12.68% |
0.01% |
2.31% |
|
| VanEck
Emerging Markets High Yield Bond ETF (return after taxes on
distributions) |
-14.91% |
-2.38% |
-0.29% |
|
| VanEck
Emerging Markets High Yield Bond ETF (return after taxes on
distributions and sale of Fund Shares) |
-7.53% |
-0.92% |
0.64% |
|
|
ICE
BofA Diversified High Yield US Emerging Markets Corporate Plus Index*
(reflects no deduction for
fees, expenses or taxes) |
-13.71% |
-0.09% |
2.57% |
|
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes) |
-13.16% |
0.03% |
1.07% |
|
|
|
|
|
| |
*Prior to May 13,
2015, the Fund sought to replicate as closely as possible, before fees and
expenses, the price and yield performance of the Prior Index. Therefore,
performance information prior to May 13, 2015 reflects the performance of the
Fund while seeking to track the Prior Index. Prior to May 13, 2015, index data
reflects that of the Prior Index. From May 13, 2015, the index data reflects
that of the Emerging Markets High Yield Index.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
September
2012 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
Fallen Angel High Yield Bond ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of ICE US Fallen Angel High Yield 10% Constrained
Index (the “Fallen Angel Index” or the “Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
|
Management
Fee |
0.35 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.00 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.35 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$36 |
| |
| 3 |
$113 |
| |
| 5 |
$197 |
| |
| 10 |
$443 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 31% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Fallen Angel Index is comprised of
below investment grade corporate bonds denominated in U.S. dollars that were
rated investment grade at the time of issuance. Qualifying securities must be
issued in the U.S. domestic market and have a below investment grade rating.
Defaulted securities are removed from the Fallen Angel Index at the end of the
month in which they default. The Fallen Angel Index is comprised of bonds issued
by both U.S. and non-U.S. issuers.
The
country of risk of qualifying issuers must be a member of the FX Group of Ten, a
Western European nation, or a territory of the United States or a Western
European nation. The FX Group of Ten includes all Euro members, Australia,
Canada, Japan, New Zealand, Norway, Sweden, Switzerland, the United Kingdom and
the United States. As of June 30, 2023, the Fallen Angel Index included 163
below investment grade bonds of 72 issuers and approximately 16% of the Fallen
Angel Index was comprised of
Rule
144A securities. The Fund’s 80% investment policy is non-fundamental and may be
changed without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Fallen Angel Index by investing in a portfolio
of securities that generally replicates the Fallen Angel Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Fallen Angel Index and does not take
temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the Fallen Angel Index.
The
Fund may become "non-diversified" as defined under the Investment Company Act of
1940, solely as a result of a change in relative market capitalization or index
weighting of one or more constituents of the Fallen Angel Index. This means that
the Fund may invest a greater percentage of its assets in a limited number of
issuers than would be the case if the Fund were always managed as a diversified
management investment company. The Fund intends to be diversified in
approximately the same proportion as the Fallen Angel Index. Shareholder
approval will not be sought when the Fund crosses from diversified to
non-diversified status due solely to a change in the relative market
capitalization or index weighting of one or more constituents of the Fallen
Angel Index.
The Fund may
concentrate its investments in a particular industry or group of industries to
the extent that the Fallen Angel Index concentrates in an industry or group of
industries. As of April 30, 2023, each of the energy, consumer discretionary,
information technology and financials sectors represented a significant portion
of the Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities, resulting in increased volatility of their market
prices and a corresponding volatility in the Fund’s net asset value. During an
economic downturn or substantial period of rising interest rates, high yield
security issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery. The
secondary market for high yield securities may be less liquid than the markets
for higher quality securities, and high yield securities issued by non-corporate
issuers may be less liquid than high yield securities issued by corporate
issuers. Illiquidity may have an adverse effect on the market prices of and the
Fund’s ability to arrive at a fair value for certain securities when it seeks to
do so. In addition, periods of economic uncertainty and change may result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to
interest
rate changes, usually making them more volatile than debt securities, such as
bonds, with shorter durations. A substantial investment by the Fund in debt
securities with longer-term maturities during periods of rising interest rates
may cause the value of the Fund’s investments to decline significantly. Changing
interest rates may have unpredictable effects on markets, may result in
heightened market volatility and may detract from Fund performance to the extent
the Fund is exposed to such interest rates and/or volatility. It is difficult to
predict the magnitude, timing or direction of interest rate changes and the
impact these changes will have on the markets in which the Fund invests.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At
times,
the performance of securities of companies in the energy sector may lag the
performance of other sectors or the broader market as a whole. The price of oil,
natural gas and other fossil fuels may decline and/or experience significant
volatility, which could adversely impact companies operating in the energy
sector.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may
be
adversely impacted and may result in additional trading costs and/or increase
the index tracking risk. The Fund may also need to rely on borrowings to meet
redemptions, which may lead to increased expenses. For tax efficiency purposes,
the Fund may sell certain securities, and such sale may cause the Fund to
realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversification
Risk.
The
Fund may become classified as “non-diversified” under the Investment Company Act
of 1940 solely as a result of a change in relative market capitalization or
index weighting of one or more constituents of the its Index. If the Fund
becomes non-diversified, it may invest a greater portion of its assets in
securities of a smaller number of individual issuers than a diversified fund. As
a result, changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a more diversified
fund.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar years shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s former benchmark
index and a broad measure of market performance. Prior to
February 28, 2020, the Fund sought to replicate as closely as possible, before
fees and expenses, the price and yield performance of the ICE BofA US Fallen
Angel High Yield Index (the "Prior Index"). Therefore, performance information
prior to February 28, 2020 reflects the performance of the Fund while seeking to
track the Prior Index. As a result, the Fund’s future
performance may differ substantially from the performance information shown
below. All returns assume reinvestment of dividends and distributions.
The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 4.68%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
14.02% |
2Q
2020 |
Worst
Quarter: |
-13.14% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Past
Ten Years |
|
| VanEck Fallen
Angel High Yield Bond ETF (return before
taxes) |
-14.24% |
3.05% |
5.72% |
|
| VanEck
Fallen Angel High Yield Bond ETF (return after taxes on
distributions) |
-15.81% |
0.96% |
3.34% |
|
| VanEck
Fallen Angel High Yield Bond ETF (return after taxes on distributions
and sale of Fund Shares) |
-8.41% |
1.46% |
3.36% |
|
|
ICE
US Fallen Angel High Yield 10% Constrained Index*
(reflects no deduction for
fees, expenses or taxes) |
-14.00% |
3.38% |
6.40% |
|
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes) |
-13.16% |
0.03% |
1.07% |
|
|
|
|
|
| |
*
Prior
to February 28, 2020, the Fund sought to replicate as closely as possible,
before fees and expenses, the price and yield performance of the Prior Index.
Therefore, the performance information included in this table reflects the
performance of the Fund while seeking to track the Prior Index. Additionally,
the index data included in this table reflects that of the Prior Index. From
February 28, 2020, the index data will reflect that of the Fallen Angel
Index.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
April
2012 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck® Green Bond ETF (the “Fund”) seeks to replicate as
closely as possible, before fees and expenses, the price and yield performance
of the S&P Green Bond U.S. Dollar Select Index (the “Green Bond Index” or
the “Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.20 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.00 |
% |
|
|
|
| |
|
|
| |
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.20 |
% |
|
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$20 |
| |
| 3 |
$64 |
| |
| 5 |
$113 |
| |
| 10 |
$255 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 20% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at least 80% of its total assets
in securities that comprise the Fund’s benchmark index. The Green Bond Index is
comprised of bonds issued for qualified “green” purposes and seeks to measure
the performance of U.S. dollar denominated “green”-labeled bonds issued
globally. The Green Bond Index is sponsored by S&P Dow Jones Indices LLC,
which is not affiliated with or sponsored by the Fund or the Adviser. “Green”
bonds are bonds whose proceeds are used principally for climate change
mitigation, climate adaptation or other environmentally beneficial projects,
such as, but not limited to, the development of clean, sustainable or renewable
energy sources, commercial and industrial energy efficiency, or conservation of
natural resources. For a bond to be eligible for inclusion in the Green Bond
Index, the issuer of the bond must indicate the bond’s “green” label and the
rationale behind it, such as the intended use of proceeds. As an additional
filter, the bond must be flagged as “green” by Climate Bonds Initiative (“CBI”),
an international not-for-profit working to mobilize the bond market for climate
change
solutions, to be eligible for inclusion in the Green Bond Index. The Green Bond
Index is market value-weighted and includes supranational, corporate,
government-related, sovereign and securitized “green” bonds issued throughout
the world (including emerging market countries), and may include both investment
grade and below investment grade securities (commonly referred to as high yield
securities or “junk bonds”). “Securitized green bonds” are securities typically
collateralized by a specified pool of assets, such as mortgages, automobile
loans or other consumer receivables. All bonds must be rated by at least one
credit rating agency, except that up to 10% of the Green Bond Index can be
invested in unrated bonds that are issued or guaranteed by a
government-sponsored enterprise. The maximum weight of below investment grade
bonds (excluding any unrated bonds that are issued or guaranteed by a
government-sponsored enterprise) in the Green Bond Index is capped at 20%. No
more than 10% of the Green Bond Index can be invested in a single issuer.
Qualifying securities must have a maturity of at least 12 months at the time of
issuance and at least one month remaining until maturity at each rebalancing
date.
As
of June 30, 2023, the Green Bond Index consisted of 456 bonds issued by 266
issuers and the weighted average maturity of the Green Bond Index was
approximately 7.89 years. As of the same date, approximately 19.35% of the Green
Bond Index was comprised of Regulation S securities and 28.65% of the Green Bond
Index was comprised of Rule 144A securities. The S&P Green Bond Index is
rebalanced monthly. The Fund’s 80% investment policy is non-fundamental and may
be changed without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Green Bond Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Green Bond Index and does not take temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Green Bond Index. Because of the practical difficulties and
expense of purchasing all of the securities in the Green Bond Index, the Fund
does not purchase all of the securities in the Green Bond Index. Instead, the
Adviser utilizes a “sampling” methodology in seeking to achieve the Fund’s
objective. As such, the Fund may purchase a subset of the securities in the
Green Bond Index in an effort to hold a portfolio of bonds with generally the
same risk and return characteristics of the Green Bond Index.
The
Fund may concentrate its investments in a particular industry or group of
industries to the extent that the Green Bond Index concentrates in an industry
or group of industries.
As
of April 30, 2023, each of the financials and utilities sectors represented a
significant portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
“Green”
Bonds Risk.
Investments in “green” bonds include bonds whose proceeds are used principally
for climate mitigation, climate adaptation or other environmentally beneficial
projects, such as, but not limited to, the development of clean, sustainable or
renewable energy sources, commercial and industrial energy efficiency, or
conservation of natural resources. Investing in “green” bonds carries the risk
that, under certain market conditions, the Fund may underperform as compared to
funds that invest in a broader range of investments. In addition, some “green”
investments may be dependent on government tax incentives and subsidies and on
political support for certain environmental technologies and companies.
Investing primarily in “green” investments may affect the Fund’s exposure to
certain sectors or types of investments and will impact the Fund’s relative
investment performance depending on whether such sectors or investments are in
or out of favor in the market. The “green” sector may also have challenges such
as a limited number of issuers and limited liquidity in the market.
Additionally, there may also be a limited supply of bonds that merit “green”
status, which may adversely affect the Fund.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China that
generate significant revenues from China, involve certain risks and
considerations not typically associated with investments in U.S securities.
These risks include among others (i) more frequent (and potentially widespread)
trading suspensions and government interventions with respect to Chinese issuers
resulting in a lack of liquidity and in price volatility, (ii)
currency
revaluations and other currency exchange rate fluctuations or blockage, (iii)
the nature and extent of intervention by the Chinese government in the Chinese
securities markets, whether such intervention will continue and the impact of
such intervention or its discontinuation, (iv) the risk of nationalization or
expropriation of assets, (v) the risk that the Chinese government may decide not
to continue to support economic reform programs, (vi) limitations on the use of
brokers, (vii) higher rates of inflation, (viii) greater political, economic and
social uncertainty, (ix) market volatility caused by any potential regional or
territorial conflicts or natural or other disasters, and (x) the risk of
increased trade tariffs, embargoes, sanctions, investment restrictions and other
trade limitations. Certain securities are, or may in the future become
restricted, and the Fund may be forced to sell such securities and incur a loss
as a result. In addition, the economy of China differs, often unfavorably, from
the U.S. economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, interest
rates, allocation of resources and capital reinvestment, among others. The
Chinese central government has historically exercised substantial control over
virtually every sector of the Chinese economy through administrative regulation
and/or state ownership and actions of the Chinese central and local government
authorities continue to have a substantial effect on economic conditions in
China. In addition, the Chinese government has from time to time taken actions
that influence the prices at which certain goods may be sold, encourage
companies to invest or concentrate in particular industries, induce mergers
between companies in certain industries and induce private companies to publicly
offer their securities to increase or continue the rate of economic growth,
control the rate of inflation or otherwise regulate economic expansion. The
Chinese government may do so in the future as well, potentially having a
significant adverse effect on economic conditions in China.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems.
Additionally,
each of the factors described below could have a negative impact on the Fund’s
performance and increase the volatility of the Fund.
Securities
Market Risk.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of
resources
in such countries is subject to a high level of government control. Such
countries’ governments may strictly regulate the payment of foreign currency
denominated obligations and set monetary policy. Through their policies, these
governments may provide preferential treatment to particular industries or
companies. The policies set by the government of one of these countries could
have a substantial effect on that country’s economy.
Investment
and Repatriation Restrictions Risk.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Risk
of Available Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges
than
on more developed securities markets and securities may be generally less
liquid. The infrastructure for clearing, settlement and registration on the
primary and secondary markets of certain emerging market countries are less
developed than in certain other markets and under certain circumstances this may
result in the Fund experiencing delays in settling and/or registering
transactions in the markets in which it invests, particularly if the growth of
foreign and domestic investment in certain emerging market countries places an
undue burden on such investment infrastructure. Such delays could affect the
speed with which the Fund can transmit redemption proceeds and may inhibit the
initiation and realization of investment opportunities at optimum
times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws Risk.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Floating Rate Risk. The
Fund invests in floating-rate securities, which are instruments in which the
interest rate payable on an obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such a security
will generally decline in a falling interest rate environment, causing the Fund
to experience a reduction in the income it receives from the
security.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and
principal
than higher rated securities and are considered speculative. The prices of high
yield securities are likely to be more sensitive to adverse economic changes or
individual issuer developments than higher rated securities, resulting in
increased volatility of their market prices and a corresponding volatility in
the Fund’s net asset value. During an economic downturn or substantial period of
rising interest rates, high yield security issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. In the event of a default, the Fund may incur
additional expenses to seek recovery. The secondary market for high yield
securities may be less liquid than the markets for higher quality securities,
and high yield securities issued by non-corporate issuers may be less liquid
than high yield securities issued by corporate issuers. Illiquidity may have an
adverse effect on the market prices of and the Fund’s ability to arrive at a
fair value for certain securities when it seeks to do so. In addition, periods
of economic uncertainty and change may result in an increased volatility of
market prices of high yield securities and a corresponding volatility in the
Fund's net asset value.
Supranational
Bond Risk.
To the extent that the Fund invests in supranational bonds, the Fund will be
sensitive to changes in, and its performance may depend to a greater extent on,
the overall condition of the supranational entities that issue such bonds.
Certain securities in which the Fund may invest are obligations issued or backed
by supranational entities, such as the European Investment Bank. Obligations of
supranational organizations are subject to the risk that the governments on
whose support the entity depends for its financial backing or repayment may be
unable or unwilling to provide that support. If an issuer of supranational bonds
defaults on payments of principal and/or interest, the Fund may have limited
recourse against the issuer. A supranational entity’s willingness or ability to
repay principal and pay interest in a timely manner may be affected by its cash
flow situation, the extent of its reserves, the relative size of the debt
service burden to the entity as a whole and the political constraints to which a
supranational entity may be subject. During periods of economic uncertainty, the
market prices of supranational bonds, and the Fund’s net asset value, may be
more volatile than prices of corporate bonds, which may result in losses.
Obligations of a supranational organization that are denominated in foreign
currencies will also be subject to the risks associated with investment in
foreign currencies.
Government-Related Bond Risk. The
governmental authority or government-related entity that controls the repayment
of the bond may be unable or unwilling to honor its payment obligations. If an
issuer of government-related bonds defaults on payments of principal and/or
interest, the Fund may have limited recourse against the issuer. A
government-related debtor’s willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange when a payment is due, the relative size of the debt
service burden to the economy as a whole, the government-related debtor’s policy
toward international lenders, and the political constraints to which the debtor
may be subject. During periods of economic uncertainty, the market prices of
government-related bonds, and the Fund’s net asset value, may be more volatile
than prices of corporate bonds, which may result in losses.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
Securitized/Asset-Backed
Securities Risk. Investments
in asset-backed securities, including collateralized mortgage obligations, are
subject to the risk of significant credit downgrades, dramatic changes in
liquidity, and defaults to a greater extent than many other types of
fixed-income investments. During periods of falling interest rates, asset-backed
securities may be called or prepaid, which may result in the Fund having to
reinvest proceeds in other investments at a lower interest rate. During periods
of rising interest rates, the average life of asset-backed securities may
extend, which may lock in a below-market interest rate, increase the security’s
duration and interest rate sensitivity, and reduce the value of the security.
The Fund may invest in asset-backed securities issued or backed by federal
agencies or government sponsored enterprises or that are part of a
government-sponsored program, which may subject the Fund to the risks noted
above. The values of assets or collateral underlying asset-backed securities may
decline and, therefore, may not be adequate to cover underlying obligations.
Enforcing rights against the underlying assets or collateral may be difficult,
and the underlying assets or collateral may be insufficient if the issuer
defaults.
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.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Companies in the
utilities sector may be adversely affected by changes in exchange rates,
domestic and international competition, difficulty in raising adequate amounts
of capital and governmental limitation on rates charged to
customers.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to
changes
to the Index and high turnover of the Index. When markets are volatile, the
ability to sell securities at fair value prices may be adversely impacted and
may result in additional trading costs and/or increase the index tracking risk.
The Fund may also need to rely on borrowings to meet redemptions, which may lead
to increased expenses. For tax efficiency purposes, the Fund may sell certain
securities, and such sale may cause the Fund to realize a loss and deviate from
the performance of the Index. In light of the factors discussed above, the
Fund’s return may deviate significantly from the return of the Index. Changes to
the composition of the Index in connection with a rebalancing or reconstitution
of the Index may cause the Fund to experience increased volatility, during which
time the Fund’s index tracking risk may be heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar year shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. Prior to
September 1, 2019, the Fund sought to replicate as closely as possible, before
fees and expenses, the price and yield performance of the S&P Green Bond
Select Index (the “Prior Index”). Therefore, performance information prior to
September 1, 2019 reflects the performance of the Fund while seeking to track
the Prior Index. All returns assume reinvestment of dividends
and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 2.53%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
5.28% |
2Q
2020 |
Worst
Quarter: |
-6.01% |
1Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Since
Inception
(3/2/2017) |
| VanEck Green
Bond ETF (return before taxes) |
-11.85% |
-1.19% |
0.58% |
| VanEck Green
Bond ETF (return after taxes on
distributions) |
-12.75% |
-1.93% |
-0.15% |
| VanEck Green
Bond ETF (return after taxes on distributions and sale of Fund
Shares) |
-7.00% |
-1.18% |
0.16% |
|
S&P
Green Bond U.S. Dollar Select Index*
(reflects no deduction for
fees, expenses or taxes) |
-12.14% |
-0.86% |
1.00% |
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes)
|
-13.16% |
0.03% |
0.59% |
|
|
|
| |
*
Prior to September 1, 2019, the Fund sought to replicate as closely
as possible, before fees and expenses, the price and yield performance of the
Prior Index. Therefore, performance information prior to September 1, 2019
reflects the performance of the Fund while seeking to track the Prior Index.
Prior to September 1, 2019, index data reflects that of the Prior Index. From
September 1, 2019, the index data reflects that of the Green Bond
Index.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
March
2017 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
IG Floating Rate ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
US Investment Grade Floating Rate Index (the “Floating Rate Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.14 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.00 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.14 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$14 |
| |
| 3 |
$45 |
| |
| 5 |
$79 |
| |
| 10 |
$179 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 55% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Floating Rate Index is comprised of
U.S. dollar-denominated floating rate notes issued by corporate entities or
similar commercial entities that are public reporting companies in the United
States and rated investment grade. The
Fund may invest a significant portion of its assets in Rule 144A securities. As
of June 30, 2023, the Floating Rate Index included 124 notes of 65 issuers and
approximately 27% of the Floating Rate Index was comprised of Rule 144A
securities. The Fund’s 80% investment policy is non-fundamental and may be
changed without shareholder approval upon 60 days’ prior written notice to
shareholders. The Fund, using a “passive” or indexing investment approach,
attempts to approximate the investment performance of the Floating Rate Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Floating Rate Index and
does not take temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Floating Rate Index. Because of
the practical difficulties and expense of purchasing all of the securities
in
the Floating Rate Index, the Fund does not purchase all of the securities in the
Floating Rate Index. Instead, the Adviser utilizes a “sampling” methodology in
seeking to achieve the Fund’s objective. As such, the Fund may purchase a subset
of the bonds in the Floating Rate Index in an effort to hold a portfolio of
bonds with generally the same risk and return characteristics of the Floating
Rate Index.
The
Fund is classified as a non-diversified fund 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 Floating Rate Index
concentrates in an industry or group of industries. As of April 30, 2023, the
financials sector represented
a significant portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Credit Risk.
Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Floating Rate Risk. The
Fund invests in floating-rate securities, which are instruments in which the
interest rate payable on an obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such a security
will generally decline in a falling interest rate environment, causing the Fund
to experience a reduction in the income it receives from the
security.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted
securities
than for more liquid securities. The Fund may have to bear the expense of
registering restricted securities for resale and the risk of substantial delays
in effecting the registration.
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.
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.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to
changes
to the Index and high turnover of the Index. When markets are volatile, the
ability to sell securities at fair value prices may be adversely impacted and
may result in additional trading costs and/or increase the index tracking risk.
The Fund may also need to rely on borrowings to meet redemptions, which may lead
to increased expenses. For tax efficiency purposes, the Fund may sell certain
securities, and such sale may cause the Fund to realize a loss and deviate from
the performance of the Index. In light of the factors discussed above, the
Fund’s return may deviate significantly from the return of the Index. Changes to
the composition of the Index in connection with a rebalancing or reconstitution
of the Index may cause the Fund to experience increased volatility, during which
time the Fund’s index tracking risk may be heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The
Fund is classified as a “non-diversified” fund under the Investment Company Act
of 1940. The Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest a relatively high percentage of its
assets in a smaller number of issuers or may invest a larger proportion of its
assets in a single issuer. Moreover, the gains and losses on a single investment
may have a greater impact on the Fund’s net asset value and may make the Fund
more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar years shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information
is available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 3.88%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
5.58% |
2Q
2020 |
Worst
Quarter: |
-5.13% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Past Ten
Years |
|
| VanEck IG
Floating Rate ETF (return before taxes) |
0.68% |
1.77% |
1.58% |
|
| VanEck IG
Floating Rate ETF (return after taxes on
distributions) |
-0.25% |
0.93% |
0.94% |
|
| VanEck IG
Floating Rate ETF (return after taxes on distributions and sale of Fund
Shares) |
0.40% |
1.00% |
0.93% |
|
|
MVIS
US Investment Grade Floating Rate Index
(reflects no deduction for
fees, expenses or taxes) |
0.48% |
1.87% |
1.83% |
|
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes) |
-13.16% |
0.03% |
1.07% |
|
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
September
2012 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
International High Yield Bond ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of ICE BofA Global ex-US Issuers High Yield
Constrained Index (the “International High Yield Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.40 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.00 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.40 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$41 |
| |
| 3 |
$128 |
| |
| 5 |
$224 |
| |
| 10 |
$505 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 22% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at least 80% of its total assets
in securities that comprise the Fund’s benchmark index. The International High
Yield Index is comprised of below investment grade bonds issued by corporations
located throughout the world (which may include emerging market countries)
excluding the United States, denominated in euros, U.S. dollars, Canadian
dollars or pound sterling and issued in the major domestic or eurobond markets.
Qualifying securities must have a below investment grade rating. As of June 30,
2023, the International High Yield Index included 1,597 below investment grade
securities of 773 issuers and approximately 37% of the International High Yield
Index was comprised of Rule 144A securities. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the International High Yield Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the International High Yield Index and does not
take temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the International High Yield Index. Because of
the practical difficulties and expense of purchasing all of the securities in
the International High Yield Index, the Fund does not purchase all of the
securities in the International High Yield Index. Instead, the Adviser utilizes
a “sampling” methodology in seeking to achieve the Fund’s objective. As such,
the Fund may purchase a subset of the bonds in the International High Yield
Index in an effort to hold a portfolio of bonds with generally the same risk and
return characteristics of the International High Yield Index.
The Fund may
concentrate its investments in a particular industry or group of industries to
the extent that the International High Yield Index concentrates in an industry
or group of industries. As of April 30, 2023, each of the financials,
industrials, information technology and energy sectors represented a significant
portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities, resulting in increased volatility of their market
prices and a corresponding volatility in the Fund’s net asset value. During an
economic downturn or substantial period of rising interest rates, high yield
security issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery. The
secondary market for high yield securities may be less liquid than the markets
for higher quality securities, and high yield securities issued by non-corporate
issuers may be less liquid than high yield securities issued by corporate
issuers. Illiquidity may have an adverse effect on the market prices of and the
Fund’s ability to arrive at a fair value for certain securities when it seeks to
do so. In addition, periods of economic uncertainty and change may result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Market Risk.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower
trading
volume, illiquidity, inflation, greater price fluctuations, uncertainty
regarding the existence of trading markets, governmental control and heavy
regulation of labor and industry. These factors, coupled with restrictions on
foreign investment and other factors, limit the supply of securities available
for investment by the Fund. This will affect the rate at which the Fund is able
to invest in emerging market countries, the purchase and sale prices for such
securities and the timing of purchases and sales. Emerging markets can
experience high rates of inflation, deflation and currency devaluation. The
prices of certain securities listed on securities markets in emerging market
countries have been subject to sharp fluctuations and sudden declines, and no
assurance can be given as to the future performance of listed securities in
general. Volatility of prices may be greater than in more developed securities
markets. Moreover, securities markets in emerging market countries may be closed
for extended periods of time or trading on securities markets may be suspended
altogether due to political or civil unrest. Market volatility may also be
heightened by the actions of a small number of investors. Brokerage firms in
emerging market countries may be fewer in number and less established than
brokerage firms in more developed markets. Since the Fund may need to effect
securities transactions through these brokerage firms, the Fund is subject to
the risk that these brokerage firms will not be able to fulfill their
obligations to the Fund. This risk is magnified to the extent the Fund effects
securities transactions through a single brokerage firm or a small number of
brokerage firms. In addition, the infrastructure for the safe custody of
securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions Risk.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Risk
of Available Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the
speed
with which the Fund can transmit redemption proceeds and may inhibit the
initiation and realization of investment opportunities at optimum
times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws Risk.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Special
Risk Considerations of Investing in United Kingdom Issuers. Investments
in securities of United Kingdom issuers, including issuers located outside of
the United Kingdom that generate significant revenues from the United Kingdom,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. Investments in United Kingdom
issuers may subject the Fund to regulatory, political, currency, security and
economic risks specific to the United Kingdom. The British economy relies
heavily on the export of financials to the United States and other European
countries. The British economy, along with the United States and certain other
European Union economies, experienced a significant economic slowdown during the
recent financial crisis. In a referendum held on June 23, 2016, voters in the
United Kingdom voted to leave the European Union, creating economic and
political uncertainty in its wake. On January 31, 2020, the United Kingdom
officially withdrew from the European Union. On December 30, 2020, the European
Union and United Kingdom signed the EU-UK Trade and Cooperation
Agreement,
an agreement on the terms governing certain aspects of the European Union’s and
the United Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition framework.
Special
Risk Considerations of Investing in Latin American Issuers.
Investments in securities of Latin American issuers involve special
considerations not typically associated with investments in securities of
issuers located in the United States. The economies of certain Latin American
countries have, at times, experienced high interest rates, economic volatility,
inflation, currency devaluations and high unemployment rates. In addition,
commodities (such as oil, gas and minerals) represent a significant percentage
of the region’s exports and many economies in this region are particularly
sensitive to fluctuations in commodity prices. Adverse economic events in one
country may have a significant adverse effect on other countries of this
region.
Most
Latin American countries have experienced severe and persistent levels of
inflation, including, in some cases, hyperinflation. This has, in turn, led to
high interest rates, extreme measures by governments to keep inflation in check,
and a generally debilitating effect on economic growth. Although inflation in
many Latin American countries has lessened, there is no guarantee it will remain
at lower levels.
The
political history of certain Latin American countries has been characterized by
political uncertainty, intervention by the military in civilian and economic
spheres, and political corruption. Such events could reverse favorable trends
toward market and economic reform, privatization, and removal of trade barriers,
and could result in significant disruption in securities markets in the
region.
The
economies of Latin American countries are generally considered emerging markets
and can be significantly affected by currency devaluations. Certain Latin
American countries may also have managed currencies which are maintained at
artificial levels relative to the U.S. dollar rather than at levels determined
by the market. This type of system can lead to sudden and large adjustments in
the currency which, in turn, can have a disruptive and negative effect on
foreign investors. Certain Latin American countries also restrict the free
conversion of their currency into foreign currencies, including the U.S. dollar.
There is no significant foreign exchange market for many Latin American
currencies and it would, as a result, be difficult for the Fund to engage in
foreign currency transactions designed to protect the value of the Fund’s
interests in securities denominated in such currencies.
Finally,
a number of Latin American countries are among the largest debtors of developing
countries. There have been moratoria on, and a rescheduling of, repayment with
respect to these debts. Such events can restrict the flexibility of these debtor
nations in the international markets and result in the imposition of onerous
conditions on their economies.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
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.
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.
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.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy
sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may
be
adversely impacted and may result in additional trading costs and/or increase
the index tracking risk. The Fund may also need to rely on borrowings to meet
redemptions, which may lead to increased expenses. For tax efficiency purposes,
the Fund may sell certain securities, and such sale may cause the Fund to
realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar years shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information
is available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 4.31%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
13.19% |
2Q
2020 |
Worst
Quarter: |
-14.44% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Past
Ten Years |
|
| VanEck
International High Yield Bond ETF (return before
taxes) |
-14.52% |
-0.60% |
1.92% |
|
| VanEck
International High Yield Bond ETF (return after taxes on
distributions) |
-16.20% |
-2.41% |
0.00% |
|
| VanEck
International High Yield Bond ETF (return after taxes on distributions
and sale of Fund Shares) |
-8.59% |
-1.14% |
0.66% |
|
|
ICE
BofA Global ex-US Issuers High Yield Constrained Index
(reflects no deduction for
fees, expenses or taxes) |
-15.34% |
-0.52% |
2.37% |
|
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes) |
-13.16% |
0.03% |
1.07% |
|
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
April
2012 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck® J.P. Morgan EM Local Currency Bond ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the J.P. Morgan GBI-EM Global Core Index (the
“Emerging Markets Global Core Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.27 |
% |
|
|
|
| |
|
Other
Expenses |
0.04 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.31 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.01 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.30 |
% |
|
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund
expenses to the extent necessary to prevent the operating expenses of the Fund
(excluding acquired fund fees and expenses, interest expense, trading expenses,
taxes and extraordinary expenses) from exceeding 0.30% of the Fund’s average
daily net assets per year until at least September 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same (except that the example
incorporates the fee waivers and/or expense reimbursement arrangement for only
the first year). Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$31 |
| |
| 3 |
$99 |
| |
| 5 |
$173 |
| |
| 10 |
$392 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 29% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Emerging Markets Global Core Index is
comprised of bonds issued by emerging market governments and denominated in the
local currency of the issuer. As of June 30, 2023, the Emerging Markets Global
Core Index included 344 bonds of 20 sovereign issuers.
This
80%
investment policy is non-fundamental and may be changed without shareholder
approval upon 60 days’ prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Emerging Markets Global Core Index. Unlike
many investment companies that try to “beat” the performance of a benchmark
index, the Fund does not try to “beat” the Emerging Markets Global Core Index
and does not take temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Emerging Markets Global Core
Index. Because of the practical difficulties and expense of purchasing all of
the securities in the Emerging Markets Global Core Index, the Fund does not
purchase all of the securities in the Emerging Markets Global Core Index.
Instead, the Adviser utilizes a “sampling” methodology in seeking to achieve the
Fund’s objective. As such, the Fund may purchase a subset of the bonds in the
Emerging Markets Global Core Index in an effort to hold a portfolio of bonds
with generally the same risk and return characteristics of the Emerging Markets
Global Core Index.
The
Fund is classified as a non-diversified fund 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 Emerging Markets Global
Core Index concentrates in an industry or group of industries. As of April 30,
2023, the government sector represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Market Risk.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in
emerging
market countries may be fewer in number and less established than brokerage
firms in more developed markets. Since the Fund may need to effect securities
transactions through these brokerage firms, the Fund is subject to the risk that
these brokerage firms will not be able to fulfill their obligations to the Fund.
This risk is magnified to the extent the Fund effects securities transactions
through a single brokerage firm or a small number of brokerage firms. In
addition, the infrastructure for the safe custody of securities and for
purchasing and selling securities, settling trades, collecting dividends,
initiating corporate actions, and following corporate activity is not as well
developed in emerging market countries as is the case in certain more developed
markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions Risk.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market
countries
may also withdraw or decline to renew a license that enables the Fund to invest
in such country. These factors make investing in issuers located or operating in
emerging market countries significantly riskier than investing in issuers
located or operating in more developed countries, and any one of them could
cause a decline in the net asset value of the Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Risk
of Available Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Risk Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code of 1986. The
liquidation of investments, if required, could be at disadvantageous prices or
otherwise have an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities
or cash from the other party. Settlement systems in emerging market countries
also have a higher risk of failed trades and back to back settlements may not be
possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws Risk.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously
experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Special
Risk Considerations of Investing in Latin American Issuers.
Investments in securities of Latin American issuers involve special
considerations not typically associated with investments in securities of
issuers located in the United States. The economies of certain Latin American
countries have, at times, experienced high interest rates, economic volatility,
inflation, currency devaluations and high unemployment rates. In addition,
commodities (such as oil, gas and minerals) represent a significant percentage
of the region’s exports and many economies in this region are particularly
sensitive to fluctuations in commodity prices. Adverse economic events in one
country may have a significant adverse effect on other countries of this
region.
Most
Latin American countries have experienced severe and persistent levels of
inflation, including, in some cases, hyperinflation. This has, in turn, led to
high interest rates, extreme measures by governments to keep inflation in check,
and a generally debilitating effect on economic growth. Although inflation in
many Latin American countries has lessened, there is no guarantee it will remain
at lower levels.
The
political history of certain Latin American countries has been characterized by
political uncertainty, intervention by the military in civilian and economic
spheres, and political corruption. Such events could reverse favorable trends
toward market and economic reform, privatization, and removal of trade barriers,
and could result in significant disruption in securities markets in the
region.
The
economies of Latin American countries are generally considered emerging markets
and can be significantly affected by currency devaluations. Certain Latin
American countries may also have managed currencies which are maintained at
artificial levels relative to the U.S. dollar rather than at levels determined
by the market. This type of system can lead to sudden and large adjustments in
the currency which, in turn, can have a disruptive and negative effect on
foreign investors. Certain Latin American countries also restrict the free
conversion of their currency into foreign currencies, including the U.S. dollar.
There is no significant foreign exchange market for many Latin American
currencies and it would, as a result, be difficult for the Fund to engage in
foreign currency transactions designed to protect the value of the Fund’s
interests in securities denominated in such currencies.
Finally,
a number of Latin American countries are among the largest debtors of developing
countries. There have been moratoria on, and a rescheduling of, repayment with
respect to these debts. Such events can restrict the flexibility of these debtor
nations in the international markets and result in the imposition of onerous
conditions on their economies.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China that
generate significant revenues from China, involve certain risks and
considerations not typically associated with investments in U.S securities.
These risks include among others (i) more frequent (and potentially widespread)
trading suspensions and government interventions with respect to Chinese issuers
resulting in a lack of liquidity and in price volatility, (ii) currency
revaluations and other currency exchange rate fluctuations or blockage, (iii)
the nature and extent of intervention by the Chinese government in the Chinese
securities markets, whether such intervention will continue and the impact of
such intervention or its discontinuation, (iv) the risk of nationalization or
expropriation of assets, (v) the risk that the Chinese government may decide not
to continue to support economic reform programs, (vi) limitations on the use of
brokers, (vii) higher rates of inflation, (viii) greater political, economic and
social uncertainty, (ix) market volatility caused by any potential regional or
territorial conflicts or natural or other disasters, and (x) the risk of
increased trade tariffs, embargoes, sanctions, investment restrictions and other
trade limitations. Certain securities are, or may in the future become
restricted, and the Fund may be forced to sell such securities and
incur
a loss as a result. In addition, the economy of China differs, often
unfavorably, from the U.S. economy in such respects as structure, general
development, government involvement, wealth distribution, rate of inflation,
growth rate, interest rates, allocation of resources and capital reinvestment,
among others. The Chinese central government has historically exercised
substantial control over virtually every sector of the Chinese economy through
administrative regulation and/or state ownership and actions of the Chinese
central and local government authorities continue to have a substantial effect
on economic conditions in China. In addition, the Chinese government has from
time to time taken actions that influence the prices at which certain goods may
be sold, encourage companies to invest or concentrate in particular industries,
induce mergers between companies in certain industries and induce private
companies to publicly offer their securities to increase or continue the rate of
economic growth, control the rate of inflation or otherwise regulate economic
expansion. The Chinese government may do so in the future as well, potentially
having a significant adverse effect on economic conditions in
China.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities, resulting in increased volatility of their market
prices and a corresponding volatility in the Fund’s net asset value. During an
economic downturn or substantial period of rising interest rates, high yield
security issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery. The
secondary market for high yield securities may be less liquid than the markets
for higher quality securities, and high yield securities issued by non-corporate
issuers may be less liquid than high yield securities issued by corporate
issuers. Illiquidity may have an adverse effect on the market prices of and the
Fund’s ability to arrive at a fair value for certain securities when it seeks to
do so. In addition, periods of economic uncertainty and change may result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
Sovereign
Bond Risk. Investment
in sovereign bonds involves special risks not present in corporate bonds. The
governmental authority that controls the repayment of the bond may be unable or
unwilling to make interest payments and/or repay the principal on its debt or to
otherwise honor its obligations. If an issuer of sovereign bonds defaults on
payments of principal and/or interest, the Fund may have limited recourse
against the issuer. During periods of economic uncertainty, the market prices of
sovereign bonds, and the Fund’s net asset value, may be more volatile than
prices of corporate bonds, which may result in losses. In the past, certain
governments of emerging market countries have declared themselves unable to meet
their financial obligations on a timely basis, which has resulted in losses for
holders of sovereign bonds.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural
disasters,
epidemics and pandemics, terrorism, conflicts and social unrest) adversely
interrupt the global economy; in these and other circumstances, such events or
developments might affect companies world-wide. Overall securities values could
decline generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The
Fund is classified as a “non-diversified” fund under the Investment Company Act
of 1940. The Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest a relatively high percentage of its
assets in a smaller number of issuers or may invest a larger proportion of its
assets in a single issuer. Moreover, the gains and losses on a single investment
may have a greater impact on the Fund’s net asset value and may make the Fund
more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed
for the calendar years shown. The table below the bar chart shows the Fund’s
average annual returns (before and after taxes). The bar chart and table provide an indication of the risks
of investing in the Fund by comparing the Fund’s performance from year to year
and by showing how the Fund’s average annual returns for
the one year, five year, ten year and/or
since inception periods, as applicable, compared with the Fund’s benchmark index
and a broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information
is available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 7.45%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
10.73 |
% |
1Q
2016 |
Worst
Quarter: |
-14.44 |
% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Past
Ten Years |
|
| VanEck J.P.
Morgan EM Local Currency Bond ETF (return before
taxes) |
-10.15% |
-3.17% |
-2.52% |
|
| VanEck J.P.
Morgan EM Local Currency Bond ETF (return after taxes on
distributions) |
-10.11% |
-3.86% |
-3.42% |
|
| VanEck J.P.
Morgan EM Local Currency Bond ETF (return after taxes on distributions
and sale of Fund Shares) |
-5.97% |
-2.58% |
-2.16% |
|
|
J.P.
Morgan GBI-EM Global Core Index
(reflects no deduction for
fees, expenses or taxes) |
-10.18% |
-2.86% |
-2.05% |
|
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes) |
-13.16% |
0.03% |
1.07% |
|
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
September
2012 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
Moody’s
Analytics®
BBB Corporate Bond ETF
(the
“Fund”) seeks to track, as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Moody’s Analytics®
US BBB Corporate Bond Index (the “BBB Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.25% |
|
|
Other
Expenses(a) |
0.00% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.25% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck
Associates Corporation (the "Adviser") will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$26 |
| |
| 3 |
$80 |
| |
| 5 |
$141 |
| |
| 10 |
$318 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 91% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at least 80% of its total assets
in securities that comprise the Fund’s benchmark index. The BBB Index is
comprised of U.S. dollar-denominated corporate bonds issued in the U.S. domestic
market that have a BBB rating based on the bond’s composite rating, which is an
average of ratings from various rating agencies. Bonds no longer rated BBB,
including non-investment grade bonds, are removed from the BBB Index at the end
of the month in which they are upgraded or downgraded in connection with the BBB
Index’s next scheduled rebalance. The BBB Index is comprised of bonds issued by
both U.S. and non-U.S. issuers that the BBB Index provider determines to have an
attractive valuation based on proprietary credit risk metrics developed by
Moody’s Analytics, Inc. (“Moody’s Analytics”). Further, bonds that the BBB Index
provider determines to
have
the highest probability of being downgraded to non-investment grade, based on
proprietary credit risk metrics developed by Moody’s Analytics, are excluded
from the BBB Index.
As
of June 30, 2023, the BBB Index included 375 notes of 109 issuers and
approximately 22% of the BBB Index was comprised of Rule 144A securities. These
amounts are subject to change. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders. The Fund, using a “passive” or indexing
investment approach, attempts to approximate the investment performance of the
BBB Index. Unlike many investment companies that try to “beat” the performance
of a benchmark index, the Fund does not try to “beat” the BBB Index and does not
take temporary defensive positions that are inconsistent with its investment
objective of seeking to track the BBB Index. Because of the practical
difficulties and expense of purchasing all of the securities in the BBB Index,
the Fund does not purchase all of the securities in the BBB Index. Instead, the
Adviser utilizes a “sampling” methodology in seeking to achieve the Fund’s
objective. As such, the Fund may purchase a subset of the bonds in the BBB Index
in an effort to hold a portfolio of bonds with generally the same risk and
return characteristics of the BBB Index.
The
Fund is classified as a non-diversified fund 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 BBB Index concentrates in an industry or group of
industries. As of April 30, 2023, each of the financials, information
technology, consumer staples, consumer discretionary and utilities sectors
represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
BBB-Rated
Bond Risk. BBB-rated
bonds are typically subject to greater risk of downgrade than other investment
grade bonds. The risk of downgrade to below-investment grade will be heightened
during an economic downturn or substantial period of rising interest rates.
Downgrading a bond from investment grade to high yield (or “junk bond”) could
negatively affect its value.
Credit Risk.
Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness
may
decline, which may adversely affect the value of the security. Lower credit
quality may also affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Companies in the
utilities sector may be adversely affected by changes in exchange rates,
domestic and international competition, difficulty in raising adequate amounts
of capital and governmental limitation on rates charged to
customers.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the
business,
or do not process creation and/or redemption orders, there may be a
significantly diminished trading market for Shares or Shares may trade like
closed-end funds at a discount (or premium) to net asset value and possibly face
trading halts and/or de-listing. This can be reflected as a spread between the
bid-ask prices for the Fund. The Authorized Participant concentration risk may
be heightened in cases where Authorized Participants have limited or diminished
access to the capital required to post collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Data
Risk.
Given the complexity of the investments and strategies of the Fund, the Adviser
relies heavily on quantitative models and information and data. This data is
used to construct sets of transactions and investments, and to provide risk
management insights. If the quantitative models and information and data proves
to be incorrect or incomplete, any decisions made in reliance thereon expose the
Fund to potential risks.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The
Fund is classified as a “non-diversified” fund under the Investment Company Act
of 1940. The Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest a relatively high percentage of its
assets in a smaller number of issuers or may invest a larger proportion of its
assets in a single issuer. Moreover, the gains and losses on a single investment
may have a greater impact on the Fund’s net asset value and may make the Fund
more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar years shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information
is available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 3.65%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
4.41% |
4Q
2022 |
Worst
Quarter: |
-8.24% |
1Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
| Past
One Year |
Since
Inception
(12/01/2020) |
|
| VanEck
Moody’s Analytics BBB Corporate Bond ETF (return before
taxes) |
-15.02% |
-6.75% |
|
| VanEck
Moody’s Analytics BBB Corporate Bond ETF (return after taxes on
distributions) |
-16.09% |
-7.77% |
|
| VanEck
Moody’s Analytics BBB Corporate Bond ETF (return after taxes on
distributions and sale of Fund Shares) |
-8.88% |
-5.48% |
|
|
MVIS Moody’s
Analytics US BBB Corporate Bond Index (reflects
no deduction for fees, expenses or
taxes) |
-15.71% |
-7.00% |
|
|
ICE
BofA US Broad Market Index
(reflects
no deduction for fees, expenses or taxes) |
-13.16% |
-7.02% |
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van
Eck Associates Corporation.
Portfolio
Manager.
The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
December
2020 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
Moody’s
Analytics® IG Corporate Bond ETF (the “Fund”) seeks to track,
as closely as possible, before fees and expenses, the price and yield
performance of the MVIS®
Moody’s Analytics®
US Investment Grade Corporate Bond Index (the “US IG Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.20% |
|
|
Other
Expenses(a) |
0.00% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.20% |
|
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$20 |
| |
| 3 |
$64 |
| |
| 5 |
$113 |
| |
| 10 |
$255 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 84% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund's benchmark index. The US IG Index is comprised of U.S.
dollar-denominated corporate bonds issued in the U.S. domestic market that have
an investment grade rating based on the bond’s composite rating, which is an
average of ratings from various rating agencies. Bonds that fall below
investment grade are removed from the US IG Index at the end of the month in
which they are downgraded in connection with the US IG Index's next scheduled
rebalance.
The
US IG Index is comprised of bonds issued by both U.S. and non-U.S. issuers that
the US IG Index provider determines to have an attractive valuation based on
proprietary credit risk metrics developed by Moody's Analytics, Inc. (“Moody's
Analytics”).
Further,
bonds that the US IG Index provider determines to have the highest probability
of being downgraded to non-investment grade, based on proprietary credit risk
metrics developed by Moody's Analytics, are excluded from the US IG
Index.
As
of June 30, 2023 the US IG Index included 492 notes of 123 issuers and
approximately 28% of the US IG Index was comprised of Rule 144A securities.
These amounts are subject to change.
The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the US IG Index. Unlike many investment companies
that try to “beat” the performance of a benchmark index, the Fund does not try
to “beat” the US IG Index and does not take temporary defensive positions that
are inconsistent with its investment objective of seeking to track the US IG
Index. Because of the practical difficulties and expense of purchasing all of
the securities in the US IG Index, the Fund does not purchase all of the
securities in the US IG Index. Instead, the Adviser utilizes a “sampling”
methodology in seeking to achieve the Fund’s objective. As such, the Fund may
purchase a subset of the bonds in the US IG Index in an effort to hold a
portfolio of bonds with generally the same risk and return characteristics of
the US IG Index.
The
Fund is classified as a non-diversified fund 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 US IG Index concentrates in an industry or group of
industries. As of April 30, 2023, each of the financials, information technology
and consumer staples sectors represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. A substantial investment by
the Fund in debt securities with longer-term maturities during periods of rising
interest rates may cause the value of the Fund’s investments to decline
significantly. Changing interest rates may have unpredictable effects on
markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Data
Risk.
Given the complexity of the investments and strategies of the Fund, the Adviser
relies heavily on quantitative models and information and data. This data is
used to construct sets of transactions and investments, and to provide risk
management insights. If the quantitative models and information and data proves
to be incorrect or incomplete, any decisions made in reliance thereon expose the
Fund to potential risks.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The
Fund is classified as a “non-diversified” fund under the Investment Company Act
of 1940. The Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest a relatively high percentage of its
assets in a smaller number of issuers or may invest a larger proportion of its
assets in a single issuer. Moreover, the gains and losses on a single investment
may have a greater impact on the Fund’s net asset value and may make the Fund
more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed
for the calendar years shown. The table below the bar chart shows the Fund’s
average annual returns (before and after taxes). The bar chart and table provide an indication of the risks
of investing in the Fund by comparing the Fund’s performance from year to year
and by showing how the Fund’s average annual returns for the one year, five
year, ten year and/or since inception periods, as applicable, compared with the
Fund’s benchmark index and
a broad measure of market
performance. All returns assume reinvestment of dividends and
distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 3.11%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
4.10% |
4Q
2022 |
Worst
Quarter: |
-7.62% |
1Q
2022 |
Average Annual
Total Returns for the Periods Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
| Past
One Year |
Since
Inception
(12/01/2020) |
|
| VanEck
Moody’s Analytics IG Corporate Bond ETF (return before
taxes) |
-14.47% |
-6.73% |
|
| VanEck
Moody’s Analytics IG Corporate Bond ETF (return after taxes on
distributions) |
-15.50% |
-7.69% |
|
| VanEck
Moody’s Analytics IG Corporate Bond ETF (return after taxes on
distributions and sale of Fund Shares) |
-8.56% |
-5.44% |
|
|
MVIS Moody’s
Analytics US Investment Grade Corporate Bond Index (reflects
no deduction for fees, expenses or
taxes) |
-14.98% |
-6.93% |
|
| ICE BofA US
Broad Market Index (reflects no deduction for fees, expenses or
taxes) |
-13.16% |
-7.02% |
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van
Eck Associates Corporation.
Portfolio
Manager.
The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Francis
G. Rodilosso |
Portfolio
Manager |
December
2020 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
Mortgage REIT Income ETF
(the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
US Mortgage REITs Index (the “Mortgage REITs Index” or the
“Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.40 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.03 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.43 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$44 |
| |
| 3 |
$138 |
| |
| 5 |
$241 |
| |
| 10 |
$542 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was 19% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Mortgage REIT Index is comprised of
publicly traded U.S. real estate investment trusts (“REITs”) that derive at
least 50% of their revenues from (or, where applicable, have at least 50% of
their assets related to) mortgage-related activity.
A
mortgage REIT makes loans to developers and owners of properties and invests
primarily in mortgages and similar real estate interests, and includes companies
or trusts that are primarily engaged in the purchasing or servicing of
commercial or residential mortgage loans or mortgage-related securities. The
Mortgage REITs Index may include small-, medium- and large-capitalization
companies. As of June 30, 2023, the Mortgage REITs Index included 25 securities
of companies with a market capitalization range of between approximately $405
million and $9.8 billion and a weighted average market capitalization of $3.5
billion.The
Fund’s
80% investment policy is non-fundamental and may be changed without shareholder
approval upon 60 days’ prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Mortgage REITs Index by investing in a
portfolio of securities that generally replicates the Mortgage REITs Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Mortgage REITs Index and
does not take temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Mortgage REITs Index.
The
Fund is classified as a non-diversified fund 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 Mortgage REITs Index
concentrates in an industry or group of industries. As of April 30, 2023, the
financials sector represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Mortgage
REITs Risk.
Mortgage REITs are exposed to the risks specific to the real estate market as
well as the risks that relate specifically to the way in which mortgage REITs
are organized and operated. Mortgage REITs receive principal and interest
payments from the owners of the mortgaged properties. Accordingly, mortgage
REITs are subject to the credit risk of the borrowers. Credit risk refers to the
possibility that the borrower will be unable and/or unwilling to make timely
interest payments and/or repay the principal on the loan to a mortgage REIT when
due. To the extent that a mortgage REIT invests in mortgage-backed securities
offered by private issuers, such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers, the mortgage REIT may be subject to additional risks.
Timely payment of interest and principal of non-governmental issuers may be
supported by various forms of private insurance or guarantees, including
individual loan, title, pool and hazard insurance purchased by the issuer.
However, there can be no assurance that the private insurers can or will meet
their obligations under such policies. Unexpected high rates of default on the
mortgages held by a mortgage pool may adversely affect the value of a
mortgage-backed security and could result in losses to a mortgage REIT. The risk
of such defaults is generally higher in the case of mortgage pools that include
subprime mortgages. To the extent that a mortgage REIT’s portfolio is exposed to
lower-rated, unsecured or subordinated instruments, the risk of loss may
increase, which may have a negative impact on the Fund. Mortgage REITs also are
subject to the risk that the value of mortgaged properties may be less than the
amounts owed on the properties. If a mortgage REIT is required to foreclose on a
borrower, the amount recovered in connection with the foreclosure may be less
than the amount owed to the mortgage REIT.
Mortgage
REITs are subject to significant interest rate risk. Interest rate risk refers
to fluctuations in the value of a mortgage REIT’s investment in fixed rate
obligations resulting from changes in the general level of interest rates. When
the general level of interest rates goes up, the value of a mortgage REIT’s
investment in fixed rate obligations goes down.
Mortgage
REITs typically use leverage and many are highly leveraged, which exposes them
to leverage risk and the risks generally associated with debt financing.
Leverage risk refers to the risk that leverage created from borrowing may impair
a mortgage REIT’s liquidity, cause it to liquidate positions at an unfavorable
time and increase the volatility of the values of securities issued by the
mortgage REIT. The use of leverage may not be advantageous to a mortgage REIT.
The success of using leverage is dependent on whether the return earned on the
investments made using the proceeds of leverage exceed the cost of using
leverage. To the extent that a mortgage REIT incurs significant leverage, it may
incur substantial losses if its borrowing costs increase. Borrowing costs may
increase for any of the following reasons: short-term interest rates increase;
the market value of a mortgage REIT’s assets decrease; interest rate volatility
increases; or the availability of financing in the market decreases. During
periods of adverse market conditions, downturns in the economy or deterioration
in the conditions of the REIT’s mortgage-related assets, the use of leverage may
cause a mortgage REIT to lose more money that would have been the case if
leverage was not used.
Mortgage
REITs are subject to prepayment risk, which is the risk that borrowers may
prepay their mortgage loans at faster than expected rates. Prepayment rates
generally increase when interest rates fall and decrease when interest rates
rise. These faster than expected payments may adversely affect a mortgage REIT’s
profitability because the mortgage REIT may be forced to replace investments
that have been redeemed or repaid early with other investments having a lower
yield. Additionally, rising interest rates rise may cause the duration of a
mortgage REIT’s investments to be longer than anticipated and increase such
investments’ interest rate sensitivity. REITs are subject to special U.S.
federal tax requirements. A REIT’s failure to comply with these requirements may
negatively affect its performance.
Mortgage
REITs may be dependent upon the management skills and may have limited financial
resources. Mortgage REITs are generally not diversified and may be subject to
heavy cash flow dependency, default by borrowers and self-liquidation. In
addition,
transactions
between mortgage REITs and their affiliates may be subject to conflicts of
interest which may adversely affect a mortgage REIT’s shareholders.
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.
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.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse
tax
consequences or other regulatory reasons (such as diversification requirements).
To the extent the Fund utilizes depositary receipts, the purchase of depositary
receipts may negatively affect the Fund’s ability to track the performance of
the Index and increase tracking error, which may be exacerbated if the issuer of
the depositary receipt discontinues issuing new depositary receipts or withdraws
existing depositary receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing
times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The
Fund is classified as a “non-diversified” fund under the Investment Company Act
of 1940. The Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest a relatively high percentage of its
assets in a smaller number of issuers or may invest a larger proportion of its
assets in a single issuer. Moreover, the gains and losses on a single investment
may have a greater impact on the Fund’s net asset value and may make the Fund
more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated in a particular sector or
sectors or industry or group of industries to reflect the Index’s allocation to
such sector or sectors or industry or group of industries. The securities of
many or all of the companies in the same sector or industry may decline in value
due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows shows how the Fund performed for the
calendar years shown. The table below the bar chart shows the Fund’s average
annual returns (before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information
is available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 7.42%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
40.06% |
2Q
2020 |
Worst
Quarter: |
-57.25% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Past
Ten Years |
|
| VanEck
Mortgage REIT Income ETF (return before
taxes) |
-26.77% |
-4.68% |
2.09% |
|
| VanEck
Mortgage REIT Income ETF (return after taxes on
distributions) |
-28.88% |
-7.05% |
-1.16% |
|
| VanEck
Mortgage REIT Income ETF (return after taxes on distributions and sale
of Fund Shares) |
-15.48% |
-3.98% |
0.46% |
|
|
MVIS
US Mortgage REITs Index
(reflects no deduction for
fees, expenses or taxes) |
-26.68% |
-4.93% |
2.11% |
|
| S&P 500
Index Total Return (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
9.42% |
12.56% |
|
|
|
|
|
| |
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily responsible for the day-to-day
management of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Peter
H. Liao |
Portfolio
Manager |
August
2011 |
|
| Griffin
Driscoll |
Deputy
Portfolio Manager |
August
2023 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck® Preferred Securities ex Financials ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the ICE Exchange-Listed Fixed & Adjustable
Rate Non-Financial Preferred Securities Index (the “Preferred Securities Index”
or the “Index”).
FUND FEES AND
EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
|
|
|
|
| |
Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| Management
Fee |
0.40 |
% |
|
|
|
| |
|
Other
Expenses(a) |
0.01 |
% |
|
|
|
| |
|
Total
Annual Fund Operating Expenses(a) |
0.41 |
% |
|
|
|
| |
|
|
| |
|
|
| |
(a)Van Eck
Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least September 1,
2024.
EXPENSE
EXAMPLE
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example does not take into account brokerage commissions that you pay when
purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell or hold all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% annual return
and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
| YEAR |
EXPENSES |
|
| 1 |
$42 |
| |
| 3 |
$132 |
| |
| 5 |
$230 |
| |
| 10 |
$518 |
| |
|
|
| |
PORTFOLIO
TURNOVER
The Fund will pay transaction costs, such as commissions, when it
purchases and sells securities (or “turns over” its portfolio). A higher
portfolio turnover will cause the Fund to incur additional transaction costs and
may result in higher taxes when Fund Shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the
example, may affect the Fund’s performance. During the most recent fiscal year,
the Fund’s portfolio turnover rate was approximately 27% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Preferred Securities Index is comprised
of U.S. exchange-listed hybrid debt, preferred stock and convertible preferred
stock issued by non-financial corporations (collectively, "Preferred
Securities"). Hybrid debt securities are securities that have characteristics of
both equity securities and debt securities. Hybrid securities usually pay
interest or dividends and, in the event of an issuer's bankruptcy or default,
holders of hybrid securities typically have claims that are senior to holders of
the issuer's equity securities but subordinate to holders of the issuer's debt
securities.
Preferred
Securities generally pay fixed or variable rate distributions to preferred
shareholders and such shareholders have preference over common shareholders in
the payment of distributions and in the event of a liquidation of the issuer’s
assets, but
are
junior to most other forms of debt, including senior and subordinated debt.
Preferred Securities may be subject to redemption or call provisions and may
include those issued by small- and medium-capitalization companies. As of June
30, 2023, the Preferred Securities Index included 111 U.S.-listed securities of
56 issuers. The Fund’s 80% investment policy is non-fundamental and may be
changed without shareholder approval upon 60 days’ prior written notice to
shareholders. The Preferred
Securities Index
is reconstituted and rebalanced monthly.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Preferred Securities Index by investing in a
portfolio of securities that generally replicates the Preferred Securities
Index. Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Preferred Securities Index
and does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Preferred Securities Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940 Act and, therefore, may invest a greater percentage of its assets in a
particular issuer. The Fund may
concentrate its investments in a particular industry or group of industries to
the extent that the Preferred Securities Index concentrates in an industry or
group of industries. As of April 30, 2023, each of the utilities, real estate
and information
technology
sectors represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN
THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is
not a deposit with a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Preferred
Securities Risk.
Preferred Securities are essentially contractual obligations that entail rights
to distributions declared by the issuer’s board of directors but may permit the
issuer to defer or suspend distributions for a certain period of time. If the
Fund owns a Preferred Security whose issuer has deferred or suspended
distributions, the Fund may be required to account for the distribution that has
been deferred or suspended for tax purposes, even though it may not have
received this income in cash. Further, Preferred Securities may lose substantial
value if distributions are deferred, suspended or not declared. Preferred
Securities may also permit the issuer to convert Preferred Securities into the
issuer’s common stock. Preferred Securities that are convertible into common
stock may decline in value if the common stock to which Preferred Securities may
be converted declines in value. Preferred Securities are subject to greater
credit risk than traditional fixed income securities because the rights of
holders of Preferred Securities are subordinated to the rights of the bond and
debtholders of an issuer.
Convertible Securities Risk. Convertible
securities are subject to risks associated with both fixed income securities and
common stocks. Depending on its conversion value, the price of a convertible
security will be influenced by interest rates (i.e.,
its price generally will increase when interest rates fall and decrease when
interest rates rise) or will tend to fluctuate directly with the price of the
equity security into which the security can be converted.
Hybrid Securities Risk. Hybrid
securities are typically subordinated to an issuer’s senior debt instruments;
therefore, they are subject to greater credit risk than those senior debt
instruments. Many hybrid securities are subject to provisions permitting their
issuers to skip or defer distributions under specified circumstances. Hybrid
securities may have limited or no voting rights and may have substantially lower
overall liquidity than many other securities.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most debt securities and certain preferred
securities go down. When the general level of interest rates goes down, the
prices of most debt securities go up. Many factors can cause interest rates to
rise, including central bank monetary policy, rising inflation rates and general
economic conditions. Debt securities with longer durations tend to be more
sensitive to
interest
rate changes, usually making them more volatile than debt securities, such as
bonds, with shorter durations. A substantial investment by the Fund in debt
securities with longer-term maturities during periods of rising interest rates
may cause the value of the Fund’s investments to decline significantly. Changing
interest rates may have unpredictable effects on markets, may result in
heightened market volatility and may detract from Fund performance to the extent
the Fund is exposed to such interest rates and/or volatility. It is difficult to
predict the magnitude, timing or direction of interest rate changes and the
impact these changes will have on the markets in which the Fund invests.
Floating Rate Risk. The
Fund invests in floating-rate securities, which are instruments in which the
interest rate payable on an obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such a security
will generally decline in a falling interest rate environment, causing the Fund
to experience a reduction in the income it receives from the
security.
Floating
Rate LIBOR Risk.
Certain
floating-rate securities pay interest based on the London Inter-bank Offered
Rate ("LIBOR"). Due to the uncertainty regarding the future utilization of LIBOR
and the nature of any replacement rate, the potential effect of a transition
away from LIBOR on a fund or the financial instruments in which the Fund invests
cannot yet be determined.
Subordinated
Obligations Risk. Payments
under some bonds may be structurally subordinated to all existing and future
liabilities and obligations of each of the respective subsidiaries and
associated companies of an issuer of the bond. Claims of creditors of such
subsidiaries and associated companies will have priority as to the assets of
such subsidiaries and associated companies over the issuer and its creditors,
including the Fund, who seek to enforce the terms of the bond. Certain bonds do
not contain any restrictions on the ability of the subsidiaries of the issuers
to incur additional unsecured indebtedness.
REITs
Risk.
Investing in REITs exposes investors to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which REITs
are organized and operated. REITs generally invest directly in real estate, in
mortgages or in some combination of the two. Operating REITs requires
specialized management skills and the Fund indirectly bears management expenses
along with the direct expenses of the Fund. Individual REITs may own a limited
number of properties and may concentrate in a particular region or property
type. REITs may also be subject to heavy cash flow dependency, default by
borrowers or tenants and self-liquidation. REITs also must satisfy specific
requirements of the Internal Revenue Code of 1986 in order to qualify for
tax-free pass-through income. The failure of a company to qualify as a REIT
could have adverse consequences for the Fund, including significantly reducing
the return to the Fund on its investment in such company. In addition, REITs,
like mutual funds, have expenses, including management and administration fees,
that are paid by their shareholders. As a result, shareholders will absorb their
proportionate share of duplicate levels of fees when the Fund invests in
REITs.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Companies in the
utilities sector may be adversely affected by changes in exchange rates,
domestic and international competition, difficulty in raising adequate amounts
of capital and governmental limitation on rates charged to
customers.
Real
Estate Sector Risk.
Companies in the real estate sector include companies that invest in real
estate, such as REITs and real estate management and development companies. The
Fund will be sensitive to changes in, and its performance will depend to a
greater extent on, the overall condition of the real estate sector. Companies
that invest in real estate are subject to the risks of owning real estate
directly as well as to risks that relate specifically to the way that such
companies operate, including management risk (such companies are dependent upon
the management skills of a few key individuals and may have limited financial
resources). Adverse economic, business or political developments affecting real
estate could have a major effect on the values of the Fund’s investments.
Investing in real estate is subject to such risks as decreases in real estate
values, overbuilding, increased competition and other risks related to local or
general economic conditions, increases in operating costs and property taxes,
changes in zoning laws, casualty or condemnation losses, possible environmental
liabilities, regulatory limitations on rent, possible lack of availability of
mortgage financing, market saturation, fluctuations in rental income and the
value of underlying properties and extended vacancies of properties. Certain
real estate securities have a relatively small market capitalization, which may
tend to increase the volatility of the market price of these securities. Real
estate securities have limited diversification and are, therefore, subject to
risks inherent in operating and financing a limited number of projects. Real
estate securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants.
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.
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.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of
the
Index in connection with a rebalancing or reconstitution of the Index may cause
the Fund to experience increased volatility, during which time the Fund’s index
tracking risk may be heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The
Fund is classified as a “non-diversified” fund under the Investment Company Act
of 1940. The Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest a relatively high percentage of its
assets in a smaller number of issuers or may invest a larger proportion of its
assets in a single issuer. Moreover, the gains and losses on a single investment
may have a greater impact on the Fund’s net asset value and may make the Fund
more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to such sector or
sectors or industry or group of industries. The securities of many or all of the
companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is
subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The
bar chart that follows shows how the Fund performed for the calendar years
shown. The table below the bar chart shows the Fund’s average annual returns
(before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. Prior to June 1, 2021, the
Fund sought to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Wells Fargo®
Hybrid and Preferred Securities ex Financials Index (the “Prior Index”).
Therefore, performance information prior to June 1, 2021 reflects the
performance of the Fund tracking the Prior Index. All returns assume
reinvestment of dividends and distributions. All returns assume reinvestment of
dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns
(%)—Calendar Years
The
year-to-date total return as of
June 30,
2023 was 9.23%.
|
|
|
|
|
|
|
| |
Best
Quarter: |
12.66% |
2Q
2020 |
Worst
Quarter: |
-17.88% |
1Q
2020 |
Average Annual
Total Returns for the Periods Ended December 31,
2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
| Past
One Year |
Past
Five Years |
Past
Ten Years |
|
| VanEck
Preferred Securities ex Financials ETF (return before
taxes) |
-19.11% |
2.43% |
3.82% |
|
| VanEck
Preferred Securities ex Financials ETF (return after taxes on
distributions) |
-20.81% |
0.32% |
1.55% |
|
| VanEck
Preferred Securities ex Financials ETF (return after taxes on
distributions and sale of Fund Shares) |
-10.96% |
1.17% |
2.06% |
|
|
ICE
Exchange-Listed Fixed & Adjustable Rate Non-Financial Preferred
Securities Index (reflects no deduction for
fees, expenses or taxes)* |
-18.41% |
2.74% |
3.90% |
|
|
S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
9.42% |
12.56% |
|
|
|
|
|
| |
*Prior to June 1, 2021, the Fund sought to replicate as
closely as possible, before fees and expenses, the price and yield performance
of the Prior Index. Therefore, performance information prior to June 1, 2021
reflects the performance of the Fund seeking to replicate the Prior Index. Prior
to June 1, 2021, index data reflects that of the Prior Index.
From June 1, 2021, the
index data will reflect that of the ICE Exchange-Listed Fixed & Adjustable
Rate Non-Financial Preferred Securities Index.
See “License Agreements and Disclaimers” for important
information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily responsible for the day-to-day
management of the Fund’s portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
| Peter
H. Liao |
Portfolio
Manager |
July
2012 |
|
| Griffin
Driscoll |
Deputy
Portfolio Manager |
August
2023 |
|
|
|
|
| |
PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information, and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information about Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
PURCHASE
AND SALE OF FUND SHARES
Individual
Shares of a Fund may only be purchased and sold in secondary market transactions
through a broker or dealer at a market price. Shares of the Funds are listed on
the Exchange, and because Shares trade at market prices rather than net asset
value, Shares of the Funds 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 a Fund (bid) and the
lowest price a seller is willing to accept for Shares (ask) when buying or
selling Shares in the secondary market (the “bid/ask spread”).
Recent
information, including information about each Fund’s net asset value, market
price, premiums and discounts, and bid/ask spreads, is included on the Fund’s
website at www.vaneck.com.
TAX
INFORMATION
Each
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
PRINCIPAL
INVESTMENT STRATEGIES
Each
Fund, except for VanEck BDC Income ETF, VanEck Dynamic High Income ETF, VanEck
Fallen Angel High Yield Bond ETF, VanEck Mortgage REIT Income ETF and VanEck
Preferred Securities ex Financials ETF, uses a sampling approach in seeking to
achieve its investment objective. Sampling means that the Adviser uses
quantitative analysis to select a representative sample of securities that the
Adviser believes collectively have an investment profile similar to each Fund’s
Index. The Adviser seeks to select securities that will have, in the aggregate,
investment characteristics (based on factors such as market capitalization and
industry weightings), fundamental characteristics (such as return variability,
duration, maturity or credit ratings and yield) and liquidity measures similar
to those of a Fund’s Index. The quantity of holdings in a Fund will be based on
a number of factors, including asset size of such Fund. The Adviser generally
expects a Fund to hold less than the total number of securities in its Index,
but reserves the right to hold as many securities as it believes necessary to
achieve the Fund’s investment objective. In addition, from time to time,
securities are added to or removed from the applicable Index. Each Fund may sell
securities that are represented in its Index, or purchase securities that are
not yet represented in its Index, in anticipation of their removal from or
addition to such Index. Further, the Adviser may choose to underweight or
overweight securities, purchase or sell securities not in an Index, or utilize
various combinations of other available investment techniques, in seeking to
track a Fund’s Index.
The
Adviser anticipates that, generally, VanEck BDC Income ETF, VanEck Fallen Angel
High Yield Bond ETF, VanEck Mortgage REIT Income ETF and VanEck Preferred
Securities ex Financials ETF will hold or gain exposure to all of the securities
that comprise each Fund’s respective Index in proportion to their weightings in
such Index. However, under various circumstances, it may not be possible or
practicable to purchase all of those securities in those weightings. In these
circumstances, VanEck BDC Income ETF, VanEck Fallen Angel High Yield Bond ETF,
VanEck Mortgage REIT Income ETF and VanEck Preferred Securities ex Financials
ETF may purchase a sample of securities in its Index. There also may be
instances in which the Adviser may choose to underweight or overweight a
security in a Fund’s Index, purchase securities not in the Fund’s Index that the
Adviser believes are appropriate to substitute for certain securities in such
Index or utilize various combinations of other available investment techniques
in seeking to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Fund’s Index. VanEck BDC Income ETF, VanEck
Fallen Angel High Yield Bond ETF, VanEck Mortgage REIT Income ETF and VanEck
Preferred Securities ex Financials ETF may sell securities that are represented
in their Index in anticipation of their removal from the respective Index or
purchase securities not represented in their Index in anticipation of their
addition to the respective Index. VanEck BDC Income ETF, VanEck Fallen Angel
High Yield Bond ETF, VanEck Mortgage REIT Income ETF and VanEck Preferred
Securities ex Financials ETF may also, in order to comply with the tax
diversification requirements of the Internal Revenue Code of 1986, temporarily
invest in securities not included in its Index that are expected to be highly
correlated with the securities included in its Index.
(VanEck
Dynamic High Income ETF only)
VanEck
Dynamic High Income ETF is an actively managed ETF that seeks to achieve its
investment objective by investing, under normal circumstances, in ETPs that are
registered under the applicable federal securities laws and that invest in
securities that generate income. VanEck Dynamic High Income ETF may also invest
in U.S. Treasury securities under normal circumstances. While the Adviser
currently anticipates that the ETPs that the VanEck Dynamic High Income ETF may
invest in will primarily be VanEck ETFs, VanEck Dynamic High Income ETF may also
invest in affiliated and unaffiliated ETPs, which could include ETFs and
closed-end funds that invest in income generating asset classes. VanEck Dynamic
High Income ETF does not have any limits on its investments in below-investment
grade securities ("junk" bonds), and VanEck Dynamic High Income ETF will have
indirect exposure to below-investment grade securities through its investments
in ETPs.
The
Adviser considers various inputs to guide asset allocation decisions and select
investments that the Adviser believes will offer income and enhanced
risk-adjusted returns. The term “risk-adjusted returns” does not imply that the
Adviser employs low-risk strategies or that an investment in VanEck Dynamic High
Income ETF should be considered a low-risk or no risk investment. The Adviser
seeks to maximize risk-adjusted returns through an optimization process that
incorporates both the yield and observed risks of each ETP. Additionally, the
Adviser may utilize relative momentum and other discretionary factors of each
underlying ETP to allocate VanEck Dynamic High Income ETF’s portfolio to ETPs
with the highest expected risk-adjusted returns. The term “relative momentum”
means the speed at which the total returns of an ETP are changing compared to
other ETPs. Based on these inputs, the Adviser selects the income generating
asset classes that VanEck Dynamic High Income ETF will invest in and determines
the relative weights each class will represent in VanEck Dynamic High Income
ETF. VanEck Dynamic High Income ETF may engage in active and frequent trading of
portfolio securities.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
Each
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees (the
“Board of Trustees”) of VanEck ETF Trust (the “Trust”) without shareholder
approval, except as noted in this Prospectus or the Statement of Additional
Information (“SAI”) under the section entitled “Investment Policies and
Restrictions—Investment Restrictions.”
RISKS
OF INVESTING IN THE FUNDS
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in each Fund’s
“Summary Information” section and additional non-principal risks, if applicable.
The risks checked in the
chart
below apply to each Fund as indicated. For a description of the risks listed in
the chart, please see "Glossary – Investment Risks" below the chart. See also
the Funds' Statement of Additional Information for information on certain other
investments in which each Fund may invest and other investment techniques in
which each Fund may engage from time to time and related risks.
Investors
in a Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
a Fund involves a substantial degree of risk. An investment in a Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.Therefore, you should
consider carefully the following risks before investing in a Fund, each of which
could significantly and adversely affect the value of an investment in a
Fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Risk |
BDC
Income ETF (BIZD) |
Dynamic
High Income ETF (INC) |
Emerging
Markets High Yield Bond ETF (HYEM) |
Fallen
Angel High Yield Bond ETF (ANGL) |
Green
Bond ETF (GRNB) |
Int’l
High Yield Bond ETF (IHY) |
IG
Floating Rate ETF (FLTR) |
J.P.
Morgan EM Local Currency Bond ETF (EMLC) |
Moody’s
Analytics BBB Corporate Bond ETF (MBBB) |
Moody’s
Analytics IG Corporate Bond ETF (MIG) |
Mortgage
REIT Income ETF (MORT) |
Preferred
Securities EX Financials ETF (PFXF) |
√
Principal Risk | X Additional Non-Principal Risk |
|
| |
Active
Management Risk |
| √ |
|
|
|
|
|
|
|
|
| |
Affiliated
Fund Risk |
| √ |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Authorized
Participant Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
BBB-Rated
Bond Risk |
|
|
|
|
|
|
|
| √ |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Call
Risk |
|
| √ |
√ |
√ |
√ |
|
| √ |
√ |
| √ |
Cash
Transactions Risk |
|
|
|
|
|
|
| √ |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Consumer
Discretionary Sector Risk |
|
|
| √ |
|
|
|
| √ |
|
| |
Consumer
Staples Sector Risk |
|
|
|
|
|
|
|
| √ |
√ |
| |
Convertible
Securities Risk |
|
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Credit
Risk |
|
| √ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Data
Risk |
|
|
|
|
|
|
|
| √ |
√ |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Derivatives
Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Emerging
Market Issuers Risk |
|
| √ |
| √ |
√ |
| √ |
|
|
| |
Energy
Sector Risk |
|
| √ |
√ |
| √ |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Equity
Securities Risk |
√ |
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Financials
Sector Risk |
√ |
| √ |
√ |
√ |
√ |
√ |
| √ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Floating
Rate LIBOR Risk |
√ |
|
|
|
|
|
|
|
|
|
| √ |
Floating
Rate Risk |
√ |
|
|
| √ |
| √ |
|
|
|
| √ |
Foreign
Currency Risk |
|
| √ |
x |
√ |
√ |
√ |
√ |
x |
√ |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Foreign
Securities Risk |
|
| √ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
Fund
of Funds Risk |
| √ |
|
|
|
|
|
|
|
|
| |
Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund
Shares |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Government-Related
Bond Risk |
|
|
|
| √ |
|
|
|
|
|
| |
“Green”
Bonds Risk |
|
|
|
| √ |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Risk |
BDC
Income ETF (BIZD) |
Dynamic
High Income ETF (INC) |
Emerging
Markets High Yield Bond ETF (HYEM) |
Fallen
Angel High Yield Bond ETF (ANGL) |
Green
Bond ETF (GRNB) |
Int’l
High Yield Bond ETF (IHY) |
IG
Floating Rate ETF (FLTR) |
J.P.
Morgan EM Local Currency Bond ETF (EMLC) |
Moody’s
Analytics BBB Corporate Bond ETF (MBBB) |
Moody’s
Analytics IG Corporate Bond ETF (MIG) |
Mortgage
REIT Income ETF (MORT) |
Preferred
Securities EX Financials ETF (PFXF) |
√
Principal Risk | X Additional Non-Principal Risk |
|
| |
High
Portfolio Turnover Risk |
| √ |
|
|
|
|
|
|
|
|
| |
High
Yield Securities Risk |
|
| √ |
√ |
√ |
√ |
| √ |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Hybrid
Securities Risk |
|
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Income
Risk |
| √ |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Index-Related
Concentration Risk |
√ |
| √ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Index
Tracking Risk |
√ |
| √ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Industrials
Sector Risk |
|
|
|
|
| √ |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Information
Technology Sector Risk |
|
|
| √ |
| √ |
|
| √ |
√ |
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Interest
Rate Risk |
| √ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Restrictions Risk |
√ |
|
|
|
|
|
|
|
|
|
| |
Issuer-Specific
Changes Risk |
√ |
|
|
|
|
|
| √ |
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Leverage
Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
Liquidity
Risk |
|
| x |
x |
x |
x |
x |
x |
x |
x |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Market
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Mortgage
REITs Risk |
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
No
Guarantee of Active Trading Market Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
Non-Diversified
Risk |
| √ |
|
|
|
| √ |
√ |
√ |
√ |
√ |
√ |
Non-Diversification
Risk |
|
|
| √ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Operational
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
Passive
Management Risk |
√ |
| √ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Preferred
Securities Risk |
|
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Real
Estate Sector Risk |
|
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
REITs
Risk |
|
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Restricted
Securities Risk |
|
| √ |
√ |
√ |
√ |
√ |
| √ |
√ |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Risk
of Investing in BDCs |
√ |
|
|
|
|
|
|
|
|
|
| |
Risk
of Investing in Chinese Bonds |
|
|
|
|
|
|
| x |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Risk
of Investing in ETPs |
| √ |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Sampling
Risk |
|
| √ |
| √ |
√ |
√ |
√ |
√ |
√ |
| |
Securitized/Asset
Backed Securities Risk |
|
|
|
| √ |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Shareholder
Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Risk |
BDC
Income ETF (BIZD) |
Dynamic
High Income ETF (INC) |
Emerging
Markets High Yield Bond ETF (HYEM) |
Fallen
Angel High Yield Bond ETF (ANGL) |
Green
Bond ETF (GRNB) |
Int’l
High Yield Bond ETF (IHY) |
IG
Floating Rate ETF (FLTR) |
J.P.
Morgan EM Local Currency Bond ETF (EMLC) |
Moody’s
Analytics BBB Corporate Bond ETF (MBBB) |
Moody’s
Analytics IG Corporate Bond ETF (MIG) |
Mortgage
REIT Income ETF (MORT) |
Preferred
Securities EX Financials ETF (PFXF) |
√
Principal Risk | X Additional Non-Principal Risk |
|
| |
Small-
and Medium-Capitalization Companies Risk |
√ |
|
|
|
|
|
|
|
|
| √ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Sovereign
Bond Risk |
|
|
|
|
|
|
| √ |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Special
Risk Considerations of Investing in Asian Issuers |
|
| √ |
| √ |
√ |
| √ |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Special
Risk Considerations of Investing in Brazilian Issuers |
|
| √ |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Special
Risk Considerations of Investing in Chinese Issuers |
|
|
|
| √ |
|
| √ |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Special
Risk Considerations of Investing in European Issuers |
|
| √ |
| √ |
√ |
| √ |
√ |
√ |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Special
Risk Considerations of Investing in Latin American Issuers |
|
| √ |
|
| √ |
| √ |
|
|
| |
Special
Risk Considerations of Investing in Middle Eastern Issuers |
|
| √ |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Special
Risk Considerations of Investing in United Kingdom Issuers |
|
|
|
|
| √ |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Subordinated
Obligations Risk |
|
|
|
|
|
|
|
|
|
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
Supranational
Bond Risk |
|
|
|
| √ |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Trading
Issues Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
U.S.
Treasury Securities Risk |
| √ |
|
|
|
|
|
|
|
|
| |
Utilities
Sector Risk |
|
|
|
| √ |
|
|
| √ |
|
| √ |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Zero
Coupon and Payment-in-Kind Securities Risk |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
x |
GLOSSARY
– INVESTMENT RISKS
Active
Management Risk.
In managing the Fund’s portfolio, the Adviser will apply investment techniques
and risk analyses in making investment decisions for the Fund, but there can be
no guarantee that these will produce the desired results. Investment decisions
made by the Adviser in seeking to achieve the Fund’s investment objective may
cause a decline in the value of the investments held by the Fund and, in turn,
cause the Fund’s shares to lose value or underperform other funds with similar
investment objectives.
Affiliated
Fund Risk. In
managing the Fund, the Adviser has the ability to select underlying funds which
it believes will achieve the Fund’s investment objective. The Adviser may be
subject to potential conflicts of interest in selecting underlying funds because
the Adviser may, due to its own financial interest or other business
considerations, have an incentive to invest in funds managed by the Adviser or
its affiliates rather than investing in funds managed or sponsored by
others.
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.
BBB-Rated
Bond Risk. BBB-rated
bonds are typically subject to greater risk of downgrade than other investment
grade bonds. The risk of downgrade to below-investment grade will be heightened
during an economic downturn or substantial period of rising interest rates.
Downgrading a bond from investment grade to high yield (or “junk bond”) could
negatively affect its value.
Call Risk. The
Fund may invest in callable debt securities. If interest rates fall, issuers may
“call” (or prepay) their debt securities before their maturity date. If the
issuer exercises a call during or following a period of declining interest
rates, the Fund is likely to have to replace the called security with a lower
yielding security or riskier security, decreasing the Fund’s net investment
income. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher interest rates, resulting in an
unexpected capital loss.
Cash
Transactions Risk.
Unlike other ETFs, the Fund effects its creations and redemptions at least
partially for cash, rather than wholly for in-kind securities. Because the Fund
currently intends to effect all or a portion of redemptions for cash, rather
than in-kind distributions, it may be required to sell portfolio securities in
order to obtain the cash needed to distribute redemption proceeds, which
involves transaction costs that the Fund may not have incurred had it effected
redemptions entirely in-kind. These costs may include brokerage costs and/or
taxable gains or losses, which may be imposed on the Fund and decrease the
Fund’s net asset value to the extent such costs are not offset by a transaction
fee payable by an Authorized Participant. If the Fund recognizes a gain on these
sales, this generally will cause the Fund to recognize a gain it might not
otherwise have recognized if it were to distribute portfolio securities in-kind,
or to recognize such gain sooner than would otherwise be required. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Other ETFs generally are able to make in-kind redemptions and
avoid realizing gains in connection with transactions designed to raise cash to
meet redemption requests. The Fund generally intends to distribute these gains
to shareholders to avoid being taxed on this gain at the Fund level and
otherwise comply with the special tax rules that apply to it. This strategy may
cause shareholders to be subject to tax on gains they would not otherwise be
subject to, or at an earlier date than, if they had made an investment in a
different ETF. Additionally, transactions may have to be carried out over
several days if the securities market is relatively illiquid and may involve
considerable transaction fees and taxes.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Convertible Securities Risk. Convertible
securities are subject to risks associated with both fixed income securities and
common stocks. Depending on its conversion value, the price of a convertible
security will be influenced by interest rates (i.e.,
its price generally will increase when interest rates fall and decrease when
interest rates rise) or will tend to fluctuate directly with the price of the
equity security into which the security can be converted.
Convertible
securities are usually subordinated to comparable nonconvertible securities.
Moreover, many convertible securities have credit ratings that are below
investment grade and are subject to the same risks as lower-rated debt
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying securities, although the
market prices of convertible securities may be affected by any dividend changes
or other changes in the underlying securities.
Credit Risk. Credit risk refers
to the possibility that the issuer or guarantor of a security will be unable
and/or unwilling to honor its payment obligations and/or default completely on
securities. The Fund’s securities are subject to varying degrees
of credit risk, depending on the issuer’s financial condition and on
the terms of the securities, which may be reflected in credit ratings. There is
a possibility that the credit rating of a security may be downgraded after
purchase or the perception of an issuer’s creditworthiness may decline, which
may adversely affect the value of the security. Lower credit quality may also
affect liquidity and make it difficult for the Fund to sell the
security.
Data
Risk.
Given the complexity of the investments and strategies of the Fund, the Adviser
relies heavily on quantitative models and information and data. This data is
used to construct sets of transactions and investments, and to provide risk
management insights. If the quantitative models and information and data proves
to be incorrect or incomplete, any decisions made in reliance thereon expose the
Fund to potential 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.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are
issuers
in more developed markets, and therefore, all material information may not be
available or reliable. Emerging markets are also more likely than developed
markets to experience problems with the clearing and settling of trades, as well
as the holding of securities by local banks, agents and depositories. Low
trading volumes and volatile prices in less developed markets may make trades
harder to complete and settle, and governments or trade groups may compel local
agents to hold securities in designated depositories that may not be subject to
independent evaluation. Local agents are held only to the standards of care of
their local markets. In general, the less developed a country’s securities
markets are, the greater the likelihood of custody problems. Additionally, each
of the factors described below could have a negative impact on the Fund’s
performance and increase the volatility of the Fund.
Securities
Market Risk.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both
geographically
and among various sectors of their economies and may also be accompanied by
periods of high inflation. Political changes, social instability and adverse
diplomatic developments in these countries could result in the imposition of
additional government restrictions, including expropriation of assets,
confiscatory taxes or nationalization of some or all of the property held by the
underlying issuers of securities of emerging market issuers. There is no
guarantee that the governments of these countries will not revert back to some
form of planned or non-market oriented economy, and such governments continue to
be active participants in many economic sectors through ownership positions and
regulation. The allocation of resources in such countries is subject to a high
level of government control. Such countries’ governments may strictly regulate
the payment of foreign currency denominated obligations and set monetary policy.
Through their policies, these governments may provide preferential treatment to
particular industries or companies. The policies set by the government of one of
these countries could have a substantial effect on that country’s
economy.
Investment
and Repatriation Restrictions Risk.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Risk
of Available Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Risk Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code of 1986. The
liquidation of investments, if required, could be at disadvantageous prices or
otherwise have an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws Risk.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to
securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. For example, an adverse event, such as an
unfavorable earnings report, may result in a decline in the value of equity
securities of an issuer held by the Fund; the price of the equity securities of
an issuer may be particularly sensitive to general movements in the securities
markets; or a drop in the securities markets may depress the price of most or
all of the equities securities held by the Fund. In addition, the equity
securities of an issuer in the Fund’s portfolio may decline in price if the
issuer fails to make anticipated dividend payments. Equity securities are
subordinated to preferred securities and debt in a company’s capital structure
with respect to priority to a share of corporate income, and therefore will be
subject to greater dividend risk than preferred securities or debt instruments.
In addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Financials
Sector Risk.
Companies in the financials sector may be subject to extensive government
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain. The profitability of
companies in the financials sector may be adversely affected by increases in
interest rates, by loan losses, which usually increase in economic downturns,
and by credit rating downgrades. In addition, the financials sector is
undergoing numerous changes, including continuing consolidations, development of
new products and structures and changes to its regulatory framework.
Furthermore, some companies in the financials sector perceived as benefiting
from government intervention in the past may be subject to future
government-imposed restrictions on their businesses or face increased government
involvement in their operations. Increased government involvement in the
financials sector, including measures such as taking ownership positions in
financial institutions, could result in a dilution of the Fund’s investments in
financial institutions.
Floating
Rate LIBOR Risk.
Certain
floating-rate securities pay interest based on the London Inter-bank Offered
Rate ("LIBOR"). Due to the uncertainty regarding the future utilization of LIBOR
and the nature of any replacement rate, the potential effect of a transition
away from LIBOR on a fund or the financial instruments in which the Fund invests
cannot yet be determined.
Floating Rate Risk. The
Fund invests in floating-rate securities, which are instruments in which the
interest rate payable on an obligation fluctuates on a periodic basis based upon
changes in an interest rate benchmark. As a result, the yield on such a security
will generally decline in a falling interest rate environment, causing the Fund
to experience a reduction in the income it receives from the
security.
Foreign Currency Risk. Because
all or a portion of the income received by the Fund from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. The Fund may also (directly or indirectly) incur
costs in connection with conversions between U.S. dollars and foreign
currencies.
Several
factors may affect the price of euros and the British pound sterling, including
the debt level and trade deficit of the Economic and Monetary Union and the
United Kingdom, inflation and interest rates of the Economic and Monetary Union
and the United Kingdom and investors’ expectations concerning inflation and
interest rates and global or regional political, economic or financial events
and situations. The European financial markets have experienced, and may
continue to experience, volatility and have been adversely affected by concerns
about economic downturns, credit rating downgrades, rising government debt
levels and possible default on or restructuring of government debt in several
European countries. These events have adversely affected, and may in the future
affect, the value and exchange rate of the euro and may continue to
significantly affect the economies of every country in Europe, including
European Union member countries that do not use the euro and non-European Union
member countries. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the United Kingdom’s withdrawal from the European Union and the
subsequent transition period, there is likely to be considerable uncertainty as
to the United Kingdom’s post-transition framework. Significant uncertainty
exists regarding the effects such withdrawal will have on the euro, European
economies and the global markets. In addition, one or more countries may abandon
the euro and the impact of these actions, especially if conducted in a
disorderly manner, may have significant and far-reaching consequences on the
euro.
The
value of certain emerging market countries’ currencies may be subject to a high
degree of fluctuation. This fluctuation may be due to changes in interest rates,
investors’ expectations concerning inflation and interest rates, the emerging
market country’s debt levels and trade deficit, the effects of monetary policies
issued by the United States, foreign governments, central banks or supranational
entities, the imposition of currency controls or other national or global
political or economic developments. For example, certain emerging market
countries have experienced economic challenges and liquidity issues with respect
to their currency. The economies of certain emerging market countries can be
significantly affected by currency devaluations. Certain emerging market
countries may also have managed currencies which are maintained at artificial
levels relative to the U.S. dollar rather than at levels determined by the
market. This type of system could lead to sudden and large adjustments in the
currency, which in turn, may have a negative effect on the Fund and its
investments.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Certain
foreign markets that have historically been considered relatively stable may
become volatile in response to changed conditions or new developments. Increased
interconnectivity of world economies and financial markets increases the
possibility that adverse developments and conditions in one country or region
will affect the stability of economies and financial markets in other countries
or regions. Because the Fund may invest in securities denominated in foreign
currencies and some of the income received by the Fund may be in foreign
currencies, changes in currency exchange rates may negatively impact the Fund’s
return.
Foreign
issuers are often subject to less stringent requirements regarding accounting,
auditing, financial reporting and record keeping than are U.S. issuers, and
therefore, not all material information may be available or reliable. Securities
exchanges or foreign governments may adopt rules or regulations that may
negatively impact the Fund’s ability to invest in foreign securities or may
prevent the Fund from repatriating its investments. The Fund may also invest in
depositary receipts which involve similar risks to those associated with
investments in foreign securities. In addition, the Fund may not receive
shareholder communications or be permitted to vote the securities that it holds,
as the issuers may be under no legal obligation to distribute shareholder
communications.
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, organizations, entities
and/or
individuals,
changes in international trade patterns, trade barriers, and other protectionist
or retaliatory measures. The United States and other nations or international
organizations may impose economic sanctions or take other actions that may
adversely affect issuers of specific countries. Economic sanctions could, among
other things, effectively restrict or eliminate the Fund’s ability to purchase
or sell securities or groups of securities for a substantial period of time, and
may make the Fund’s investments in such securities harder to value. These
sanctions, any future sanctions or other actions, or even the threat of further
sanctions or other actions, may negatively affect the value and liquidity of the
Fund.
Also,
certain issuers located in foreign countries in which the Fund invests may
operate in, or have dealings with, countries subject to sanctions and/or
embargoes imposed by the U.S. Government and the United Nations and/or countries
identified by the U.S. Government as state sponsors of terrorism. As a result,
an issuer may sustain damage to its reputation if it is identified as an issuer
which operates in, or has dealings with, such countries. The Fund, as an
investor in such issuers, will be indirectly subject to those
risks.
Fund of Funds Risk. The
performance of the Fund is dependent on the performance of the underlying funds.
The Fund will be subject to the risks of the underlying funds’ investments. The
Fund will pay indirectly a proportional share of the fees and expenses of the
underlying funds in which it invests, including their investment advisory and
administration fees, while continuing to pay its own management fee. As a
result, the Fund’s shareholders will indirectly bear the expenses of the
underlying funds, absorbing duplicative levels of fees.
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.
Government-Related Bond Risk. The
governmental authority or government-related entity that controls the repayment
of the bond may be unable or unwilling to honor its payment obligations. If an
issuer of government-related bonds defaults on payments of principal and/or
interest, the Fund may have limited recourse against the issuer. A
government-related debtor’s willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange when a payment is due, the relative size of the debt
service burden to the economy as a whole, the government-related debtor’s policy
toward international lenders, and the political constraints to which the debtor
may be subject. During periods of economic uncertainty, the market prices of
government-related bonds, and the Fund’s net asset value, may be more volatile
than prices of corporate bonds, which may result in losses.
“Green”
Bonds Risk.
Investments in “green” bonds include bonds whose proceeds are used principally
for climate mitigation, climate adaptation or other environmentally beneficial
projects, such as, but not limited to, the development of clean, sustainable
or
renewable energy sources, commercial and industrial energy efficiency, or
conservation of natural resources. Investing in “green” bonds carries the risk
that, under certain market conditions, the Fund may underperform as compared to
funds that invest in a broader range of investments. In addition, some “green”
investments may be dependent on government tax incentives and subsidies and on
political support for certain environmental technologies and companies.
Investing primarily in “green” investments may affect the Fund’s exposure to
certain sectors or types of investments and will impact the Fund’s relative
investment performance depending on whether such sectors or investments are in
or out of favor in the market. The “green” sector may also have challenges such
as a limited number of issuers and limited liquidity in the market.
Additionally, there may also be a limited supply of bonds that merit “green”
status, which may adversely affect the Fund.
In
addition, the performance of a “green” bond issuer may cause its securities to
no longer merit “green” status, and such securities would no longer be eligible
for inclusion in the Index. This could cause the Fund to temporarily hold
securities that are not in the Index, which may adversely affect the Fund and
its investments and may increase the risk of Index tracking error. Additionally,
there may also be a limited supply of bonds that merit “green” status, which may
increase the risk of index tracking error.
High
Portfolio Turnover Risk. The
Fund may engage in active and frequent trading of its portfolio securities,
which will result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of the securities and on reinvestment in other securities. High portfolio
turnover may also result in higher taxes when Fund Shares are held in a taxable
account. The effects of high portfolio turnover may adversely affect Fund
performance.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities, resulting in increased volatility of their market
prices and a corresponding volatility in the Fund’s net asset value. During an
economic downturn or substantial period of rising interest rates, high yield
security issuers may experience financial stress that would adversely affect
their ability to service their principal and interest payment obligations, to
meet their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery. The
secondary market for high yield securities may be less liquid than the markets
for higher quality securities, and high yield securities issued by non-corporate
issuers may be less liquid than high yield securities issued by corporate
issuers. Illiquidity may have an adverse effect on the market prices of and the
Fund’s ability to arrive at a fair value for certain securities when it seeks to
do so. In addition, periods of economic uncertainty and change may result in an
increased volatility of market prices of high yield securities and a
corresponding volatility in the Fund's net asset value.
Hybrid Securities Risk. Hybrid
securities are typically subordinated to an issuer’s senior debt instruments;
therefore, they are subject to greater credit risk than those senior debt
instruments. Many hybrid securities are subject to provisions permitting their
issuers to skip or defer distributions under specified circumstances. Hybrid
securities may have limited or no voting rights and may have substantially lower
overall liquidity than many other securities.
Income
Risk. The
Fund’s income may fluctuate and may decline during periods of falling interest
rates.
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.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index, or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Unusual market conditions may cause the Index provider to postpone a
scheduled rebalance, which could cause the Index to vary from its normal or
expected composition. There is no assurance that the Index provider or any
agents that may act on its behalf will compile the Index accurately, or that the
Index will be determined, composed or calculated accurately. Errors in respect
of the quality, accuracy and completeness of the data used to compile the Index
may occur from time to time and may not be identified and corrected by the Index
provider, particularly where the indices are less commonly used as benchmarks by
funds or managers. Therefore, gains, losses or costs associated with errors of
the Index provider or its agents will generally be borne by the Fund and its
shareholders. For example, during a period where the Index contains incorrect
constituents, the Fund would have market exposure to such constituents and would
be underexposed to the Index’s other constituents. Such errors may negatively or
positively impact the Fund and its shareholders.
When
the Index is rebalanced and the Fund in turn rebalances its portfolio to attempt
to increase the correlation between the Fund’s portfolio and the Index, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne directly by the Fund and its shareholders. The Fund may not be
fully invested at times either as a result of cash flows into the Fund or
reserves of cash held by the Fund to pay expenses or to meet redemptions. In
addition, the Fund may not invest in certain securities and/or other assets
included in the Index, or invest in them in the exact proportions in which they
are represented in the Index. The Fund’s performance may also deviate from the
return of the Index for a variety of reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). A lack of liquidity may be due
to various events, including market events, economic conditions or investor
perceptions. Illiquid securities may be difficult to value and their value may
be lower than the market price of comparable liquid securities, which would
negatively affect the Fund’s performance. Moreover, the Fund may be delayed in
purchasing or selling securities included in the Index. When markets are
volatile, the ability to sell securities at fair value prices may be adversely
impacted and may result in additional trading costs and/or increase the index
tracking risk. To the extent the Fund encounters any issues with regard to
currency convertibility (including the cost of borrowing funds, if any),
repatriation or economic sanctions, such issues may also increase index tracking
risk. The Fund may also need to rely on borrowings to meet redemptions, which
may lead to increased expenses. For tax efficiency purposes, the Fund may sell
certain securities, and such sale may cause the Fund to realize a loss and
deviate from the performance of the Index. The Fund’s performance may also
deviate from the performance of the Index due to the impact of withholding
taxes, late announcements relating to changes to the Index and high turnover of
the Index.
The
Fund may fair value certain of its investments, underlying currencies and/or
other assets. To the extent the Fund calculates its net asset value based on
fair value prices and the value of the Index is based on securities’ closing
prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices) or if the Fund
otherwise calculates its net asset value based on prices that differ from those
used in calculating the Index, the Fund’s ability to track the Index may be
adversely affected. The need to comply with the tax diversification and other
requirements of the Internal Revenue Code 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.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector may be adversely affected by environmental damages, product
liability claims and exchange rates.
The
stock prices of companies in the industrials sector are affected by supply and
demand both for their specific product or service and for industrial sector
products in general. The products of manufacturing companies may face product
obsolescence due to rapid technological developments and frequent new product
introduction. In addition, the industrials sector may also be adversely affected
by changes or trends in commodity prices, which may be influenced or
characterized by unpredictable factors.
Information
Technology Sector Risk.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Interest Rate Risk.
Debt securities and preferred securities are subject to interest rate risk.
Interest rate risk refers to fluctuations in the value of a security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes
up,
the prices of most debt securities and certain preferred securities go down.
When the general level of interest rates goes down, the prices of most debt
securities go up. Many factors can cause interest rates to rise, including
central bank monetary policy, rising inflation rates and general economic
conditions. Debt securities with longer durations tend to be more sensitive to
interest rate changes, usually making them more volatile than debt securities,
such as bonds, with shorter durations. A substantial investment by the Fund in
debt securities with longer-term maturities during periods of rising interest
rates may cause the value of the Fund’s investments to decline significantly.
Changing interest rates may have unpredictable effects on markets, may result in
heightened market volatility and may detract from Fund performance to the extent
the Fund is exposed to such interest rates and/or volatility. It is difficult to
predict the magnitude, timing or direction of interest rate changes and the
impact these changes will have on the markets in which the Fund invests.
Investment
Restrictions Risk. The
Fund is subject to the conditions set forth in certain provisions of the
Investment Company Act of 1940 and Securities and Exchange Commission
regulations thereunder that limit the amount that the Fund and its affiliates,
in the aggregate, can invest in the outstanding voting securities of an
unaffiliated investment company or business development company. The Fund and
its affiliates may not actively acquire “control” of an investment company or
business development company, which is presumed once ownership of an investment
company’s outstanding voting securities exceeds 25%. Also, to comply with
provisions of the Investment Company Act of 1940 and regulations thereunder, the
Adviser may be required to vote shares of an investment company or business
development company in the same general proportion as shares held by other
shareholders of the investment company or business development
company.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Leverage
Risk.
To the extent that the Fund borrows money or utilizes certain derivatives, it
may be leveraged. Leveraging generally exaggerates the effect on net asset value
of any increase or decrease in the market value of the Fund’s portfolio
securities. The Fund is required to comply with the derivatives rule when it
engages in transactions that create future Fund payment or delivery obligations.
The Fund is required to comply with the asset coverage requirements under the
Investment Company Act of 1940 when it engages in borrowings and/or transactions
treated as borrowings.
Liquidity
Risk.
Reduced
liquidity in the bond markets can result from a number of events, such as
limited trading activity, reductions in bond inventory, market volatility, and
rapid or unexpected changes in interest rates. Less liquid markets could lead to
greater price volatility and limit the Fund’s ability to sell a holding at a
suitable price.
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.
Mortgage
REITs Risk. Mortgage
REITs are exposed to the risks specific to the real estate market as well as the
risks that relate specifically to the way in which mortgage REITs are organized
and operated. Mortgage REITs receive principal and interest payments from the
owners of the mortgaged properties. Accordingly, mortgage REITs are subject to
the credit risk of the borrowers. Credit risk refers to the possibility that the
borrower will be unable and/or unwilling to make timely interest payments and/or
repay the principal on the loan to a mortgage REIT when due.
Mortgage
REITs may be dependent upon the management skills and may have limited financial
resources. Mortgage REITs are generally not diversified and may be subject to
heavy cash flow dependency, default by borrowers and self-liquidation. In
addition, transactions between mortgage REITs and their affiliates may be
subject to conflicts of interest which may adversely affect a mortgage REIT’s
shareholders default of a mortgage loan, the mortgage REIT bears the risk of
loss of principal to the extent of any deficiency between the value of the
collateral and the principal and accrued interest of the loan.
A
mortgage REIT may invest in mortgage-backed securities issued or guaranteed by
Fannie Mae, Freddie Mac or the Federal Home Loan Banks, which are not backed by
the full faith and credit of the United States. Because these securities are not
backed by the full faith and credit of the United States, there is a risk that
the U.S. Government will not provide financial support to these agencies if it
is not obligated to do so. The maximum potential liability of such entities may
greatly exceed their current resources, and it is possible that they will not be
able to meet their obligations in the future. Concerns about Freddie Mac’s and
Fannie Mae’s solvency during the volatility and disruption that impacted the
capital and credit markets during late 2008 and into 2009 led to Freddie Mac and
Fannie Mae being placed under the conservatorship of the Federal Housing Finance
Agency and receiving a capital infusion from the U.S. Treasury. The value of the
mortgage-backed securities issued or guaranteed by Freddie Mac or Fannie Mae
held by a mortgage REIT may be affected by future actions taken by the Federal
Housing Finance Agency, the U.S. Treasury or the U.S. Government with respect to
these entities and market perceptions. 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, increased government involvement in the
financials sector, including measures such as mortgage loan modification and
refinance programs, could affect the value of a mortgage REIT’s investments. The
Dodd Frank Wall Street Reform and Consumer Protection Act imposes significant
regulatory restrictions on the origination of residential mortgage loans and
will impact the formation of new issuances of mortgage-backed securities. While
the full impact of the Dodd Frank Wall Street Reform and Consumer Protection Act
and the role of the Consumer Financial Protection Bureau cannot be assessed
until all implementing regulations are released, the regulations’ extensive
requirements may have a significant effect on the financial markets, and may
affect the availability or terms of financing or terms of mortgage-backed
securities, both of which may have an adverse effect on the value of a mortgage
REIT’s investments. Recent developments in the credit markets may cause
companies operating in the financials sector to incur large losses, experience
declines in the value of their assets and even cease operations.
To
the extent that a mortgage REIT invests in mortgage-backed securities offered by
private issuers, such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers, the mortgage REIT may be subject to additional risks. Timely
payment of interest and principal of non-governmental issuers may be supported
by various forms of private insurance or guarantees, including individual loan,
title, pool and hazard insurance purchased by the issuer. However, there can be
no assurance that the private insurers can or will meet their obligations under
such policies. Unexpected high rates of default on the mortgages held by a
mortgage pool may adversely affect the value of a mortgage-backed security and
could result in losses to a mortgage REIT. The risk of such defaults is
generally higher in the case of mortgage pools that include subprime mortgages.
To the extent that a mortgage REIT’s portfolio is exposed to lower-rated,
unsecured or subordinated instruments, the risk of loss may increase, which may
have a negative impact on the Fund. Mortgage REITs also are subject to the risk
that the value of mortgaged properties may be less than the amounts owed on the
properties. If a mortgage REIT is required to foreclose on a borrower, the
amount recovered in connection with the foreclosure may be less than the amount
owed to the mortgage REIT.
Mortgage
REITs are subject to significant interest rate risk. Interest rate risk refers
to fluctuations in the value of a mortgage REIT’s investment in fixed rate
obligations resulting from changes in the general level of interest rates. When
the general level of interest rates goes up, the value of a mortgage REIT’s
investment in fixed rate obligations goes down.
In
addition, rising interest rates generally reduce the demand for consumer credit,
including mortgage loans, due to the higher cost of borrowing. This could cause
the value of a mortgage REIT’s investments to decline. A mortgage REIT’s
investment in adjustable rate obligations may react differently to interest rate
changes than an investment in fixed rate obligations. As interest rates on
adjustable rate mortgage loans are reset periodically, yields on a REIT’s
investment in such loans will gradually align themselves to reflect changes in
market interest rates, causing the value of such investments to fluctuate less
dramatically in response to interest rate fluctuations than would investments in
fixed rate obligations. Mortgage REITs typically use leverage and many are
highly leveraged, which exposes them to leverage risk and the risks generally
associated with debt financing. Leverage risk refers to the risk that leverage
created from borrowing may impair a mortgage REIT’s liquidity, cause it to
liquidate positions at an unfavorable time, reduce dividends paid by the
mortgage REIT and increase the volatility of the values of securities issued by
the mortgage REIT. The use of leverage may not be advantageous to a mortgage
REIT. The success of using leverage is dependent on whether the return earned on
the investments made using the proceeds of leverage exceed the cost of using
leverage. To the extent that a mortgage REIT incurs significant leverage, it may
incur substantial losses if its borrowing costs increase. Borrowing costs may
increase for any of the following reasons: short-term interest rates increase;
the market value of a mortgage REIT’s assets decreases; interest rate volatility
increases; or the availability of financing in the market decreases. During
periods of adverse market conditions, downturns in the economy or deterioration
in the conditions of the REIT’s mortgage-related assets the use of leverage may
cause a mortgage REIT to lose more money than would have been the case if
leverage was not used.
To
the extent that a mortgage REIT uses significant leverage, it may incur
substantial losses if its borrowing costs increase. Mortgage REITs are subject
to prepayment risk, which is the risk that borrowers may prepay their mortgage
loans at faster than expected rates. Prepayment rates generally increase when
interest rates fall and decrease when interest rates rise. These faster than
expected payments may adversely affect a mortgage REIT’s profitability.
Prepayments can also occur when borrowers default on their mortgages and the
mortgages are prepaid from the proceeds of a foreclosure sale of the property,
or when borrowers sell the property and use the sale proceeds to prepay the
mortgage as part of a physical relocation. Prepayment rates may be affected by
conditions in the housing and financial markets, increasing defaults on
residential mortgage loans, general economic conditions and the relative
interest rates on loans. REITs are subject to special U.S. federal tax
requirements. Unlike corporations, REITs do not have to pay income taxes if they
meet certain requirements set forth in the Internal Revenue Code of 1986. To
qualify, a REIT must distribute at least 90% of its taxable income to its
shareholders and receive at least 75% of that income from rents, mortgages and
sales of property. A REIT’s failure to comply with applicable U.S. federal tax
requirements may subject it to U.S. federal income taxation. This may adversely
affect the REIT’s performance as well as the Fund’s performance.
Mortgage
REITs may be dependent upon the management skills of a few individuals and may
have limited financial resources. The managers of mortgage REITs may employ
hedging strategies designed to mitigate certain risks, including interest rate
risk. Poorly designed strategies or improperly executed transactions could
significantly increase the mortgage REIT’s risk and lead to material losses.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Van
Eck Securities Corporation, the distributor of the Shares, does not maintain a
secondary market in the Shares. Investors purchasing and selling Shares in the
secondary market may not experience investment results consistent with those
experienced by those Authorized Participants creating and redeeming directly
with the Fund.
Decisions
by market makers or Authorized Participants to reduce their role or “step away”
from these activities in times of market stress could inhibit the effectiveness
of the arbitrage process in maintaining the relationship between the underlying
value of the Fund’s portfolio securities and the Fund’s market price. This
reduced effectiveness could result in Fund Shares trading at a price which
differs materially from net asset value and also in greater than normal intraday
bid/ask spreads for Fund Shares.
Non-Diversification
Risk.
The Fund may become classified as “non-diversified” under the Investment Company
Act of 1940 solely as a result of a change in relative market capitalization or
index weighting of one or more constituents of the its Index. If the Fund
becomes non-diversified, it may invest a greater portion of its assets in
securities of a smaller number of individual issuers than a diversified fund. As
a result, changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a more diversified
fund.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified” fund under the Investment Company
Act of 1940. The Fund is subject to the risk that it will be more volatile than
a diversified fund because the Fund may invest a relatively high percentage of
its assets in a smaller number of issuers or may invest a larger proportion of
its assets in a single issuer. Moreover, the gains and losses on a single
investment may have a greater impact on the Fund’s net asset value and may make
the Fund more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
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.
Preferred
Securities Risk.
Preferred Securities are essentially contractual obligations that entail rights
to distributions declared by the issuer’s board of directors but may permit the
issuer to defer or suspend distributions for a certain period of time. Preferred
Securities, which generally pay fixed or adjustable rate dividends or interest
to investors, have preference over common stock in the payment of dividends or
interest and the liquidation of a company’s assets, which means that a company
typically must pay dividends or interest on its Preferred Securities before
paying any dividends on its common stock. On the other hand, preferred
securities are junior to the company’s debt, including both senior and
subordinated debt. Because of their subordinated position in the capital
structure of an issuer, the ability to defer dividend or interest payments for
extended periods of time without triggering an event of default for the issuer,
and certain other features, Preferred Securities are often treated as
equity-like instruments by both issuers and investors, as their quality and
value are heavily dependent on the profitability and cash flows of the issuer
rather than on any legal claims to specific assets.
If
the Fund owns a Preferred Security whose issuer has deferred or suspended
distributions, the Fund may be required to account for the distribution that has
been deferred or suspended for tax purposes, even though it may not have
received this income in cash. Further, Preferred Securities may lose substantial
value if distributions are deferred, suspended or not declared. Preferred
Securities may also permit the issuer to convert Preferred Securities into the
issuer’s common stock. Preferred Securities that are convertible into common
stock may decline in value if the common stock to which Preferred Securities may
be converted declines in value. Preferred Securities are subject to greater
credit risk than traditional fixed income securities because the rights of
holders of Preferred Securities are subordinated to the rights of the bond and
debtholders of an issuer. Preferred Securities may be less liquid than such
securities as common stocks and do not convey the same rights as common stock to
the holder of Preferred
Securities,
such as voting rights (except in certain situations relating to distributions of
preferred dividends). If an issuer of Preferred Securities encounters financial
difficulties, the issuer’s board of directors may not declare a distribution and
the value of Preferred Securities may decline as a result. The board of
directors of an issuer of Preferred Securities may not declare distributions
even if such payments have come due.
Real
Estate Sector Risk.
Companies in the real estate sector include companies that invest in real
estate, such as REITs and real estate management and development companies. The
Fund will be sensitive to changes in, and its performance will depend to a
greater extent on, the overall condition of the real estate sector. Companies
that invest in real estate are subject to the risks of owning real estate
directly as well as to risks that relate specifically to the way that such
companies operate, including management risk (such companies are dependent upon
the management skills of a few key individuals and may have limited financial
resources). Adverse economic, business or political developments affecting real
estate could have a major effect on the values of the Fund’s investments.
Investing in real estate is subject to such risks as decreases in real estate
values, overbuilding, increased competition and other risks related to local or
general economic conditions, increases in operating costs and property taxes,
changes in zoning laws, casualty or condemnation losses, possible environmental
liabilities, regulatory limitations on rent, possible lack of availability of
mortgage financing, market saturation, fluctuations in rental income and the
value of underlying properties and extended vacancies of properties. Certain
real estate securities have a relatively small market capitalization, which may
tend to increase the volatility of the market price of these securities. Real
estate securities have limited diversification and are, therefore, subject to
risks inherent in operating and financing a limited number of projects. Real
estate securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants.
REITs
Risk.
Investing in REITs exposes investors to the risks of owning real estate
directly, as well as to risks that relate specifically to the way in which REITs
are organized and operated. REITs generally invest directly in real estate, in
mortgages or in some combination of the two. Operating REITs requires
specialized management skills and the Fund indirectly bears management expenses
along with the direct expenses of the Fund. Individual REITs may own a limited
number of properties and may concentrate in a particular region or property
type. REITs may also be subject to heavy cash flow dependency, default by
borrowers or tenants and self-liquidation. REITs typically use leverage to
acquire assets, which increases the risk of investing in REITs and can cause the
values of the Fund’s investments in REITs to be more volatile and to decline if
interest rates increase. REITs also must satisfy specific requirements of the
Internal Revenue Code of 1986 in order to qualify for tax-free pass-through
income. The failure of a company to qualify as a REIT could have adverse
consequences for the Fund, including significantly reducing the return to the
Fund on its investment in such company. In addition, REITs, like mutual funds,
have expenses, including management and administration fees, that are paid by
their shareholders. As a result, shareholders will absorb their proportionate
share of duplicate levels of fees when the Fund invests in REITs.
Individuals
(and certain other non-corporate entities) are generally eligible for a
deduction of up to 20% on taxable ordinary dividends from REITs and certain
other types of business income through 2025. Internal Revenue Service
regulations permit a regulated investment company to pass through to its
shareholders qualified REIT dividends eligible for the 20% deduction. Some
portion of the distributions by the Fund may be taxable ordinary dividends from
REITs.
Restricted
Securities Risk.
Regulation S securities and Rule 144A securities are restricted securities that
are not registered under the Securities Act of 1933. They may be less liquid and
more difficult to value than other investments because such securities may not
be readily marketable. The Fund may not be able to purchase or sell a restricted
security promptly or at a reasonable time or price. Although there may be a
substantial institutional market for these securities, it is not possible to
predict exactly how the market for such securities will develop or whether it
will continue to exist. A restricted security that was liquid at the time of
purchase may subsequently become illiquid and its value may decline as a result.
Restricted securities that are deemed illiquid will count towards the Fund’s
limitation on illiquid securities. In addition, transaction costs may be higher
for restricted securities than for more liquid securities. The Fund may have to
bear the expense of registering restricted securities for resale and the risk of
substantial delays in effecting the registration.
Risk
of Investing in BDCs. BDCs
generally invest in less mature U.S. private companies or thinly traded U.S.
public companies which involve greater risk than well-established
publicly-traded companies. While the BDCs that comprise the Index are expected
to generate income in the form of dividends, certain BDCs during certain periods
of time may not generate such income. The Fund will indirectly bear its
proportionate share of any management fees and other operating expenses incurred
by the BDCs and of any performance-based or incentive fees payable by the BDCs
in which it invests, in addition to the expenses paid by the Fund. A BDC’s
incentive fee may be very high, vary from year to year and be payable even if
the value of the BDC’s portfolio declines in a given time period. Incentive fees
may create an incentive for a BDC’s manager to make investments that are risky
or more speculative than would be the case in the absence of such compensation
arrangements, and may also encourage the BDC’s manager to use leverage to
increase the return on the BDC’s investments. Any incentive fee payable by a BDC
that relates to its net investment income may be computed and paid on income
that may include interest that has been accrued but not yet received. If a
portfolio company defaults on a loan that is structured to provide accrued
interest income, it is possible that accrued interest income previously included
in the calculation of the incentive fee will become uncollectible. A BDC’s
manager may not be obligated to reimburse the BDC’s shareholder for any part of
the incentive fee it received that was based on accrued interest income that was
never received as a result of a subsequent default, and such circumstances would
result in the BDC’s shareholders (including the Fund) paying an incentive fee on
income that was never received by the BDC. Such incentive fees may
also
create an incentive for a BDC’s manager to make investments in securities with
deferred interest features. The use of leverage by BDCs magnifies gains and
losses on amounts invested and increases the risks associated
with investing in BDCs. A BDC may make investments with a larger
amount of risk of volatility and loss of principal than other investment options
and may also be highly speculative and aggressive.
The
Investment Company Act of 1940 imposes certain constraints upon the operations
of a BDC. For example, BDCs are required to invest at least 70% of their total
assets primarily in securities of U.S. private companies or thinly traded U.S.
public companies, cash, cash equivalents, U.S. government securities and high
quality debt investments that mature in one year or less. Generally, little
public information exists for private and thinly traded companies in which a BDC
may invest and there is a risk that investors may not be able to make a fully
informed evaluation of a BDC and its portfolio of investments. With respect to
investments in debt instruments, there is a risk that the issuers of such
instruments may default on their payments or declare bankruptcy. Many debt
investments in which a BDC may invest will not be rated by a credit rating
agency and will be below investment grade quality. These investments are
commonly referred to as “junk bonds” and have predominantly speculative
characteristics with respect to an issuer’s capacity to make payments of
interest and principal. Although lower grade securities are potentially higher
yielding, they are also characterized by high risk. In addition, the secondary
market for lower grade securities may be less liquid than that of higher rated
securities.
Certain
BDCs may also be difficult to value since many of the assets of BDCs do not have
readily ascertainable market values. Therefore, such assets are most often
recorded at fair value, in good faith, in accordance with valuation procedures
adopted by such companies, which may potentially result in material differences
between a BDC’s net asset value per share and its market value.
Additionally,
a BDC may only incur indebtedness in amounts such that the BDC’s asset coverage
ratio of total assets to total senior securities equals at least 150% after such
incurrence. These limitations on asset mix and leverage may affect the way that
the BDC raises capital. BDCs compete with other entities for the types of
investments they make, and such entities are not necessarily subject to the same
investment constraints as BDCs.
To
comply with provisions of the Investment Company Act of 1940 and Securities and
Exchange Commission regulations thereunder, the Adviser may be required to vote
BDC shares in the same general proportion as shares held by other shareholders
of the BDC.
To
qualify and remain eligible for the special tax treatment accorded to regulated
investment companies and their shareholders under the Internal Revenue Code of
1986, the BDCs in which the Fund invests must meet certain source-of-income,
asset diversification and annual distribution requirements. If a BDC in which
the Fund invests fails to qualify as a regulated investment company, such BDC
would be liable for federal, and possibly state, corporate taxes on its taxable
income and gains. Such failure by a BDC could substantially reduce the BDC’s net
assets and the amount of income available for distribution to the Fund, which
would in turn decrease the total return of the Fund.
Risk
of Investing in Chinese Bonds.
The Fund may invest in Renminbi ("RMB")-denominated bonds issued in the People's
Republic of China by Chinese credit, government and quasi-governmental issuers
("RMB Bonds"). RMB Bonds are available on the China interbank bond market to
eligible foreign investors through the CIBM Direct Access Program and through
the "Mutual Bond Market Access between Mainland China and Hong Kong" ("Bond
Connect") program. The Fund's investments in bonds through either program will
be subject to a number of additional risks and restrictions that may affect the
Fund's investments and returns.
The
Bond Connect program and the CIBM Direct Access Program are relatively new.
Laws, rules, regulations, policies, notices, circulars or guidelines relating to
the programs as published or applied by the relevant authorities of the People's
Republic of China are untested and are subject to change from time to time.
There can be no assurance that the Bond Connect program and/or the CIBM Direct
Access Program will not be restricted, suspended or abolished.
Under
the prevailing People's Republic of China regulations, eligible foreign
investors who wish to participate in the Bond Connect program may do so through
an offshore custody agent, registration agent or other third parties (as the
case may be), who would be responsible for making the relevant filings and
account opening with the relevant authorities. The Fund is therefore subject to
the risk of default or errors on the part of such agents.
Under
the prevailing People's Republic of China regulations, eligible foreign
institutional investors who wish to invest directly in the China interbank bond
market through the CIBM Direct Access Program may do so through an onshore
settlement agent, who would be responsible for making the relevant filings and
account opening with the relevant authorities. The Fund is therefore subject to
the risk of default or errors on the part of such agent.
Trading
through the Bond Connect program is performed through newly developed trading
platforms and operational systems. There is no assurance that such systems will
function properly (in particular, under extreme market conditions) or will
continue to be adapted to changes and developments in the market. In addition,
where the Fund invests in the China interbank bond market through the Bond
Connect program, it may be subject to risks of delays inherent in the order
placing and/or settlement.
Investing
in RMB Bonds involves additional risks, including, but not limited to, the fact
that the economy of China differs, often unfavorably, from the U.S. economy,
including, among other things, in terms of currency revaluation, structure,
general development, government involvement, wealth distribution, rate of
inflation, growth rate, allocation of resources and capital
reinvestment.
The
RMB is currently not a freely convertible currency. The Chinese government
places strict regulation on the RMB and sets the value of the RMB to levels
dependent on the value of the U.S. dollar. The Chinese government's imposition
of restrictions on the repatriation of RMB out of mainland China may limit the
depth of the offshore RMB market and reduce the liquidity of the Fund's
investments.
Risk
of Investing in ETPs.
The Fund may be subject to the following risks as a result of its investments in
ETPs:
Dividend
Paying Securities Risk.
There
can be no assurance that securities that pay dividends will continue to have a
high dividend yield, strong financial health or attractive valuation for any
period of time. Securities that pay dividends, as a group, may be out of favor
with the market and may underperform the overall equity market or stocks of
companies that do not pay dividends. In addition, changes in the dividend
policies of the companies held by an ETP or the capital resources available for
such companies' dividend payments may adversely affect the ETP.
Risk
of Investing in Foreign Securities.
Investments in the securities of foreign issuers involve risks beyond
those associated with investments in U.S. securities.
These additional risks include greater market volatility, the availability of
less reliable financial information, higher transactional and custody costs,
taxation by foreign governments, decreased market liquidity and political
instability. Because certain foreign securities markets may be limited in size,
the activity of large traders may have an undue influence on the prices of
securities that trade in such markets. An ETP invests in securities of issuers
located in countries whose economies are heavily dependent upon trading with key
partners. Any reduction in this trading may have an adverse impact on the ETP’s
investments.
Risk
of Investing in Emerging Market Issuers. Investments
in securities of emerging market issuers are exposed to a number of risks that
may make these investments volatile in price or difficult to trade. Emerging
markets are more likely than developed markets to experience problems with the
clearing and settling of trades, as well as the holding of securities by local
banks, agents and depositories. Political risks may include unstable
governments, nationalization, restrictions on foreign ownership, laws that
prevent investors from getting their money out of a country and legal systems
that do not protect property rights as well as the laws of the United States.
Market risks may also include economies that concentrate in only a few
industries, securities issues that are held by only a few investors, liquidity
issues and limited trading capacity in local exchanges and the possibility that
markets or issues may be manipulated by foreign nationals who have inside
information. The frequency, availability and quality of financial information
about investments in emerging markets varies. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited. All of these
factors can make emerging market securities more volatile and potentially less
liquid than securities issued in more developed markets.
Foreign
Currency Risk.
Because
all or a portion of the income received by an ETP from its investments and/or
the revenues received by the underlying issuer will generally be denominated in
foreign currencies, the ETP's exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the ETP, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. Moreover, an ETP may incur costs in connection with
conversions between U.S. dollars and foreign currencies.
Risk
of Investing in Mortgage REITs.
Mortgage
real estate investment trusts (“REITs”) are exposed to the risks specific to the
real estate market as well as the risks that relate specifically to the way in
which mortgage REITs are organized and operated. Mortgage REITs receive
principal and interest payments from the owners of the mortgaged properties.
Accordingly, mortgage REITs are subject to the credit risk of the borrowers.
Credit risk refers to the possibility that the borrower will be unable and/or
unwilling to make timely interest payments and/or repay the principal on the
loan to a mortgage REIT when due. To the extent that a mortgage REIT invests in
mortgage-backed securities offered by private issuers, such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers, the mortgage REIT may be subject to
additional risks. Timely payment of interest and principal of non-governmental
issuers may be supported by various forms of private insurance or guarantees,
including individual loan, title, pool and hazard insurance purchased by the
issuer. However, there can be no assurance that the private insurers can or will
meet their obligations under such policies. Unexpected high rates of default on
the mortgages held by a mortgage pool may adversely affect the value of a
mortgage-backed security and could result in losses to a mortgage REIT. The risk
of such defaults is generally higher in the case of mortgage pools that include
subprime mortgages. To the extent that a mortgage REIT’s portfolio is exposed to
lower-rated, unsecured or subordinated instruments, the risk of loss may
increase, which may have a negative impact on an ETP. Mortgage REITs also are
subject to the risk that the value of mortgaged properties may be less than the
amounts owed on the properties. If a mortgage REIT is required to foreclose on a
borrower, the amount recovered in connection with the foreclosure may be less
than the amount owed to the mortgage REIT. Mortgage REITs typically use leverage
and many are highly leveraged, which exposes them to leverage risk and the risks
generally associated with debt financing. Leverage risk refers to the risk that
leverage created from borrowing may impair a mortgage REIT’s
liquidity,
cause it to liquidate positions at an unfavorable time and increase the
volatility of the values of securities issued by the mortgage REIT.
Preferred
Securities Risk.
Preferred securities are essentially contractual obligations that entail rights
to distributions declared by the issuer’s board of directors but may permit the
issuer to defer or suspend distributions for a certain period of time. If an ETP
owns a preferred security whose issuer has deferred or suspended distributions,
the ETP may be required to account for the distribution that has been deferred
or suspended for tax purposes, even though it may not have received this income
in cash. Further, preferred securities may lose substantial value if
distributions are deferred, suspended or not declared. Preferred securities may
also permit the issuer to convert preferred securities into the issuer’s common
stock. Preferred securities that are convertible to common stock may decline in
value if the common stock into which preferred securities may be converted
declines in value. Preferred securities are subject to greater credit risk than
traditional fixed income securities because the rights of holders of preferred
securities are subordinated to the rights of the bond and debt holders of an
issuer.
CLO
Risk. The
risks of investing in CLO securities include both the economic risks of the
underlying loans combined with the risks associated with the CLO structure
governing the priority of payments. The degree of such risk will generally
correspond to the specific tranche in which the Fund is invested. The Fund
intends to invest primarily in investment grade-rated tranches of CLOs rated
between and inclusive of AAA/Aaa and BBB-/Baa3; however, this rating does not
constitute a guarantee of credit quality and may be downgraded, and in stressed
market environments it is possible that even senior CLO debt tranches could
experience losses due to actual defaults, increased sensitivity to defaults due
to collateral default and the disappearance of the subordinated/equity tranches,
market anticipation of defaults, as well as negative market sentiment with
respect to CLO securities as an asset class. The Fund’s portfolio managers may
not be able to accurately predict how specific CLO securities or the portfolio
of underlying loans for such CLO securities will react to changes or stresses in
the market, including changes in interest rates. The most common risks
associated with investing in CLO securities are liquidity risk, interest rate
risk, credit risk, call risk, and the risk of default of the underlying asset.
Credit
Risk.
Debt securities are subject to credit risk. Credit risk refers to the
possibility that the issuer or guarantor of a security will be unable and/or
unwilling to make timely interest payments and/or repay the principal on its
debt or to otherwise honor its obligations and/or default completely on
securities. Debt securities are subject to varying degrees of credit risk,
depending on the issuer’s financial condition and on the terms of the
securities, which may be reflected in credit ratings. There is a possibility
that the credit rating of a debt security may be downgraded after purchase or
the perception of an issuer’s credit worthiness may decline, which may adversely
affect the value of the security.
High
Yield Securities Risk. Securities
rated below investment grade are commonly referred to as high yield securities
or “junk bonds.” High yield securities are often issued by issuers that are
restructuring, are smaller or less creditworthy than other issuers, or are more
highly indebted than other issuers. High yield securities are subject to greater
risk of loss of income and principal than higher rated securities and are
considered speculative. The prices of high yield securities are likely to be
more sensitive to adverse economic changes or individual issuer developments
than higher rated securities. During an economic downturn or substantial period
of rising interest rates, high yield security issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. In the event of a default, an ETP may incur
additional expenses to seek recovery. The secondary market for securities that
are high yield securities may be less liquid than the markets for higher quality
securities and high yield securities issued by non-corporate issuers may be less
liquid than high yield securities issued by corporate issuers, which, in either
instance, may have an adverse effect on the market prices of and an ETP’s
ability to arrive at a fair value for certain securities. The illiquidity of the
market also could make it difficult for an ETP to sell certain securities in
connection with a rebalancing of its index, if applicable. In addition, periods
of economic uncertainty and change may result in an increased volatility of
market prices of high yield securities and a corresponding volatility in an
ETP’s net asset value. In addition, adverse publicity and investor perceptions
may decrease the values and liquidity of high yield securities.
Interest
Rate Risk. Debt
securities, such as bonds, are also subject to interest rate risk. Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. When the general level of interest rates
goes up, the prices of most debt securities go down. When the general level of
interest rates goes down, the prices of most debt securities go up. Many factors
can cause interest rates to rise, including central bank monetary policy, rising
inflation rates and general economic conditions. A low interest rate environment
increases the risk associated with rising interest rates, including the
potential for periods of volatility and increased redemptions.
Measures
taken by the Federal Reserve Board may affect the money supply and as a result
of these measures, an ETF may face a heightened interest rate risk.
In
addition, debt securities with longer durations tend to be more sensitive to
interest rate changes, usually making them more volatile than debt securities
with shorter durations. To the extent an ETP invests a substantial portion of
its assets in debt securities with longer-term maturities, rising interest rates
may cause the value of an ETP’s investments to decline significantly.
In
addition, in response to the COVID-19 pandemic, as with other serious economic
disruptions, governmental authorities and regulators are enacting significant
fiscal and monetary policy changes, including providing direct capital infusions
into companies, creating new monetary programs and lowering interest rates
considerably. These actions present heightened risks to debt instruments, and
such risks could be even further heightened if these actions are unexpectedly or
suddenly reversed or are ineffective in achieving their desired
outcomes.
Call
Risk.
An ETP may invest in callable debt securities. If interest rates fall, it is
possible that issuers of callable securities will “call” (or prepay) their debt
securities before their maturity date. If a call were exercised by the issuer
during or following a period of declining interest rates, the ETP is likely to
have to replace such called security with a lower yielding security or
securities with greater risks or other less favorable features. If that were to
happen, it would decrease the ETP’s net investment income. An ETP also may fail
to recover additional amounts (i.e., premiums) paid for securities with higher
interest rates, resulting in an unexpected capital loss.
Concentration
Risk. Certain
of the ETPs may be concentrated in a particular sector or sectors or industry or
group of industries. To the extent that an ETP is concentrated in a particular
sector or sectors or industry or group of industries, the ETP will be subject to
the risk that economic, political or other conditions that have a negative
effect on those sectors and/or industry or groups of industries may negatively
impact the ETP to a greater extent than if the ETP’s assets were invested in a
wider variety of sectors or industries.
Sampling
Risk. The
Fund’s use of a representative sampling approach will result in its holding a
smaller number of securities than are in its Index. As a result, an adverse
development respecting an issuer of securities held by the Fund could result in
a greater decline in net asset value than would be the case if the Fund held all
of the securities in its Index. Conversely, a positive development relating to
an issuer of securities in the Index that is not held by the Fund could cause
the Fund to underperform the Index. To the extent the assets in the Fund are
smaller, these risks will be greater.
Securitized/Asset-Backed
Securities Risk. Investments
in asset-backed securities, including collateralized mortgage obligations, are
subject to the risk of significant credit downgrades, dramatic changes in
liquidity, and defaults to a greater extent than many other types of
fixed-income investments. During periods of falling interest rates, asset-backed
securities may be called or prepaid, which may result in the Fund having to
reinvest proceeds in other investments at a lower interest rate. During periods
of rising interest rates, the average life of asset-backed securities may
extend, which may lock in a below-market interest rate, increase the security’s
duration and interest rate sensitivity, and reduce the value of the security.
The Fund may invest in asset-backed securities issued or backed by federal
agencies or government sponsored enterprises or that are part of a
government-sponsored program, which may subject the Fund to the risks noted
above. The values of assets or collateral underlying asset-backed securities may
decline and, therefore, may not be adequate to cover underlying obligations.
Enforcing rights against the underlying assets or collateral may be difficult,
and the underlying assets or collateral may be insufficient if the issuer
defaults.
Shareholder
Risk. Certain
shareholders, including other funds advised by the Adviser, may from time to
time own a substantial amount of the Fund’s Shares. In addition, a third party
investor, the Adviser or an affiliate of the Adviser, an Authorized Participant,
a market maker, or another entity may invest in the Fund and hold its investment
for a limited period of time. There can be no assurance that any large
shareholder would not redeem its investment. Redemptions by shareholders could
have a negative impact on the Fund. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
exchange and may, therefore, have a material effect on the market price of the
Shares.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Sovereign
Bond Risk. Investment
in sovereign bonds involves special risks not present in corporate bonds. The
governmental authority that controls the repayment of the bond may be unable or
unwilling to make interest payments and/or repay the principal on its debt or to
otherwise honor its obligations. If an issuer of sovereign bonds defaults on
payments of principal and/or interest, the Fund may have limited recourse
against the issuer. During periods of economic uncertainty, the market prices of
sovereign bonds, and the Fund’s net asset value, may be more volatile than
prices of corporate bonds, which may result in losses. In the past, certain
governments of emerging market countries have declared themselves unable to meet
their financial obligations on a timely basis, which has resulted in losses for
holders of sovereign bonds.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation,
decreased
exports and economic recessions. Geopolitical hostility, political instability,
as well as economic or environmental events in any one Asian country can have a
significant effect on the entire Asian region as well as on major trading
partners outside Asia, and any adverse effect on some or all of the Asian
countries and regions in which the Fund invests. The securities markets in some
Asian economies are relatively underdeveloped and may subject the Fund to higher
action costs or greater uncertainty than investments in more developed
securities markets. Such risks may adversely affect the value of the Fund’s
investments. Certain Asian countries have also developed increasingly strained
relationships with the U.S., and if these relations were to worsen, they could
adversely affect Asian issuers that rely on the U.S. for trade.
Governments
of many Asian countries have implemented significant economic reforms in order
to liberalize trade policy, promote foreign investment in their economies,
reduce government control of the economy and develop market mechanisms. There
can be no assurance these reforms will continue or that they will be effective.
Despite recent reform and privatizations, significant regulation of investment
and industry is still pervasive in many Asian countries and may restrict foreign
ownership of domestic corporations and repatriation of assets, which may
adversely affect the Fund’s investments. Governments in some Asian countries are
authoritarian in nature, have been installed or removed as a result of military
coups or have periodically used force to suppress civil dissent. Disparities of
wealth, the pace and success of democratization, and ethnic, religious and
racial disaffection have led to social turmoil, violence and labor unrest in
some countries. Unanticipated or sudden political or social developments may
result in sudden and significant investment losses. Investing in certain Asian
countries involves risk of loss due to expropriation, nationalization, or
confiscation of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested. In addition, several
countries in Asia may be impacted by the occurrence of global events such as
war, terrorism, environmental disasters, natural disasters or events, country
instability, and infectious disease epidemics and pandemics.
Special
Risk Considerations of Investing in Brazilian Issuers. Investments
in securities of Brazilian issuers, including issuers located outside of Brazil
that generate significant revenues from Brazil, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such risks include, among others, a high level of price volatility in
the Brazilian markets, chronic structural public sector deficits, a rising
unemployment rate and disparities of wealth. The Brazilian economy has been
characterized by frequent, and occasionally drastic, interventions by the
Brazilian government, including the imposition of wage and price controls,
exchange controls, limiting imports, blocking access to bank accounts and other
measures. The Brazilian government has often changed monetary, taxation, credit,
trade and other policies to influence the core of Brazil’s economy.
Additionally, Brazilian accounting, auditing and financial standards and
requirements differ from those in the United States, and this may affect the tax
consequences with respect to and valuation of investments in the
Fund.
Actions
taken by the Brazilian government concerning the economy may have significant
effects on Brazilian companies and on market conditions and prices of Brazilian
securities. Brazil’s economy may be subject to sluggish economic growth due to,
among other things, weak consumer spending, political turmoil, high rates of
inflation and low commodity prices. Brazil suffers from chronic structural
public sector deficits. Additionally, the process of privatizing certain
entities by the Brazilian government may cause privatized entities to suffer
losses due to, among other things, the inability to adjust to a competitive
environment.
The
market for Brazilian securities is directly influenced by the flow of
international capital, and economic and market conditions of certain countries,
especially emerging market countries. As a result, adverse economic conditions
or developments in other emerging market countries have at times significantly
affected the availability of credit in the Brazilian economy and resulted in
considerable outflows of funds and declines in the amount of foreign currency
invested in Brazil. In addition, currency devaluations and economic or political
developments in any Central and South American country could have a significant
adverse effect on the entire region, including Brazil.
Investments
in Brazilian securities may be subject to certain restrictions on foreign
investment. Brazilian law provides that whenever a serious imbalance in Brazil’s
balance of payments exists or is anticipated, the Brazilian government may
impose temporary restrictions on the remittance to foreign investors of the
proceeds of their investment in Brazil and on the conversion of the Brazilian
real into foreign currency. The likelihood of such restrictions may be affected
by the extent of Brazil’s foreign currency revenues, the size of Brazil’s debt
service burden relative to the economy as a whole, and political constraints to
which Brazil may be subject. Brazilian investment and repatriation controls
could also affect the Fund’s ability to operate and to qualify for the favorable
tax treatment afforded to regulated investment companies for U.S. federal income
tax purposes.
Brazil
has historically experienced high rates of inflation, a high level of debt, and
high crime rates, each of which may constrain economic growth. Brazil suffers
from high levels of corruption, crime and income disparity. The Brazilian
economy and Brazilian companies may also be adversely affected by significant
public health concerns and associated declines in tourism.
The
Brazilian economy is heavily dependent upon commodity prices and international
trade. The Brazilian securities markets are smaller, less liquid and more
volatile than U.S. securities markets and the market for Brazilian securities is
influenced by economic and market conditions of certain countries, especially
emerging market countries in Central and South America. Unanticipated political
or social developments may result in sudden and significant investment losses.
An increase in prices for commodities, such as petroleum, the depreciation of
the Brazilian real and future governmental measures seeking to maintain the
value of the Brazilian real in relation to the U.S. dollar, may trigger
increases in inflation in Brazil and may slow the rate of growth of the
Brazilian economy. Conversely, appreciation of the Brazilian real relative to
the U.S. dollar may lead to the deterioration of Brazil’s current account and
balance of payments as well as limit the growth of exports.
Because
the Fund’s assets will be invested primarily in securities of Brazilian issuers,
the income received by the Fund will be principally in Brazilian real. The
Fund’s exposure to the Brazilian real and changes in value of the Brazilian real
versus the U.S. dollar may result in reduced returns for the Fund. Moreover, the
Fund may incur costs in connection with conversions between U.S. dollars and
Brazilian real.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China that
generate significant revenues from China, involve certain risks and
considerations not typically associated with investments in U.S securities.
These risks include among others (i) more frequent (and potentially widespread)
trading suspensions and government interventions with respect to Chinese issuers
resulting in a lack of liquidity and in price volatility, (ii) currency
revaluations and other currency exchange rate fluctuations or blockage, (iii)
the nature and extent of intervention by the Chinese government in the Chinese
securities markets, whether such intervention will continue and the impact of
such intervention or its discontinuation, (iv) the risk of nationalization or
expropriation of assets, (v) the risk that the Chinese government may decide not
to continue to support economic reform programs, (vi) limitations on the use of
brokers, (vii) higher rates of inflation, (viii) greater political, economic and
social uncertainty, (ix) market volatility caused by any potential regional or
territorial conflicts or natural or other disasters, and (x) the risk of
increased trade tariffs, embargoes, sanctions, investment restrictions and other
trade limitations. Certain securities are, or may in the future become
restricted, and the Fund may be forced to sell such securities and incur a loss
as a result. In addition, the economy of China differs, often unfavorably, from
the U.S. economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, interest
rates, allocation of resources and capital reinvestment, among others. The
Chinese central government has historically exercised substantial control over
virtually every sector of the Chinese economy through administrative regulation
and/or state ownership and actions of the Chinese central and local government
authorities continue to have a substantial effect on economic conditions in
China. In addition, the Chinese government has from time to time taken actions
that influence the prices at which certain goods may be sold, encourage
companies to invest or concentrate in particular industries, induce mergers
between companies in certain industries and induce private companies to publicly
offer their securities to increase or continue the rate of economic growth,
control the rate of inflation or otherwise regulate economic expansion. The
Chinese government may do so in the future as well, potentially having a
significant adverse effect on economic conditions in China.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Responses
to the financial problems by European governments, central banks and others,
including austerity measures and reforms, may not work, may result in social
unrest and may limit future growth and economic recovery or have other
unintended consequences. The governments of European Union countries may be
subject to change and such countries may experience social and political unrest.
Unanticipated or sudden political or social developments may result in sudden
and significant investment losses. The occurrence of terrorist incidents,
outbreaks of war or ongoing regional armed conflict throughout Europe also could
impact financial markets. Further defaults or restructurings by governments and
other entities of their debt could have additional adverse effects on economies,
financial markets and asset valuations around the world. In addition, one or
more countries may abandon the euro and/or withdraw from the European Union. The
impact of these actions, especially if they occur in a disorderly fashion, is
not clear but could be significant and far-reaching.
Special
Risk Considerations of Investing in Latin American Issuers.
Investments in securities of Latin American issuers involve special
considerations not typically associated with investments in securities of
issuers located in the United States. The economies of certain Latin American
countries have, at times, experienced high interest rates, economic volatility,
inflation, currency devaluations and high unemployment rates. In addition,
commodities (such as oil, gas and minerals) represent a
significant
percentage of the region’s exports and many economies in this region are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region.
Most
Latin American countries have experienced severe and persistent levels of
inflation, including, in some cases, hyperinflation. This has, in turn, led to
high interest rates, extreme measures by governments to keep inflation in check,
and a generally debilitating effect on economic growth. Although inflation in
many Latin American countries has lessened, there is no guarantee it will remain
at lower levels.
The
political history of certain Latin American countries has been characterized by
political uncertainty, intervention by the military in civilian and economic
spheres, and political corruption. Such events could reverse favorable trends
toward market and economic reform, privatization, and removal of trade barriers,
and could result in significant disruption in securities markets in the
region.
The
economies of Latin American countries are generally considered emerging markets
and can be significantly affected by currency devaluations. Certain Latin
American countries may also have managed currencies which are maintained at
artificial levels relative to the U.S. dollar rather than at levels determined
by the market. This type of system can lead to sudden and large adjustments in
the currency which, in turn, can have a disruptive and negative effect on
foreign investors. Certain Latin American countries also restrict the free
conversion of their currency into foreign currencies, including the U.S. dollar.
There is no significant foreign exchange market for many Latin American
currencies and it would, as a result, be difficult for the Fund to engage in
foreign currency transactions designed to protect the value of the Fund’s
interests in securities denominated in such currencies.
Finally,
a number of Latin American countries are among the largest debtors of developing
countries. There have been moratoria on, and a rescheduling of, repayment with
respect to these debts. Such events can restrict the flexibility of these debtor
nations in the international markets and result in the imposition of onerous
conditions on their economies.
Special
Risk Considerations of Investing in Middle Eastern Issuers. Investments
in securities of Middle Eastern issuers, including issuers located outside of
the Middle East that generate significant revenues from the Middle East, involve
risks and special considerations not typically associated with investments in
the U.S. securities markets. Many Middle Eastern countries have little or no
democratic tradition, and the political and legal systems in such countries may
have an adverse impact on the Fund. Many economies in the Middle East are highly
reliant on income from the sale of oil and natural gas or trade with countries
involved in the sale of oil and natural gas, and their economies are therefore
vulnerable to changes in the market for oil and natural gas and foreign currency
values. As global demand for oil and natural gas fluctuates, many Middle Eastern
economies may be significantly impacted.
In
addition, many Middle Eastern governments have exercised and continue to
exercise substantial influence over many aspects of the private sector. In
certain cases, a Middle Eastern country’s government may own or control many
companies,including some of the largest companies in the country. Accordingly,
governmental actions in the future could have a significant effect on economic
conditions in Middle Eastern countries. This could affect private sector
companies and the Fund,as well as the value of securities in the Fund’s
portfolio.
Certain
Middle Eastern markets are in the earliest stages of development. As a result,
there may be a high concentration of market capitalization and trading volume in
a small number of issuers representing a limited number of industries, as well
as a high concentration of investors and financial intermediaries. Brokers in
Middle Eastern countries typically are fewer in number and less capitalized than
brokers in the U.S.
The
legal systems in certain Middle Eastern countries also may have an adverse
impact on the Fund. For example, the potential liability of a shareholder in a
U.S. corporation with respect to acts of the corporation generally is limited to
the amount of the shareholder’s investment. However, the notion of limited
liability is less clear in certain Middle Eastern countries. The Fund therefore
may be liable in certain Middle Eastern countries for the acts of a corporation
in which it invests for an amount greater than its actual investment in that
corporation. Similarly, the rights of investors in Middle Eastern issuers may be
more limited than those of shareholders of a U.S. corporation. It may be
difficult or impossible to obtain or enforce a legal judgment in a Middle
Eastern country. Some Middle Eastern countries prohibit or impose substantial
restrictions on investments in their capital markets, particularly their equity
markets, by foreign entities such as the Fund. For example, certain countries
may require governmental approval prior to investment by foreign persons or
limit the amount of investment by foreign persons in a particular issuer.
Certain Middle Eastern countries may also limit investment by foreign persons to
only a specific class of securities of an issuer that may have less advantageous
terms (including price) than securities of the issuer available for purchase by
nationals of the relevant Middle Eastern country.
The
manner in which foreign investors may invest in companies in certain Middle
Eastern countries, as well as limitations on those investments, may have an
adverse impact on the operations of the Fund. For example, in certain of these
countries, the Fund may be required to invest initially through a local broker
or other entity and then have the shares that were purchased re-registered in
the name of the Fund. Re-registration in some instances may not be possible on a
timely basis. This may result in a delay during which the Fund may be denied
certain of its rights as an investor, including rights as to dividends or to be
made aware of certain corporate actions. There also may be instances where the
Fund places a purchase order but is subsequently informed, at the time
of
re-registration, that the permissible allocation of the investment to foreign
investors has already been filled and, consequently, the Fund may not be able to
invest in the relevant company.
Substantial
limitations may exist in certain Middle Eastern countries with respect to the
Fund’s ability to repatriate investment income or capital gains. The Fund could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investment.
Certain
Middle Eastern countries may be heavily dependent upon international trade and,
consequently, have been and may continue to be negatively affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade. These countries also have been and may continue to be adversely
impacted by economic conditions in the countries with which they trade. In
addition,certain issuers located in Middle Eastern countries in which the Fund
invests may operate in, or have dealings with, countries subject to sanctions
and/or embargoes imposed by the U.S. government and the United Nations, and/or
countries identified by the U.S. government as state sponsors of terrorism. As a
result, an issuer may sustain damage to its reputation if it is identified as an
issuer which operates in, or has dealings with, such countries. The Fund, as an
investor in such issuers, will be indirectly subject to those
risks.
Certain
Middle Eastern countries have strained relations with other Middle Eastern
countries due to territorial disputes,historical animosities, international
alliances, defense concerns or other reasons, which may adversely affect the
economies of these Middle Eastern countries. Certain Middle Eastern countries
experience significant unemployment, as well as widespread underemployment.
There has also been a recent increase in recruitment efforts and an aggressive
push for territorial control by terrorist groups in the region, which has led to
an outbreak of warfare and hostilities. Warfare in Syria has spread to
surrounding areas, including many portions of Iraq and Turkey. Such hostilities
may continue into the future or may escalate at any time due to ethnic, racial,
political, religious or ideological tensions between groups in the region or
foreign intervention or lack of intervention, among other factors.
Special
Risk Considerations of Investing in United Kingdom Issuers. Investments
in securities of United Kingdom issuers, including issuers located outside of
the United Kingdom that generate significant revenues from the United Kingdom,
involve risks and special considerations not typically associated with
investments in the U.S. securities markets. Investments in United Kingdom
issuers may subject the Fund to regulatory, political, currency, security and
economic risks specific to the United Kingdom. The British economy relies
heavily on the export of financials to the United States and other European
countries. A prolonged slowdown in the financials sector may have a negative
impact on the British economy. In the past, the United Kingdom has been a target
of terrorism. Acts of terrorism in the United Kingdom or against British
interests abroad may cause uncertainty in the British financial markets and
adversely affect the performance of the issuers to which the Fund has exposure.
The British economy, along with the United States and certain other European
Union economies, experienced a significant economic slowdown during the recent
financial crisis. In a referendum held on June 23, 2016, voters in the United
Kingdom voted to leave the European Union, creating economic and political
uncertainty in its wake. On January 31, 2020, the United Kingdom officially
withdrew from the European Union. On December 30, 2020, the European Union and
United Kingdom signed the EU-UK Trade and Cooperation Agreement, an agreement on
the terms governing certain aspects of the European Union’s and the United
Kingdom’s relationship following the end of the transition period.
Notwithstanding the EU-UK Trade and Cooperation Agreement, following the
transition period, there is likely to be considerable uncertainty as to the
United Kingdom’s post-transition framework.
Subordinated
Obligations Risk. Payments
under some bonds may be structurally subordinated to all existing and future
liabilities and obligations of each of the respective subsidiaries and
associated companies of an issuer of the bond. Claims of creditors of such
subsidiaries and associated companies will have priority as to the assets of
such subsidiaries and associated companies over the issuer and its creditors,
including the Fund, who seek to enforce the terms of the bond. Certain bonds do
not contain any restrictions on the ability of the subsidiaries of the issuers
to incur additional unsecured indebtedness.
Supranational
Bond Risk.
To the extent that the Fund invests in supranational bonds, the Fund will be
sensitive to changes in, and its performance may depend to a greater extent on,
the overall condition of the supranational entities that issue such bonds.
Certain securities in which the Fund may invest are obligations issued or backed
by supranational entities, such as the European Investment Bank. Obligations of
supranational organizations are subject to the risk that the governments on
whose support the entity depends for its financial backing or repayment may be
unable or unwilling to provide that support. If an issuer of supranational bonds
defaults on payments of principal and/or interest, the Fund may have limited
recourse against the issuer. A supranational entity’s willingness or ability to
repay principal and pay interest in a timely manner may be affected by its cash
flow situation, the extent of its reserves, the relative size of the debt
service burden to the entity as a whole and the political constraints to which a
supranational entity may be subject. During periods of economic uncertainty, the
market prices of supranational bonds, and the Fund’s net asset value, may be
more volatile than prices of corporate bonds, which may result in losses.
Obligations of a supranational organization that are denominated in foreign
currencies will also be subject to the risks associated with investment in
foreign currencies.
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.
U.S.
Treasury Securities Risk.
Direct obligations of the U.S. Treasury have historically involved little risk
of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Issuers in the
utilities sector are subject to a variety of factors that may adversely affect
their business or operations, including high interest costs in connection with
capital construction and improvement programs, difficulty in raising capital in
adequate amounts on reasonable terms in periods of high inflation and unsettled
capital markets, and the effects of economic slowdowns and surplus capacity.
Companies in the utilities sector are subject to extensive regulation, including
governmental regulation of rates charged to customers, and may face difficulty
in obtaining regulatory approval of new technologies. The effects of a U.S.
national energy policy and lengthy delays and greatly increased costs and other
problems associated with the design, construction, licensing, regulation and
operation of nuclear facilities for electric generation, including, among other
considerations, the problems associated with the use of radioactive materials
and the disposal of radioactive wastes, may adversely affect companies in the
utilities sector. Certain companies in the utilities sector may be inexperienced
and may suffer potential losses resulting from a developing deregulatory
environment. Technological innovations may render existing plants, equipment or
products obsolete. Companies in the utilities sector may face increased
competition from other providers of utility services. The potential impact of
terrorist activities on companies in the utilities sector and its customers and
the impact of natural or man-made disasters may adversely affect the utilities
sector. Issuers in the utilities sector also may be subject to regulation by
various governmental authorities and may be affected by the imposition of
special tariffs and changes in tax laws, regulatory policies and accounting
standards.
Zero
Coupon and Payment-in Kind Securities Risk. Zero-coupon
securities are securities that are sold at a discount to par value and on which
interest payments are not made during the life of the security. Upon maturity,
the holder is entitled to receive the par value of the security. Payment-in-kind
securities are securities that have interest payable by delivery of additional
securities. Upon maturity, the holder is entitled to receive the aggregate par
value of the securities. The market prices of zero coupon and payment-in-kind
securities are generally more volatile than the market prices of interest
bearing securities and are likely to respond to a greater degree to changes in
interest rates than interest bearing securities having similar maturities and
credit quality. The Fund accrues income with respect to zero-coupon and
payment-in-kind securities prior to the receipt of cash payments. Even though
periodic interest payments in cash are not made on such securities, tax rules
require the Fund to distribute accrued income, which may require the Fund to
liquidate securities at unfavorable prices or borrow money in order to make
these distributions. Additionally, if the issuer of such securities defaults,
the Fund may obtain no return at all on its investment.
INFORMATION
ABOUT UNDERLYING FUNDS AND ETPs
(VanEck
Dynamic High Income ETF only)
Under
normal circumstances, the VanEck Dynamic High Income ETF intends to invest
primarily in VanEck ETPs that are registered under the federal securities laws
and that invest in publicly traded securities that generate income The following
table sets forth (i) the names of the underlying funds that the VanEck Dynamic
High Income ETF anticipates investing in, and (ii) brief descriptions of the
underlying funds’ investment objectives and principal investment strategies. The
list of underlying funds is subject to change at the discretion of the Adviser
without notice to shareholders. In addition, the investment objective(s) and
principal investment strategies of each underlying fund are subject to change
without notice to shareholders.
Prospectuses
for the VanEck ETPs can be obtained at www.vaneck.com.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
| VanEck
Fund Name |
| Investment
Objective(s) and Principal Investment Strategies |
|
|
|
|
| |
| VanEck
BDC Income ETF |
|
VanEck®
BDC Income ETF seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the MVIS®
US Business Development Companies Index (the “BDC Index”). The BDC Index
is comprised of business development companies (“BDCs”). To be eligible
for the BDC Index and qualify as a BDC, a company must be organized under
the laws of, and have its principal place of business in, the United
States, be registered with the Securities and Exchange Commission and have
elected to be regulated as a BDC under the Investment Company Act of
1940. |
|
|
|
|
| |
| VanEck
CLO ETF |
|
VanEck®
CLO ETF seeks capital preservation and current income. VanEck CLO ETF is
an actively managed ETF that normally invests at least 80% of its total
assets in investment grade-rated debt tranches of collateralized loan
obligations (“CLOs”) of any maturity. |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| VanEck
Emerging Markets High Yield Bond ETF |
|
VanEck®
Emerging Markets High Yield Bond ETF
seeks
to replicate as closely as possible, before fees and expenses, the price
and yield performance of ICE BofA Diversified High Yield US Emerging
Markets Corporate Plus Index (the “Emerging Markets High Yield Index”).
VanEck Emerging Markets High Yield Bond ETF normally invests at least 80%
of its total assets in securities that comprise the VanEck Emerging
Markets High Yield Bond ETF’s benchmark index. The Emerging Markets High
Yield Index is comprised of U.S. dollar denominated bonds issued by
non-sovereign emerging market issuers that have a below investment grade
rating and that are issued in the major domestic and Eurobond markets.
|
|
|
|
|
| |
| VanEck
Energy Income ETF |
|
VanEck®
Energy Income ETF seeks to replicate as closely as possible, before fees
and expenses, the price and yield performance of the MVIS®
North
America Energy Infrastructure Index. VanEck Energy Income ETF normally
invests at least 80% of its total assets in securities that comprise the
MVIS®
North
America Energy Infrastructure Index. MVIS®
North America Energy Infrastructure Index is a rules-based index designed
to give investors a means to track the overall performance of North
American companies involved in the midstream energy segment, which
includes master limited partnerships (“MLPs”) and corporations involved in
oil and gas storage and transportation. |
|
|
|
|
| |
| VanEck
Fallen Angel High Yield Bond ETF |
|
VanEck®
Fallen
Angel High Yield Bond ETF seeks to replicate as closely as possible,
before fees and expenses, the price and yield performance of ICE US Fallen
Angel High Yield 10% Constrained Index (the “Fallen Angel Index”). VanEck
Fallen Angel High Yield Bond ETF normally invests at least 80% of its
total assets in securities that comprise the VanEck Fallen Angel High
Yield Bond ETF’s benchmark index. The Fallen Angel Index is comprised of
below investment grade corporate bonds denominated in U.S. dollars that
were rated investment grade at the time of issuance. |
|
|
|
|
| |
| VanEck
Inflation Allocation ETF |
|
VanEck®
Inflation Allocation ETF is an actively managed ETF that seeks to achieve
its investment objective by investing, under normal circumstances,
primarily in (i) exchange traded products that provide exposure to real
assets through investment in domestic and foreign equity and debt
securities, MLPs, and commodities, including ETFs and non-Investment
Company Act of 1940 commodity pools or commodity trusts and exchange
traded notes; and (ii) cash or cash equivalents. |
|
|
|
|
| |
| VanEck
International High Yield Bond ETF |
|
VanEck®
International High Yield Bond ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of ICE
BofA Global ex-US Issuers High Yield Constrained Index (the “International
High Yield Index”). VanEck International High Yield Bond ETF normally
invests at least 80% of its total assets in securities that comprise the
VanEck International High Yield Bond ETF’s benchmark index. The
International High Yield Index is comprised of below investment grade
bonds issued by corporations located throughout the world (which may
include emerging market countries) excluding the United States,
denominated in euros, U.S. dollars, Canadian dollars or pound sterling and
issued in the major domestic or eurobond markets. |
|
|
|
|
| |
| VanEck
J.P. Morgan EM Local Currency Bond ETF |
|
VanEck®
J.P. Morgan EM Local Currency Bond ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of the
J.P. Morgan GBI-EM Global Core Index (the “Emerging Markets Global Core
Index”). VanEck J.P. Morgan EM Local Currency Bond ETF normally invests at
least 80% of its total assets in securities that comprise the Emerging
Markets Global Core Index, which is comprised of bonds issued by emerging
market governments and denominated in the local currency of the issuer.
|
|
|
|
|
| |
| VanEck
Long/Flat Trend ETF |
|
VanEck®
Long/Flat Trend ETF seeks to replicate as closely as possible, before fees
and expenses, the price and yield performance of the Ned Davis Research
CMG US Large Cap Long/Flat Index (the “NDR CMG Index”). VanEck Long/Flat
Trend ETF normally invests at least 80% of its total assets in securities
that track and/or comprise the VanEck Long/Flat Trend ETF’s benchmark
index. |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| VanEck
Mortgage REIT Income ETF |
|
VanEck®
Mortgage REIT Income ETF
seeks
to replicate as closely as possible, before fees and expenses, the price
and yield performance of the MVIS®
US Mortgage REITs Index (the “Mortgage REITs Index”). VanEck Mortgage REIT
Income ETF normally invests at least 80% of its total assets in securities
that comprise the VanEck Mortgage REIT Income ETF’s benchmark index. The
Mortgage REITs Index is comprised of publicly traded U.S. REITs that
derive at least 50% of their revenues from (or, where applicable, have at
least 50% of their assets related to) mortgage-related activity.
|
|
|
|
|
| |
| VanEck
Morningstar Durable Dividend ETF |
|
VanEck®
Morningstar Durable Dividend ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of the
Morningstar®
US Dividend Valuation IndexSM
(the “US Dividend Valuation Index”). VanEck Morningstar Durable Dividend
ETF normally invests at least 80% of its total assets in securities that
comprise the VanEck Morningstar Durable Dividend ETF’s benchmark index.
The US Dividend Valuation Index is comprised of securities of companies
with a high dividend yield, strong financial health and an attractive
uncertainty-adjusted valuation. |
|
|
|
|
| |
| VanEck
Preferred Securities ex Financials ETF |
|
VanEck®
Preferred Securities ex Financials ETF seeks to replicate as closely as
possible, before fees and expenses, the price and yield performance of the
ICE Exchange-Listed Fixed & Adjustable Rate Non-Financial Preferred
Securities Index (the “Preferred Securities Index”). VanEck Preferred
Securities ex Financials ETF normally invests at least 80% of its total
assets in securities that comprise the VanEck Preferred Securities ex
Financials ETF’s benchmark index. The Preferred Securities Index is
comprised of U.S. exchange-listed hybrid debt, preferred stock and
convertible preferred stock issued by non-financial
corporations. |
|
|
|
|
| |
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
(VanEck
BDC Income ETF, VanEck Emerging Markets High Yield Bond ETF, VanEck Fallen Angel
High Yield Bond ETF, VanEck Green Bond ETF, VanEck IG Floating Rate ETF, VanEck
International High Yield Bond ETF, VanEck J.P. Morgan EM Local Currency Bond ETF
, VanEck Moody's Analytics BBB Corporate Bond ETF, VanEck Moody's Analytics IG
Corporate Bond ETF, VanEck Mortgage REIT Income ETF and VanEck Preferred
Securities ex Financials ETF only)
Each
Fund may invest in securities not included in its respective Index, money market
instruments, including repurchase agreements or other funds which invest
exclusively in money market instruments, convertible securities, structured
notes (notes on which the amount of principal repayment and interest payments
are based on the movement of one or more specified factors, such as the movement
of a particular stock or stock index and/or certain derivatives, which the
Adviser believes will help a Fund track its Index. VanEck Green Bond ETF will
not use derivatives for purposes of meeting the requirement that the Fund invest
at least 80% of its total assets in securities that comprise the Fund’s
benchmark index. Convertible securities and depositary receipts not included in
a Fund’s Index may be used by certain Funds in seeking performance that
corresponds to its respective Index, and in managing cash flows, and may count
towards compliance with a Fund’s 80% policy. Certain Funds may also utilize
participation notes to seek performance that corresponds to their Index. Each
Fund may also invest, to the extent permitted by the Investment Company Act of
1940 and the Securities and Exchange Commission regulations thereunder in other
affiliated and unaffiliated funds, such as open-end or closed-end management
investment companies, including other ETFs.
(VanEck
Dynamic High Income ETF only)
The
Fund may also invest in securities issued by other investment companies, equity
securities, fixed income securities and money market instruments, including
repurchase agreements or other funds which invest exclusively in money market
instruments. For temporary defensive purposes, the Fund may invest without limit
in money market instruments, including repurchase agreements or other funds
which invest exclusively in money market instruments. The Fund may also pursue
temporary defensive positions in anticipation of or in an attempt to respond to
adverse market, economic, political or other conditions. Such a position could
have the effect of reducing any benefit the Fund may receive from a market
increase.
BORROWING
MONEY
Each
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. Each Fund has entered 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 a Fund borrows money, it may be
leveraged; at such times, the Fund will
appreciate
or depreciate in value more rapidly than its Index. Leverage generally has the
effect of increasing the amount of loss or gain a Fund might realize, and may
increase volatility in the value of a Fund’s investments.
LENDING
PORTFOLIO SECURITIES
Each
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, a Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Fund’s
bank lending agent equal to at least 102% of the value of the portfolio
securities being loaned. This collateral is marked-to-market on a daily basis.
Although a Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower fail to return the borrowed securities (e.g.,
the Fund would have to buy replacement securities and the loaned securities may
have appreciated beyond the value of the collateral held by the Fund) or become
insolvent. A Fund may pay fees to the party arranging the loan of securities. In
addition, a Fund will bear the risk that it may lose money because the borrower
of the loaned securities fails to return the securities in a timely manner or at
all. Each Fund could also lose money in the event of a decline in the value of
any cash collateral or in the value of investments made with the cash
collateral. These events could trigger adverse tax consequences for the Funds.
Substitute payments for dividends received by a Fund for securities loaned out
by a Fund will not be considered qualified dividend income.
Unlike
many conventional mutual funds which are only bought and sold at closing net
asset values, the Shares of each Fund have been designed to be tradable in a
secondary market on an intra-day basis and to be created and redeemed
principally in-kind, except for VanEck J.P. Morgan EM Local Currency Bond ETF
whose Shares are redeemed at least partially for cash, in Creation Units at each
day’s market close. These in-kind arrangements are designed to mitigate the
adverse effects on a Fund’s portfolio that could arise from frequent cash
purchase and redemption transactions that affect the net asset value of the
Fund. Moreover, in contrast to conventional mutual funds, where frequent
redemptions can have an adverse tax impact on taxable shareholders because of
the need to sell portfolio securities which, in turn, may generate taxable gain,
the in-kind redemption mechanism of each 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 each Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Funds’
SAI.
Board
of Trustees.
The
Board of Trustees of the Trust has responsibility for the general oversight of
the management of the Funds, including general supervision of the Adviser and
other service providers, but is not involved in the day-to-day management of the
Trust. A list of the Trustees and the Trust officers, and their present
positions and principal occupations, is provided in the Funds’ SAI.
Investment
Adviser. Under
the terms of an investment management agreement between the Trust and Van Eck
Associates Corporation with respect to the Funds (the “Investment Management
Agreement”), Van Eck Associates Corporation serves as the adviser to each Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
day-to-day investment management of each Fund. As of June 30, 2023, the Adviser
managed approximately $77.75 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 with respect to each Fund will be available in
the Trust’s semi-annual report for the period ended October 31, 2023.
For
the services provided to VanEck J.P. Morgan EM Local Currency Bond ETF under the
Investment Management Agreement, VanEck J.P. Morgan EM Local Currency Bond ETF
pays the Adviser monthly fees based on a percentage of its average daily net
assets at the annual rate of 0.27%. From time to time, the Adviser may waive all
or a portion of its fee. Until at least September 1, 2024, the Adviser has
agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent
the operating expenses of VanEck J.P. Morgan EM Local Currency Bond ETF
(excluding acquired fund fees and expenses, interest expense, trading expenses,
taxes and extraordinary expenses) from exceeding 0.30% of its average daily net
assets per year.
VanEck
J.P. Morgan EM Local Currency Bond ETF is responsible for all of its expenses,
including the investment advisory fees, costs of transfer agency, custody,
legal, audit and other services, interest, taxes, any distribution fees or
expenses, offering fees or expenses and extraordinary expenses.
Pursuant
to the Investment Management Agreement, the Adviser is responsible for all
expenses of the Funds, except VanEck J.P. Morgan EM Local Currency Bond ETF,
including the costs of transfer agency, custody, fund administration, legal,
audit and other services, except for the fee payment under the Investment
Management Agreement, acquired fund fees and expenses, interest expense,
offering costs, trading expenses, taxes and extraordinary expenses. For its
services to each Fund, each Fund has agreed to pay the Adviser an annual unitary
management fee equal to 0.40% (with respect to VanEck BDC Income ETF, VanEck
Emerging Markets High Yield Bond ETF, VanEck International High Yield Bond ETF,
VanEck Mortgage REIT Income ETF and VanEck Preferred Securities ex Financials
ETF), 0.35% (with respect to VanEck Fallen Angel High Yield Bond ETF), 0.25%
(with respect to VanEck Moody's Analytics BBB Corporate Bond ETF), 0.20% (with
respect to VanEck Green Bond ETF and VanEck Moody's Analytics IG Corporate Bond
ETF), 0.14% (with respect to VanEck IG Floating Rate ETF) and 0.10% (with
respect to VanEck Dynamic High Income ETF) of its average daily assets. Offering
costs excluded from the annual unitary management fee are: (a) legal fees
pertaining to a Fund’s Shares offered for sale; (b) Securities and Exchange
Commission and state registration fees; and (c) initial fees paid for Shares of
a Fund to be listed on an exchange. Notwithstanding the foregoing, the Adviser
has agreed to pay all such offering costs until at least September 1, 2024 with
respect to each Fund.
Manager
of Managers Structure.
With respect to VanEck BDC Income ETF, VanEck Dynamic High Income ETF, VanEck
Emerging Markets High Yield Bond ETF, VanEck Fallen Angel High Yield Bond ETF,
VanEck Green Bond ETF, VanEck International High Yield Bond ETF, VanEck Moody's
Analytics BBB Corporate Bond ETF and VanEck Moody's Analytics IG Corporate Bond
ETF, the Adviser and the Trust may rely on an exemptive order (the “Order”) from
the Securities and Exchange Commission that permits the Adviser to enter into
investment sub-advisory agreements with unaffiliated sub-advisers without
obtaining shareholder approval. The Adviser, subject to the review and approval
of the Board of Trustees, may select one or more sub-advisers for the Fund and
supervise, monitor and evaluate the performance of each
sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Funds and
their shareholders. The Adviser thus would have the responsibility (subject to
the oversight of the Board of Trustees) to recommend the hiring and replacement
of sub-advisers as well as the discretion to terminate any sub-adviser and
reallocate a Fund’s assets for management among any other sub-adviser(s) and
itself. This means that the Adviser would be able to reduce the sub-advisory
fees and retain a larger portion of the management fee, or increase the
sub-advisory fees and retain a smaller portion of the management fee. The
Adviser would compensate each sub-adviser out of its management
fee.
Administrator,
Custodian and Transfer Agent. Van
Eck Associates Corporation is the administrator for the Funds (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
the Funds’ assets and provides transfer agency and fund accounting services to
the Funds. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
Distributor.
Van
Eck Securities Corporation is the distributor of the Shares (the "Distributor").
The Distributor will not distribute Shares in less than a specified number of
Shares, each called a "Creation Unit," and does not maintain a secondary market
in the Shares. The Shares are traded in the secondary market.
The
portfolio manager who is currently responsible for the day-to-day management of
each of the VanEck Emerging Markets High Yield Bond ETF’s, VanEck Fallen Angel
High Yield Bond ETF’s, VanEck Green Bond ETF’s, VanEck International High Yield
Bond ETF’s, VanEck IG Floating Rate ETF’s, VanEck J.P. Morgan EM Local Currency
Bond ETF’s, VanEck Moody's Analytics BBB Corporate Bond ETF's and VanEck Moody's
Analytics IG Corporate Bond ETF's portfolios is Francis G. Rodilosso. The
portfolio managers who currently share joint responsibility for the day-to-day
management of each of the VanEck BDC Income ETF’s, VanEck Mortgage REIT Income
ETF’s and VanEck Preferred Securities ex Financials ETF’s portfolios are Peter
H. Liao and Griffin Driscoll. The portfolio managers who currently share joint
responsibility for the day-to-day management of the VanEck Dynamic High Income
ETF are David Schassler and John Lau.
Mr.
Rodilosso has been employed by the Adviser as a portfolio manager since March
2012. Mr. Rodilosso graduated from Princeton University in 1990 with a Bachelor
of Arts and from the Wharton School of Business in 1993 with a Masters of
Business Administration.
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.
Schassler has been employed by the Adviser as a portfolio manager since May
2016, a deputy portfolio manager from 2015 to 2016 and a director of manager
research from 2012 to 2015. Mr. Schassler graduated from the State University of
New York College at Cortland in 2003 with a Bachelor of Arts and from the NYU
Stern School of Business in 2012 with a Masters of Business
Administration.
Mr.
Lau is deputy portfolio manager of the Fund. He has been employed with the
Adviser since 2007 and has over 10 years’ experience in the financial markets.
Mr. Lau received his Bachelor of Science in Business Administration, with a
concentration in Financial Analysis from the State University of New York at
Buffalo.
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.
Each
of Messrs. Driscoll, Lau, Liao, Rodilosso and Schassler serve as a portfolio
manager of other funds of the Trust. Messrs. Driscoll, Lau, Liao, Rodilosso and
Schassler also serve as portfolio managers for certain other investment
companies and pooled investment vehicles advised by the Adviser. See the Funds’
SAI for additional information about the portfolio managers’ compensation, other
accounts managed by the portfolio managers and their respective ownership of
Shares of each Fund.
DETERMINATION
OF NAV
The
net asset value (“NAV”) per Share for each Fund is computed by dividing the
value of the net assets of the Fund (i.e.,
the value of its total assets less total liabilities) by the total number of
Shares outstanding. Expenses and fees, including the management fee, are accrued
daily and taken into account for purposes of determining NAV. The NAV of each
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of each Fund’s portfolio securities are based on the securities’ closing
prices on the markets on which the securities trade, when available. Due to the
time differences between the United States and certain countries in which
certain Funds invest, securities on these exchanges may not trade at times when
Shares of the Fund will trade. In the absence of a last reported sales price, or
if no sales were reported, and for other assets for which market quotes are not
readily available, values may be based on quotes obtained from a quotation
reporting system, established market makers or by an outside independent pricing
service. Debt instruments with remaining maturities of more than 60 days are
valued at the evaluated mean price provided by an outside independent pricing
service. If an outside independent pricing service is unable to provide a
valuation, the instrument is valued at the mean of the highest bid and the
lowest asked quotes obtained from one or more brokers or dealers selected by the
Adviser. Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values obtained
from yield data related to investments or securities with similar
characteristics and may use a computerized grid matrix of securities and its
evaluations in determining what it believes is the fair value of the portfolio
securities. Short-term debt instruments having a maturity of 60 days or less are
valued at amortized cost. Any assets or liabilities denominated in currencies
other than the U.S. dollar are converted into U.S. dollars at the current market
rates on the date of valuation as quoted by one or more sources. If a market
quotation for a security or other asset is not readily available or the Adviser
believes it does not otherwise accurately reflect the market value of the
security or asset at the time a Fund calculates its NAV, the security or asset
will be fair valued by the Adviser in accordance with the Trust’s valuation
policies and procedures approved by the Board of Trustees. Each Fund may also
use fair value pricing in a variety of circumstances, including but not limited
to, situations when the value of a security in the Fund’s portfolio has been
materially affected by events occurring after the close of the market on which
the security is principally traded (such as a corporate action or other news
that may materially affect the price of a security) or trading in a security has
been suspended or halted. In addition, each Fund that holds foreign equity
securities currently expects that it will fair value certain of the foreign
equity securities held by the Fund, if any, each day the Fund calculates its
NAV, except those securities principally traded on exchanges that close at the
same time the Fund calculates its NAV.
Accordingly,
a Fund’s NAV may reflect certain portfolio securities’ fair values rather than
their market prices at the time the exchanges on which they principally trade
close. Fair value pricing involves subjective judgments and it is possible that
a fair value determination for a security or other asset is materially different
than the value that could be realized upon the sale of such security or asset.
In addition, fair value pricing could result in a difference between the prices
used to calculate a Fund’s NAV and the prices used by such Fund’s respective
Index. This may adversely affect a Fund’s ability to track its Index. With
respect to securities that are principally traded on foreign exchanges, the
value of a Fund’s portfolio securities may change on days when you will not be
able to purchase or sell your Shares.
INTRADAY
VALUE
The
trading prices of the Funds’ Shares in the secondary market generally differ
from the Funds’ daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by each Fund,
economic conditions and other factors. Information regarding the intraday value
of the Funds’ Shares (“IIV”) may be disseminated throughout each trading day by
an Exchange or by market data vendors or other information providers. The IIV is
based on the current market value of the securities and/or cash required to be
deposited in exchange for a Creation Unit. The IIV does not necessarily reflect
the precise composition of the current portfolio of securities held by each Fund
at a particular point in time or the best possible valuation of the current
portfolio. Therefore, the IIV should not be viewed as a “real-time” update of
the Funds’ NAV, which is computed only once a day. The IIV is generally
determined by using current market quotations and/or price quotations obtained
from broker-dealers and other market intermediaries that may trade in the
portfolio securities held by each Fund and valuations based on current market
rates. The quotations and/or valuations of certain Fund holdings may not be
updated during U.S. trading hours if such holdings do not trade in the United
States. Each Fund is not involved in, or responsible for, the calculation or
dissemination of the IIV and makes no warranty as to its accuracy.
RULE
144A AND OTHER UNREGISTERED SECURITIES
An
AP (i.e., a person eligible to place orders with the Distributor to create or
redeem Creation Units of a Fund) that is not a “qualified institutional buyer,”
as such term is defined under Rule 144A of the Securities Act of 1933, as
amended (the “Securities Act”), will not be able to receive, as part of a
redemption, restricted securities eligible for resale under Rule 144A or other
unregistered securities.
BUYING
AND SELLING EXCHANGE-TRADED SHARES
The
Shares of the Funds are listed on an Exchange. If you buy or sell Shares in the
secondary market, you will incur customary brokerage commissions and charges and
may pay some or all of the “spread,” which is any difference between the bid
price and the ask price. The spread varies over time for a Fund’s Shares based
on the Fund’s trading volume and market liquidity, and is generally lower if the
Funds have high trading volume and market liquidity, and generally higher if the
Funds have little trading volume and market liquidity (which is often the case
for funds that are newly launched or small in size). In times of severe market
disruption
or low trading volume in a Fund’s Shares, this spread can increase
significantly. It is anticipated that the Shares will trade in the secondary
market at prices that may differ to varying degrees from the NAV of the Shares.
During periods of disruptions to creations and redemptions or the existence of
extreme market volatility, the market prices of Shares are more likely to differ
significantly from the Shares’ NAV.
The
Depository Trust Company (“DTC”) serves as securities depository for the Shares.
(The Shares may be held only in book-entry form; stock certificates will not be
issued.) DTC, or its nominee, is the record or registered owner of all
outstanding Shares. Beneficial ownership of Shares will be shown on the records
of DTC or its participants (described below). Beneficial owners of Shares are
not entitled to have Shares registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and are
not considered the registered holder thereof. Accordingly, to exercise any
rights of a holder of Shares, each beneficial owner must rely on the procedures
of: (i) DTC; (ii) “DTC Participants,” i.e.,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives) own
DTC; and (iii) “Indirect Participants,” i.e.,
brokers, dealers, banks and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly,
through which such beneficial owner holds its interests. The Trust understands
that under existing industry practice, in the event the Trust requests any
action of holders of Shares, or a beneficial owner desires to take any action
that DTC, as the record owner of all outstanding Shares, is entitled to take,
DTC would authorize the DTC Participants to take such action and that the DTC
Participants would authorize the Indirect Participants and beneficial owners
acting through such DTC Participants to take such action and would otherwise act
upon the instructions of beneficial owners owning through them. As described
above, the Trust recognizes DTC or its nominee as the owner of all Shares for
all purposes. For more information, see the section entitled “Book Entry Only
System” in the Funds’ SAI.
Each
Exchange is open for trading Monday through Friday and is closed on weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because
non-U.S. exchanges may be open on days when a Fund does not price its Shares,
the value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell a Fund’s Shares.
The
right of redemption by an AP may be suspended or the date of payment postponed
(1) for any period during which an Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on an
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of a Fund or
determination of its NAV is not reasonably practicable; or (4) in such other
circumstance as is permitted by the Securities and Exchange Commission.
Market
Timing and Related Matters.
The
Funds impose no restrictions on the frequency of purchases and redemptions.
Frequent purchases and redemptions of Fund Shares may attempt to take advantage
of a potential arbitrage opportunity presented by a lag between a change in the
value of a Fund’s portfolio securities after the close of the primary markets
for a Fund’s portfolio securities and the reflection of that change in a Fund’s
NAV (“market timing”). The Board of Trustees considered the nature of each Fund
(i.e., a fund whose Shares are expected to trade intraday), that the Adviser
monitors the trading activity of APs for patterns of abusive trading, that the
Funds reserve the right to reject orders that may be disruptive to the
management of or otherwise not in the Funds’ best interests, and that each Fund
may fair value certain of its securities. Given this structure, the Board of
Trustees determined that it is not necessary to impose restrictions on the
frequency of purchases and redemptions for the Funds at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains.
As a shareholder of a Fund, you are entitled to your share of such Fund’s
distributions of net investment income and net realized capital gains on its
investments. Each Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
Each
Fund typically earns income dividends from stocks and/or interest from debt
securities. These amounts, net of expenses, are typically passed along to Fund
shareholders as dividends from net investment income. Each Fund generally
realizes capital gains or losses whenever it sells securities. Net capital gains
are distributed to shareholders as “capital gain distributions.” Distributions
from a Fund’s net investment income, including any net short-term capital gains,
if any, are taxable to you as ordinary income. Any long-term capital gains
distributions you receive from a Fund are taxable as long-term capital
gains.
Net
investment income, if any, is typically distributed to shareholders at least
monthly by each Fund (quarterly with respect to VanEck BDC Income ETF and VanEck
Mortgage REIT Income ETF) while net realized capital gains, if any, are
typically distributed to shareholders at least annually. Dividends may be
declared and paid more frequently to improve index tracking or to comply with
the distribution requirements of the Internal Revenue Code of 1986. In addition,
in situations where a Fund acquires investment securities after the beginning of
a dividend period, the Funds may elect to distribute at least annually amounts
representing the full dividend yield net of expenses on the underlying
investment securities, as if the Funds owned the underlying investment
securities for the entire dividend period. If a Fund so elects, some portion of
each distribution may result in a return of capital, which, for tax purposes, is
treated as a return on 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 your 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 Funds, including the possible application of foreign, state
and local taxes. Unless your investment in a Fund is through a tax-exempt entity
or tax-deferred retirement account, such as a 401(k) plan, you need to be aware
of the possible tax consequences when: (i) a Fund makes distributions; (ii) you
sell Shares in the secondary market or (iii) you create or redeem Creation
Units.
Taxes
on Distributions.
As noted above, each Fund expects to distribute net investment income, if any,
monthly (quarterly with respect to VanEck BDC Income ETF and VanEck Mortgage
REIT Income ETF), and any net realized long-term or short-term capital gains, if
any, annually. Each Fund may also pay a special distribution at any time to
comply with U.S. federal tax requirements.
In
general, your distributions are subject to U.S. federal income tax when they are
paid, whether you take them in cash or reinvest them in a Fund. Distributions
from a Fund’s net investment income, including any net short-term gains, if any,
are taxable to you as ordinary income. Whether distributions of capital gains
represent long-term or short-term capital gains is determined by how long a Fund
owned the investments that generated them, rather than how long you have owned
your Shares. Distributions of net short-term capital gain 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
(but the 25% capital gain tax rate will remain applicable to 25% rate gain
distributions received by VanEck Mortgage REIT Income ETF).
The
Funds, except for VanEck BDC Income ETF, VanEck Dynamic High Income ETF, VanEck
Mortgage REIT Income ETF and VanEck Preferred Securities ex Financials ETF, do
not expect that any of their distributions will be qualified dividends eligible
for lower tax rates or for the corporate dividends received deduction. In the
event that VanEck BDC Income ETF, VanEck Dynamic High Income ETF, VanEck
Mortgage REIT Income ETF and VanEck Preferred Securities ex Financials ETF
receive such a dividend and report the distribution of such dividend as a
qualified dividend, the dividend may be taxed at 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 VanEck BDC Income ETF’s, VanEck Dynamic High Income ETF’s, VanEck
Mortgage REIT Income ETF’s or VanEck Preferred Securities ex Financials ETF’s
distributions will be eligible for qualified dividend treatment.
Distributions
in excess of a Fund’s current and accumulated earnings and profits are treated
as a tax-free return of your investment to the extent of your basis in the
Shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce a Fund’s NAV per Share and may
be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of
capital.
Dividends,
interest and gains from non-U.S. investments of the Funds 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 or if at least 50% of the value of the Fund's total assets
at the close of each quarter end is represented by interests in RICs, 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, as an additional dividend, even though not actually received, the
investor's pro rata share of the Fund's foreign income taxes, and (ii) either
deduct (in calculating U.S. taxable income) or credit (in calculating U.S.
federal income), subject to certain holding period and other limitations, the
investor's pro rata share of the Fund's foreign income taxes. It is expected
that more than 50% of each Fund's assets will consist of foreign securities or
interests in RICs, except for, VanEck Fallen Angel High Yield Bond ETF, VanEck
IG Floating Rate ETF, VanEck Moody's Analytics BBB Corporate Bond ETF, VanEck
Moody's Analytics IG Corporate Bond ETF, VanEck Mortgage REIT Income ETF and
VanEck Preferred Securities ex Financials ETF.
Backup
Withholding. A
Fund may be required to withhold a percentage of your distributions and proceeds
if you have not provided a taxpayer identification number or social security
number or otherwise established a basis for exemption from backup withholding.
The backup withholding rate for individuals is currently 24%. This is not an
additional tax and may be refunded, or credited against your U.S. federal income
tax liability, provided certain required information is furnished to the
IRS.
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares. Currently,
any capital gain or loss realized upon a sale of Shares is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as a short-term capital gain or loss if held for one year or less.
However, any capital loss on a sale of Shares held for six months or less is
treated as long-term capital loss to the extent that capital gain dividends were
paid with respect to such Shares. The ability to
deduct
capital losses may be limited. To the extent that a Fund’s shareholder’s Shares
are redeemed for cash, this is normally treated as a sale for tax
purposes.
Taxes
on Creations and Redemptions of Creation Units.
A person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The IRS, however, may assert that a
loss realized upon an exchange of primarily securities for Creation Units cannot
be deducted currently under the rules governing “wash sales,” or on the basis
that there has been no significant change in economic position. Persons
exchanging securities for Creation Units or redeeming Creation Units should
consult their own tax adviser with respect to whether wash sale rules apply and
when a loss might be deductible and the tax treatment of any creation or
redemption transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units held as capital assets is generally
treated as long-term capital gain or loss if the Shares (or securities
surrendered) have been held for more than one year and as a short-term capital
gain or loss if the Shares (or securities surrendered) have been held for one
year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax.
An additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Non-U.S.
Shareholders.
Dividends paid by a Fund to non-U.S. shareholders are generally subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty to the extent derived from investment income and short-term
capital gains. Dividends paid by a Fund from long-term capital gains are
generally not subject to such withholding tax. Properly-reported dividends are
generally exempt from U.S. federal withholding tax where they (i) are paid in
respect of a Fund’s “qualified net interest income” (generally, a Fund’s U.S.
source interest income, other than certain contingent interest and interest from
obligations of a corporation or partnership in which a Fund is at least a 10%
shareholder, reduced by expenses that are allocable to such income); or (ii) are
paid in respect of a Fund’s “qualified short-term capital gains” (generally, the
excess of a Fund’s net short-term capital gain over a Fund’s long-term capital
loss for such taxable year). However, depending on its circumstances, a Fund may
report all, some or none of its potentially eligible dividends as such qualified
net interest income or as qualified short-term capital gains and/or treat such
dividends, in whole or in part, as ineligible for this exemption from
withholding.
Any
capital gain realized by a non-U.S. shareholder upon a sale of Shares of a Fund
will generally not be subject to U.S. federal income or withholding tax unless
(i) the gain is effectively connected with the shareholder’s trade or business
in the United States, or in the case of a shareholder who is a nonresident alien
individual, the shareholder is present in the United States for 183 days or more
during the taxable year and certain other conditions are met or (ii) the Fund is
or has been a U.S. real property holding corporation, as defined below, at any
time within the five-year period preceding the date of disposition of the Fund’s
Shares or, if shorter, within the period during which the non-U.S. shareholder
has held the Shares. Generally, a corporation is a U.S. real property holding
corporation if the fair market value of its U.S. real property interests, as
defined in the Internal Revenue Code of 1986 and applicable regulations, equals
or exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. A
Fund may be, or may prior to a non-U.S. shareholder’s disposition of Shares
become, a U.S. real property holding corporation. If a Fund is or becomes a U.S.
real property holding corporation, so long as the Fund’s Shares are regularly
traded on an established securities market, only a non-U.S. shareholder who
holds or held (at any time during the shorter of the five-year period preceding
the date of disposition or the holder’s holding period) more than 5% (directly
or indirectly as determined under applicable attribution rules of the Internal
Revenue Code of 1986) of the Fund’s Shares will be subject to United States
federal income tax on the disposition of Shares.
As
part of the Foreign Account Tax Compliance Act (“FATCA”), a Fund may be required
to withhold 30% tax on certain types of U.S. sourced income (e.g.,
dividends, interest, and other types of passive income) paid to (i) foreign
financial institutions (“FFIs”), including non-U.S. investment funds, unless
they agree to collect and disclose to the IRS information regarding their direct
and indirect U.S. account holders and (ii) certain nonfinancial foreign entities
(“NFFEs”), unless they certify certain information regarding their direct and
indirect U.S. owners. To avoid possible withholding, FFIs will need to enter
into agreements with the IRS which state that they will provide the IRS
information, including the names, account numbers and balances, addresses and
taxpayer identification numbers of U.S. account holders and comply with due
diligence procedures with respect to the identification of U.S. accounts as well
as agree to withhold tax on certain types of withholdable payments made to
non-compliant foreign financial institutions or to applicable foreign account
holders who fail to provide the required information to the IRS, or similar
account information and required documentation to a local revenue authority,
should an applicable intergovernmental agreement be
implemented.
NFFEs will need to provide certain information regarding each substantial U.S.
owner or certifications of no substantial U.S. ownership, unless certain
exceptions apply, or agree to provide certain information to the
IRS.
A
Fund may be subject to the FATCA withholding obligation, and also will be
required to perform due diligence reviews to classify foreign entity investors
for FATCA purposes. Investors are required to agree to provide information
necessary to allow a Fund to comply with the FATCA rules. If a Fund is required
to withhold amounts from payments pursuant to FATCA, investors will receive
distributions that are reduced by such withholding amounts.
Non-U.S.
shareholders are advised to consult their tax advisors with respect to the
particular tax consequences to them of an investment in the Funds, including the
possible applicability of the U.S. estate tax.
The
foregoing discussion summarizes some of the consequences under current U.S.
federal income tax law of an investment in a Fund. It is not a substitute for
personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in a Fund under all applicable tax laws. Changes
in applicable tax authority could materially affect the conclusions discussed
above and could adversely affect the Funds, and such changes often
occur.
The
Emerging Markets Global Core Index is published by JPMorgan Securities Inc.
(“J.P. Morgan”). The BBB
Index, BDC
Index, Floating Rate Index, Mortgage REITs Index and US
IG Index are
published by MarketVector Indexes GmbH (“MarketVector Indexes”), which is an
indirectly wholly owned subsidiary of the Adviser. The Emerging Markets High
Yield Index, Fallen Angel Index, International High Yield Index and Preferred
Securities Index are published by ICE Data Indices, LLC (“ICE
Data”) and
its affiliates. The Green Bond Index is published by S&P Dow Jones Indices
LLC ("S&P Dow Jones"). J.P. Morgan, MarketVector
Indexes,
ICE Data and S&P Dow Jones are referred to herein as the “Index Providers.”
The Index Providers do not sponsor, endorse, or promote the Funds and bear no
liability with respect to the Funds or any security.
The
BDC Index is a rules based, modified capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
BDCs. To be eligible for the BDC Index and qualify as a BDC, a company must be
organized under the laws of, and have its principal place of business in, the
United States, be registered with the Securities and Exchange Commission and
have elected to be regulated as a BDC under the Investment Company Act of 1940.
To
be eligible for addition to the BDC Index, stocks must have a market
capitalization of greater than $150 million as of the end of the month prior to
the month in which a rebalancing date occurs. Stocks must have a three-month
average daily trading volume value of at least $1 million at a review and also
at the previous two reviews to be eligible for the BDC Index and issuers of such
stocks must have traded at least 250,000 shares each month over the last six
months at a review and also at the previous two reviews.
The
BDC Index is calculated and maintained by Solactive AG on behalf of MarketVector
Indexes.
The
BDC Index is reconstituted and rebalanced quarterly. MarketVector Indexes may
delay or change a scheduled rebalancing or reconstitution of the BDC Index or
the implementation of certain rules at its sole discretion.
The
Emerging Markets High Yield Index is comprised of U.S. dollar denominated bonds
issued by non-sovereign emerging market issuers that have a below investment
grade rating (in accordance with ICE Data’s methodology) and that are issued in
the major domestic and Eurobond markets. In order to qualify for inclusion in
the Emerging Markets High Yield Index, an issuer must have risk exposure to
countries other than members of the FX Group of Ten, all Western European
countries and territories of the United States and Western European countries.
The FX Group of Ten includes all Euro members, Australia, Canada, Japan, New
Zealand, Norway, Sweden, Switzerland, the United Kingdom and the United
States.
The
Emerging Markets High Yield Index includes corporate and quasi-government bonds
of qualifying countries, but excludes sovereign and supranational
bonds.
The
Emerging Markets High Yield Index constituents are capitalization-weighted based
on their current amount outstanding times the market price plus accrued
interest, subject to a 10% country of risk cap and a 3% issuer cap.
The
Emerging Markets High Yield Index is rebalanced on the last calendar day of each
month. ICE Data may delay or change a scheduled rebalancing or reconstitution of
the Emerging Markets High Yield Index or the implementation of certain rules at
its sole discretion.
The
Fallen Angel Index is comprised of below investment grade corporate bonds
denominated in U.S. dollars that were rated investment grade at the time of
issuance. Qualifying securities must be issued in the U.S. domestic market and
have a below investment grade rating (in accordance with the ICE Data’s
methodology). The Fallen Angel Index includes bonds issued by both U.S. and
non-U.S. issuers. The country of risk of qualifying issuers must be a member of
the FX Group of Ten, a western European nation, or a territory of the U.S. or a
Western European nation. The FX Group of Ten includes all Euro members,
Australia, Canada, Japan, New Zealand, Norway, Sweden, Switzerland, the United
Kingdom and the United States.
A
single issuer may not comprise more than 10% of the Fallen Angel Index. The
Fallen Angel Index constituents are capitalization weighted, subject to the
issuer cap, based on their current amount outstanding.
The
Fallen Angel Index is rebalanced on the last calendar day of the month. ICE Data
may delay or change a scheduled rebalancing or reconstitution of the Fallen
Angel Index or the implementation of certain rules at its sole
discretion.
The
Green Bond Index is designed to provide a broad measure of the performance of
the investable, U.S. dollar-denominated “green” bond market. The Green Bond
Index is comprised of bonds issued for qualified “green” purposes and seeks to
measure the performance of U.S. dollar-denominated “green”- labeled bonds issued
globally. For a bond to be eligible for inclusion in the Green Bond Index, the
issuer of the bond must indicate the bond’s “green” label and the rationale
behind it, such as the intended use of proceeds. As an additional filter, the
bond must be flagged as “green” by Climate Bonds Initiative (“CBI”) to be
eligible for inclusion in the Green Bond Index. The Green Bond Index includes
supranational, corporate, government related, sovereign and securitized “green”
bonds issued throughout the world (including emerging market countries), and may
include both investment grade and below investment grade securities (commonly
referred to as high yield securities or “junk bonds”). The maximum weight of
below investment grade bonds (excluding any unrated bonds that are issued or
guaranteed by a government-sponsored enterprise) in the Green Bond Index is
capped at 20%. No more than 10% of the Green Bond Index can be invested in a
single issuer.
Qualifying
securities must have (1) a maturity of at least 12 months at the time of
issuance to be included, (2) at least one month remaining until maturity at each
rebalancing date, and (3) a minimum par amount outstanding of $200 million, to
be included in the Green Bond Index. All bonds must be rated by at least one
credit rating agency, except that up to 10% of the Green Bond Index can be
invested in unrated bonds that are issued or guaranteed by a
government-sponsored enterprise.
The
Green Bond Index is a market-value weighted index (subject to issuer and credit
rating caps). The Green Bond Index includes bonds across sectors, countries and
maturities.
The
composition of the Green Bond Index is rebalanced monthly. Bonds that have
defaulted are removed from the Green Bond Index at the next rebalancing. S&P
Dow Jones may delay or change a scheduled rebalancing or reconstitution of the
Green Bond Index or the implementation of certain rules at its sole
discretion.
The
Floating Rate Index is designed to track the performance of U.S. investment
grade floating rate notes with outstanding issue sizes of greater than or equal
to $500 million. The Floating Rate Index is comprised of U.S. dollar-denominated
floating rate notes issued by corporate entities or similar commercial entities
that are public reporting companies in the United States. Floating Rate Index
securities must have an investment grade rating (in accordance with the
MarketVector Indexes’ methodology).
To
be eligible for inclusion in the Floating Rate Index, investment grade floating
rate notes must be issued by issuers that are formed as corporations, limited
liability companies and similar types of entities that are engaged in a
financial or commercial enterprise. Notes issued by governments, sovereigns,
quasi-sovereigns, not-for-profit entities and government backed entities are not
eligible.
Securities
included in the Floating Rate Index must have a minimum of 0.5 years remaining
to maturity.
The
Floating Rate Index is calculated and maintained by Solactive AG on behalf of
MarketVector Indexes.
The
weight of any single constituent is capped at 2.00%. The Floating Rate Index is
reconstituted and rebalanced monthly. MarketVector Indexes may delay or change a
scheduled rebalancing or reconstitution of the Floating Rate Index or the
implementation of certain rules at its sole discretion.
The
International High Yield Index tracks the performance of below investment grade
debt issued by corporations located throughout the world (which may include
emerging market countries) excluding the United States, denominated in euros,
U.S. dollars, Canadian dollars or pound sterling and issued in the major
domestic or eurobond markets. Qualifying securities must have a below investment
grade rating (in accordance with the ICE Data’s methodology).
International
High Yield Index constituents are capitalization-weighted, based on their
current amount outstanding multiplied by the market price plus accrued interest,
provided the total allocation to an individual issuer does not exceed
3%.
The
International High Yield Index is rebalanced on the last calendar day of the
month. ICE Data may delay or change a scheduled rebalancing or reconstitution of
the International High Yield Index or the implementation of certain rules at its
sole discretion.
The
Emerging Markets Global Core Index is designed to track the performance of bonds
issued by emerging market governments and denominated in the local currency of
the issuer. The Emerging Markets Global Core Index is designed to be investible
and includes only those countries that are accessible by most of the
international investor base. J.P. Morgan selects bonds from emerging market
countries that are fixed-rate, domestic currency government bonds with greater
than six (6) months to maturity.
Countries
eligible for inclusion in the Emerging Markets Global Core Index are countries
that either meet the GNI per capita-based Index Income Ceiling ("IIC") criterion
or the PPP-based Index PPP Ratio ("IPR") criterion. J.P. Morgan defines the IIC
as the GNI per capital level that is adjusted every year by the growth rate of
the World GNI per capita, Atlas method (current US$), provided by the World Bank
annually. An existing country may be considered for removal from the index if
its GNI per capita is above the Index Income Ceiling (IIC) for three consecutive
years and the country’s long term foreign currency sovereign credit rating (the
available ratings from all three major rating agencies: is A- /A3/A- (inclusive)
or above for three consecutive years). The IPR is calculated from the one-year
lagged GDP data available in IMF’s World Economic Outlook publication. The EM
IPR threshold is an indexed number which tracks the changes to the World IPR.
IPR = GDP (current prices, USD) / GDP (current prices, PPP dollars) * 100. IPR
criterion states that a country’s IPR should be below the EM threshold for three
consecutive years, to be eligible. Changes in country eligibility may warrant
the re-categorization of countries into and out of the Emerging Markets Global
Core Index.
The
Emerging Markets Global Core Index excludes countries with explicit capital
controls, but does not factor in regulatory/tax hurdles in assessing
eligibility, unless such regulatory or tax hurdles significantly hinder an
investor’s ability to replicate the Emerging Markets Global Core Index.
Countries
in the Emerging Markets Global Core Index are subject to a maximum weight of 10%
and a minimum weight of 1% to 3% depending on the amount of the country’s
eligible debt outstanding. The Emerging Markets Global Core Index is rebalanced
monthly. J.P. Morgan may delay or change a scheduled rebalancing or
reconstitution of the Emerging Markets Global Core Index or the implementation
of certain rules at its sole discretion.
The
BBB Index is designed to track the performance of U.S. dollar-denominated
BBB-rated corporate bonds issued in the U.S. domestic market by U.S. and
non-U.S. issuers that MarketVector Indexes determines offer an excess spread
over fair value, while excluding bonds exhibiting the highest probability of
being downgraded to non-investment grade, based on proprietary credit risk
metrics developed and licensed by Moody’s Analytics, Inc. (“Moody’s Analytics”).
The BBB Index uses ICE BofA US Corporate Index as its index universe.
MarketVector Indexes constructs the BBB Index using a rules-based methodology
that involves the following steps:
Step
1:
Bonds with a BBB rating, based on the bond’s composite rating, are grouped into
categories based on sector and duration.
Step
2:
Within each category, MarketVector Indexes ranks each bond by a factor that
measures the bond's excess spread over fair value. If a bond is
not
already included in the BBB
Index, it must rank within the highest 10%
within its respective category
to qualify. If a
bond
is already included in the BBB
Index, it must rank within the highest 40% within its respective category to
qualify.
Step
3:
Each bond selected in Step 2 is ranked by the probability of its issuer being
downgraded to non-investment grade using a
downgrade
probability factor developed by Moody's Analytics. If the probability of being
downgraded is 20% or greater and the bond does not rank within the highest
10%
by excess spread over fair value within its category, the bond is excluded from
the BBB
Index.
Bonds
no longer rated BBB, including non-investment grade bonds, are removed from the
BBB Index at the end of the month in which they are upgraded or downgraded in
connection with the BBB Index’s next scheduled rebalance.
The
BBB Index uses a modified market cap weighting. Single issuer exposure is capped
at 5% and sector exposure is capped at 25%. The BBB Index is calculated by ICE
Data Indices, LLC or its affiliates (“ICE Data”). The calculation of the
BBB Index makes use of certain methodologies and calculation formulas as
described in the Bond Index Methodologies publication accessible at
https://indices.theice.com under the Publication - General
Methodology.
The
BBB Index is reconstituted and rebalanced monthly. MarketVector Indexes may
delay or change a scheduled rebalancing or reconstitution of the BBB Index or
the implementation of certain rules at its sole discretion.
The
US IG Index is designed to track the performance of U.S. dollar-denominated
investment grade corporate bonds issued in the U.S. domestic market by U.S. and
non-U.S. issuers that MarketVector Indexes determines offer an excess spread
over fair value, while excluding bonds exhibiting the highest probability of
being downgraded to non-investment grade, based on proprietary credit risk
metrics developed and licensed by Moody's Analytics, Inc. (“Moody's Analytics”).
The US IG Index uses ICE BofA US Corporate Index as its index universe.
MarketVector Indexes constructs the US IG Index using a rules-based methodology
that involves the following steps:
Step
1: Bonds are grouped into categories based on sector and duration.
Step
2: Within each category, MarketVector Indexes ranks each bond by a factor that
measures the bond's excess spread
over fair value.
If a bond is not already included in the US IG Index, it must rank within the
highest 5% within its respective
category
to qualify. If a bond is already included in the US IG Index, it must rank
within the highest 40% within its respective category
to qualify.
Step
3:
Each bond selected in Step 2 is ranked by the probability of its issuer being
downgraded to non-investment grade using a
downgrade
probability factor developed by Moody's Analytics. If the probability of being
downgraded is 20% or greater and the bond does not rank within the highest 5% by
excess spread over fair value within its category, the bond is excluded from the
US IG Index.
Bonds
that fall below investment grade are removed from the US IG Index at the end of
the month in which they are downgraded in connection with the US IG Index's next
scheduled rebalance.
The
US IG Index uses a modified market cap weighting. Single issuer exposure is
capped at 3% and sector exposure is capped at 25%.
The
US IG Index is calculated by ICE Data Indices, LLC or its affiliates (“ICE
Data”). The calculation of the US IG Index makes use of certain
methodologies and calculation formulas as described in the Bond Index
Methodologies publication accessible at https://indices.theice.com under the
Publication - General Methodology.
The
US IG Index is reconstituted and rebalanced monthly. MarketVector Indexes may
delay or change a scheduled rebalancing or reconstitution of the US IG Index or
the implementation of certain rules at its sole discretion.
The
Mortgage REITs Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of publicly traded U.S. REITs that derive at least 50% of their
revenues from mortgage-related activity. Mortgage-related activity includes
companies or trusts that are primarily engaged in the purchase or service of
commercial or residential mortgage loans or mortgage related
securities.
To
be initially eligible for addition to the Mortgage REITs Index, (i) companies
must generate at least 50% of their revenues from (or, in certain circumstances,
have at least 50% of their assets related to) mortgage-related activity (as
defined above) and (ii) stocks must have a market capitalization of greater than
$150 million as of the end of the month prior to the month in which a
rebalancing date occurs. Stocks must have a three month average daily trading
volume value of at least $1 million at a review and also at the previous two
reviews to be eligible for the Mortgage REITs Index and issuers of such stocks
must have traded at least 250,000 shares each month over the last six months at
a review and also at the previous two reviews. The Mortgage REITs Index includes
stocks of publicly traded U.S. REITs that meet the eligibility requirements
described above. Only REITs that are listed and
incorporated
in the United States will be eligible for inclusion in the Mortgage REITs
Index.
The
Mortgage REITs Index is calculated and maintained by Solactive AG on behalf of
MarketVector Indexes.
The
Mortgage REITs Index is reconstituted and rebalanced quarterly. MarketVector
Indexes may delay or change a scheduled rebalancing or reconstitution of the
Mortgage REITs Index or the implementation of certain rules at its sole
discretion.
The
Preferred Securities Index tracks the performance of exchange-listed US dollar
denominated hybrid debt, preferred stock and convertible preferred stock
publicly issued by non-financial corporations in the US domestic market. It
includes both rated and unrated securities, and securities with either a fixed
or floating rate coupon or dividend. Qualifying securities must be exchange
listed and have either the NASDAQ or NYSE®
as their primary exchange in order to be included in the index. In addition,
qualifying securities must have at least $250 million face amount outstanding
and at least one day remaining to maturity and at least 250,000 average monthly
trading volume over the previous six-month period.
The
Preferred Securities Index constituents are capitalization-weighted and the
index is rebalanced on the last calendar day of the month. ICE Data, as the
Preferred Securities Index Administrator, may at any time delay or change a
scheduled rebalancing or reconstitution of the Preferred Securities Index or the
implementation of certain rules at its sole discretion.
The
Adviser has entered into a licensing agreement with each Index Provider to use
each Fund’s respective Index. Each Fund is entitled to use its respective Index
pursuant to a sublicensing arrangement with the Adviser.
J.P.
Morgan is the marketing name for JPMorgan Chase & Co., and its subsidiaries
and affiliates worldwide. J.P. Morgan Securities Inc. is a member of NYSE and
SIPC. JPMorgan Chase Bank, National Association is a member of FDIC. J.P. Morgan
Futures Inc. is a member of the NFA. J.P. Morgan Securities Ltd. and J.P. Morgan
plc are authorized by the FSA and members of the LSE. J.P. Morgan Europe Limited
is authorized by the FSA. J.P. Morgan Equities Limited is a member of the
Johannesburg Securities Exchange and is regulated by the FSB. J.P. Morgan
Securities (Asia Pacific) Limited is registered as an investment adviser with
the Securities & Futures Commission in Hong Kong and its CE number is
AAJ321. J.P. Morgan Securities Singapore Private Limited is a member of
Singapore Exchange Securities Trading Limited and is regulated by the Monetary
Authority of Singapore ("MAS"). J.P. Morgan Securities Asia Private Limited is
regulated by the MAS and the Financial Services Agency in Japan. J.P. Morgan
Australia Limited (ABN 52 002 888 011) is a licensed securities dealer.
The
Shares of VanEck J.P. Morgan EM Local Currency Bond ETF are not sponsored,
endorsed, sold or promoted by J.P. Morgan. J.P. Morgan makes no representation
or warranty, express or implied, to the owners of the Shares of VanEck J.P.
Morgan EM Local Currency Bond ETF or any member of the public regarding the
advisability of investing in securities generally, or in the Shares of VanEck
J.P. Morgan EM Local Currency Bond ETF particularly or the Emerging Markets
Global Core Index to track general bond market performance. J.P. Morgan's only
relationship to the Adviser is the licensing of the Emerging Markets Global Core
Index which is determined, composed and calculated by J.P. Morgan without regard
to the Adviser or the Shares of VanEck J.P. Morgan EM Local Currency Bond ETF.
J.P. Morgan has no obligation to take the needs of the Adviser or the owners of
the Shares of VanEck J.P. Morgan EM Local Currency Bond ETF into consideration
in determining, composing or calculating the Emerging Markets Global Core Index.
J.P. Morgan is not responsible for and has not participated in the determination
of the timing of, prices at, or quantities of the Shares of VanEck J.P. Morgan
EM Local Currency Bond ETF to be issued or in the determination or calculation
of the equation by which the Shares of VanEck J.P. Morgan EM Local Currency Bond
ETF are to be converted into cash. J.P. Morgan has no obligation or liability in
connection with the administration, marketing or trading of the Shares of VanEck
J.P. Morgan EM Local Currency Bond ETF.
THE
EMERGING MARKETS GLOBAL CORE INDEX AND/OR SHARES OF THE VANECK J.P. MORGAN EM
LOCAL CURRENCY BOND ETF, IS PROVIDED "AS IS" WITH ANY AND ALL FAULTS. J.P.
MORGAN DOES NOT GUARANTEE THE AVAILABILITY, SEQUENCE, TIMELINESS, QUALITY,
ACCURACY AND/OR THE COMPLETENESS OF THE EMERGING MARKETS GLOBAL CORE INDEX
AND/OR SHARES OF THE VANECK J.P. MORGAN EM LOCAL CURRENCY BOND ETF AND/OR ANY
DATA INCLUDED THEREIN, OR OTHERWISE OBTAINED BY THE ADVISER, OWNERS OF THE
VANECK J.P. MORGAN EM LOCAL CURRENCY BOND ETF OR BY ANY OTHER PERSON OR ENTITY,
FROM ANY USE OF THE EMERGING MARKETS GLOBAL CORE INDEX AND/OR THE SHARES OF THE
VANECK J.P. MORGAN EM LOCAL CURRENCY BOND ETF. J.P. MORGAN MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
EMERGING MARKETS GLOBAL CORE INDEX OR ANY DATA INCLUDED THEREIN, OR OTHERWISE
OBTAINED BY THE ADVISER, OWNERS OF SHARES OF THE VANECK J.P. MORGAN EM LOCAL
CURRENCY BOND ETF OR BY ANY OTHER PERSON OR ENTITY, FROM ANY USE OF THE EMERGING
MARKETS GLOBAL CORE INDEX AND/OR SHARES OF THE VANECK J.P. MORGAN EM LOCAL
CURRENCY BOND ETF. THERE ARE NO REPRESENTATIONS OR WARRANTIES WHICH EXTEND
BEYOND THE DESCRIPTION ON THE FACE OF THIS DOCUMENT, IF ANY. ALL WARRANTIES AND
REPRESENTATIONS OF ANY KIND WITH REGARD TO THE EMERGING MARKETS GLOBAL CORE
INDEX AND/OR SHARES OF THE VANECK J.P. MORGAN LOCAL CURRENCY BOND ETF, ARE
DISCLAIMED INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, QUALITY,
ACCURACY, FITNESS FOR A PARTICULAR PURPOSE AND/OR AGAINST INFRINGEMENT AND/OR
WARRANTIES AS TO ANY RESULTS TO BE OBTAINED BY AND/OR FROM THE USE OF THE
EMERGING MARKETS GLOBAL CORE INDEX.
The
indexes may not be copied, used, or distributed without J.P. Morgan's prior
written approval. J.P. Morgan and the J.P. Morgan index names are service
mark(s) of J.P. Morgan or its affiliates and have been licensed for use for
certain purposes by VanEck. No purchaser, seller or holder of this security,
product or fund, or any other person or entity, should use or refer to any J.P.
Morgan trade name, trademark or service mark to sponsor, endorse, market or
promote this Financial Product or any other financial product without first
contacting J.P. Morgan to determine whether J.P. Morgan's permission is
required. Under no circumstances may any person or entity claim any affiliation
with J.P. Morgan without the prior written permission of J.P. Morgan.
Information has been obtained from sources believed to be reliable but J.P.
Morgan does not warrant its completeness or accuracy. Copyright 2023, J.P.
Morgan Chase & Co. All rights reserved.
The
Adviser has entered into a licensing agreement with MarketVector Indexes to use
each of the BBB Index, BDC Index, Floating Rate Index, Mortgage REITs Index and
US IG Index (each an "MarketVector Index," and together, the "MarketVector
Indexes"). Each of VanEck BDC Income ETF, VanEck IG Floating Rate ETF, VanEck
Moody's Analytics BBB Corporate Bond ETF, VanEck Moody's Analytics IG Corporate
Bond ETF and VanEck Mortgage REIT Income ETF (each an "MarketVector Index ETF,"
and together, the "MarketVector Index ETFs") is entitled to use its Index
pursuant to a sub-licensing arrangement with the Adviser.
Shares
of the MarketVector Index ETFs are not sponsored, endorsed, sold or promoted by
MarketVector Indexes. MarketVector Indexes makes no representation or warranty,
express or implied, to the owners of Shares of the MarketVector Index ETFs or
any member of the public regarding the advisability of investing in securities
generally or in the Shares of the MarketVector Index ETFs particularly or the
ability of the MarketVector Indexes to track the performance of its respective
securities market. MarketVector Indexes’ only relationship to the Adviser is the
licensing of certain service marks and trade names and of the MarketVector
Indexes that are determined, composed and calculated by MarketVector Indexes
without regard to the Adviser or the Shares of the MarketVector Index ETFs.
MarketVector Indexes has no obligation to take the needs of the Adviser or the
owners of Shares of the MarketVector Index ETFs into consideration in
determining, composing or calculating the MarketVector Indexes. MarketVector
Indexes is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Shares of the MarketVector
Indexes ETFs to be issued or in the determination or calculation of the equation
by which the Shares of the MarketVector Indexes ETFs are to be converted into
cash. MarketVector Indexes has no obligation or liability in connection with the
administration, marketing or trading of the Shares of the MarketVector Indexes
ETFs.
MARKETVECTOR
INDEXES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
MARKETVECTOR INDEXES OR ANY DATA INCLUDED THEREIN AND MARKETVECTOR INDEXES SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
MARKETVECTOR INDEXES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE ADVISER, OWNERS OF SHARES OF THE MARKETVECTOR INDEXES ETFS, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MARKETVECTOR INDEXES OR ANY DATA
INCLUDED THEREIN. MARKETVECTOR INDEXES 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 MARKETVECTOR INDEXES OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
MARKETVECTOR INDEXES HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
Shares
of the MarketVector Indexes ETFs are not sponsored, promoted, sold or supported
in any other manner by Solactive AG nor does Solactive AG offer any express or
implicit guarantee or assurance either with regard to the results of using the
MarketVector Indexes and/or its trade mark or its price at any time or in any
other respect. The MarketVector Indexes are calculated and maintained by
Solactive AG. Solactive AG uses its best efforts to ensure that the MarketVector
Indexes are calculated correctly. Irrespective of its obligations towards
MarketVector Indexes, Solactive AG has no obligation to point out errors in the
MarketVector Indexes to third parties including but not limited to investors
and/or financial intermediaries of the MarketVector Indexes ETFs. Neither
publication of the MarketVector Indexes by Solactive AG nor the licensing of the
MarketVector Indexes or its trade mark for the purpose of use in connection with
the MarketVector Indexes ETFs constitutes a recommendation by Solactive AG to
invest capital in the MarketVector Indexes ETFs nor does it in any way represent
an assurance or opinion of Solactive AG with regard to any investment in the
MarketVector Indexes ETFs. Solactive AG is not responsible for fulfilling the
legal requirements concerning the accuracy and completeness of the prospectus of
the MarketVector Indexes ETFs.
Source
ICE Data Indices, LLC (“ICE Data”), is used with permission. “ICE” is a
registered trademark of ICE Data or its affiliates. “BofA”®
is a registered trademark of Bank of America Corporation licensed by Bank of
America Corporation and its affiliates ("BofA") and may not be used without
BofA's prior written approval. These trademarks have been licensed, along with
the ICE BofA Diversified High Yield US Emerging Markets Corporate Plus Index,
ICE US Fallen Angel High Yield 10% Constrained Index, ICE BofA Global Ex-US
Issuers High Yield Constrained Index, ICE Exchange-Listed Fixed & Adjustable
Rate Non-Financial Preferred Securities Index (collectively, the “Indices”) for
use by Van Eck Associates Corporation (the “Licensee“) in connection with the
VanEck Emerging Markets High Yield Bond ETF, VanEck Fallen Angel High Yield Bond
ETF, VanEck International High Yield Bond ETF and the VanEck Preferred
Securities ex Financials ETF (collectively, the “Products“). Neither the
Licensee nor the Products, as applicable, are sponsored, endorsed, sold or
promoted by ICE Data, its affiliates or their third party suppliers (“ICE Data
and its Suppliers”). ICE Data and its Suppliers make no representations or
warranties regarding the advisability of investing in securities generally, in
the Products particularly, the Licensee or the ability of the Indices to track
general stock market performance. Past performance of an Index is not an
indicator of or a guarantee of future results.
ICE
Data’s only relationship to the Licensee is the licensing of certain trademarks
and trade names and the Indices or components thereof. The Indices are
determined, composed and calculated by ICE Data without regard to the Licensee
or the Products or its holders. ICE Data has no obligation to take the needs of
the Licensee or the holders of the Products into consideration in determining,
composing or calculating the Indices. ICE Data is not responsible for and has
not participated in the determination of the timing of, prices of, or quantities
of the Products to be issued or in the determination or calculation of the
equation by which the Products are to be priced, sold, purchased, or redeemed.
Except for certain custom index calculation services, all information provided
by ICE Data is general in nature and not tailored to the needs of the Licensee
or any other person, entity or group of persons. ICE Data has no obligation or
liability in connection with the administration, marketing, or trading of the
Products. ICE Data is not an investment advisor. Inclusion of a security within
an index is not a recommendation by ICE Data to buy, sell, or hold such
security, nor is it considered to be investment advice.
ICE
DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY
INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM (“INDEX DATA”). ICE
DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH
RESPECT
TO
THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND THE INDEX
DATA, WHICH ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR OWN
RISK.
The
S&P Green Bond U.S. Dollar Select Index (the “Green Bond Index”) is a
product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has
been licensed for use by the Adviser. S&P®,
S&P 500®,
US 500, The 500, iBoxx®,
iTraxx®
and CDX®
are trademarks of S&P Global, Inc. or its affiliates (“S&P”); Dow Jones®
is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”);
These trademarks have been licensed for use by SPDJI and sublicensed for certain
purposes by the Adviser. It is not possible to invest directly in an index. The
VanEck Green Bond ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow
Jones, S&P, any of their respective affiliates (collectively, “S&P Dow
Jones Indices”). S&P Dow Jones Indices does not make any representation or
warranty, express or implied, to the owners of the VanEck Green Bond ETF or any
member of the public regarding the advisability of investing in securities
generally or in the VanEck Green Bond ETF particularly or the ability of the
Green Bond Index to track general market performance. Past performance of an
index is not an indication or guarantee of future results. S&P Dow Jones
Indices’ only relationship to the Adviser with respect to the Green Bond Index
is the licensing of the Index and certain trademarks, service marks and/or trade
names of S&P Dow Jones Indices and/or its licensors. The Green Bond Index is
determined, composed and calculated by S&P Dow Jones Indices without regard
to the Adviser or the VanEck Green Bond ETF. S&P Dow Jones Indices has no
obligation to take the needs of the Adviser or the owners of the VanEck Green
Bond ETF into consideration in determining, composing or calculating the Green
Bond Index. S&P Dow Jones Indices has no obligation or liability in
connection with the administration, marketing or trading of the VanEck Green
Bond ETF. There is no assurance that investment products based on the Green Bond
Index will accurately track index performance or provide positive investment
returns. S&P Dow Jones Indices LLC is not an investment adviser,
commodity trading advisory, commodity pool operator, broker dealer, fiduciary,
promoter” (as defined in the Investment Company Act of 1940), “expert” as
enumerated within 15 U.S.C. § 77k(a) or tax advisor. Inclusion of a
security, commodity, crypto currency or other asset within an index is not a
recommendation by S&P Dow Jones Indices to buy, sell, or hold such security,
commodity, crypto currency or other asset, nor is it considered to be investment
advice or commodity trading advice.
NEITHER
S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE GREEN BOND INDEX OR ANY DATA
RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT
THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR
LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES
INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS
TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF THE VANECK GREEN BOND ETF,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE GREEN BOND INDEX OR WITH
RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT
LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY
HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT,
STRICT LIABILITY, OR OTHERWISE. S&P DOW JONES INDICES HAS NOT REVIEWED,
PREPARED AND/OR CERTIFIED ANY PORTION OF, NOR DOES S&P DOW JONES INDICES
HAVE ANY CONTROL OVER, THE LICENSEE PRODUCT REGISTRATION STATEMENT, PROSPECTUS
OR OTHER OFFERING MATERIALS. THERE ARE NO THIRD-PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND THE ADVISER,
OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
The
financial highlights tables which follow are intended to help you understand the
Funds’ financial performance for the past five years or as indicated. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions). The information for the fiscal year ended April 30, 2023 has
been audited by PricewaterhouseCoopers LLP, the Trust's independent registered
public accounting firm, whose report, along with the Funds' financial
statements, is included in the Funds' Annual Report, which is available upon
request. The information for periods prior to the fiscal year ended April 30,
2023 was audited by another independent registered public accounting firm.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| BDC
Income ETF |
| Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
16.76 |
|
| $ |
16.76 |
|
| $ |
10.75 |
|
| $ |
16.55 |
|
| $ |
16.10 |
|
|
|
|
| |
Net
investment income (a) |
1.63 |
|
| 1.44 |
|
| 1.43 |
|
| 1.54 |
|
| 1.59 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(2.18) |
|
| (0.06) |
|
| 6.02 |
|
| (5.86) |
|
| 0.41 |
|
|
|
|
| |
Total
from investment operations |
(0.55) |
|
| 1.38 |
|
| 7.45 |
|
| (4.32) |
|
| 2.00 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(1.63) |
|
| (1.38) |
|
| (1.44) |
|
| (1.48) |
|
| (1.55) |
|
|
|
|
| |
Return
of capital |
(0.04) |
|
| — |
|
| — |
| (b) |
— |
|
| — |
|
|
|
|
| |
Total
distributions |
(1.67) |
|
| (1.38) |
|
| (1.44) |
|
| (1.48) |
|
| (1.55) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
14.54 |
|
| $ |
16.76 |
|
| $ |
16.76 |
|
| $ |
10.75 |
|
| $ |
16.55 |
|
|
|
|
| |
Total
return (c) |
(2.60) |
| % |
8.23 |
| % |
73.81 |
| % |
(27.77) |
| % |
13.27 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (d) |
0.42 |
| % |
0.41 |
| % |
0.46 |
| % |
0.48 |
| % |
0.47 |
| % |
|
|
| |
Net
expenses (d) |
0.42 |
| % |
0.41 |
| % |
0.41 |
| % |
0.41 |
| % |
0.41 |
| % |
|
|
| |
Net
expenses excluding interest and taxes (d) |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
|
|
| |
Net
investment income |
10.75 |
| % |
8.34 |
| % |
10.57 |
| % |
9.95 |
| % |
9.73 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
577 |
|
| $ |
625 |
|
| $ |
412 |
|
| $ |
170 |
|
| $ |
207 |
|
|
|
|
| |
Portfolio
turnover rate (e) |
28 |
| % |
29 |
| % |
26 |
| % |
22 |
| % |
13 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Amount
represents less than $0.005 per share.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Periods
after April 30, 2021 reflect a unitary management fee structure.
(e)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
| |
| Dynamic
High Income ETF |
| Period Ended April
30, 2023(a) |
Net
asset value, beginning of period |
$ |
25.13 |
| |
Net
investment income (b) |
0.59 |
| |
Net
realized and unrealized gain on investments |
1.03 |
| |
Total
from investment operations |
1.62 |
| |
Distributions
from: |
| |
Net
investment income |
(0.59) |
| |
Return
of capital |
(0.07) |
| |
Total
distributions |
(0.66) |
| |
Net
asset value, end of period |
$ |
26.09 |
| |
Total
return (c) |
6.47 |
%(d) |
Ratios
to average net assets |
| |
Expenses |
0.10 |
| %(e) |
Net
investment income |
4.55 |
| %(e) |
Supplemental
data |
| |
Net
assets, end of period (in millions) |
$ |
1 |
| |
Portfolio
turnover rate (f) |
8 |
| %(d) |
(a)For
the period November 2, 2022 (commencement of operations) through April 30,
2023.
(b)Calculated
based upon average shares outstanding.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Annualized
(f)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Emerging
Markets High Yield Bond ETF |
|
Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
19.52 |
|
| $ |
23.63 |
|
| $ |
20.54 |
|
| $ |
23.34 |
|
| $ |
23.83 |
|
|
|
|
| |
Net
investment income (a) |
1.10 |
|
| 1.20 |
|
| 1.29 |
|
| 1.42 |
|
| 1.33 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(1.25) |
|
| (4.11) |
|
| 3.06 |
|
| (2.77) |
|
| (0.46) |
|
|
|
|
| |
Total
from investment operations |
(0.15) |
|
| (2.91) |
|
| 4.35 |
|
| (1.35) |
|
| 0.87 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(1.18) |
|
| (1.20) |
|
| (1.26) |
|
| (1.45) |
|
| (1.36) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
18.19 |
|
| $ |
19.52 |
|
| $ |
23.63 |
|
| $ |
20.54 |
|
| $ |
23.34 |
|
|
|
|
| |
Total
return (b) |
(0.56) |
| % |
(12.84) |
| % |
21.53 |
| % |
(6.27) |
| % |
3.93 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (c) |
0.40 |
| % |
0.40 |
| % |
0.45 |
| % |
0.47 |
| % |
0.46 |
| % |
|
|
| |
Net
expenses (c) |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
|
|
| |
Net
investment income |
6.08 |
| % |
5.39 |
| % |
5.58 |
| % |
6.19 |
| % |
5.81 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
431 |
|
| $ |
1,152 |
|
| $ |
784 |
|
| $ |
308 |
|
| $ |
261 |
|
|
|
|
| |
Portfolio
turnover rate (d) |
21 |
| % |
34 |
| % |
31 |
| % |
28 |
| % |
27 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Periods
after April 30, 2021 reflect a unitary management fee structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Fallen
Angel High Yield Bond ETF |
| Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
28.94 |
|
| $ |
32.20 |
|
| $ |
26.84 |
|
| $ |
29.00 |
|
| $ |
29.19 |
|
|
|
|
| |
Net
investment income (a) |
1.29 |
|
| 1.19 |
|
| 1.49 |
|
| 1.54 |
|
| 1.64 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(1.15) |
|
| (3.22) |
|
| 5.35 |
|
| (2.16) |
|
| (0.24) |
|
|
|
|
| |
Total
from investment operations |
0.14 |
|
| (2.03) |
|
| 6.84 |
|
| (0.62) |
|
| 1.40 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(1.34) |
|
| (1.23) |
|
| (1.48) |
|
| (1.54) |
|
| (1.59) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
asset value, end of year |
$ |
27.74 |
|
| $ |
28.94 |
|
| $ |
32.20 |
|
| $ |
26.84 |
|
| $ |
29.00 |
|
|
|
|
| |
Total
return (b) |
0.60 |
| % |
(6.63) |
| % |
25.95 |
| % |
(2.38) |
| % |
5.04 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (c) |
0.35 |
| % |
0.35 |
| % |
0.43 |
| % |
0.43 |
| % |
0.45 |
| % |
|
|
| |
Net
expenses (c) |
0.35 |
| % |
0.35 |
| % |
0.35 |
| % |
0.35 |
| % |
0.35 |
| % |
|
|
| |
Net
investment income |
4.68 |
| % |
3.70 |
| % |
4.83 |
| % |
5.35 |
| % |
5.76 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
2,783 |
|
| $ |
3,826 |
|
| $ |
4,915 |
|
| $ |
1,683 |
|
| $ |
976 |
|
|
|
|
| |
Portfolio
turnover rate (d) |
31 |
| % |
44 |
| % |
27 |
| % |
68 |
| % |
29 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Periods
after April 30, 2021 reflect a unitary management fee structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Green
Bond ETF |
| Year
Ended April 30, |
|
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
| |
Net
asset value, beginning of year |
$ |
24.13 |
|
| $ |
27.16 |
|
| $ |
26.85 |
|
| $ |
25.87 |
|
| $ |
26.54 |
|
|
|
|
| |
Net
investment income (a) |
0.63 |
|
| 0.55 |
|
| 0.55 |
|
| 0.58 |
|
| 0.34 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(0.54) |
|
| (3.03) |
|
| 0.28 |
| (b) |
1.00 |
|
| (0.68) |
|
|
|
|
| |
Total
from investment operations |
0.09 |
|
| (2.48) |
|
| 0.83 |
|
| 1.58 |
|
| (0.34) |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(0.64) |
|
| (0.55) |
|
| (0.52) |
|
| (0.50) |
|
| (0.29) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Return
of capital |
— |
|
| — |
|
| — |
|
| (0.10) |
|
| (0.04) |
|
|
|
|
| |
Total
distributions |
(0.64) |
|
| (0.55) |
|
| (0.52) |
|
| (0.60) |
|
| (0.33) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
23.58 |
|
| $ |
24.13 |
|
| $ |
27.16 |
|
| $ |
26.85 |
|
| $ |
25.87 |
|
|
|
|
| |
Total
return (c) |
0.41 |
| % |
(9.30) |
| % |
3.07 |
| % |
6.17 |
| % |
(1.25) |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (d) |
0.20 |
| % |
0.20 |
| % |
0.65 |
| % |
0.83 |
| % |
1.02 |
| % |
|
|
| |
Net
expenses (d) |
0.20 |
| % |
0.20 |
| % |
0.20 |
| % |
0.23 |
| % |
0.33 |
| % |
|
|
| |
Net
investment income |
2.71 |
| % |
2.07 |
| % |
2.01 |
| % |
2.17 |
| % |
1.32 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
75 |
|
| $ |
95 |
|
| $ |
84 |
|
| $ |
32 |
|
| $ |
26 |
|
|
|
|
| |
Portfolio
turnover rate (e) |
20 |
| % |
19 |
| % |
25 |
| % |
83 |
| % |
28 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Periods
after April 30, 2021 reflect a unitary management fee structure.
(e)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| IG
Floating Rate ETF |
| Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
25.07 |
|
| $ |
25.33 |
|
| $ |
24.61 |
|
| $ |
25.25 |
|
| $ |
25.32 |
|
|
|
|
| |
Net
investment income (a) |
0.98 |
|
| 0.14 |
|
| 0.23 |
|
| 0.68 |
|
| 0.77 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(0.09) |
|
| (0.25) |
|
| 0.76 |
|
| (0.61) |
|
| (0.10) |
|
|
|
|
| |
Total
from investment operations |
0.89 |
|
| (0.11) |
|
| 0.99 |
|
| 0.07 |
|
| 0.67 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(0.88) |
|
| (0.15) |
|
| (0.27) |
|
| (0.71) |
|
| (0.74) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
25.08 |
|
| $ |
25.07 |
|
| $ |
25.33 |
|
| $ |
24.61 |
|
| $ |
25.25 |
|
|
|
|
| |
Total
return (b) |
3.61 |
| % |
(0.45) |
| % |
4.07 |
| % |
0.26 |
| % |
2.71 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (c) |
0.14 |
| % |
0.14 |
| % |
0.39 |
| % |
0.40 |
| % |
0.40 |
| % |
|
|
| |
Net
expenses (c) |
0.14 |
| % |
0.14 |
| % |
0.14 |
| % |
0.14 |
| % |
0.14 |
| % |
|
|
| |
Net
investment income |
3.95 |
| % |
0.56 |
| % |
0.93 |
| % |
2.70 |
| % |
3.05 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
1,146 |
|
| $ |
1,135 |
|
| $ |
560 |
|
| $ |
461 |
|
| $ |
542 |
|
|
|
|
| |
Portfolio
turnover rate (d) |
55 |
| % |
78 |
| % |
72 |
| % |
40 |
| % |
30 |
| % |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| International
High Yield Bond ETF |
| Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
20.90 |
|
| $ |
25.71 |
|
| $ |
22.21 |
|
| $ |
24.54 |
|
| $ |
25.20 |
|
|
|
|
| |
Net
investment income (a) |
0.96 |
|
| 1.02 |
|
| 1.13 |
|
| 1.26 |
|
| 1.13 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(0.85) |
|
| (4.78) |
|
| 3.54 |
|
| (2.33) |
|
| (0.65) |
|
|
|
|
| |
Total
from investment operations |
0.11 |
|
| (3.76) |
|
| 4.67 |
|
| (1.07) |
|
| 0.48 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(0.89) |
|
| (1.05) |
|
| (1.10) |
|
| (1.17) |
|
| (1.08) |
|
|
|
|
| |
Return
of capital |
(0.10) |
|
| — |
|
| (0.07) |
|
| (0.09) |
|
| (0.06) |
|
|
|
|
| |
Total
distributions |
(0.99) |
|
| (1.05) |
|
| (1.17) |
|
| (1.26) |
|
| (1.14) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
20.02 |
|
| $ |
20.90 |
|
| $ |
25.71 |
|
| $ |
22.21 |
|
| $ |
24.54 |
|
|
|
|
| |
Total
return (b) |
0.78 |
| % |
(15.07) |
| % |
21.30 |
| % |
(4.67) |
| % |
2.08 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (c) |
0.40 |
| % |
0.40 |
| % |
0.56 |
| % |
0.62 |
| % |
0.54 |
| % |
|
|
| |
Net
expenses (c) |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
|
|
| |
Net
investment income |
4.89 |
| % |
4.21 |
| % |
4.54 |
| % |
5.17 |
| % |
4.66 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
66 |
|
| $ |
79 |
|
| $ |
100 |
|
| $ |
89 |
|
| $ |
113 |
|
|
|
|
| |
Portfolio
turnover rate (d) |
22 |
| % |
25 |
| % |
33 |
| % |
37 |
| % |
32 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Periods
after April 30, 2021 reflect a unitary management fee structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| J.P.
Morgan EM Local Currency Bond ETF |
| Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
25.33 |
|
| $ |
31.14 |
|
| $ |
29.36 |
|
| $ |
33.11 |
|
| $ |
37.56 |
|
|
|
|
| |
Net
investment income (a) |
1.43 |
|
| 1.47 |
|
| 1.55 |
|
| 2.00 |
|
| 2.14 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(0.21) |
|
| (5.84) |
|
| 1.78 |
|
| (3.75) |
|
| (4.45) |
|
|
|
|
| |
Total
from investment operations |
1.22 |
|
| (4.37) |
|
| 3.33 |
|
| (1.75) |
|
| (2.31) |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(0.18) |
|
| (0.77) |
|
| (0.01) |
|
| (0.48) |
|
| (1.36) |
|
|
|
|
| |
Return
of capital |
(1.24) |
|
| (0.67) |
|
| (1.54) |
|
| (1.52) |
|
| (0.78) |
|
|
|
|
| |
Total
distributions |
(1.42) |
|
| (1.44) |
|
| (1.55) |
|
| (2.00) |
|
| (2.14) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
25.13 |
|
| $ |
25.33 |
|
| $ |
31.14 |
|
| $ |
29.36 |
|
| $ |
33.11 |
|
|
|
|
| |
Total
return (b) |
5.16 |
| % |
(14.56) |
| % |
11.40 |
| % |
(5.79) |
| % |
(6.05) |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses |
0.31 |
| % |
0.32 |
| % |
0.31 |
| % |
0.36 |
| % |
0.41 |
| % |
|
|
| |
Net
expenses |
0.30 |
| % |
0.30 |
| % |
0.30 |
| % |
0.30 |
| % |
0.31 |
| % |
|
|
| |
Net
investment income |
5.87 |
| % |
5.00 |
| % |
4.92 |
| % |
6.05 |
| % |
6.35 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
3,224 |
|
| $ |
3,073 |
|
| $ |
3,380 |
|
| $ |
3,339 |
|
| $ |
5,332 |
|
|
|
|
| |
Portfolio
turnover rate (c) |
29 |
| % |
33 |
| % |
40 |
| % |
39 |
| % |
36 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Moody’s
Analytics BBB Corporate Bond ETF |
| Year
Ended April 30, |
| Period Ended April
30, 2021(a) |
| 2023 |
|
| 2022 |
| |
Net
asset value, beginning of period |
$ |
21.52 |
|
|
| $ |
24.73 |
|
|
| $ |
25.00 |
| |
Net
investment income (b) |
0.78 |
|
|
| 0.55 |
|
|
| 0.22 |
| |
Net
realized and unrealized loss on investments |
(0.44) |
|
|
| (3.19) |
|
|
| (0.30) |
| |
Total
from investment operations |
0.34 |
|
|
| (2.64) |
|
|
| (0.08) |
| |
Distributions
from: |
|
|
|
|
|
|
| |
Net
investment income |
(0.75) |
|
|
| (0.57) |
|
|
| (0.19) |
| |
Net
asset value, end of period |
$ |
21.11 |
|
|
| $ |
21.52 |
|
|
| $ |
24.73 |
| |
Total
return (c) |
1.70 |
| % |
| (10.96) |
| % |
| (0.32) |
%(d) |
Ratios
to average net assets |
|
|
|
|
|
|
| |
Expenses |
0.25 |
| % |
| 0.25 |
| % |
| 0.25 |
| %(e) |
Net
investment income |
3.75 |
| % |
| 2.26 |
| % |
| 2.14 |
| %(e) |
Supplemental
data |
|
|
|
|
|
|
| |
Net
assets, end of period (in millions) |
$ |
8 |
|
|
| $ |
9 |
|
|
| $ |
10 |
| |
Portfolio
turnover rate (f) |
91 |
| % |
| 48 |
| % |
| 35 |
| %(d) |
(a)For
the period December 2, 2020 (commencement of operations) through April 30,
2021.
(b)Calculated
based upon average shares outstanding.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Annualized
(f)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Moody’s
Analytics IG Corporate Bond ETF |
| Year
Ended April 30, |
| Period Ended April
30, 2021(a) |
| 2023 |
|
| 2022 |
| |
Net
asset value, beginning of period |
$ |
21.61 |
|
|
| $ |
24.58 |
|
|
| $ |
25.00 |
| |
Net
investment income (b) |
0.74 |
|
|
| 0.52 |
|
|
| 0.21 |
| |
Net
realized and unrealized loss on investments |
(0.49) |
|
|
| (2.96) |
|
|
| (0.45) |
| |
Total
from investment operations |
0.25 |
|
|
| (2.44) |
|
|
| (0.24) |
| |
Distributions
from: |
|
|
|
|
|
|
| |
Net
investment income |
(0.72) |
|
|
| (0.53) |
|
|
| (0.18) |
| |
Net
asset value, end of period |
$ |
21.14 |
|
|
| $ |
21.61 |
|
|
| $ |
24.58 |
| |
Total
return (c) |
1.22 |
| % |
| (10.15) |
| % |
| (0.97) |
%(d) |
Ratios
to average net assets |
|
|
|
|
|
|
| |
Expenses |
0.20 |
| % |
| 0.20 |
| % |
| 0.20 |
| %(e) |
Net
investment income |
3.53 |
| % |
| 2.13 |
| % |
| 2.10 |
| %(e) |
Supplemental
data |
|
|
|
|
|
|
| |
Net
assets, end of period (in millions) |
$ |
13 |
|
|
| $ |
13 |
|
|
| $ |
15 |
| |
Portfolio
turnover rate (f) |
84 |
| % |
| 53 |
| % |
| 28 |
| %(d) |
(a)For
the period December 2, 2020 (commencement of operations) through April 30,
2021.
(b)Calculated
based upon average shares outstanding.
(c)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d)Not
Annualized
(e)Annualized
(f)Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Mortgage
REIT Income ETF |
|
Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
15.23 |
|
| $ |
19.45 |
|
| $ |
11.42 |
|
| $ |
23.63 |
|
| $ |
22.71 |
|
|
|
|
| |
Net
investment income (a) |
1.21 |
|
| 0.76 |
|
| 0.86 |
|
| 1.45 |
|
| 1.68 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(3.82) |
|
| (3.44) |
|
| 8.49 |
|
| (11.90) |
|
| 0.94 |
|
|
|
|
| |
Total
from investment operations |
(2.61) |
|
| (2.68) |
|
| 9.35 |
|
| (10.45) |
|
| 2.62 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(1.21) |
|
| (0.79) |
|
| (0.83) |
|
| (1.45) |
|
| (1.67) |
|
|
|
|
| |
Return
of capital |
(0.40) |
|
| (0.75) |
|
| (0.49) |
|
| (0.31) |
|
| (0.03) |
|
|
|
|
| |
Total
distributions |
(1.61) |
|
| (1.54) |
|
| (1.32) |
|
| (1.76) |
|
| (1.70) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
11.01 |
|
| $ |
15.23 |
|
| $ |
19.45 |
|
| $ |
11.42 |
|
| $ |
23.63 |
|
|
|
|
| |
Total
return (b) |
(16.95) |
| % |
(14.74) |
| % |
85.71 |
| % |
(46.63) |
| % |
12.00 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (c) |
0.43 |
| % |
0.41 |
| % |
0.49 |
| % |
0.50 |
| % |
0.49 |
| % |
|
|
| |
Net
expenses (c) |
0.43 |
| % |
0.41 |
| % |
0.41 |
| % |
0.41 |
| % |
0.42 |
| % |
|
|
| |
Net
expenses excluding interest and taxes (c) |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
|
|
| |
Net
investment income |
9.30 |
| % |
4.15 |
| % |
5.55 |
| % |
6.70 |
| % |
7.19 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
189 |
|
| $ |
211 |
|
| $ |
310 |
|
| $ |
119 |
|
| $ |
175 |
|
|
|
|
| |
Portfolio
turnover rate (d) |
19 |
| % |
12 |
| % |
31 |
| % |
16 |
| % |
35 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Periods
after April 30, 2021 reflect a unitary management fee structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Preferred
Securities ex Financials ETF |
| Year
Ended April 30, |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 |
|
|
|
| |
Net
asset value, beginning of year |
$ |
19.15 |
|
| $ |
20.97 |
|
| $ |
18.23 |
|
| $ |
19.37 |
|
| $ |
19.09 |
|
|
|
|
| |
Net
investment income (a) |
1.12 |
|
| 1.01 |
|
| 0.98 |
|
| 1.06 |
|
| 1.13 |
|
|
|
|
| |
Net
realized and unrealized gain (loss) on investments |
(1.62) |
|
| (1.68) |
|
| 2.72 |
|
| (1.12) |
|
| 0.32 |
|
|
|
|
| |
Total
from investment operations |
(0.50) |
|
| (0.67) |
|
| 3.70 |
|
| (0.06) |
|
| 1.45 |
|
|
|
|
| |
Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
investment income |
(1.14) |
|
| (1.13) |
|
| (0.96) |
|
| (1.08) |
|
| (1.17) |
|
|
|
|
| |
Return
of capital |
— |
|
| (0.02) |
|
| — |
|
| — |
|
| — |
|
|
|
|
| |
Total
distributions |
(1.14) |
|
| (1.15) |
|
| (0.96) |
|
| (1.08) |
|
| (1.17) |
|
|
|
|
| |
Net
asset value, end of year |
$ |
17.51 |
|
| $ |
19.15 |
|
| $ |
20.97 |
|
| $ |
18.23 |
|
| $ |
19.37 |
|
|
|
|
| |
Total
return (b) |
(2.50) |
| % |
(3.61) |
| % |
20.78 |
| % |
(0.54) |
| % |
7.90 |
| % |
|
|
| |
Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross
expenses (c) |
0.41 |
| % |
0.40 |
| % |
0.43 |
| % |
0.44 |
| % |
0.46 |
| % |
|
|
| |
Net
expenses (c) |
0.41 |
| % |
0.40 |
| % |
0.40 |
| % |
0.41 |
| % |
0.41 |
| % |
|
|
| |
Net
expenses excluding interest and taxes (c) |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
0.40 |
| % |
|
|
| |
Net
investment income |
6.28 |
| % |
4.79 |
| % |
4.97 |
| % |
5.41 |
| % |
5.92 |
| % |
|
|
| |
Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net
assets, end of year (in millions) |
$ |
1,060 |
|
| $ |
1,002 |
|
| $ |
948 |
|
| $ |
689 |
|
| $ |
584 |
|
|
|
|
| |
Portfolio
turnover rate (d) |
27 |
| % |
37 |
| % |
36 |
| % |
45 |
| % |
31 |
| % |
|
|
| |
(a)Calculated
based upon average shares outstanding.
(b)Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c)Periods
after April 30, 2021 reflect a unitary management fee structure.
(d)Portfolio
turnover rate excludes in-kind transactions.
Information
regarding how often the closing trading price of the Shares of each Fund was
above (i.e., at a premium) or below (i.e., at a discount) the NAV of the Fund
for the most recently completed calendar year and the most recently completed
calendar quarter(s) since that year (or the life of the Fund, if shorter) can be
found at www.vaneck.com.
CONTINUOUS
OFFERING
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the Investment Company Act of 1940. As a result, broker dealer
firms should note that dealers who are not underwriters but are participating in
a distribution (as contrasted with ordinary secondary market transactions) and
thus dealing with the Shares that are part of an overallotment within the
meaning of Section 4(a)(3)(A) of the Securities Act would be unable to take
advantage of the prospectus delivery exemption provided by Section 4(a)(3) of
the Securities Act. Firms that incur a prospectus delivery obligation with
respect to Shares are reminded that, under Rule 153 of the Securities Act, a
prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed
to an exchange member in connection with a sale on the Exchange is satisfied by
the fact that the prospectus is available at the Exchange upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
In
addition, certain affiliates of the Funds and the Adviser may purchase and
resell Fund shares pursuant to this Prospectus.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on March 15, 2001. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of shareholders will not be held except as required by the Investment Company
Act of 1940 and other applicable law. See the Funds’ SAI for more information
concerning the Trust’s form of organization. Section 12(d)(1) of the Investment
Company Act of 1940 restricts investments by investment companies in the
securities of other investment companies, including Shares of a Fund.
Registered
investment companies are permitted to invest in the Funds (except VanEck BDC
Income ETF) beyond the limits set forth in Section 12(d)(1) subject to certain
terms and conditions set forth in Securities and Exchange Commission
regulations, including that such investment companies enter into an agreement
with such Fund.
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the 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) any Fund,
including contracts with the Adviser or other parties who provide services to
the Fund.
Dechert
LLP serves as counsel to the Trust, including the Funds. PricewaterhouseCoopers
LLP serves as the Trust’s independent registered public accounting firm and will
audit the Fund’s financial statements annually.
ADDITIONAL
INFORMATION
This
Prospectus does not contain all the information included in the Registration
Statement filed with the Securities and Exchange Commission with respect to the
Funds’ Shares. The Funds’ Registration Statement, including this Prospectus, the
Funds’ SAI and the exhibits are available on the EDGAR database at the
Securities
and Exchange Commission’s
website (http://www.sec.gov), and copies may be obtained, after paying a
duplicating fee, by electronic request at the following email address:
[email protected].
The
SAI for the Funds, which has been filed with the Securities and Exchange
Commission, provides more information about the Funds. The SAI for the Funds is
incorporated herein by reference and is legally part of this Prospectus.
Additional information about the Funds’ investments is available in each Fund’s
annual and semi-annual reports to shareholders. In each Fund’s annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance during its last fiscal year.
The SAI and the Funds’ annual and semi-annual reports may be obtained without
charge by writing to the Funds at Van Eck Securities Corporation, the Funds’
Distributor, at 666 Third Avenue, 9th Floor, New York, New York 10017 or by
calling the Distributor at the following number: Investor Information:
800.826.2333.
Shareholder
inquiries may be directed to the Funds in writing to 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling 800.826.2333.
The
Funds’ SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
For
more detailed information about the Funds, see the SAI dated September 1, 2023,
as may be supplemented from time to time. Additional information about the
Funds’ investments is or will be available in each Fund’s annual and semi-annual
reports to shareholders. In each Fund’s annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund’s performance during its last fiscal year.
Call
VanEck at 800.826.2333 to request, free of charge, the annual or semi-annual
reports, the SAI, or other information about the Funds or to make shareholder
inquiries. You may also obtain the SAI or a Fund’s annual or semi-annual reports
by visiting the VanEck website at www.vaneck.com.
Reports
and other information about the Funds are available on the EDGAR Database on the
Securities and Exchange Commission’s internet site at http://www.sec.gov. In
addition, copies of this information may be obtained, after paying a duplicating
fee, by electronic request at the following email address:
[email protected].
|
|
|
|
| |
|
|
Transfer
Agent: State Street Bank and Trust Company SEC Registration Number:
333-123257 Investment Company Act of 1940 Registration Number:
811-10325 |
800.826.2333 vaneck.com |
INCOMEPRO |
|