ck0001137360-20221231
Agribusiness
ETF MOO
Future
of Food ETF YUMY
Gold
Miners ETF GDX®
Green
Metals ETF GMET
Junior
Gold Miners ETF GDXJ®
Low
Carbon Energy ETF SMOG
Natural
Resources ETF HAP
Oil
Refiners ETF CRAK
Oil
Services ETF OIH
Rare
Earth/Strategic Metals ETF REMX
Steel
ETF SLX
Uranium+Nuclear
Energy ETF NLR
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Principal
U.S. Listing Exchange for each Fund: NYSE Arca, Inc. |
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The
U.S. Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense. |
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800.826.2333 vaneck.com
INVESTMENT OBJECTIVE
VanEck® Agribusiness ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Global Agribusiness Index (the “Agribusiness Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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Other
Expenses |
0.03 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.53 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.53 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.56% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$54 |
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3 |
$170 |
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5 |
$296 |
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10 |
$665 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
24% 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 Agribusiness Index includes equity securities of companies in the
agribusiness segment. To be initially eligible for the Agribusiness Index,
companies must generate at least 50% of their revenues from agri-chemicals,
animal health and fertilizers, seeds and traits, from farm/irrigation equipment
and farm machinery, aquaculture and fishing, livestock, cultivation and
plantations (including grain, oil palms, sugar cane, tobacco leafs, grapevines,
etc.) and trading of agricultural products. Such companies may include small-
and
medium-capitalization companies and foreign market issuers. As of December 31,
2022, the Agribusiness Index included 49 securities of companies with a market
capitalization range of between approximately $785 million and $129.4 billion
and a weighted average market capitalization of $34.1 billion. These amounts are
subject to change. The Fund’s 80% investment policy is non-fundamental and may
be changed without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Agribusiness Index by investing in a portfolio
of securities that generally replicates the Agribusiness Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Agribusiness Index and does not seek
temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the Agribusiness Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Agribusiness Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the consumer staples, health care, industrials and
basic materials 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.
Agriculture
Companies Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the agriculture companies. Economic forces
affecting agricultural companies and related industries, including forces
affecting the agricultural commodity prices, labor costs, and energy and
financial markets, could adversely affect the Fund’s portfolio companies and
thus, the Fund’s financial situation and profitability. Agricultural and
livestock production and trade flows are significantly affected by government
policies and regulations. In addition, these companies are also subject to risks
associated with cyclicality of revenues and earnings, currency fluctuations,
changing consumer tastes, extensive competition, consolidation, and excess
capacity. In addition, agriculture companies must comply with a broad range of
environmental health, food safety and worker safety laws and regulations which
could adversely affect the Fund. Additional or more stringent environmental and
food safety laws and regulations may be enacted in the future and such changes
could have a material adverse effect on the business of the agriculture
companies.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide economy, consumer spending, competition, demographics
and consumer preferences, exploration and production spending. Companies in this
sector are also affected by changes in government regulation, world events and
economic conditions.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of
securities
that trade in such markets. The Fund invests in securities of issuers located in
countries whose economies are heavily dependent upon trading with key partners.
Any reduction in this trading may have an adverse impact on the Fund’s
investments. Foreign market trading hours, clearance and settlement procedures,
and holiday schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and
economic
spheres, and political corruption. Such events could reverse favorable trends
toward market and economic reform, privatization, and removal of trade barriers,
and result in significant disruption in securities markets in the
region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at
artificial
levels relative to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in
certain
instances, after a shareholder meeting where a vote of shareholders will be
taken. Share blocking may prevent the Fund from buying or selling securities for
a period of time. During the time that shares are blocked, trades in such
securities will not settle. The blocking period can last up to several weeks.
The process for having a blocking restriction lifted can be quite onerous with
the particular requirements varying widely by country. In addition, in certain
countries, the block cannot be removed. As a result of the ramifications of
voting ballots in markets that allow share blocking, the Adviser, on behalf of
the Fund, reserves the right to abstain from voting proxies in those
markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's
relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and
increase
tracking error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in
stressed
market conditions, the market for the Fund’s Shares may become less liquid in
response to deteriorating liquidity in the markets for the Fund’s underlying
portfolio holdings and a shareholder may be unable to sell his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The
bar chart that follows shows how the Fund performed for the calendar years
shown. The table below the bar chart shows the Fund’s average annual returns
(before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. Prior to March 18, 2013, the
Fund sought to replicate as closely as possible, before fees and expenses, the
price and yield performance of the DAXglobal® Agribusiness Index (the “Prior Index”).
Therefore, performance prior to March 18, 2013 reflects the performance of the
Fund while seeking to track the Prior Index. All returns
assume reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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|
| Best
Quarter: |
17.35% |
2Q 2020 |
| Worst
Quarter: |
-25.16% |
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.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Agribusiness ETF (return before
taxes) |
-7.95% |
8.47% |
6.96% |
|
|
VanEck Agribusiness ETF (return after
taxes on distributions) |
-8.48% |
8.07% |
6.43% |
|
|
VanEck Agribusiness ETF (return after
taxes on distributions
and sale of Fund
Shares) |
-4.44% |
6.63% |
5.46% |
|
|
MVIS®
Global Agribusiness Index (reflects no deduction for fees,
expenses
or taxes, except withholding taxes)* |
-7.64% |
8.61% |
7.21% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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|
*Prior to March 18, 2013,
the Fund sought to replicate as closely as possible, before fees and expenses,
the price and yield performance of the Prior Index. Therefore, performance
information prior to March 18, 2013 reflects the performance of the Fund while
seeking to track the Prior Index. Prior to March 18, 2013, the index data
reflects that of the Prior Index. From March 18, 2013, the index data reflects
that of the Agribusiness Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
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|
Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
|
Peter
H. Liao |
Portfolio
Manager |
August
2007 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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VANECK®
FUTURE OF FOOD ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck®
Future of Food ETF (the
“Fund”) seeks long-term 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.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.69 |
% |
|
|
Other
Expenses(a)
|
0.00 |
% |
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Total
Annual Fund Operating Expenses(a)
|
0.69 |
% |
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|
(a) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least May 1,
2024.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR
|
EXPENSES |
|
|
1 |
$70 |
|
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|
3 |
$221 |
|
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|
5 |
$384 |
|
|
|
10 |
$859 |
|
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
4% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
Under
normal conditions, the Fund invests at least 80% of its total assets in domestic
and foreign equity securities of companies engaged in Agri-Food technology and
innovation. “Agri-Food technology and innovation” encompasses industries and
companies that are leading, enabling, supplying, disrupting, or benefiting from
new environmentally sustainable agriculture and food products and services. The
Adviser performs a qualitative and quantitative analysis of each company’s
financial statements, balance sheets and/or earnings reports to determine
whether a company is engaged in Agri-Food technology and innovation. The Fund is
an actively managed exchange-traded fund (“ETF”).
The
Adviser classifies Agri-Food technology and innovation-related companies into
three overarching categories: food technology companies, precision agriculture
companies and agricultural sustainability companies. Food technology companies
include
companies
that apply innovative science to the creation, production, packaging, or
distribution of new environmentally sustainable food products, such as
alternative proteins, novel ingredients and flavors, and aquaculture (i.e.,
breeding, rearing and harvesting of fish, shellfish and other organisms).
Precision agriculture companies are companies that make, service, or operate
solutions that optimize farm operations, such as robotics and automation
platforms, indoor and vertical (i.e., growth in vertically stacked layers)
farms, water and irrigation equipment, and data collection and analysis
software. Agricultural sustainability companies are companies that research,
develop, make, or distribute environmentally sustainable products across the
agricultural supply chain, such as new seed genetics, environmentally
sustainable fertilizers, biological and nature-based crop chemicals, novel
animal feed and nutrition solutions, and sustainable crop preservation and
storage alternatives.
The
Fund may invest without limitation in any of these three Agri-Food technology
and innovation categories and may have limited or no exposure to one or more
particular categories at any given time. The Adviser selects equity securities
of companies that it believes represent growth opportunities. The Adviser
engages in its own internal research and analysis and leverages insights from
diverse sources, including external research, to identify and take advantage of
Agri-Food technology and innovation trends that influence and impact individual
companies or industries. Further, the Adviser will analyze financially material
risks and opportunities related to ESG (i.e., Environmental, Social and
Governance) factors as a component of the overall investment process. ESG
considerations can affect the Adviser’s fundamental assessment of a company or
country.
The
Fund may invest in securities of companies located anywhere in the world,
including the United States. The Fund may invest in securities of companies of
any capitalization range. The Fund concentrates its investments in the food
technology, precision agriculture, and agricultural sustainability group of
industries. An Agri-Food technology and innovation-related company may not
currently derive any revenue, and there is no assurance that such company will
derive any revenue from environmentally sustainable agriculture and food
products and services in the future. 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 may also invest up to 20% of its net assets in special purpose vehicles
such as special purpose acquisition companies (“SPACs”), initial public
offerings (“IPOs”), and securities issued by other investment companies,
including exchange traded funds (“ETFs”) and foreign investment companies. The
Fund may also invest in money market funds, but these investments are not
subject to this limitation. The Fund may invest in SPACs, IPOs, and ETFs to
participate in, or gain exposure to, certain market industries, or when direct
investments in certain countries are not permitted or available.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”) and, therefore, may
invest a greater percentage of its assets in a particular issuer. As of December 31, 2022, each of the
basic materials, consumer staples, and industrials sectors represented a
significant portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Agri-Food
Technology and Innovation Food Companies Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of companies operating in the food technology,
precision agriculture, and agricultural sustainability markets, which may have
limited product lines, markets, financial resources or personnel. These
companies may face intense competition and potentially rapid product
obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. These companies are also subject to significant environmental and food
safety regulations that could adversely affect their business. Additional or
more stringent environmental and food safety regulations may be enacted in the
future and such changes could have a material adverse effect on the business of
the Fund’s portfolio companies. The food industry is highly competitive and can
be significantly affected by demographic and product trends, competitive
pricing, marketing campaigns, environmental factors, government regulation,
adverse changes in general economic conditions, evolving consumer preferences,
nutritional and health-related concerns, federal, state and local food
inspection and processing controls, consumer product liability claims, consumer
boycotts, risks of product tampering, and the availability and expense of
liability insurance. Food product recalls require companies in the food industry
to withdraw contaminated or mislabeled products from the market. Companies
operating in the precision agriculture and agricultural sustainability markets
are subject to other risks affecting the agricultural industry, including the
impact of global climate change on agricultural production. These companies,
especially smaller companies, tend to be more volatile than companies that do
not rely heavily on technology. These companies may be adversely affected by
commodity price volatility, changes in exchange rates, government policies and
regulations such as taxes, tariffs, duties, subsidies and import and export
restrictions, availability of certain inputs and materials required for
production, depletion of resources, technological developments and labor
relations. The customers and/or suppliers of the companies in which the Fund
invests may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on such companies.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
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.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
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. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
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.
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.
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.
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.
Initial
Public Offerings Risk.
The Fund may invest in initial public offerings (“IPOs”) of common stock or
other primary or secondary syndicated offerings of equity or debt securities
issued by a corporate issuer. A purchase of IPO securities often involves higher
transaction costs than those associated with the purchase of securities already
traded on exchanges or markets. IPO securities are subject to market risk and
liquidity risk. The market value of recently issued IPO securities may fluctuate
considerably due to factors such as the absence of a prior public market,
unseasoned trading and speculation, a potentially small number of securities
available for trading, limited information about the issuer, and other factors.
The Fund may hold IPO securities for a period of time, or may sell them soon
after the purchase. Investments in IPOs could have a magnified impact – either
positive or negative – on the Fund’s performance while the Fund’s assets are
relatively small. The impact of an IPO on the Fund’s performance may tend to
diminish as the Fund’s assets grow. In circumstances when investments in IPOs
make a significant contribution to the Fund’s performance, there can be no
assurance that similar contributions from IPOs will continue in the
future.
Special
Purpose Acquisition Companies Risk.
Equity securities in which the Fund invests include stock, rights, warrants, and
other interests in special purpose acquisition companies (“SPACs”) or similar
special purpose entities. A SPAC is typically a publicly traded company that
raises investment capital via an initial public offering for the purpose of
acquiring one or more existing companies (or interests therein) via merger,
combination, acquisition or other similar transactions. If the Fund purchases
shares of a SPAC in an initial public offering it will generally bear a sales
commission, which may be significant. The shares of a SPAC are often issued in
“units” that include one share of common stock and one right or warrant (or
partial right or warrant) conveying the right to purchase additional shares or
partial shares. In some cases, the rights and warrants may be separated from the
common stock at the election of the holder, after which they may become freely
tradeable. After going public and until a transaction is completed, a SPAC
generally invests the proceeds of its initial public offering (less a portion
retained to cover expenses) in U.S. Government securities, money market
securities and cash. To the extent the SPAC is invested in cash or similar
securities, this may impact the Fund’s ability to meet its investment objective.
If a SPAC does not complete a transaction within a specified period of time
after going public, the SPAC is typically dissolved, at which point the invested
funds are returned to the SPAC’s shareholders (less certain permitted expenses)
and any rights or warrants issued by the SPAC expire worthless. SPACs generally
provide their investors with the option of redeeming an investment in the SPAC
at or around the time of effecting a transaction. In some cases, the Fund may
forfeit its right to receive additional warrants or other interests in the SPAC
if it redeems its interest in the SPAC in connection with a transaction. Because
SPACs often do not have an operating history or ongoing business other than
seeking a transaction, the value of their securities may be particularly
dependent on the quality of its management and on the ability of the SPAC’s
management to identify and complete a profitable transaction. Some SPACs may
pursue transactions only within certain industries or regions, which may
increase the volatility of an investment in them. In addition, the securities
issued by a SPAC, which may be traded in the over-the-counter market, may become
illiquid and/or may be subject to restrictions on resale. Other risks of
investing in SPACs include that a significant portion of the monies raised by
the SPAC may be expended during the search for a target transaction; an
attractive transaction may not be identified at all (or any requisite approvals
may not be obtained) and the SPAC may be required to return any remaining monies
to shareholders; a transaction once identified or effected may prove
unsuccessful and an investment in the SPAC may lose value; the warrants or other
rights with respect to the SPAC held by the Fund may expire worthless or may be
repurchased or retired by the SPAC at an unfavorable price; and an investment in
a SPAC may be diluted by additional later offerings of interests in the SPAC or
by other investors exercising existing rights to purchase shares of the SPAC.
Industry
Concentration Risk.
The Fund’s assets may be concentrated in an industry or group of industries. As
such, the Fund may be subject to greater risks and market fluctuations than a
fund whose portfolio has exposure to a broader range of industries. The Fund may
be susceptible to financial, economic, political or market events, as well as
government regulation, impacting a particular
industry.
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 Year
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| Best
Quarter: |
8.49% |
4Q 2022 |
| Worst
Quarter: |
-16.68% |
2Q
2022 |
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Past
One
Year |
Since
Inception (11/30/21) |
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VanEck Future of Food ETF (return
before taxes) |
-26.14% |
-23.31% |
|
|
VanEck Future of Food ETF (return after
taxes on distributions) |
-26.39% |
-23.54% |
|
|
VanEck Future of Food ETF (return after
taxes on distributions and sale of Fund Shares) |
-15.30% |
-17.71% |
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MSCI ACWI Net TR Index (reflects no deduction for
fees, expenses or taxes) |
-18.36% |
-14.00% |
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PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily and jointly responsible for the
day-to-day management of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Shawn
Reynolds |
Portfolio
Manager |
November
2021 |
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Ammar
James |
Deputy
Portfolio Manager |
November
2021 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Gold Miners ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the NYSE®
Arca Gold Miners Index®
(the “Gold Miners Index” or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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Other
Expenses |
0.01 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.51 |
% |
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Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.51 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.53% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$52 |
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3 |
$164 |
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|
5 |
$285 |
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|
10 |
$640 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
17% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in common stocks and depositary receipts of
companies involved in the gold mining industry. Such companies may include
small- and medium-capitalization companies and foreign issuers. The Gold Miners
Index is a modified market-capitalization weighted index primarily comprised of
publicly traded companies involved in the mining for gold and silver. The weight
of companies whose revenues are more significantly exposed to silver mining will
not exceed 20% of the Gold Miners Index at rebalance. As of December 31, 2022,
the Gold Miners Index included 49 securities of companies
with
a market capitalization range of between approximately $614.16 million and
$37.53 billion and a weighted average market capitalization of $16.99 billion.
These amounts are subject to change. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Gold Miners Index by investing in a portfolio
of securities that generally replicates the Gold Miners Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Gold Miners Index and does not seek
temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the Gold Miners Index. The Fund normally
invests at least 80% of its total assets in securities that comprise the Gold
Miners Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Gold Miners Index concentrates in an industry or group of industries. As of
December 31, 2022, the gold mining industry 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.
Gold
and Silver Mining Companies Risk.
The Fund invests in stocks and depositary receipts of U.S. and foreign companies
that are involved in the gold mining and silver mining industries, which are
considered speculative and are affected by a variety of factors. Competitive
pressures may have a significant effect on the financial condition of gold
mining and silver mining companies. Also, gold and silver mining companies are
highly dependent on the price of gold bullion and silver bullion, respectively,
but may also be adversely affected by a variety of worldwide economic, financial
and political factors. The price of gold and silver may fluctuate substantially
over short periods of time so the Fund’s Share price may be more volatile than
other types of investments. Fluctuation in the prices of gold and silver may be
due to a number of factors, including changes in inflation, changes in currency
exchange rates and changes in industrial and commercial demand for metals
(including fabricator demand). Additionally, increased environmental or labor
costs may depress the value of metal investments.
Special
Risk Considerations of Investing in Canadian Issuers. Investments
in securities of Canadian issuers, including issuers located outside of Canada
that generate significant revenue from Canada, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Canadian economy is very dependent on the demand for, and supply
and price of, natural resources. The Canadian market is relatively concentrated
in issuers involved in the production and distribution of natural resources.
There is a risk that any changes in natural resources sectors could have an
adverse impact on the Canadian economy. Additionally, the Canadian economy is
heavily dependent on relationships with certain key trading partners, including
the United States, countries in the European Union and China. Because the United
States is Canada’s largest trading partner and foreign investor, the Canadian
economy is dependent on and may be significantly affected by the U.S. economy.
Reduction in spending on Canadian products and services or changes in the U.S.
economy may adversely impact the Canadian economy. Trade agreements may further
increase Canada’s dependency on the U.S. economy, and uncertainty as to the
future of such trade agreements may cause a decline in the value of the Fund’s
Shares. Past periodic demands by the Province of Quebec for sovereignty have
significantly affected equity valuations and foreign currency movements in the
Canadian market and such demands may have this effect in the future. In
addition, certain sectors of Canada’s economy may be subject to foreign
ownership limitations. This may negatively impact the Fund’s ability to
invest in Canadian issuers and to pursue its investment objective.
Special
Risk Considerations of Investing in Australian Issuers. Investments
in securities of Australian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also dependent on trading with key trading partners.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United
Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the
date
that the income is earned by the Fund at the foreign exchange rate in effect on
that date. Therefore, if the value of the respective emerging market country’s
currency falls relative to the U.S. dollar between the earning of the income and
the time at which the Fund converts the relevant emerging market country’s
currency to U.S. dollars, the Fund may be required to liquidate certain
positions in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements under the Internal Revenue Code.
The liquidation of investments, if required, could be at disadvantageous prices
or otherwise have an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the
Index
provider’s or others’ errors will be kept by the Fund and its shareholders and
any losses or costs resulting from the Index provider’s or others’ errors will
be borne by the Fund and its shareholders. Additionally, when the Index is
rebalanced and the Fund in turn rebalances its portfolio to attempt to increase
the correlation between the Fund’s portfolio and the Index, any transaction
costs and market exposure arising from such portfolio rebalancing will be borne
directly by the Fund and its shareholders. Apart from scheduled rebalances, the
Index provider or its agents may carry out additional ad hoc rebalances to the
Index. Therefore, errors and additional ad hoc rebalances carried out by the
Index provider or its agents to the Index may increase the costs to and the
tracking error risk of the Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or
reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
56.29% |
2Q 2020 |
| Worst
Quarter: |
-35.32% |
2Q
2013 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Gold Miners ETF (return before
taxes) |
-8.87% |
5.34% |
-3.87% |
|
|
VanEck Gold Miners ETF (return after
taxes on distributions) |
-9.09% |
5.18% |
-4.03% |
|
|
VanEck Gold Miners ETF (return after
taxes on distributions
and sale of Fund
Shares) |
-4.87% |
4.26% |
-2.80% |
|
|
NYSE Arca Gold Miners Index (reflects
no deduction for fees,
expenses or taxes, except withholding
taxes) |
-8.63% |
5.68% |
-3.52% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
May
2006 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
INVESTMENT OBJECTIVE
VanEck®
Green Metals ETF (the
“Fund”) seeks to track as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Global
Clean-Tech Metals Index (the “Clean-Tech Metals Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.59 |
% |
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Other
Expenses(a) |
0.04 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.63 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least May 1,
2024.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR |
EXPENSES |
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1 |
$64 |
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3 |
$202 |
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5 |
$351 |
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10 |
$786 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
32% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities of Green
Metals Companies. The Clean-Tech Metals Index is a global index that tracks the
performance of Green Metals Companies. “Green Metals Companies” are companies
involved in the production, refining, processing and recycling of green metals.
“Green metals” are metals, including certain rare earth and strategic metals,
used in the applications, products and processes that enable the energy
transition from fossil fuels to cleaner energy sources and technologies. To be
initially eligible for the Clean-Tech Metals Index, companies must generate at
least 50% of their revenues from green metals or have mining projects with the
potential to generate at least 50% of their revenues from green metals when
developed.
The
Clean-Tech Metals Index may include small- and medium-capitalization companies,
foreign and emerging market issuers and A-shares issued by companies trading via
the Shanghai-Hong Kong Stock Connect program and the Shenzhen-Hong Kong Stock
Connect program (together, “Stock Connect”). As of December 31, 2022, the
Clean-Tech Metals Index included 49 securities of
companies
with a market capitalization range of between approximately $1.3 billion and
$85.4 billion and a weighted average market capitalization of $25.6 billion.
These amounts are subject to change. The Clean-Tech Metals Index is published by
MarketVector IndexesTM
GmbH (the “Index Provider” or “MarketVector”), which is a wholly owned
subsidiary of the Adviser. The Clean-Tech Metals Index is reconstituted and
rebalanced quarterly. The Fund’s 80% investment policy is non-fundamental and
may be changed without shareholder approval upon 60 days’ prior written notice
to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Clean-Tech Metals Index by investing in a
portfolio of securities that generally replicates the Clean-Tech Metals Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Clean-Tech Metals Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to track the Clean-Tech Metals Index.
The Fund is classified as a non-diversified
fund under the Investment Company Act of 1940, as amended (the “Investment
Company Act of 1940”), and therefore, may invest a greater percentage of its
assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Clean-Tech Metals Index concentrates in an industry or group of industries.
As of December 31, 2022, each of the metals & mining and chemicals
industries represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
“Green”
Metals Risk. Investments
in companies involved in the production, refining, processing and recycling of
green metals used to facilitate the energy transition from fossil fuels to
cleaner energy sources and technologies are subject to a variety of risks. Under
certain market conditions, the Fund may underperform as compared to funds that
invest in a broader range of investments. There may be significant differences
in interpretations of what is considered a “green” metal and the definition used
by the Index Provider may differ with those used by other investors, investment
advisers or index providers. In addition, some companies that rely on green
metals may be dependent on government tax incentives and subsidies and on
political support for certain environmental technologies and companies. The
“green” sector may also have challenges such as a limited number of issuers and
limited liquidity in the market. Additionally, there may be a limited supply of
companies involved in green metals, which may adversely affect the
Fund.
Clean
Energy Companies Risk. Companies
involved with green metals may be dependent upon renewable and alternative
energy companies. Renewable and alternative energy companies can be
significantly affected by the following factors: obsolescence, short product
cycles, stricter government regulations and enforcement policies, fluctuations
in energy prices and supply and demand of alternative energy fuels, energy
conservation, the success of exploration projects, the supply of and demand for
oil and gas, world events and economic conditions. In addition, shares of clean
energy companies have been significantly more volatile than shares of companies
operating in other more established industries and the securities included in
the Fund may be subject to sharp price declines. This industry is relatively
nascent and under-researched in comparison to more established and mature
sectors, and should therefore be regarded as having greater investment
risk.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Mining
Industry Risk.
Investments in mining companies may be speculative. Competitive pressures may
have a significant effect on the financial condition of such companies. Mining
companies are highly dependent on the price of the underlying metal or element.
These prices may fluctuate substantially over short periods of time so the
Fund’s Share price may be more volatile than other types of investments. In
particular, a drop in the price of gold, silver bullion, steel or rare
earth/strategic metals would particularly adversely affect the profitability of
small- and medium-capitalization mining companies and their ability to secure
financing. Furthermore, companies that are only in the exploration stage are
typically unable to adopt specific strategies for controlling the impact of such
price changes. In addition, many early stage miners operate at a loss and are
dependent on securing equity and/or debt financing, which might be more
difficult to secure for an early stage mining company than for a more
established counterpart.
Regulatory
Action and Changes in Governments Risk.
The producing, refining and recycling of rare earth/strategic metals will be
significantly affected by regulatory action and changes in governments. Actions
by countries essential to the producing, refining and recycling of rare
earth/strategic metals to limit exports could have a significant adverse effect
on industries around the globe and on the values of the businesses in which the
Fund invests.
Rare
Earth and Strategic Metals Companies Risk. Rare
earth/strategic metals are industrial metals that are typically mined as
by-products or secondary metals in operations focused on precious metals and
base metals. Compared to base metals, they have more specialized uses and are
often more difficult to extract. Rare earth metals (or rare earth elements), a
subset of strategic metals, are a collection of chemical elements that are
crucial to many of the world’s most advanced technologies. Consequently, the
demand for strategic metals has strained supply, which has the potential to
result in a shortage of such materials which could adversely affect the
companies in the Fund’s portfolio. Companies involved in the various activities
that are related to the producing, refining and recycling of rare
earth/strategic metals tend to be small-, medium- and micro-capitalization
companies with volatile share prices, are highly dependent on the price of rare
earth/strategic metals, which may fluctuate substantially over short periods of
time. The value of such companies may be significantly affected by events
relating to international, national and local political and economic
developments, energy conservation efforts, the success of exploration projects,
commodity prices, tax and other government regulations, depletion of resources,
and mandated expenditures for safety and pollution control devices. The
producing, refining and recycling of rare earth/strategic metals can be capital
intensive and, if companies involved in such activities are not managed well,
the share prices of such companies could decline even as prices for the
underlying rare earth/strategic metals are rising. In addition, companies
involved in the various activities that are related to the producing, refining
and recycling of rare earth/strategic metals may be at risk for environmental
damage claims.
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 Australian Issuers. Investments
in securities of Australian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also dependent on trading with key trading partners.
Special
Risk Considerations of Investing in 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 African Issuers. Investments
in securities of African issuers, including issuers located outside of Africa
that generate significant revenues from Africa, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in
international trade, confiscatory taxation, political instability, including
authoritarian and/or military involvement in governmental decision making, armed
conflict, terrorism, infectious disease outbreaks, strained international
relations related to border disputes, the impact on the economy as a result of
civil war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest and, in certain countries, genocidal warfare. Unanticipated
political
or social developments may result in sudden and significant investment losses.
Additionally, Africa is located in a part of the world that has historically
been prone to natural disasters, such as droughts, and is economically sensitive
to environmental events.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than those markets located in more
developed countries or geographic regions. A subset of African emerging market
countries are considered to be “frontier markets.” Frontier market countries
generally have smaller economies and less developed capital markets than
traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier market countries. As a
result, securities markets in Africa are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations, uncertainty regarding the
existence of trading markets, governmental control and heavy regulation of labor
and industry. There may also be a high concentration of trading volume in a
small number of issuers, investors and financial intermediaries representing a
limited number of sectors or industries. Moreover, trading on securities markets
may be suspended altogether.
Certain
economies in African countries depend to a significant degree upon exports of
primary commodities such as agricultural products, gold, silver, copper,
diamonds and oil. These economies therefore are vulnerable to changes in
commodity prices, which in turn may be affected by a variety of
factors.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. Moreover, certain countries in Africa may require
governmental approval or special licenses prior to investments by foreign
investors and may limit the amount of investments by foreign investors in a
particular industry and/or issuer and may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domiciliaries of those countries
and/or impose additional taxes on foreign investors. These factors, among
others, make investing in issuers located or operating in countries in Africa
significantly riskier than investing in issuers located or operating in more
developed countries, and any one of them could cause a decline in the value of
the Fund’s Shares.
There
may be a risk of loss due to the imposition of restrictions on repatriation of
capital invested. In addition, certain African countries have currencies pegged
to the U.S. dollar. If such currency pegs are abandoned, such abandonment could
cause sudden and significant currency adjustments, which could impact the Fund’s
investment returns in those countries. There may be limitations or delays in the
convertibility or repatriation of certain African currencies, which would
adversely affect the U.S. dollar value and/or liquidity of the Fund’s
investments denominated in such African currencies, may impair the Fund’s
ability to achieve its investment objective and/or may impede the Fund’s ability
to satisfy redemption requests in a timely manner. For these or other reasons,
the Fund could seek to suspend redemptions of Creation Units, including in the
event that an emergency exists in which it is not reasonably practicable for the
Fund to dispose of its securities or to determine its net asset value. The Fund
could also, among other things, limit or suspend creations of Creation Units.
During the period that creations or redemptions are affected, the Fund’s shares
could trade at a significant premium or discount to their net asset value. In
the case of a period during which creations are suspended, the Fund could
experience substantial redemptions, which may exacerbate the discount to net
asset value at which the Fund’s shares trade, cause the Fund to experience
increased transaction costs, and cause the Fund to make greater taxable
distributions to shareholders of the Fund. When the Fund holds illiquid
investments, its portfolio may be harder to value.
Special
Risk Considerations of Investing in South African Issuers.
Investments in securities of South African issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. South Africa’s economy exhibits characteristics of both a developed
country and a developing country and has historically experienced extremely
uneven distribution of wealth and income and high rates of unemployment. This
may cause civil and social unrest, which could adversely impact the South
African economy. Although economic reforms such as privatization have been
enacted to promote growth and foreign investments, there can be no assurance
that these programs will achieve the desired results. The securities markets in
South Africa are subject to greater risks associated with market volatility,
lower market capitalization, lower trading volume, illiquidity, inflation,
greater price fluctuations, uncertainty regarding the existence of trading
markets, governmental control and heavy regulation of labor and industry. In
addition, South Africa’s currency has at times been at risk of devaluation due
to inadequate foreign currency reserve. While economic reforms have been enacted
in recent periods, there can be no assurance that these reforms will achieve the
intended results. Furthermore, adverse social and economic conditions in a
neighboring country may have a significant adverse effect on South Africa.
Additionally, the agriculture and mining sectors of South Africa’s economy
account for a large portion of its exports, and thus the South African economy
is susceptible to fluctuations in these commodity markets. South Africa is
located in a part of the world that has historically been prone to natural
disasters, such as droughts, and is economically sensitive to environmental
events. Any such event may adversely impact South Africa’s economy or business
operations of companies in South Africa, causing an adverse impact on the value
of the Fund.
Stock
Connect Risk. The
Fund may invest in A-shares listed and traded on the Shanghai Stock Exchange and
the Shenzhen Stock Exchange through Stock Connect, or on such other stock
exchanges that participate in Stock Connect from time to time or in the future.
Trading through Stock Connect is subject to a number of restrictions that may
affect the Fund’s investments and
returns.
For example, trading through Stock Connect is subject to daily quotas that limit
the maximum daily net purchases on any particular day, which may restrict or
preclude the Fund’s ability to invest in Stock Connect A-shares. In addition,
investments made through Stock Connect are subject to trading, clearance and
settlement procedures that are relatively untested in the PRC, which could pose
risks to the Fund. Furthermore, securities purchased via Stock Connect will be
held via a book entry omnibus account in the name of HKSCC, Hong Kong’s clearing
entity, at the CSDCC. The Fund’s ownership interest in Stock Connect securities
will not be reflected directly in book entry with CSDCC and will instead only be
reflected on the books of its Hong Kong sub-custodian. The Fund may therefore
depend on HKSCC’s ability or willingness as record-holder of Stock Connect
securities to enforce the Fund’s shareholder rights. PRC law did not
historically recognize the concept of beneficial ownership; while PRC
regulations and the Hong Kong Stock Exchange have issued clarifications and
guidance supporting the concept of beneficial ownership via Stock Connect, the
interpretation of beneficial ownership in the PRC by regulators and courts may
continue to evolve. Moreover, Stock Connect A-shares generally may not be sold,
purchased or otherwise transferred other than through Stock Connect in
accordance with applicable rules.
A
primary feature of Stock Connect is the application of the home market’s laws
and rules applicable to investors in A-shares. Therefore, the Fund’s investments
in Stock Connect A-shares are generally subject to PRC securities regulations
and listing rules, among other restrictions. The Fund will not benefit from
access to Hong Kong investor compensation funds, which are set up to protect
against defaults of trades, when investing through Stock Connect. Stock Connect
is only available on days when markets in both the PRC and Hong Kong are open,
which may limit the Fund’s ability to trade when it would be otherwise
attractive to do so. Since the inception of Stock Connect, foreign investors
(including the Fund) investing in A-shares through Stock Connect have been
temporarily exempt from the PRC corporate income tax and value-added tax on the
gains on disposal of such A-shares. Dividends are subject to PRC corporate
income tax on a withholding basis at 10%, unless reduced under a double tax
treaty with China upon application to and obtaining approval from the competent
tax authority. Aside from these temporary measures, uncertainties in permanent
PRC tax rules governing taxation of income and gains from investments in Stock
Connect A-shares could result in unexpected tax liabilities for the
Fund.
The
Stock Connect program is a relatively new program and may be subject to further
interpretation and guidance. There can be no assurance as to the program’s
continued existence or whether future developments regarding the program may
restrict or adversely affect the Fund’s investments or returns. In addition, the
application and interpretation of the laws and regulations of Hong Kong and the
PRC, and the rules, policies or guidelines published or applied by relevant
regulators and exchanges in respect of the Stock Connect program are uncertain,
and they may have a detrimental effect on the Fund’s investments and
returns.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at
which
the Fund is able to invest in emerging market countries, the purchase and sale
prices for such securities and the timing of purchases and sales. Emerging
markets can experience high rates of inflation, deflation and currency
devaluation. The prices of certain securities listed on securities markets in
emerging market countries have been subject to sharp fluctuations and sudden
declines, and no assurance can be given as to the future performance of listed
securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the
Fund
may not be able to buy or sell securities or receive full value for such
securities. Moreover, certain emerging market countries may require governmental
approval or special licenses prior to investments by foreign investors and may
limit the amount of investments by foreign investors in a particular industry
and/or issuer; may limit such foreign investment to a certain class of
securities of an issuer that may have less advantageous rights than the classes
available for purchase by domiciliaries of such emerging market countries;
and/or may impose additional taxes on foreign investors. A delay in obtaining a
required government approval or a license would delay investments in those
emerging market countries, and, as a result, the Fund may not be able to invest
in certain securities while approval is pending. The government of certain
emerging market countries may also withdraw or decline to renew a license that
enables the Fund to invest in such country. These factors make investing in
issuers located or operating in emerging market countries significantly riskier
than investing in issuers located or operating in more developed countries, and
any one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there
may
be legal restrictions or limitations on the ability of the Fund to recover
assets held in custody by a foreign sub-custodian in the event of the bankruptcy
of the sub-custodian. Because settlement systems in emerging market countries
may be less organized than in other developed markets, there may be a risk that
settlement may be delayed and that cash or securities of the Fund may be in
jeopardy because of failures of or defects in the systems. Under the laws in
many emerging market countries, the Fund may be required to release local shares
before receiving cash payment or may be required to make cash payment prior to
receiving local shares, creating a risk that the Fund may surrender cash or
securities without ever receiving securities or cash from the other party.
Settlement systems in emerging market countries also have a higher risk of
failed trades and back to back settlements may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less
competitive
strength than large-capitalization companies. Returns on investments in
securities of small- and medium-capitalization companies could trail the returns
on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may
be
adversely impacted and may result in additional trading costs and/or increase
the index tracking risk. The Fund may also need to rely on borrowings to meet
redemptions, which may lead to increased expenses. For tax efficiency purposes,
the Fund may sell certain securities, and such sale may cause the Fund to
realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of investments.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to those types of
securities. The securities of many or all of the companies in
the same sector or industry may decline in
value due to developments adversely affecting such sector or industry. By
concentrating its assets in a particular sector or sectors or industry or group
of industries, the Fund is subject to the risk that economic, political or other
conditions that have a negative effect on those sectors and/or industries may
negatively impact the Fund to a greater extent than if the Fund’s assets were
invested in a wider variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar Year
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| Best
Quarter: |
10.55% |
4Q 2022 |
| Worst
Quarter: |
-20.98% |
2Q
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.
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Past
One
Year |
Since
Inception (11/09/21) |
|
|
VanEck Green Metals ETF (return before
taxes) |
-16.99% |
-14.58% |
|
|
VanEck Green Metals ETF (return after
taxes on distributions) |
-17.33% |
-14.89% |
|
|
VanEck Green Metals ETF (return after
taxes on distributions and sale of Fund Shares) |
-9.55% |
-10.94% |
|
|
MVIS®
Global
Clean-Tech Metals Index (reflects no deduction for
fees, expenses or taxes) |
-16.24% |
-14.11% |
|
|
S&P
500®
Index (reflects no deduction for fees, expenses or
taxes) |
-18.11% |
-14.61% |
|
|
|
|
|
|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
|
Peter
H. Liao |
Portfolio
Manager |
November
2021 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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VANECK®
JUNIOR GOLD MINERS ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Junior Gold Miners ETF
(the “Fund”) seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the MVIS®
Global Junior Gold Miners Index (the “Junior Gold Miners Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
|
|
Other
Expenses |
0.02 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
0.52 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.52 |
% |
|
|
|
|
|
(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 0.56% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR |
EXPENSES |
|
|
1 |
$53 |
|
|
|
3 |
$167 |
|
|
|
5 |
$291 |
|
|
|
10 |
$653 |
|
|
|
|
|
|
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
27% of the average value of its portfolio. In
addition, as a result of certain rule changes relating to the Fund’s benchmark
index, the Fund may experience additional portfolio turnover, which may cause
the Fund to incur additional transaction costs and may result in higher taxes
when Fund Shares are held in a taxable account.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in securities that comprise the Fund’s benchmark
index. The Fund will normally invest at least 80% of its total assets in
companies that are involved in the gold mining industry (the “80% policy”). To
be initially eligible for the Junior Gold Miners Index, companies must generate
at least 50% of their revenues from gold and/or silver
mining/royalties/streaming or have mining projects with the potential to
generate at least 50% of their revenues from gold and/or
silver
when developed. Such companies may include small- and medium-capitalization
companies and foreign issuers. As of December 31, 2022, the Junior Gold Miners
Index included 93 securities of companies with a market capitalization range of
between approximately $82.5 million and $5.3 billion and a weighted average
market capitalization of $2.5 billion. These amounts are subject to change. The
Fund’s 80% 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 Junior Gold Miners Index by investing in a
portfolio of securities that generally replicates the Junior Gold Miners Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Junior Gold Miners Index
and does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Junior Gold Miners Index. As of
December 31, 2022, approximately 93.86% of the Junior Gold Miners Index was
comprised of securities of gold mining companies.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Junior Gold Miners Index concentrates in an industry or group of industries.
As of December 31, 2022, each of the gold mining and silver mining industries
represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Gold
and Silver Mining Companies Risk.
The Fund invests in stocks and depositary receipts of U.S. and foreign companies
that are involved in the gold mining and silver mining industries, which are
considered speculative and are affected by a variety of factors. Competitive
pressures may have a significant effect on the financial condition of gold
mining and silver mining companies. Also, gold and silver mining companies are
highly dependent on the price of gold bullion and silver bullion, respectively,
but may also be adversely affected by a variety of worldwide economic, financial
and political factors. The price of gold and silver may fluctuate substantially
over short periods of time so the Fund’s Share price may be more volatile than
other types of investments. Fluctuation in the prices of gold and silver may be
due to a number of factors, including changes in inflation, changes in currency
exchange rates and changes in industrial and commercial demand for metals
(including fabricator demand). Additionally, increased environmental or labor
costs may depress the value of metal investments.
Special
Risk Considerations of Investing in Australian Issuers. Investments
in securities of Australian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also dependent on trading with key trading partners.
Special
Risk Considerations of Investing in Canadian Issuers. Investments
in securities of Canadian issuers, including issuers located outside of Canada
that generate significant revenue from Canada, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Canadian economy is very dependent on the demand for, and supply
and price of, natural resources. The Canadian market is relatively concentrated
in issuers involved in the production and distribution of natural resources.
There is a risk that any changes in natural resources sectors could have an
adverse impact on the Canadian economy. Additionally, the Canadian economy is
heavily dependent on relationships with certain key trading partners, including
the United States, countries in the European Union and China. Because the United
States is Canada’s largest trading partner and foreign investor, the Canadian
economy is dependent on and may be significantly affected by the U.S. economy.
Reduction in spending on Canadian products and services or changes in the U.S.
economy may adversely impact the Canadian economy. Trade agreements may further
increase Canada’s dependency on the U.S. economy, and uncertainty as to the
future of such trade agreements may cause a decline in the value of the Fund’s
Shares. Past periodic demands by the Province of Quebec for sovereignty have
significantly affected equity valuations and foreign currency movements in the
Canadian market and such demands may have this effect in the future. In
addition, certain sectors of Canada’s economy may be subject to foreign
ownership limitations. This may negatively impact the Fund’s ability to
invest in Canadian issuers and to pursue its investment objective.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign
market trading hours, clearance and settlement procedures, and holiday schedules
may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign
investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite
onerous with the particular requirements varying widely by country. In addition,
in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Micro-Capitalization
Companies Risk.
Micro-capitalization companies are subject to substantially greater risks of
loss and price fluctuations because their earnings and revenues tend to be less
predictable (and some companies may be experiencing significant losses), and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market capitalizations. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell those securities.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume reinvestment of
dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
72.29% |
2Q 2020 |
| Worst
Quarter: |
-45.36% |
2Q
2013 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Junior Gold Miners ETF (return
before taxes) |
-14.48% |
1.77% |
-6.61% |
|
|
VanEck Junior Gold Miners ETF (return
after taxes on distributions) |
-14.59% |
1.50% |
-6.97% |
|
|
VanEck Junior Gold Miners ETF (return
after taxes on distributions and sale of Fund
Shares) |
-8.50% |
1.35% |
-4.73% |
|
|
MVIS®
Global Junior Gold Miners Index (reflects no deduction for fees, expenses
or taxes, except withholding taxes) |
-14.27% |
2.27% |
-6.33% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
November
2009 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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VANECK®
LOW CARBON ENERGY ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Low Carbon Energy ETF
(the “Fund”) seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the MVIS®
Global Low Carbon Energy Index (the “Low Carbon Energy Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
|
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Other
Expenses |
0.11 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
0.61 |
% |
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|
Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
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|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.61 |
% |
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(a) Van
Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay
Fund expenses to the extent necessary to prevent the operating expenses of the
Fund (excluding acquired fund fees and expenses, interest expense, trading
expenses, taxes and extraordinary expenses) from exceeding 0.62% of the Fund’s
average daily net assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$62 |
|
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|
3 |
$195 |
|
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|
5 |
$340 |
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|
10 |
$762 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
16% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in stocks of low carbon energy companies. Such
companies may include small- and medium-capitalization companies and foreign
issuers. “Low carbon energy companies” refers to companies primarily engaged in
renewable energy, including renewable energy production, alternative fuels,
electric vehicles, and related technologies and building materials (such as
advanced batteries). Renewable energy refers to the generation of power through
environmentally friendly sources that can replace or supplement traditional
fossil-fuel sources and that may reduce the global carbon footprint. It
includes
power derived principally from bio-fuels (such as ethanol), wind, solar, hydro,
hydrogen, and geothermal sources and also includes lithium-ion batteries, fuel
cells, and the various technologies that support the production, use and storage
of these sources. As of December 31, 2022, the Low Carbon Energy Index included
70 securities of companies with a market capitalization range of between
approximately $1 billion and $388.9 billion and a weighted average market
capitalization of $59.9 billion. These amounts are subject to change. The Fund’s
80% investment policy is non-fundamental and may be changed without shareholder
approval upon 60 days’ prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Low Carbon Energy Index by investing in a
portfolio of securities that generally replicates the Low Carbon Energy Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Low Carbon Energy Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Low Carbon Energy Index. The
Fund normally invests at least 80% of its total assets in securities that
comprise the Low Carbon Energy Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Low Carbon Energy Index concentrates in an industry or group of industries.
As of December 31, 2022, each of the consumer discretionary, industrials,
information technology 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.
Low
Carbon Energy Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of low carbon (i.e.,
renewable) energy companies. Low carbon energy refers to the generation of power
through environmentally friendly sources that can replace or supplement
traditional fossil-fuel sources and that may reduce the global carbon footprint.
It includes power derived principally from bio fuels (such as ethanol), wind,
solar, hydro and geothermal sources and also includes the various technologies
that support the production, use and storage of these sources.
Renewable
energy companies may be significantly affected by the competition from new and
existing market entrants, obsolescence of technology, short product cycles,
production spending, varying prices and profits, commodity price volatility,
changes in exchange rates, imposition of import controls, depletion of
resources, seasonal weather conditions, technological developments and general
economic conditions, market sentiment, fluctuations in energy prices and supply
and demand of renewable energy fuels, fluctuations in the price of oil and gas,
energy conservation efforts, the success of exploration projects, tax and other
government regulations (such as incentives and subsidies) and international
political events. Additionally, adverse weather conditions may cause
fluctuations in renewable energy generation and adversely affect the cash flows
associated with these assets.
Further,
renewable energy companies may be subject to risks associated with hazardous
materials and can be significantly and adversely affected by legislation
resulting in more strict government regulations and enforcement policies and
specific expenditures for environmental cleanup efforts. There are also risks
associated with a failure to enforce environmental law. If the government
reduces environmental regulations or their enforcement, companies that produce
products designed to provide a clean environment are less likely to prosper.
Renewable energy companies may be more volatile than companies operating in more
established industries. Certain valuation methods used to value renewable energy
companies have not been in widespread use for a significant period of time. As a
result, the use of these valuation methods may serve to further increase the
volatility of certain renewable and transitional energy company share prices. If
government subsidies and incentives for renewable energy sources are reduced or
eliminated, the demand for renewable energy may decline and cause corresponding
declines in the revenues and profits of renewable energy companies. In addition,
changes in U.S., European and other governments’ policies towards renewable
energy technology also may have an adverse effect on the Fund’s performance.
Furthermore, the Fund may invest in the shares of companies with a limited
operating history, some of which may never have operated profitably. Investment
in young companies with a short operating history is generally riskier than
investing in companies with a longer operating history. The Fund will carry
greater risk and may be more volatile than a portfolio composed of securities
issued by companies operating in a wide variety of different or more established
industries.
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.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
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.
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
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between
neighboring
countries. Any of these factors, including an outbreak of hostilities could
negatively impact the Fund’s returns. Limited political and democratic freedoms
in emerging market countries might cause significant social unrest. These
factors may have a significant adverse effect on an emerging market country’s
economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in
emerging
market countries may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small
number
of investors. In addition, because certain emerging market countries’ trading
exchanges on which the Fund’s portfolio securities may trade are open when the
relevant exchanges are closed, the Fund may be subject to heightened risk
associated with market movements. Trading volume may be lower on certain
emerging market countries’ trading exchanges than on more developed securities
markets and securities may be generally less liquid. The infrastructure for
clearing, settlement and registration on the primary and secondary markets of
certain emerging market countries are less developed than in certain other
markets and under certain circumstances this may result in the Fund experiencing
delays in settling and/or registering transactions in the markets in which it
invests, particularly if the growth of foreign and domestic investment in
certain emerging market countries places an undue burden on such investment
infrastructure. Such delays could affect the speed with which the Fund can
transmit redemption proceeds and may inhibit the initiation and realization of
investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares
or
Shares may trade like closed-end funds at a discount (or premium) to net asset
value and possibly face trading halts and/or de-listing. This can be reflected
as a spread between the bid-ask prices for the Fund. The Authorized Participant
concentration risk may be heightened in cases where Authorized Participants have
limited or diminished access to the capital required to post collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows shows
how the Fund performed for the calendar years shown. The table below the bar
chart shows the Fund’s average annual returns (before and after taxes).
The bar chart and table provide
an indication of the risks of investing in the Fund by comparing the Fund’s
performance from year to year and by showing how the Fund’s average annual
returns for the one year, five year, ten year and/or since inception periods, as
applicable, compared with the Fund’s benchmark index and a broad
measure of market
performance. Prior to April 26, 2021, the
Fund sought to replicate as closely as possible, before fees and expenses, the
price and yield performance of the Ardour Global
IndexSM (Extra Liquid) (the “Prior Index”).
Therefore, performance information prior to April 26, 2021 reflects the
performance of the Fund tracking the Prior Index. All returns
assume reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
50.97% |
4Q 2020 |
| Worst
Quarter: |
-20.43% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Low Carbon Energy ETF (return
before taxes) |
-29.52% |
13.31% |
13.67% |
|
|
VanEck Low Carbon Energy ETF (return
after taxes on distributions) |
-29.66% |
13.21% |
13.45% |
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|
VanEck Low Carbon Energy ETF (return
after taxes on distributions and sale of Fund
Shares) |
-17.24% |
10.72% |
11.47% |
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|
MVIS®
Global Low Carbon Energy TR Index (reflects no deduction for fees,
expenses or taxes, except withholding
taxes)* |
-29.57% |
13.93% |
13.98% |
|
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S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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*Prior to April 26, 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 April 26, 2021 reflects the performance of the Fund seeking
to replicate the Prior Index. Prior to April 26, 2021, index data reflects that
of the Prior Index. From April 26, 2021, the index data reflects that of the
MVIS Global Low Carbon Energy Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
May
2007 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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VANECK®
NATURAL RESOURCES ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Natural Resources ETF
(the “Fund”) seeks to replicate as closely as possible, before fees and
expenses, the price and yield performance of the VanEck®
Natural Resources Index (the “Natural Resources Index” or the
“Index”).
FUND FEES AND EXPENSES
The following tables describe
the fees and expenses that you may pay if you buy, hold and sell shares of the
Fund (“Shares”). You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the tables and examples below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.49 |
% |
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Other
Expenses(a) |
0.01 |
% |
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Total
Annual Fund Operating Expenses(a) |
0.50 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least May 1,
2024.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR |
EXPENSES |
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1 |
$51 |
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3 |
$160 |
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|
5 |
$280 |
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|
10 |
$628 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
37% 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 Natural Resources Index is comprised of publicly traded companies
engaged (derive greater than 50% of revenues from applicable sources) in the
production and distribution of commodities and commodity-related products and
services in the following sectors: 1) Agriculture; 2) Alternatives (Water &
Alternative Energy); 3) Base and Industrial Metals; 4) Energy; 5) Forest
Products; and 6) Precious Metals. Such companies may include small- and
medium-capitalization companies and foreign issuers. As of December 31, 2022,
the Natural Resources Index included 415 securities of companies with a market
capitalization range of between approximately $389.43 million and $454.25
billion and a weighted average market capitalization of $88.28 billion. These
amounts are subject to change. The Fund’s 80% investment policy is
non-fundamental and may be change 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 Natural Resources Index by investing in a
portfolio of securities that generally replicates the Natural Resources Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Natural Resources Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Natural Resources
Index.
The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Natural Resources Index concentrates in an industry or group of industries.
As of December 31, 2022, each of the basic materials, energy and industrials
sectors represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Natural
Resources Companies Risk.
Investments in natural resources and natural resources companies, which include
companies engaged in agriculture, alternatives (e.g.,
water and alternative energy), base and industrial metals, energy, forest
products and precious metals, can be significantly affected by events relating
to these industries, including international political and economic
developments, embargoes, tariffs, inflation, weather and natural disasters,
livestock diseases, limits on exploration, rapid changes in the supply of and
demand for natural resources and other factors. The Fund’s portfolio securities
may experience substantial price fluctuations as a result of these factors, and
may move independently of the trends of other operating companies. Companies
engaged in these industries may be adversely affected by changes in government
policies and regulations, technological advances and/or obsolescence,
environmental damage claims, energy conservation efforts, the success of
exploration projects, limitations on the liquidity of certain natural resources
and commodities and competition from new market entrants. Changes in general
economic conditions, including commodity price volatility, changes in exchange
rates, imposition of import controls, rising interest rates, prices of raw
materials and other commodities, depletion of resources and labor relations,
could adversely affect the Fund’s portfolio companies.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide demand, political instability in the regions that the companies
operate, government regulation stipulating rates charged by utilities, interest
rate sensitivity, oil price volatility, energy conservation, environmental
policies, depletion of resources, and the cost of providing the specific utility
services and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy
sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s performance.
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.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less
competitive
strength than large-capitalization companies. Returns on investments in
securities of small- and medium-capitalization companies could trail the returns
on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may
be
adversely impacted and may result in additional trading costs and/or increase
the index tracking risk. The Fund may also need to rely on borrowings to meet
redemptions, which may lead to increased expenses. For tax efficiency purposes,
the Fund may sell certain securities, and such sale may cause the Fund to
realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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|
| Best
Quarter: |
21.95% |
4Q 2020 |
| Worst
Quarter: |
-32.16% |
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.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Natural Resources ETF (return
before taxes) |
7.10% |
8.66% |
5.79% |
|
|
VanEck Natural Resources ETF (return
after taxes on distributions) |
6.29% |
8.07% |
5.20% |
|
|
VanEck Natural Resources ETF (return
after taxes on distributions and sale of Fund
Shares) |
4.78% |
6.81% |
4.52% |
|
|
VanEck®
Natural Resources Index (reflects no deduction for fees, expenses or
taxes, except withholding taxes)* |
7.29% |
8.73% |
5.95% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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*Prior to April 11, 2017,
the Natural Resources Index was named the
RogersTM
– Van Eck Natural Resources Index. Prior to May 1, 2014, the Natural Resources
Index was named the RogersTM
– Van Eck Hard Assets Producers
Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
August
2008 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Oil Refiners ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Global Oil Refiners Index (the “Oil Refiners Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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Other
Expenses |
0.28 |
% |
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|
|
Total
Annual Fund Operating Expenses(a) |
0.78 |
% |
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|
Fee
Waivers and Expense Reimbursement(a) |
-0.17 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.61 |
% |
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|
(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.59% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$62 |
|
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|
3 |
$232 |
|
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|
5 |
$417 |
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|
10 |
$950 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
40% 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 Oil Refiners Index includes equity securities and depositary receipts
of companies in the global oil refining segment. To be initially eligible for
the Oil Refiners Index, companies must generate at least 50% of their revenues
from crude oil refining. Products of these companies may include gasoline,
diesel, jet fuel, fuel oil, naphtha, and other petrochemicals. Companies which
operate in the marketing and distribution of these products may be included in
the Oil Refiners Index if refining is performed in company-owned
refineries.
Such companies may include medium-capitalization companies and foreign and
emerging market issuers. As of December 31, 2022, the Oil Refiners Index
included 25 securities of companies with a market capitalization range of
between approximately $1.8 billion and $208 billion and a weighted average
market capitalization of $35.2 billion. These amounts are subject to change. The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Oil Refiners Index by investing in a portfolio
of securities that generally replicates the Oil Refiners Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Oil Refiners Index and does not seek
temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the Oil Refiners Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Oil Refiners Index concentrates in an industry or group of industries. As of
December 31, 2022, the energy sector represented a significant portion of the
Fund.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Oil
Refining Companies Risk. The
profitability of oil refining companies is related to supply and demand of all
sources of energy. The price of energy, the earnings of oil refining companies,
and the value of such companies’ securities, are subject to significant
volatility. Additionally, the price of oil may experience significant
volatility, which may materially impact oil refining companies. Such companies
are also subject to risks of natural declines in the production of oil and
natural gas fields (which utilize their gathering and processing facilities as a
way to market their production), prolonged declines in the price of natural gas
or crude oil (which curtails drilling activity and therefore production) and
declines in the prices of natural gas liquids and refined petroleum products
(which cause lower processing margins). Changes in commodity prices, exploration
and production spending, interest rates and exchange rates, government
regulation, the imposition of import controls, world events, negative
perception, depletion of resources, development of alternative energy sources,
technological developments, labor relations and general economic conditions, as
well as market, economic and political risks of the countries where oil refining
companies are located or do business, fluctuations caused by events relating to
international politics, including political instability, expropriation, social
unrest and acts of war, acts of terrorism, economic sanctions, energy
conservation, the success of exploration projects and tax and other governmental
regulatory policies. Changes to U.S. trading policies could cause friction with
certain oil-producing countries and between the governments of the United States
and other major exporters of oil to the United States.
Oil
refining companies are also subject to risks related to environmental damage,
injury to persons and loss of life or the destruction of property, any of which
could expose such companies to the risk of litigation, clean-up or other
remedial costs and disruption of operations. Additionally, oil refining
companies are vulnerable to disruptions in operations, including those due to
weather-related events such as hurricanes and transportation-related disruptions
that may affect the flow of oil to the oil refining companies. Oil refining
companies operate in a highly competitive and cyclical industry, with intense
price competition. The operations of oil refineries are subject to stringent and
complex federal, state and local environmental laws and regulations. New and
more stringent environmental and health and safety laws, regulations and permit
requirements or stricter interpretations of current laws or regulations could
impose substantial additional costs on companies in which the Fund invests. On
the other hand, even regulatory changes such as the implementation of policies
with less stringent environmental protection standards and those geared away
from sustainable energy development could lead to fluctuations in supply, demand
and prices of oil and gas. Moreover, failure to comply with any such
requirements could have a material adverse effect on a company, and there can be
no assurance that companies will at all times comply with all applicable
environmental laws, regulations and permit requirements. A significant portion
of an oil refining company’s revenues may depend on a relatively small number of
customers, including governmental entities and utilities.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s
investments.
Certain Asian countries have also developed increasingly strained relationships
with the U.S., and if these relations were to worsen, they could adversely
affect Asian issuers that rely on the U.S. for trade.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Special
Risk Considerations of Investing in Japanese Issuers.
Investments in securities of Japanese issuers, including issuers located outside
of Japan that generate significant revenues from Japan, involve risks and
special considerations not typically associated with investments in the U.S.
securities markets. The Fund’s performance is expected to be closely tied to
social, political, and economic conditions within Japan and to be more volatile
than the performance of more geographically diversified funds. The risks of
investing in the securities of Japanese issuers include lack of natural
resources, fluctuations or shortages in the commodity markets, new trade
regulations, decreasing U.S. imports and changes in the U.S. dollar exchange
rates. Japan is located in a part of the world that has historically been prone
to natural disasters such as earthquakes, volcanoes and tsunamis and is
economically sensitive to environmental events. Any such event could result in a
significant adverse impact on the Japanese economy. In addition, such disasters,
and the resulting damage, could impair the long-term ability of issuers in which
the Fund invests to conduct their businesses in the manner normally
conducted.
Because
the Fund’s assets will be invested primarily in securities of Japanese issuers,
a significant portion of its assets will be denominated in Japanese yen. The
Fund’s exposure to the Japanese yen and changes in value of the Japanese yen
versus the U.S. dollar may result in reduced returns for the Fund. Moreover, the
Fund may incur costs in connection with conversions between U.S. dollars and
Japanese yen.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems.
Additionally,
each of the factors described below could have a negative impact on the Fund’s
performance and increase the volatility of the Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of
resources
in such countries is subject to a high level of government control. Such
countries’ governments may strictly regulate the payment of foreign currency
denominated obligations and set monetary policy. Through their policies, these
governments may provide preferential treatment to particular industries or
companies. The policies set by the government of one of these countries could
have a substantial effect on that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that
currency
to the dealer. The Fund will conduct its foreign currency exchange transactions
either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be
limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
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. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Medium-Capitalization
Companies Risk.
Medium-capitalization companies may be more volatile and more likely than
large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength.
In addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. Returns on
investments in securities of medium-capitalization companies could trail the
returns on investments in securities of large-capitalization
companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs
and/or recognize gains or losses on such sales that the Fund might not have
recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk
may
be heightened in cases where Authorized Participants have limited or diminished
access to the capital required to post collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
29.42% |
4Q 2020 |
| Worst
Quarter: |
-40.19% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Since
Inception (8/18/2015) |
|
|
VanEck Oil Refiners ETF (return before
taxes) |
18.50% |
2.92% |
8.90% |
|
|
VanEck Oil Refiners ETF (return after
taxes on distributions) |
17.98% |
2.55% |
8.47% |
|
|
VanEck Oil Refiners ETF (return after
taxes on distributions and sale
of Fund
Shares) |
11.88% |
2.38% |
7.24% |
|
|
MVIS®
Global Oil Refiners Index (reflects no deduction for fees, expenses or
taxes, except withholding taxes) |
18.62% |
3.02% |
8.96% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
10.61% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
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Peter
H. Liao |
Portfolio
Manager |
August
2015 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Oil Services ETF (the
“Fund”) seeks to replicate as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
US Listed Oil Services 25 Index (the “Oil Services Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.35 |
% |
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Other
Expenses(a) |
0.00 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
0.35 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least May 1,
2024.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR |
EXPENSES |
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1 |
$36 |
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3 |
$113 |
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5 |
$197 |
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10 |
$443 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
17% 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 Oil Services Index includes common
stocks and depositary receipts of U.S. exchange-listed companies in the oil
services segment. Such companies may include small- and medium-capitalization
companies and foreign companies that are listed on a U.S. exchange. To be
initially eligible for inclusion in the Oil Services Index, companies must
generate at least 50% of their revenues from oil services to the upstream oil
sector, which includes companies engaged primarily in oil equipment, oil
services or oil drilling. Of the largest 50 stocks in the oil services sector by
full market capitalization, the top 25 by free-float market capitalization
(e.g.,
includes only shares that are readily available for trading in the market) and
three month average daily trading volume are included in the Oil Services Index.
As of December 31, 2022, the Oil Services Index included 25 securities of
companies with a market capitalization range of between approximately $477
million and $75.8 billion and a weighted average market capitalization of $24.8
billion. These
amounts
are subject to change. The Fund’s 80% investment policy is non-fundamental and
may be changed without shareholder approval upon 60 days’ prior written notice
to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Oil Services Index by investing in a portfolio
of securities that generally replicates the Oil Services Index. Unlike many
investment companies that try to “beat” the performance of a benchmark index,
the Fund does not try to “beat” the Oil Services Index and does not seek
temporary defensive positions that are inconsistent with its investment
objective of seeking to replicate the Oil Services Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Oil Services Index concentrates in an industry or group of industries. As of
December 31, 2022, each of the energy sector, oil and gas drilling sub-industry,
and oil and gas equipment and services sub-industry represented a significant
portion of the Fund.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk.
An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency.
Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Oil
Services Companies Risk. The
profitability of oil services companies is related to worldwide energy prices,
including all sources of energy, and exploration and production costs. The price
of energy, the earnings of oil services companies, and the value of such
companies’ securities are subject to significant volatility. Oil services
companies are also subject to risks of changes in exchange rates and the price
of oil and gas, changes in prices for competitive energy services, changes in
the global supply of and demand for oil and gas, the imposition of import
controls, world events, actions of OPEC, negative perception and publicity,
depletion of resources and general economic conditions, development of
alternative energy sources, energy conservation efforts, technological
developments and labor relations, as well as market, economic, social and
political risks of the countries where oil services companies are located or do
business. Oil services companies operate in a highly competitive and cyclical
industry, with intense price competition.
Oil
services companies are exposed to significant and numerous operating hazards.
Oil services companies can be significantly affected by natural disasters and
adverse weather conditions in the regions in which they operate. The revenues of
oil services companies may be negatively impacted by contract termination and
renegotiation.
Oil
services companies are subject to, and may be adversely affected by, extensive
federal, state, local and foreign laws, rules and regulations. Oil services
companies may also be adversely affected by environmental damage claims and
other types of litigation. Changes to environmental protection laws, including
the implementation of policies with less stringent environmental protection
standards and those geared away from sustainable energy development, could lead
to fluctuations in supply, demand and prices of oil and gas. The international
operations of oil services companies expose them to risks associated with
instability and changes in economic and political conditions, foreign currency
fluctuations, changes in interest rates, changes in foreign regulations and
other risks inherent to international business. Additionally, changes to U.S.
trading policies could cause friction with certain oil producing countries and
between the governments of the United States and other major exporters of oil to
the United States. Some oil services companies are engaged in other lines of
business unrelated to oil services, and they may experience problems with these
lines of business which could adversely affect their operating results. The
operating results of these companies may fluctuate as a result of these
additional risks and events in the other lines of business. In addition, a
company’s ability to engage in new activities may expose it to business risks
with which it has less experience than it has with the business risks associated
with its traditional businesses. Despite a company’s possible success in
traditional oil services activities, there can be no assurance that the other
lines of business in which these companies are engaged will not have an adverse
effect on a company’s business or financial condition.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Energy Sector
Risk. The
Fund may be sensitive to, and its performance may depend to a greater extent on,
the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth,
worldwide
demand, political instability in the regions that the companies operate,
government regulation stipulating rates charged by utilities, interest rate
sensitivity, oil price volatility, energy conservation, environmental policies,
depletion of resources, and the cost of providing the specific utility services
and other factors that they cannot control.
The
energy sector is cyclical and is highly dependent on commodity prices; prices
and supplies of energy may fluctuate significantly over short and long periods
of time due to, among other things, national and international political
changes, OPEC policies, changes in relationships among OPEC members and between
OPEC and oil-importing nations, the regulatory environment, taxation policies,
and the economy of the key energy-consuming countries. Commodity prices have
recently been subject to increased volatility and declines, which may negatively
affect companies in which the Fund invests.
Companies
in the energy sector may be adversely affected by terrorism, natural disasters
or other catastrophes. Companies in the energy sector are at risk of civil
liability from accidents resulting in injury, loss of life or property,
pollution or other environmental damage claims and risk of loss from terrorism
and natural disasters. Disruptions in the oil industry or shifts in fuel
consumption may significantly impact companies in this sector. Significant oil
and gas deposits are located in emerging markets countries where corruption and
security may raise significant risks, in addition to the other risks of
investing in emerging markets.
Companies
in the energy sector may also be adversely affected by changes in exchange
rates, tax treatment, government regulation and intervention, negative
perception, efforts at energy conservation and world events in the regions in
which the companies operate (e.g.,
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital,
military coups, social unrest, violence or labor unrest). Because a significant
portion of revenues of companies in this sector is derived from a relatively
small number of customers that are largely comprised of governmental entities
and utilities, governmental budget constraints may have a significant impact on
the stock prices of companies in this sector. Entities operating in the energy
sector are subject to significant regulation of nearly every aspect of their
operations by federal, state and local governmental agencies. Such regulation
can change rapidly or over time in both scope and intensity. Stricter laws,
regulations or enforcement policies could be enacted in the future which would
likely increase compliance costs and may materially adversely affect the
financial performance of companies in the energy sector.
A
downturn in the energy sector, adverse political, legislative or regulatory
developments or other events could have a larger impact on the Fund than on an
investment company that does not invest a substantial portion of its assets in
the energy sector. At times, the performance of securities of companies in the
energy sector may lag the performance of other sectors or the broader market as
a whole. The price of oil, natural gas and other fossil fuels may decline and/or
experience significant volatility, which could adversely impact companies
operating in the energy sector.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other
circumstances,
such events or developments might affect companies world-wide. Overall
securities values could decline generally or underperform other investments.
An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
59.39% |
4Q 2020 |
| Worst
Quarter: |
-69.68% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten Years |
|
|
VanEck Oil Services ETF (return before
taxes) |
66.14% |
-8.86% |
-7.33% |
|
|
VanEck Oil Services ETF (return after
taxes on distributions) |
65.77% |
-9.26% |
-7.82% |
|
|
VanEck Oil Services ETF (return after
taxes on distributions
and sale of Fund
Shares) |
39.42% |
-6.54% |
-5.08% |
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|
MVIS®
US Listed Oil Services 25 Index (reflects no deduction for fees, expenses
or taxes, except withholding taxes) |
66.49% |
-8.90% |
-7.44% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
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|
Name |
Title
with Adviser |
Date
Began Managing the Fund |
|
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Peter
H. Liao |
Portfolio
Manager |
December
2011 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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VANECK®
RARE EARTH/STRATEGIC METALS
ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Rare Earth/Strategic Metals
ETF (the “Fund”) seeks to replicate as closely as possible,
before fees and expenses, the price and yield performance of the
MVIS®
Global Rare Earth/Strategic Metals Index (the “Rare Earth/Strategic Metals
Index” or the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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|
Other
Expenses |
0.04 |
% |
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|
|
Total
Annual Fund Operating Expenses(a) |
0.54 |
% |
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|
Fee
Waivers and Expense Reimbursement(a) |
0.00 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.54 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.57% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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YEAR |
EXPENSES |
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1 |
$55 |
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3 |
$173 |
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5 |
$302 |
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10 |
$677 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
40% 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 Rare Earth/Strategic Metals Index includes companies primarily
engaged in a variety of activities that are related to the producing, refining
and recycling of rare earth and strategic metals and minerals. Such companies
may include small- and medium- capitalization companies and foreign and emerging
market issuers. To be initially eligible for the Rare Earth/Strategic Metals
Index, companies
must
generate at least 50% of their revenues from rare earth/strategic metals or have
mining projects with the potential to generate at least 50% of their revenues
from rare earth/strategic metals when developed. Rare earth/strategic metals are
industrial metals that are typically mined as by-products or secondary metals in
operations focused on precious metals and base metals. Compared to base metals,
they have more specialized uses and are often more difficult to extract.
Currently, approximately 44 elements in the periodic table are considered rare
earth/strategic metals. Rare earth metals (or rare earth elements), a subset of
strategic metals, are a collection of chemical elements that are crucial to many
of the world’s most advanced technologies, such as cellular phones, high
performance batteries, flat screen televisions, green energy technology, and are
expected to be critical to the future of hybrid and electric cars, high-tech
military applications and superconductors and fiber-optic communication systems.
The Rare Earth/Strategic Metals Index may include A-shares issued by companies
trading via the Shanghai-Hong Kong Stock Connect program and the Shenzhen-Hong
Kong Stock Connect program (together, “Stock Connect”). As of December 31, 2022,
the Rare Earth/Strategic Metals Index included 24 securities of companies with a
market capitalization range of between approximately $491 million and $13.1
billion and a weighted average market capitalization of $4.9 billion. These
amounts are subject to change. The Fund’s 80% investment policy is
non-fundamental and may be changed without shareholder approval upon 60 days’
prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Rare Earth/Strategic Metals Index by investing
in a portfolio of securities that generally replicates the Rare Earth/Strategic
Metals Index. Unlike many investment companies that try to “beat” the
performance of a benchmark index, the Fund does not try to “beat” the Rare
Earth/Strategic Metals Index and does not seek temporary defensive positions
that are inconsistent with its investment objective of seeking to replicate the
Rare Earth/Strategic Metals Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Rare Earth/Strategic Metals Index concentrates in an industry or group of
industries. As of December 31, 2022, the basic materials 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.
Rare
Earth and Strategic Metals Companies Risk. Rare
earth/strategic metals are industrial metals that are typically mined as
by-products or secondary metals in operations focused on precious metals and
base metals. Compared to base metals, they have more specialized uses and are
often more difficult to extract. Rare earth metals (or rare earth elements), a
subset of strategic metals, are a collection of chemical elements that are
crucial to many of the world’s most advanced technologies. Consequently, the
demand for strategic metals has strained supply, which has the potential to
result in a shortage of such materials which could adversely affect the
companies in the Fund’s portfolio. Companies involved in the various activities
that are related to the producing, refining and recycling of rare
earth/strategic metals tend to be small-, medium- and micro-capitalization
companies with volatile share prices, are highly dependent on the price of rare
earth/strategic metals, which may fluctuate substantially over short periods of
time. The value of such companies may be significantly affected by events
relating to international, national and local political and economic
developments, energy conservation efforts, the success of exploration projects,
commodity prices, tax and other government regulations, depletion of resources,
and mandated expenditures for safety and pollution control devices. The
producing, refining and recycling of rare earth/strategic metals can be capital
intensive and, if companies involved in such activities are not managed well,
the share prices of such companies could decline even as prices for the
underlying rare earth/strategic metals are rising. In addition, companies
involved in the various activities that are related to the producing, refining
and recycling of rare earth/strategic metals may be at risk for environmental
damage claims.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Regulatory
Action and Changes in Governments Risk.
The producing, refining and recycling of rare earth/strategic metals will be
significantly affected by regulatory action and changes in governments. Actions
by countries essential to the producing, refining and recycling of rare
earth/strategic metals to limit exports could have a significant adverse effect
on industries around the globe and on the values of the businesses in which the
Fund invests.
Special
Risk Considerations of Investing in Australian Issuers. Investments
in securities of Australian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Australian economy is
heavily
dependent on exports from the agricultural and mining sectors. As a result, the
Australian economy is susceptible to fluctuations in the commodity markets. The
Australian economy is also dependent on trading with key trading
partners.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Special
Risk Considerations of Investing in 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.
Stock
Connect Risk. The
Fund may invest in A-shares listed and traded on the Shanghai Stock Exchange and
the Shenzhen Stock Exchange through Stock Connect, or on such other stock
exchanges that participate in Stock Connect from time to time or in the future.
Trading through Stock Connect is subject to a number of restrictions that may
affect the Fund’s investments and returns. For example, trading through Stock
Connect is subject to daily quotas that limit the maximum daily net purchases on
any particular day, which may restrict or preclude the Fund’s ability to invest
in Stock Connect A-shares. In addition, investments made through Stock Connect
are subject to trading, clearance and settlement procedures that are relatively
untested in the PRC, which could pose risks to the Fund. Furthermore, securities
purchased via Stock Connect will be held via a book entry omnibus account in the
name of HKSCC, Hong Kong’s clearing entity, at the CSDCC. The Fund’s ownership
interest in Stock Connect securities will not be reflected directly in book
entry with CSDCC and will instead only be reflected on the books of its Hong
Kong sub-custodian. The Fund may therefore depend on HKSCC’s ability or
willingness as record-holder of Stock Connect securities to enforce the Fund’s
shareholder rights. PRC law did not historically recognize the concept of
beneficial ownership; while PRC regulations and the Hong Kong Stock Exchange
have issued clarifications and guidance supporting the concept of beneficial
ownership via Stock Connect, the interpretation of beneficial ownership in the
PRC by regulators and courts may continue to evolve. Moreover, Stock Connect
A-shares generally may not be sold, purchased or otherwise transferred other
than through Stock Connect in accordance with applicable rules.
A
primary feature of Stock Connect is the application of the home market’s laws
and rules applicable to investors in A-shares. Therefore, the Fund’s investments
in Stock Connect A-shares are generally subject to PRC securities regulations
and listing rules, among other restrictions. The Fund will not benefit from
access to Hong Kong investor compensation funds, which are set up to protect
against defaults of trades, when investing through Stock Connect. Stock Connect
is only available on days when markets in both the PRC and Hong Kong are open,
which may limit the Fund’s ability to trade when it would be otherwise
attractive to do so. Since the inception of Stock Connect, foreign investors
(including the Fund) investing in A-shares through Stock Connect have been
temporarily exempt from the PRC corporate income tax and value-added tax on the
gains on disposal of such A-shares. Dividends are subject to PRC corporate
income tax on a withholding basis at 10%, unless reduced under a double tax
treaty with China upon application to and obtaining approval from the competent
tax authority. Aside from these temporary measures,
uncertainties
in permanent PRC tax rules governing taxation of income and gains from
investments in Stock Connect A-shares could result in unexpected tax liabilities
for the Fund.
The
Stock Connect program is a relatively new program and may be subject to further
interpretation and guidance. There can be no assurance as to the program’s
continued existence or whether future developments regarding the program may
restrict or adversely affect the Fund’s investments or returns. In addition, the
application and interpretation of the laws and regulations of Hong Kong and the
PRC, and the rules, policies or guidelines published or applied by relevant
regulators and exchanges in respect of the Stock Connect program are uncertain,
and they may have a detrimental effect on the Fund’s investments and
returns.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s
economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the
Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the date that the income is earned by the
Fund at the foreign exchange rate in effect on that date. Therefore, if the
value of the respective emerging market country’s currency falls relative to the
U.S. dollar between the earning of the income and the time at which the Fund
converts the relevant emerging market country’s currency to U.S. dollars, the
Fund may be required to liquidate certain positions in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements under the Internal Revenue Code. The liquidation of
investments, if required, could be at disadvantageous prices or otherwise have
an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk
associated
with market movements. Trading volume may be lower on certain emerging market
countries’ trading exchanges than on more developed securities markets and
securities may be generally less liquid. The infrastructure for clearing,
settlement and registration on the primary and secondary markets of certain
emerging market countries are less developed than in certain other markets and
under certain circumstances this may result in the Fund experiencing delays in
settling and/or registering transactions in the markets in which it invests,
particularly if the growth of foreign and domestic investment in certain
emerging market countries places an undue burden on such investment
infrastructure. Such delays could affect the speed with which the Fund can
transmit redemption proceeds and may inhibit the initiation and realization of
investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to
specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk
may
be heightened in cases where Authorized Participants have limited or diminished
access to the capital required to post collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
71.95% |
4Q 2020 |
| Worst
Quarter: |
-33.02% |
3Q
2015 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Rare Earth/Strategic Metals ETF
(return before taxes) |
-30.68% |
1.07% |
-3.97% |
|
|
VanEck Rare Earth/Strategic Metals ETF
(return after taxes
on distributions) |
-31.10% |
-0.49% |
-5.11% |
|
|
VanEck Rare Earth/Strategic Metals ETF
(return after taxes
on distributions and sale of Fund
Shares) |
-18.16% |
0.10% |
-3.37% |
|
|
MVIS®
Global Rare Earth/Strategic Metals Index (reflects no deduction
for
fees, expenses or taxes, except withholding
taxes) |
-32.23% |
0.21% |
-4.49% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
October
2010 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Steel ETF (the “Fund”)
seeks to replicate as closely as possible, before fees and expenses, the price
and yield performance of the NYSE Arca Steel Index (the “Steel Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
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Other
Expenses |
0.08 |
% |
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|
Total
Annual Fund Operating Expenses(a) |
0.58 |
% |
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|
Fee
Waivers and Expense Reimbursement(a) |
-0.02 |
% |
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Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.56 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.55% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$57 |
|
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|
3 |
$184 |
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|
5 |
$322 |
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|
10 |
$724 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
20% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The Fund normally invests at
least 80% of its total assets in common stocks and depositary receipts of
companies involved in the steel sector. Such companies may include small- and
medium-capitalization companies and foreign and emerging market issuers. As of
December 31, 2022, the Steel Index included 25 securities of companies with a
market capitalization range of between approximately $373.74 million and $87.16
billion and a weighted average market capitalization of $28.65 billion. These
amounts
are
subject to change. The Fund’s 80% investment policy is non-fundamental and may
be changed without shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Steel Index by investing in a portfolio of
securities that generally replicates the Steel Index. Unlike many investment
companies that try to “beat” the performance of a benchmark index, the Fund does
not try to “beat” the Steel Index and does not seek temporary defensive
positions that are inconsistent with its investment objective of seeking to
replicate the Steel Index. The Fund normally invests at least 80% of its total
assets in securities that comprise the Steel Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Steel Index concentrates in an industry or group of industries. As of
December 31, 2022, the basic materials 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.
Steel
Companies Risk.
Competitive pressures may have a significant effect on the financial condition
of steel companies. Also, these companies are highly dependent on the price of
steel. Steel prices may fluctuate substantially over short periods of time, so
the Fund’s Share price may be more volatile than other types of investments.
These companies are also affected by changes in government regulation, tariffs
and trade disputes, world events and economic conditions. Steel companies may
benefit from government subsidies or certain trade protections. If those
subsidies or trade protections are reduced or removed, the profits of steel
companies may be affected, potentially drastically. In addition, these companies
are at risk for environmental damage claims.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
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 Australian Issuers. Investments
in securities of Australian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also dependent on trading with key trading partners.
Special
Risk Considerations of Investing in 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 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.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United
Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the
date
that the income is earned by the Fund at the foreign exchange rate in effect on
that date. Therefore, if the value of the respective emerging market country’s
currency falls relative to the U.S. dollar between the earning of the income and
the time at which the Fund converts the relevant emerging market country’s
currency to U.S. dollars, the Fund may be required to liquidate certain
positions in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements under the Internal Revenue Code.
The liquidation of investments, if required, could be at disadvantageous prices
or otherwise have an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the
Index
provider’s or others’ errors will be kept by the Fund and its shareholders and
any losses or costs resulting from the Index provider’s or others’ errors will
be borne by the Fund and its shareholders. Additionally, when the Index is
rebalanced and the Fund in turn rebalances its portfolio to attempt to increase
the correlation between the Fund’s portfolio and the Index, any transaction
costs and market exposure arising from such portfolio rebalancing will be borne
directly by the Fund and its shareholders. Apart from scheduled rebalances, the
Index provider or its agents may carry out additional ad hoc rebalances to the
Index. Therefore, errors and additional ad hoc rebalances carried out by the
Index provider or its agents to the Index may increase the costs to and the
tracking error risk of the Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or
reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of
investments.
Index-Related
Concentration Risk. The Fund’s assets may be concentrated
in a particular sector or sectors or industry or group of industries to reflect
the Index’s allocation to those types of securities. The securities of many or
all of the companies in the same sector or industry may decline in value due to
developments adversely affecting such sector or industry. By concentrating its
assets in a particular sector or sectors or industry or group of industries, the
Fund is subject to the risk that economic, political or other conditions that
have a negative effect on those sectors and/or industries may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of securities.
PERFORMANCE
The bar chart that follows
shows how the Fund performed for the calendar years shown. The table below the
bar chart shows the Fund’s average annual returns (before and after taxes).
The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
47.11% |
4Q 2020 |
| Worst
Quarter: |
-41.90% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
|
|
VanEck Steel ETF (return before
taxes) |
13.87% |
9.59% |
5.44% |
|
|
VanEck Steel ETF (return after taxes on
distributions) |
12.35% |
8.35% |
4.40% |
|
|
VanEck Steel ETF (return after taxes on
distributions and sale of Fund Shares) |
8.88% |
7.26% |
3.94% |
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|
NYSE®
Arca Steel Index (reflects no deduction for fees, expenses or
taxes) |
14.66% |
10.22% |
5.83% |
|
|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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|
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Manager. The
following individual is primarily responsible for the day-to-day management of
the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
October
2006 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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VANECK®
URANIUM+NUCLEAR ENERGY ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Uranium+Nuclear Energy
ETF (the “Fund”) seeks to replicate as closely as possible,
before fees and expenses, the price and yield performance of the
MVIS®
Global Uranium & Nuclear Energy Index (the “Nuclear Energy Index” or the
“Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.50 |
% |
|
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Other
Expenses |
0.17 |
% |
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|
|
Total
Annual Fund Operating Expenses(a) |
0.67 |
% |
|
|
Fee
Waivers and Expense Reimbursement(a) |
-0.06 |
% |
|
|
Total
Annual Fund Operating Expenses After Fee Waivers and Expense
Reimbursement(a) |
0.61 |
% |
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(a) Van Eck Associates
Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to
the extent necessary to prevent the operating expenses of the Fund (excluding
acquired fund fees and expenses, interest expense, trading expenses, taxes and
extraordinary expenses) from exceeding 0.60% of the Fund’s average daily net
assets per year until at least May 1,
2024. During such time, the expense limitation is expected to
continue until the Fund’s Board of Trustees acts to discontinue all or a portion
of such expense limitation.
EXPENSE EXAMPLE
This example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account brokerage
commissions that you pay when purchasing or selling Shares of the
Fund.
The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same (except that the example incorporates the fee waivers and/or expense
reimbursement arrangement for only the first year). Although your actual costs
may be higher or lower, based on these assumptions, your costs would
be:
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|
YEAR |
EXPENSES |
|
|
1 |
$62 |
|
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|
3 |
$208 |
|
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|
5 |
$367 |
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|
10 |
$829 |
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PORTFOLIO TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was
53% 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 Nuclear Energy Index includes equity securities and depositary
receipts issued by companies involved in uranium and nuclear energy. To be
initially eligible for the Nuclear Energy Index, companies must generate at
least 50% of their revenues from (i) uranium mining or uranium mining projects
that have the potential to generate at least 50% of a company’s revenues from
uranium when developed (ii) the construction, engineering and maintenance of
nuclear power facilities and nuclear reactors; (iii) the production of
electricity from nuclear sources; or (iv) equipment and technology or services
to the nuclear power industry. Such companies may include
medium-capitalization
companies and foreign issuers. As of December 31, 2022, the Nuclear Energy Index
included 25 securities of companies with a market capitalization range of
between approximately $449 million and $51.1 billion and a weighted average
market capitalization of $18.5 billion. These amounts are subject to change. The
Fund’s 80% investment policy is non-fundamental and may be changed without
shareholder approval upon 60 days’ prior written notice to
shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Nuclear Energy Index by investing in a
portfolio of securities that generally replicates the Nuclear Energy Index.
Unlike many investment companies that try to “beat” the performance of a
benchmark index, the Fund does not try to “beat” the Nuclear Energy Index and
does not seek temporary defensive positions that are inconsistent with its
investment objective of seeking to replicate the Nuclear Energy Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Nuclear Energy Index concentrates in an industry or group of industries. As
of December 31, 2022, the energy 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.
Nuclear
Energy Companies Risk.
Nuclear energy companies may face considerable risk as a result of incidents and
accidents, breaches of security, ill-intentioned acts of terrorism, natural
disasters (such as floods or earthquakes), equipment malfunctions or mishandling
in storage, handling, transportation, treatment or conditioning of substances
and nuclear materials. Such events could have serious consequences, especially
in case of radioactive contamination and irradiation of the environment, for the
general population, as well as a material, negative impact on the Fund’s
portfolio companies and thus the Fund’s financial situation. In addition,
nuclear energy companies are subject to competitive risk associated with the
prices of other energy sources, such as natural gas and oil. Consumers of
nuclear energy may have the ability to switch between nuclear energy and other
energy sources and, as a result, during periods when competing energy sources
are less expensive, the revenues of nuclear energy companies may decline with a
corresponding impact on earnings.
Nuclear
activity is also subject to particularly detailed and restrictive regulations,
with a scheme for the monitoring and periodic re-examination of operating
authorization, which primarily takes into account nuclear safety, environmental
and public health protection, and also national security considerations
(terrorist threats in particular). These regulations and any future regulations
may be subject to significant tightening by national and international
authorities. This could result in increased operating costs, which would have a
negative impact on the Fund’s portfolio companies and may cause operating
businesses related to nuclear energy to become unprofitable or impractical to
operate.
Uranium
prices are subject to fluctuation. The price of uranium may be affected by
numerous factors beyond the Fund’s control. Such factors include the demand for
nuclear power, political and economic conditions in uranium producing and
consuming countries, uranium supply from secondary sources and uranium
production levels and costs of production. In addition, the prices of crude oil,
natural gas and electricity produced from traditional hydro power and possibly
other undiscovered energy sources could potentially have a negative impact on
the competitiveness of nuclear energy companies in which the Fund
invests.
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.
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.
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 Canadian Issuers. Investments
in securities of Canadian issuers, including issuers located outside of Canada
that generate significant revenue from Canada, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Canadian economy is very dependent on the demand for, and supply
and price of, natural resources. The Canadian market is relatively concentrated
in issuers involved in the production and distribution of natural resources.
There is a risk that any changes in natural resources sectors could have an
adverse impact on the Canadian economy. Additionally, the Canadian economy is
heavily dependent on relationships with certain key trading partners, including
the United States, countries in the European Union and China. Because the United
States is Canada’s largest trading partner and foreign investor, the Canadian
economy is dependent on and may be significantly affected by the U.S. economy.
Reduction in spending on Canadian products and services or changes in the U.S.
economy may adversely impact the Canadian economy. Trade agreements may further
increase Canada’s dependency on the U.S. economy, and uncertainty as to the
future of such trade agreements may cause a decline in the value of the Fund’s
Shares. Past periodic demands by the Province of Quebec for sovereignty have
significantly affected equity valuations and foreign currency movements in the
Canadian market and such demands may have this effect in the future. In
addition, certain sectors of Canada’s economy may be subject to foreign
ownership limitations. This may negatively impact the Fund’s ability to
invest in Canadian issuers and to pursue its investment objective.
Special
Risk Considerations of Investing in 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. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Cash
Transactions Risk.
Unlike other ETFs, the Fund expects to effect its creations and redemptions at
least partially for cash, rather than wholly for in-kind securities. Therefore,
it may be required to sell portfolio securities and subsequently incur brokerage
costs and/or recognize gains or losses on such sales that the Fund might not
have recognized if it were to distribute portfolio securities in kind. As such,
investments in Shares may be less tax-efficient than an investment in a
conventional ETF. Transaction costs, including brokerage costs, will decrease
the Fund’s net asset value to the extent not offset by the transaction fee
payable by an Authorized Participant.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including human error, processing and communication errors, errors of the Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or system failures.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Errors in the Index data, the Index computations and/or the
construction of the Index in accordance with its methodology may occur from time
to time and may not be identified and corrected by the Index provider, which may
have an adverse impact on the Fund and its shareholders. Shareholders should
understand that any gains from the Index provider’s or others’ errors will be
kept by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s or others’ errors will be borne by the Fund and its
shareholders. Additionally, when the Index is rebalanced and the Fund in turn
rebalances its portfolio to attempt to increase the correlation between the
Fund’s portfolio and the Index, any transaction costs and market exposure
arising from such portfolio rebalancing will be borne directly by the Fund and
its shareholders. Apart from scheduled rebalances, the Index provider or its
agents may carry out additional ad hoc rebalances to the Index. Therefore,
errors and additional ad hoc rebalances carried out by the Index provider or its
agents to the Index may increase the costs to and the tracking error risk of the
Fund.
The
Fund may not be fully invested at times either as a result of cash flows into
the Fund or reserves of cash held by the Fund to pay expenses or to meet
redemptions. In addition, the Fund may not invest in certain securities included
in the Index, or invest in them in the exact proportions in which they are
represented in the Index. The Fund’s performance may also deviate from the
return of the Index for various reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). To the extent the Fund utilizes
depositary receipts, the purchase of depositary receipts may negatively affect
the Fund’s ability to track the performance of the Index and increase tracking
error, which may be exacerbated if the issuer of the depositary receipt
discontinues issuing new depositary receipts or withdraws existing depositary
receipts.
The
Fund may value certain of its investments, underlying currencies and/or other
assets based on fair value prices. To the extent the Fund calculates its net
asset value based on fair value prices and the value of the Index is based on
securities’ closing prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any), repatriation or economic sanctions may also increase
the index tracking risk. The Fund’s performance may also deviate from the
performance of the Index due to the impact of withholding taxes, late
announcements relating to changes to the Index and high turnover of the Index.
When markets are volatile, the ability to sell securities at fair value prices
may be adversely impacted and may result in additional trading costs and/or
increase the index tracking risk. The Fund may also need to rely on borrowings
to meet redemptions, which may lead to increased expenses. For tax efficiency
purposes, the Fund may sell certain securities, and such sale may cause the Fund
to realize a loss and deviate from the performance of the Index. In light of the
factors discussed above, the Fund’s return may deviate significantly from the
return of the Index. Changes to the composition of the Index in connection with
a rebalancing or reconstitution of the Index may cause the Fund to experience
increased volatility, during which time the Fund’s index tracking risk may be
heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants may step away from making a market in the Shares and in executing
creation and redemption orders, which could cause a material deviation in the
Fund’s market price from its net asset value.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can
be
no assurance that requirements of the exchange necessary to maintain the listing
of the Fund will continue to be met or will remain unchanged.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from its Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Fund’s Index, the Fund may be forced to
sell such security at an inopportune time or for prices other than at current
market values. An investment in the Fund involves risks similar to those of
investing in any fund that invests in bonds or equity securities, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. The Fund’s
Index may not contain the appropriate or a diversified mix of securities for any
particular economic cycle. The timing of changes in the securities of the Fund’s
portfolio in seeking to replicate its Index could have a negative effect on the
Fund. Unlike with an actively managed fund, the Adviser does not use techniques
or defensive strategies designed to lessen the effects of market volatility or
to reduce the impact of periods of market decline. Additionally, unusual market
conditions may cause the Fund’s Index provider to postpone a scheduled rebalance
or reconstitution, which could cause the Fund’s Index to vary from its normal or
expected composition. This means that, based on market and economic conditions,
the Fund’s performance could be lower than funds that may actively shift their
portfolio assets to take advantage of market opportunities or to lessen the
impact of a market decline or a decline in the value of one or more issuers.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. The
market price of the Shares may fluctuate in response to the Fund’s net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including disruptions to creations and redemptions, the existence of
market volatility or potential lack of an active trading market for Shares
(including through a trading halt), may result in Shares trading at a
significant premium or discount to net asset value or to the intraday value of
the Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. Liquidity
in those securities may be reduced after the applicable closing times.
Accordingly, during the time when the exchange is open but after the applicable
market closing, fixing or settlement times, bid/ask spreads on the exchange and
the resulting premium or discount to the Shares’ net asset value may widen.
Additionally, in stressed market conditions, the market for the Fund’s Shares
may become less liquid in response to deteriorating liquidity in the markets for
the Fund’s underlying portfolio holdings and a shareholder may be unable to sell
his or her Shares.
Issuer-Specific
Changes Risk.
The value of individual securities in the Fund’s portfolio can be more volatile
than the market as a whole and can perform differently from the value of the
market as a whole, which may have a greater impact if the Fund’s portfolio is
concentrated in a country, region, market, industry, sector or asset class. A
change in the financial condition, market perception or the credit rating of an
issuer of securities included in the Fund’s Index may cause the value of its
securities to decline.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the Investment Company Act of 1940. The Fund is subject to the risk
that it will be more volatile than a diversified fund because the Fund may
invest a relatively high percentage of its assets in a smaller number of issuers
or may invest a larger proportion of its assets in a single issuer. Moreover,
the gains and losses on a single investment may have a greater impact on the
Fund’s net asset value and may make the Fund more volatile than more diversified
funds. The Fund may be particularly vulnerable to this risk if it is comprised
of a limited number of investments.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to those types of
securities. The securities of many or all of the companies in the same sector or
industry may decline in value due to developments adversely affecting such
sector or industry. By concentrating its assets in a particular sector or
sectors or industry or group of industries, the Fund is subject to the risk that
economic, political or other conditions that have a negative effect on those
sectors and/or industries may negatively impact the Fund to a greater extent
than if the Fund’s assets were invested in a wider variety of
securities.
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.
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 March 24, 2014,
the Fund sought to replicate as closely as possible, before fees and expenses,
the price and yield performance of the DAXglobal®
Nuclear
Energy Index (the “Prior Index”). Therefore, performance information prior to
March 24, 2014 reflects the performance of the Fund while seeking to track the
Prior Index. All returns assume
reinvestment of dividends and
distributions. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.vaneck.com.
Annual Total Returns (%)—Calendar
Years
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| Best
Quarter: |
13.49% |
4Q 2020 |
| Worst
Quarter: |
-18.87% |
1Q
2020 |
Average Annual Total Returns for the Periods
Ended December 31, 2022
The after-tax returns presented
in the table below are calculated using the highest historical individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown below. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Past
Five
Years |
Past
Ten
Years |
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|
VanEck Uranium+Nuclear Energy ETF
(return before taxes) |
2.10% |
4.86% |
5.70% |
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|
VanEck Uranium+Nuclear Energy ETF
(return after taxes
on distributions) |
1.61% |
4.23% |
5.03% |
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VanEck Uranium+Nuclear Energy ETF
(return after taxes distributions and sale of Fund
Shares) |
1.58% |
3.71% |
4.46% |
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MVIS®
Global Uranium & Nuclear Energy Index (reflects no deduction
for
fees, expenses or taxes, except withholding
taxes)* |
2.56% |
4.78% |
5.57% |
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|
S&P
500®
Index (reflects no deduction for
fees, expenses or taxes) |
-18.11% |
9.42% |
12.56% |
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*Prior to March 24, 2014,
the Fund sought to replicate as closely as possible, before fees and expenses,
the price and yield performance of the Prior Index. Therefore, performance
information prior to March 24, 2014 reflects the performance of the Fund while
seeking to track the Prior Index. Prior to March 24, 2014, index data reflects
that of the Prior Index. From March 24, 2014, the index data reflects that of
the Nuclear Energy Index.
See “License Agreements
and Disclaimers” for important information.
PORTFOLIO
MANAGEMENT
Investment
Adviser. Van
Eck Associates Corporation.
Portfolio
Manager.
The following individual is primarily responsible for the day-to-day management
of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
August
2007 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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SUMMARY
INFORMATION ABOUT PURCHASES AND SALES OF FUND SHARES, TAXES AND PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES |
PURCHASE
AND SALE OF FUND SHARES
Individual
Shares of a Fund may only be purchased and sold in secondary market transactions
through a broker or dealer at a market price. Shares of the Funds are listed on
the Exchange, and because Shares trade at market prices rather than net asset
value, Shares of the Funds may trade at a price greater than net asset
(i.e.,
a “premium”) or less than net asset (i.e.,
a “discount”).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares of a Fund (bid) and the
lowest price a seller is willing to accept for Shares (ask) when buying or
selling Shares in the secondary market (the “bid/ask spread”).
Recent
information, including information about each Fund’s NAV, market price, premiums
and discounts, and bid/ask spreads, is included on the Fund’s website at
www.vaneck.com.
TAX
INFORMATION
Each
Fund’s distributions (other than return of capital distributions) are taxable
and will generally be taxed as ordinary income or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
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ADDITIONAL
INFORMATION ABOUT THE FUNDS’ INVESTMENT STRATEGIES AND
RISKS |
PRINCIPAL
INVESTMENT STRATEGIES
(All
Funds except VanEck Future of Food ETF)
The
Adviser anticipates that, generally, each Fund will hold or gain exposure to all
of the securities that comprise its benchmark index (the “Index”) in proportion
to their weightings in such Index. However, under various circumstances, it may
not be possible or practicable to purchase all of those securities in those
weightings. In these circumstances, a Fund may purchase a sample of securities
in its Index. There also may be instances in which the Adviser may choose to
underweight or overweight a security in a Fund’s Index, purchase securities not
in the Fund’s Index that the Adviser believes are appropriate to substitute for
certain securities in such Index or utilize various combinations of other
available investment techniques in seeking to replicate as closely as possible,
before fees and expenses, the price and yield performance of the Fund’s Index.
Each Fund may sell securities that are represented in its Index in anticipation
of their removal from its Index or purchase securities not represented in its
Index in anticipation of their addition to such Index. Each Fund may also, in
order to comply with the tax diversification requirements of the Internal
Revenue Code of 1986, as amended (the “Code”), temporarily invest in securities
not included in its Index that are expected to be highly correlated with the
securities included in its Index.
(VanEck
Future of Food ETF only)
Under
normal conditions, the Fund invests at least 80% of its total assets in domestic
and foreign equity securities of companies engaged in Agri-Food technology and
innovation. “Agri-Food technology and innovation” encompasses industries and
companies that are leading, enabling, supplying, disrupting, or benefiting from
new environmentally sustainable agriculture and food products and services. The
Adviser performs a qualitative and quantitative analysis of each company’s
financial statements, balance sheets and/or earnings reports to determine
whether a company is engaged in Agri-Food technology and innovation. The Fund is
an actively managed ETF.
The
Fund may also invest up to 20% of its net assets in special purpose vehicles
such as SPACs, IPOs and securities issued by other investment companies,
including ETFs and foreign investment companies. The Fund may also invest in
money market funds, but these investments are not subject to this limitation.
The Fund may invest in SPACs, IPOs, and ETFs to participate in, or gain exposure
to, certain market industries, or when direct investments in certain countries
are not permitted or available.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
Each
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees (the
“Board of Trustees”) of VanEck ETF Trust (the “Trust”) without shareholder
approval, except as noted in this Prospectus or the Statement of Additional
Information (“SAI”) under the section entitled “Investment Policies and
Restrictions—Investment Restrictions.”
RISKS
OF INVESTING IN THE FUNDS
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in each Fund’s
“Summary Information” section and additional (non-principal) risks, if
applicable. The risks checked in the chart below apply to each Fund as
indicated. For a description of the risks listed in the chart, please see
"Glossary – Investment Risks" below the chart. See also the Funds' Statement of
Additional Information for information on certain other investments in which
each Fund may invest and other investment techniques in which each Fund may
engage from time to time and related risks.
Investors
in a Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
a Fund involves a substantial degree of risk. An investment in a Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore, you should
consider carefully the following risks before investing in a Fund, each of which
could significantly and adversely affect the value of an investment in a
Fund.
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| Risk |
Agribusiness
ETF
(MOO) |
Future
of Food ETF
(YUMY) |
Gold
Miners ETF
(GDX)) |
Green
Metals ETF
(GMET) |
Junior
Gold Miners ETF
(GDXJ) |
Low
Carbon Energy ETF
(SMOG) |
Natural
Resources ETF
(HAP) |
Oil
Refiners ETF
(CRAK) |
Oil
Services ETF
(OIH) |
Rare
Earth/Strategic Metals ETF
(REMX)
|
Steel
ETF
(SLX)
|
Uranium+Nuclear
Energy ETF (NLR) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Active
Management Risk |
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√ |
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| Agriculture
Companies Risk |
√ |
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| Risk |
Agribusiness
ETF
(MOO) |
Future
of Food ETF
(YUMY) |
Gold
Miners ETF
(GDX)) |
Green
Metals ETF
(GMET) |
Junior
Gold Miners ETF
(GDXJ) |
Low
Carbon Energy ETF
(SMOG) |
Natural
Resources ETF
(HAP) |
Oil
Refiners ETF
(CRAK) |
Oil
Services ETF
(OIH) |
Rare
Earth/Strategic Metals ETF
(REMX)
|
Steel
ETF
(SLX)
|
Uranium+Nuclear
Energy ETF (NLR) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Agri-Food
Technology and Innovation Food Companies Risk |
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√ |
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| Authorized
Participant Concentration Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Basic
Materials Sector Risk |
√ |
√ |
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√ |
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√ |
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√ |
√ |
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| Cash
Transactions Risk |
√ |
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√ |
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√ |
√ |
√ |
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√ |
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√ |
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| Clean
Energy Companies Risk |
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√ |
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| Consumer
Discretionary Sector Risk |
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√ |
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| Consumer
Staples Sector Risk |
√ |
√ |
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| Depositary
Receipts Risk |
√ |
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√ |
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√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Derivatives
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
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| Emerging
Market Issuers Risk |
√ |
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√ |
√ |
√ |
√ |
|
√ |
|
√ |
√ |
|
| Energy
Sector Risk |
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√ |
√ |
√ |
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√ |
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| Equity
Securities Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign
Currency Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign
Securities Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund
Shares |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold
and Silver Mining Companies Risk |
|
|
√ |
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| “Green”
Metals Risk |
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Health
Care Sector Risk |
√ |
|
|
|
|
|
|
|
|
|
|
|
| High
Portfolio Turnover Risk |
|
|
|
|
|
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Index-Related
Concentration Risk |
√ |
|
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Risk |
Agribusiness
ETF
(MOO) |
Future
of Food ETF
(YUMY) |
Gold
Miners ETF
(GDX)) |
Green
Metals ETF
(GMET) |
Junior
Gold Miners ETF
(GDXJ) |
Low
Carbon Energy ETF
(SMOG) |
Natural
Resources ETF
(HAP) |
Oil
Refiners ETF
(CRAK) |
Oil
Services ETF
(OIH) |
Rare
Earth/Strategic Metals ETF
(REMX)
|
Steel
ETF
(SLX)
|
Uranium+Nuclear
Energy ETF (NLR) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Index
Tracking Risk |
√ |
|
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Industrials
Sector Risk |
√ |
√ |
|
|
|
√ |
√ |
|
|
|
|
|
| Industry
Concentration Risk |
|
√ |
|
|
|
|
|
|
|
|
|
|
| Information
Technology Sector Risk |
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Initial
Public Offerings Risk |
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuer-Specific
Changes Risk |
|
|
|
|
|
|
|
√ |
√ |
√ |
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Leverage
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Low
Carbon Energy Companies Risk |
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Market
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Medium-Capitalization
Companies Risk |
|
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Micro-Capitalization
Companies Risk |
|
|
|
|
√ |
|
|
|
|
|
|
|
| Mining
Industry Risk |
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MLP
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Natural
Resources Companies Risk |
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| No
Guarantee of Active Trading Market Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Non-Diversified
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
|
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nuclear
Energy Companies Risk |
|
|
|
|
|
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Oil
Refining Companies Risk |
|
|
|
|
|
|
|
√ |
|
|
|
|
| Oil
Services Companies Risk |
|
|
|
|
|
|
|
|
√ |
|
|
|
| Operational
Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Passive
Management Risk |
√ |
|
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Risk |
Agribusiness
ETF
(MOO) |
Future
of Food ETF
(YUMY) |
Gold
Miners ETF
(GDX)) |
Green
Metals ETF
(GMET) |
Junior
Gold Miners ETF
(GDXJ) |
Low
Carbon Energy ETF
(SMOG) |
Natural
Resources ETF
(HAP) |
Oil
Refiners ETF
(CRAK) |
Oil
Services ETF
(OIH) |
Rare
Earth/Strategic Metals ETF
(REMX)
|
Steel
ETF
(SLX)
|
Uranium+Nuclear
Energy ETF (NLR) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Rare
Earth and Strategic Metals Companies Risk |
|
|
|
√ |
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Regulatory
Action and Changes in Governments Risk |
|
|
|
√ |
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Relationship
to Commodities |
|
|
X |
X |
X |
|
|
X |
X |
X |
X |
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholder
Risk |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
| Small-
and Medium-Capitalization Companies Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special
Purpose Acquisition Companies Risk |
|
√ |
|
|
|
|
|
|
|
|
|
|
| Special
Risk Considerations of Investing in African Issuers |
|
|
|
√ |
|
|
|
|
|
|
|
|
| Special
Risk Considerations of Investing in Asian Issuers |
√ |
|
|
√ |
|
√ |
|
√ |
|
√ |
|
√ |
| Special
Risk Considerations of Investing in Australian Issuers |
|
|
√ |
√ |
√ |
|
|
|
|
√ |
√ |
|
| Special
Risk Considerations of Investing in Brazilian Issuers |
|
|
|
|
|
|
|
|
|
|
√ |
|
| Special
Risk Considerations of Investing in Canadian Issuers |
|
|
√ |
|
√ |
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special
Risk Considerations of Investing in Chinese Issuers |
|
|
|
√ |
|
√ |
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special
Risk Considerations of Investing in European Issuers |
√ |
√ |
|
|
|
√ |
√ |
√ |
|
|
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special
Risk Considerations of Investing in Japanese Issuers |
|
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Risk |
Agribusiness
ETF
(MOO) |
Future
of Food ETF
(YUMY) |
Gold
Miners ETF
(GDX)) |
Green
Metals ETF
(GMET) |
Junior
Gold Miners ETF
(GDXJ) |
Low
Carbon Energy ETF
(SMOG) |
Natural
Resources ETF
(HAP) |
Oil
Refiners ETF
(CRAK) |
Oil
Services ETF
(OIH) |
Rare
Earth/Strategic Metals ETF
(REMX)
|
Steel
ETF
(SLX)
|
Uranium+Nuclear
Energy ETF (NLR) |
| √
Principal Risk | X Additional Non-Principal Risk |
| Special
Risk Considerations of Investing in Latin American Issuers |
|
|
|
|
|
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special
Risk Considerations of Investing in South African Issuers |
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Steel
Companies Risk |
|
|
|
|
|
|
|
|
|
|
√ |
|
| Stock
Connect Risk |
|
|
|
√ |
|
|
|
|
|
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Trading
Issues Risk |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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.
Agriculture
Companies Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the agriculture companies. Economic forces
affecting agricultural companies and related industries, including forces
affecting the agricultural commodity prices, labor costs, and energy and
financial markets, could adversely affect the Fund’s portfolio companies and
thus, the Fund’s financial situation and profitability. Agricultural and
livestock production and trade flows are significantly affected by government
policies and regulations. Such policies and regulations include subsidy policies
and the imposition of taxes, tariffs, duties and import and export restrictions,
and can affect the planting/raising of certain crops/livestock versus other uses
of resources, the location and site of crop and livestock production, whether
processed or unprocessed commodity products are traded and the volume and types
of imports and exports. Agriculture companies may be subject to the risk of
liability for environmental damage, worker safety, depletion of resources,
mandated expenditures for safety and pollution control devices, and litigation.
An increased competitive landscape, caused by increased availability of food and
other agricultural commodities, economic recession, labor difficulties or
changing consumer tastes and spending, may lead to a decrease in demand for the
products and services provided by companies involved in agriculture.
Furthermore, companies involved in agriculture are particularly sensitive to
changing weather conditions and other natural disasters, including floods,
droughts and disease outbreaks. In addition, these companies are also subject to
risks associated with cyclicality of revenues and earnings, currency
fluctuations, changing consumer tastes, extensive competition, consolidation,
and excess capacity. In addition, agriculture companies must comply with a broad
range of environmental health, food safety and worker safety laws and
regulations which could adversely affect the Fund. Additional or more stringent
environmental and food safety laws and regulations may be enacted in the future
and such changes could have a material adverse effect on the business of the
agriculture companies.
Agri-Food
Technology and Innovation Food Companies Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of companies operating in the food technology,
precision agriculture, and agricultural sustainability markets, which may have
limited product lines, markets, financial resources or personnel. These
companies may face intense competition and potentially rapid product
obsolescence. These companies are also heavily dependent on intellectual
property rights and may be adversely affected by loss or impairment of those
rights. These companies are also subject to significant environmental and food
safety regulations that could adversely affect their business. Additional or
more stringent environmental and food safety regulations may be enacted in the
future and such changes could have a material adverse effect on the business of
the Fund’s portfolio companies. The food industry is highly competitive and can
be significantly affected by demographic and product trends, competitive
pricing, marketing campaigns, environmental factors, government regulation,
adverse changes in general economic conditions, evolving consumer preferences,
nutritional and health-related concerns, federal,
state
and local food inspection and processing controls, consumer product liability
claims, consumer boycotts, risks of product tampering, and the availability and
expense of liability insurance. Food product recalls require companies in the
food industry to withdraw contaminated or mislabeled products from the market.
Companies operating in the precision agriculture and agricultural sustainability
markets are subject to other risks affecting the agricultural industry,
including the impact of global climate change on agricultural production. These
companies, especially smaller companies, tend to be more volatile than companies
that do not rely heavily on technology. These companies may be adversely
affected by commodity price volatility, changes in exchange rates, government
policies and regulations such as taxes, tariffs, duties, subsidies and import
and export restrictions, availability of certain inputs and materials required
for production, depletion of resources, technological developments and labor
relations. The customers and/or suppliers of the companies in which the Fund
invests may be concentrated in a particular country, region or industry. Any
adverse event affecting one of these countries, regions or industries could have
a negative impact on such companies.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
Basic
Materials Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the basic materials sector. Companies
engaged in the production and distribution of basic materials may be adversely
affected by changes in world events, political and economic conditions, energy
conservation, environmental policies, commodity price volatility, changes in
exchange rates, imposition of import controls, increased competition, depletion
of resources and labor relations.
Cash
Transactions Risk.
Unlike other ETFs, the Fund effects its creations and redemptions at least
partially for cash, rather than wholly for in-kind securities. Because the Fund
currently intends to effect all or a portion of redemptions for cash, rather
than in-kind distributions, it may be required to sell portfolio securities in
order to obtain the cash needed to distribute redemption proceeds, which
involves transaction costs that the Fund may not have incurred had it effected
redemptions entirely in-kind. These costs may include brokerage costs and/or
taxable gains or losses, which may be imposed on the Fund and decrease the
Fund’s net asset value to the extent such costs are not offset by a transaction
fee payable by an Authorized Participant. If the Fund recognizes a gain on these
sales, this generally will cause the Fund to recognize a gain it might not
otherwise have recognized if it were to distribute portfolio securities in-kind,
or to recognize such gain sooner than would otherwise be required. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Other ETFs generally are able to make in-kind redemptions and
avoid realizing gains in connection with transactions designed to raise cash to
meet redemption requests. The Fund generally intends to distribute these gains
to shareholders to avoid being taxed on this gain at the Fund level and
otherwise comply with the special tax rules that apply to it. This strategy may
cause shareholders to be subject to tax on gains they would not otherwise be
subject to, or at an earlier date than, if they had made an investment in a
different ETF. Additionally, transactions may have to be carried out over
several days if the securities market is relatively illiquid and may involve
considerable transaction fees and taxes.
Clean
Energy Companies Risk. Companies
involved with green metals may be dependent upon renewable and alternative
energy companies. Renewable and alternative energy companies can be
significantly affected by the following factors: obsolescence, short product
cycles, stricter government regulations and enforcement policies, fluctuations
in energy prices and supply and demand of alternative energy fuels, energy
conservation, the success of exploration projects, the supply of and demand for
oil and gas, world events and economic conditions. In addition, shares of clean
energy companies have been significantly more volatile than shares of companies
operating in other more established industries and the securities included in
the Fund may be subject to sharp price declines. This industry is relatively
nascent and under-researched in comparison to more established and mature
sectors, and should therefore be regarded as having greater investment
risk.
Consumer Discretionary Sector
Risk. The
Fund will be sensitive to, and its performance will depend to a greater extent
on, the overall condition of the consumer discretionary sector. The
consumer discretionary sector comprises companies whose
businesses are sensitive to economic cycles, such as manufacturers of high-end
apparel and automobile and leisure companies. Companies in
the consumer discretionary sector are subject to
fluctuations in supply and demand. These companies may also be adversely
affected by changes in consumer spending as a result of world events, political
and economic conditions, commodity price volatility, changes in exchange rates,
imposition of import controls, increased competition, depletion of resources and
labor relations.
Consumer Staples Sector
Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the consumer staples sector. The
consumer staples sector comprises
companies whose businesses are less sensitive to economic cycles, such as
manufacturers and distributors of food and beverages and producers of
non-durable household goods and personal products. Companies in
the consumer staples sector may be adversely affected by
changes in the worldwide
economy,
consumer spending, competition, demographics and consumer preferences,
exploration and production spending. Companies in this sector are also affected
by changes in government regulation, world events and economic
conditions.
Depositary Receipts
Risk. The
Fund may invest in depositary receipts (including American Depositary Receipts),
which involve similar risks to those associated with investments in foreign
securities. Depositary receipts are receipts listed on U.S. or foreign exchanges
issued by banks or trust companies that entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares. The issuers of
certain depositary receipts are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Investments in
depositary receipts may be less liquid than the underlying shares in their
primary trading market. The issuers of depositary receipts may discontinue
issuing new depositary receipts and withdraw existing depositary receipts at any
time, which may result in costs and delays in the distribution of the underlying
assets to the Fund and may negatively impact the Fund’s
performance.
Derivatives
Risk. Derivatives
and other similar instruments (referred to collectively as “derivatives”) are
financial instruments whose values are based on the value of one or more
reference assets or indicators, such as a security, currency, interest rate, or
index. The Fund’s use of derivatives involves risks different from, and possibly
greater than, the risks associated with investing directly in securities and
other more traditional investments. Moreover, although the value of a derivative
is based on an underlying asset or indicator, a derivative typically does not
carry the same rights as would be the case if the Fund invested directly in the
underlying securities, currencies or other assets.
Derivatives
are subject to a number of risks, such as potential changes in value in response
to market developments or, in the case of “over-the-counter” derivatives, as a
result of a counterparty’s credit quality and the risk that a derivative
transaction may not have the effect the Adviser anticipated. Derivatives also
involve the risk of mispricing or improper valuation and the risk that changes
in the value of a derivative may not achieve the desired correlation with the
underlying asset or indicator. Derivative transactions can create investment
leverage and may be highly volatile, and the Fund could lose more than the
amount it invests. The use of derivatives may increase the amount and affect the
timing and character of taxes payable by shareholders of the Fund.
Many
derivative transactions are entered into “over-the-counter” without a central
clearinghouse; as a result, the value of such a derivative transaction will
depend on, among other factors, the ability and the willingness of the Fund’s
counterparty to perform its obligations under the transaction. If a counterparty
were to default on its obligations, the Fund’s contractual remedies against such
counterparty may be subject to bankruptcy and insolvency laws, which could
affect the Fund’s rights as a creditor (e.g.,
the Fund may not receive the net amount of payments that it is contractually
entitled to receive). Counterparty risk also refers to the related risks of
having concentrated exposure to such a counterparty. A liquid secondary market
may not always exist for the Fund’s derivative positions at any time, and the
Fund may not be able to initiate or liquidate a swap position at an advantageous
time or price, which may result in significant losses. The Fund may also face
the risk that it may not be able to meet margin and payment requirements and
maintain a derivatives position.
Derivatives
are also subject to operational and legal risks. Operational risk generally
refers to risk related to potential operational issues, including documentation
issues, settlement issues, system failures, inadequate controls, and human
errors. Legal risk generally refers to insufficient documentation, insufficient
capacity or authority of counterparty, or legality or enforceability of a
contract.
Under
Rule 18f-4 (the “derivatives rule”), funds need to trade derivatives and other
transactions that create future fund payment or delivery obligations subject to
a value-at-risk (“VaR”) leverage limit, and certain derivatives risk management
program and reporting requirements. Generally, these requirements apply unless a
fund qualifies as a “limited derivatives user,” as defined in the derivatives
rule. Under the derivatives rule, when a fund trades reverse repurchase
agreements or similar financing transactions, including certain tender option
bonds, it needs to aggregate the amount of indebtedness associated with the
reverse repurchase agreements or similar financing transactions with the
aggregate amount of any other senior securities representing indebtedness when
calculating the fund’s asset coverage ratio or treat all such transactions as
derivatives transactions. Reverse repurchase agreements or similar financing
transactions aggregated with other indebtedness do not need to be included in
the calculation of whether a fund is a limited derivatives user, but for funds
subject to the VaR testing, reverse repurchase agreements and similar financing
transactions must be included for purposes of such testing whether treated as
derivatives transactions or not. The Securities and Exchange Commission also
provided guidance in connection with the derivatives rule regarding use of
securities lending collateral that may limit a fund's securities lending
activities. In addition, under the derivatives rule, the Fund is permitted to
invest in a security on a when-issued or forward-settling basis, or with a
non-standard settlement cycle, and the transaction will be deemed not to involve
a senior security under the Investment Company Act of 1940, provided that (i)
the Fund intends to physically settle the transaction and (ii) the transaction
will settle within 35 days of its trade date (the “Delayed-Settlement Securities
Provision”). The Fund may otherwise engage in such transactions that do not meet
the conditions of the Delayed-Settlement Securities Provision so long as the
Fund treats any such transaction as a “derivatives transaction” for purposes of
compliance with the derivatives rule. Furthermore, under the derivatives rule,
the Fund will be permitted to enter into an unfunded commitment agreement, and
such unfunded commitment agreement will not be subject to the asset coverage
requirements under the Investment Company Act of 1940, if the Fund reasonably
believes, at the time it enters into such agreement, that it will have
sufficient cash and cash equivalents to meet its obligations with respect to all
such agreements as they come due.
Emerging
Market Issuers Risk.
Investments in securities of emerging market issuers involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization
of assets, restrictions on and government intervention in international trade,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision making, armed conflict, the impact
on the economy as a result of civil war, crime (including drug violence) and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
Issuers in certain emerging market countries are subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are issuers in more developed markets, and therefore, all material
information may not be available or reliable. Emerging markets are also more
likely than developed markets to experience problems with the clearing and
settling of trades, as well as the holding of securities by local banks, agents
and depositories. Low trading volumes and volatile prices in less developed
markets may make trades harder to complete and settle, and governments or trade
groups may compel local agents to hold securities in designated depositories
that may not be subject to independent evaluation. Local agents are held only to
the standards of care of their local markets. In general, the less developed a
country’s securities markets are, the greater the likelihood of custody
problems. Additionally, each of the factors described below could have a
negative impact on the Fund’s performance and increase the volatility of the
Fund.
Securities
Markets.
Securities markets in emerging market countries are underdeveloped and are often
considered to be less correlated to global economic cycles than those markets
located in more developed countries. Securities markets in emerging market
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. These factors,
coupled with restrictions on foreign investment and other factors, limit the
supply of securities available for investment by the Fund. This will affect the
rate at which the Fund is able to invest in emerging market countries, the
purchase and sale prices for such securities and the timing of purchases and
sales. Emerging markets can experience high rates of inflation, deflation and
currency devaluation. The prices of certain securities listed on securities
markets in emerging market countries have been subject to sharp fluctuations and
sudden declines, and no assurance can be given as to the future performance of
listed securities in general. Volatility of prices may be greater than in more
developed securities markets. Moreover, securities markets in emerging market
countries may be closed for extended periods of time or trading on securities
markets may be suspended altogether due to political or civil unrest. Market
volatility may also be heightened by the actions of a small number of investors.
Brokerage firms in emerging market countries may be fewer in number and less
established than brokerage firms in more developed markets. Since the Fund may
need to effect securities transactions through these brokerage firms, the Fund
is subject to the risk that these brokerage firms will not be able to fulfill
their obligations to the Fund. This risk is magnified to the extent the Fund
effects securities transactions through a single brokerage firm or a small
number of brokerage firms. In addition, the infrastructure for the safe custody
of securities and for purchasing and selling securities, settling trades,
collecting dividends, initiating corporate actions, and following corporate
activity is not as well developed in emerging market countries as is the case in
certain more developed markets.
Political
and Economic Risk.
Certain emerging market countries have historically been subject to political
instability and their prospects are tied to the continuation of economic and
political liberalization in the region. Instability may result from factors such
as government or military intervention in decision making, terrorism, civil
unrest, extremism or hostilities between neighboring countries. Any of these
factors, including an outbreak of hostilities could negatively impact the Fund’s
returns. Limited political and democratic freedoms in emerging market countries
might cause significant social unrest. These factors may have a significant
adverse effect on an emerging market country’s economy.
Many
emerging market countries may be heavily dependent upon international trade and,
consequently, may continue to be negatively affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which it
trades. They also have been, and may continue to be, adversely affected by
economic conditions in the countries with which they trade.
In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of certain emerging market countries’ exports and these economies are
particularly sensitive to fluctuations in commodity prices. Adverse economic
events in one country may have a significant adverse effect on other countries
of this region. In addition, most emerging market countries have experienced, at
one time or another, severe and persistent levels of inflation, including, in
some cases, hyperinflation. This has, in turn, led to high interest rates,
extreme measures by governments to keep inflation in check, and a generally
debilitating effect on economic growth.
Although
inflation in many countries has lessened, there is no guarantee it will remain
at lower levels. The political history of certain emerging market countries has
been characterized by political uncertainty, intervention by the military in
civilian and economic spheres, and political corruption. Such events could
reverse favorable trends toward market and economic reform, privatization, and
removal of trade barriers, and result in significant disruption in securities
markets in the region.
Also,
from time to time, certain issuers located in emerging market countries in which
the Fund invests may operate in, or have dealings with, countries subject to
sanctions and/or embargoes imposed by the U.S. Government and the United
Nations
and/or countries identified by the U.S. Government as state sponsors of
terrorism. As a result, an issuer may sustain damage to its reputation if it is
identified as an issuer which operates in, or has dealings with, such countries.
The Fund, as an investor in such issuers, will be indirectly subject to those
risks.
The
economies of one or more countries in which the Fund may invest may be in
various states of transition from a planned economy to a more market oriented
economy. The economies of such countries differ from the economies of most
developed countries in many respects, including levels of government
involvement, states of development, growth rates, control of foreign exchange
and allocation of resources. Economic growth in these economies may be uneven
both geographically and among various sectors of their economies and may also be
accompanied by periods of high inflation. Political changes, social instability
and adverse diplomatic developments in these countries could result in the
imposition of additional government restrictions, including expropriation of
assets, confiscatory taxes or nationalization of some or all of the property
held by the underlying issuers of securities of emerging market issuers. There
is no guarantee that the governments of these countries will not revert back to
some form of planned or non-market oriented economy, and such governments
continue to be active participants in many economic sectors through ownership
positions and regulation. The allocation of resources in such countries is
subject to a high level of government control. Such countries’ governments may
strictly regulate the payment of foreign currency denominated obligations and
set monetary policy. Through their policies, these governments may provide
preferential treatment to particular industries or companies. The policies set
by the government of one of these countries could have a substantial effect on
that country’s economy.
Investment
and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in such emerging market countries. These restrictions
and/or controls may at times limit or prevent foreign investment in securities
of issuers located or operating in emerging market countries and may inhibit the
Fund’s ability to meet its investment objective. In addition, the Fund may not
be able to buy or sell securities or receive full value for such securities.
Moreover, certain emerging market countries may require governmental approval or
special licenses prior to investments by foreign investors and may limit the
amount of investments by foreign investors in a particular industry and/or
issuer; may limit such foreign investment to a certain class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of such emerging market countries; and/or may impose
additional taxes on foreign investors. A delay in obtaining a required
government approval or a license would delay investments in those emerging
market countries, and, as a result, the Fund may not be able to invest in
certain securities while approval is pending. The government of certain emerging
market countries may also withdraw or decline to renew a license that enables
the Fund to invest in such country. These factors make investing in issuers
located or operating in emerging market countries significantly riskier than
investing in issuers located or operating in more developed countries, and any
one of them could cause a decline in the net asset value of the
Fund.
Additionally,
investments in issuers located in certain emerging market countries may be
subject to a greater degree of risk associated with governmental approval in
connection with the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. Moreover, there is the risk that if
the balance of payments in an emerging market country declines, the government
of such country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in, or
a refusal to grant, required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Furthermore, investments in emerging market countries may require the Fund to
adopt special procedures, seek local government approvals or take other actions,
each of which may involve additional costs to the Fund.
Available
Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the
same rules and regulations as issuers located or operating in more developed
countries. Therefore, there may be less financial and other information publicly
available with regard to issuers located or operating in emerging market
countries and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located or operating in
more developed countries.
Foreign
Currency Considerations.
The Fund’s assets that are invested in securities of issuers in emerging market
countries will generally be denominated in foreign currencies, and the proceeds
received by the Fund from these investments will be principally in foreign
currencies. The value of an emerging market country’s currency may be subject to
a high degree of fluctuation. This fluctuation may be due to changes in interest
rates, the effects of monetary policies issued by the United States, foreign
governments, central banks or supranational entities, the imposition of currency
controls or other national or global political or economic developments. The
economies of certain emerging market countries can be significantly affected by
currency devaluations. Certain emerging market countries may also have managed
currencies which are maintained at artificial levels relative to the U.S. dollar
rather than at levels determined by the market. This type of system can lead to
sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors.
The
Fund’s exposure to an emerging market country’s currency and changes in value of
such foreign currencies versus the U.S. dollar may reduce the Fund’s investment
performance and the value of your investment in the Fund. Meanwhile, the Fund
will compute and expects to distribute its income in U.S. dollars, and the
computation of income will be made on the
date
that the income is earned by the Fund at the foreign exchange rate in effect on
that date. Therefore, if the value of the respective emerging market country’s
currency falls relative to the U.S. dollar between the earning of the income and
the time at which the Fund converts the relevant emerging market country’s
currency to U.S. dollars, the Fund may be required to liquidate certain
positions in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements under the Internal Revenue Code.
The liquidation of investments, if required, could be at disadvantageous prices
or otherwise have an adverse impact on the Fund’s performance.
Certain
emerging market countries also restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no significant
foreign exchange market for many such currencies and it would, as a result, be
difficult for the Fund to engage in foreign currency transactions designed to
protect the value of the Fund’s interests in securities denominated in such
currencies. Furthermore, if permitted, the Fund may incur costs in connection
with conversions between U.S. dollars and an emerging market country’s currency.
Foreign exchange dealers realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a dealer
normally will offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire immediately to resell
that currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through entering into forward, futures or options contracts to purchase or
sell foreign currencies.
Operational
and Settlement Risk.
In addition to having less developed securities markets, emerging market
countries have less developed custody and settlement practices than certain
developed countries. Rules adopted under the Investment Company Act of 1940
permit the Fund to maintain its foreign securities and cash in the custody of
certain eligible non-U.S. banks and securities depositories. Banks in emerging
market countries that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in
certain emerging market countries there may be legal restrictions or limitations
on the ability of the Fund to recover assets held in custody by a foreign
sub-custodian in the event of the bankruptcy of the sub-custodian. Because
settlement systems in emerging market countries may be less organized than in
other developed markets, there may be a risk that settlement may be delayed and
that cash or securities of the Fund may be in jeopardy because of failures of or
defects in the systems. Under the laws in many emerging market countries, the
Fund may be required to release local shares before receiving cash payment or
may be required to make cash payment prior to receiving local shares, creating a
risk that the Fund may surrender cash or securities without ever receiving
securities or cash from the other party. Settlement systems in emerging market
countries also have a higher risk of failed trades and back to back settlements
may not be possible.
The
Fund may not be able to convert a foreign currency to U.S. dollars in time for
the settlement of redemption requests. In the event that the Fund is not able to
convert the foreign currency to U.S. dollars in time for settlement, which may
occur as a result of the delays described above, the Fund may be required to
liquidate certain investments and/or borrow money in order to fund such
redemption. The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Fund’s
performance (e.g.,
by causing the Fund to overweight foreign currency denominated holdings and
underweight other holdings which were sold to fund redemptions). In addition,
the Fund will incur interest expense on any borrowings and the borrowings will
cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
In
certain emerging market countries, the marketability of investments may be
limited due to the restricted opening hours of trading exchanges, and a
relatively high proportion of market value may be concentrated in the hands of a
relatively small number of investors. In addition, because certain emerging
market countries’ trading exchanges on which the Fund’s portfolio securities may
trade are open when the relevant exchanges are closed, the Fund may be subject
to heightened risk associated with market movements. Trading volume may be lower
on certain emerging market countries’ trading exchanges than on more developed
securities markets and securities may be generally less liquid. The
infrastructure for clearing, settlement and registration on the primary and
secondary markets of certain emerging market countries are less developed than
in certain other markets and under certain circumstances this may result in the
Fund experiencing delays in settling and/or registering transactions in the
markets in which it invests, particularly if the growth of foreign and domestic
investment in certain emerging market countries places an undue burden on such
investment infrastructure. Such delays could affect the speed with which the
Fund can transmit redemption proceeds and may inhibit the initiation and
realization of investment opportunities at optimum times.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer’s securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Corporate
and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled
and, consequently, there is a risk of rapid and unpredictable change in laws
regarding foreign investment, securities regulation, title to securities and
securityholders rights. Accordingly, foreign investors may be adversely affected
by new or amended laws and regulations. In addition, the systems of corporate
governance to which emerging market issuers are subject may be less advanced
than those systems to which issuers located in more developed countries are
subject, and therefore, securityholders of issuers located in emerging market
countries may not receive many of the protections available to securityholders
of issuers located in more developed countries. In circumstances where adequate
laws and securityholders rights exist, it may not be possible to obtain swift
and equitable enforcement of the law. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent and subject to sudden change. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited.
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.
Foreign Currency Risk. The
Fund’s exposure to foreign currencies and changes in the value of foreign
currencies versus the U.S. dollar may result in reduced returns for the Fund,
and the value of certain foreign currencies may be subject to a high degree of
fluctuation. The Fund may also incur costs in connection with conversions
between U.S. dollars and foreign currencies.
Several
factors may affect the price of euros and the British pound sterling, including
the debt level and trade deficit of the Economic and Monetary Union and the
United Kingdom, inflation and interest rates of the Economic and Monetary Union
and the United Kingdom and investors’ expectations concerning inflation and
interest rates and global or regional political, economic or financial events
and situations. The European financial markets have experienced, and may
continue to experience, volatility and have been adversely affected by concerns
about economic downturns, credit rating downgrades, rising government debt
levels and possible default on or restructuring of government debt in several
European countries. These events have adversely affected, and may in the future
affect, the value and exchange rate of the euro and may continue to
significantly affect the economies of every country in Europe, including
European Union member countries that do not use the euro and non-European Union
member countries. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the United Kingdom’s withdrawal from the European Union and the
subsequent transition period, there is likely to be considerable uncertainty as
to the United Kingdom’s post-transition framework. Significant uncertainty
exists regarding the effects such withdrawal will have on the euro, European
economies and the global markets. In addition, one or more countries may abandon
the euro and the impact of these actions, especially if conducted in a
disorderly manner, may have significant and far-reaching consequences on the
euro.
The
value of certain emerging market countries’ currencies may be subject to a high
degree of fluctuation. This fluctuation may be due to changes in interest rates,
investors’ expectations concerning inflation and interest rates, the emerging
market country’s debt levels and trade deficit, the effects of monetary policies
issued by the United States, foreign governments, central banks or supranational
entities, the imposition of currency controls or other national or global
political or economic developments. For example, certain emerging market
countries have experienced economic challenges and liquidity issues with respect
to their currency. The economies of certain emerging market countries can be
significantly affected by currency devaluations. Certain emerging market
countries may also have managed currencies which are maintained at artificial
levels relative to the U.S. dollar rather than at levels determined by the
market. This type of system could lead to sudden and large adjustments in the
currency, which in turn, may have a negative effect on the Fund and its
investments.
Foreign
Securities Risk.
Investments in the securities of foreign issuers involve risks beyond those
associated with investments in U.S. securities. These additional risks include
greater market volatility, the availability of less reliable financial
information, higher transactional and custody costs, taxation by foreign
governments, decreased market liquidity and political instability. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s investments.
Foreign market trading hours, clearance and settlement procedures, and holiday
schedules may limit the Fund's ability to buy and sell securities.
Certain
foreign markets that have historically been considered relatively stable may
become volatile in response to changed conditions or new developments. Increased
interconnectivity of world economies and financial markets increases the
possibility that adverse developments and conditions in one country or region
will affect the stability of economies and financial markets in other countries
or regions. Because the Fund may invest in securities denominated in foreign
currencies and some of the income received by the Fund may be in foreign
currencies, changes in currency exchange rates may negatively impact the Fund’s
return.
Foreign
issuers are often subject to less stringent requirements regarding accounting,
auditing, financial reporting and record keeping than are U.S. issuers, and
therefore, not all material information may be available or reliable. Securities
exchanges or foreign governments may adopt rules or regulations that may
negatively impact the Fund’s ability to invest in foreign securities or may
prevent the Fund from repatriating its investments. The Fund may also invest in
depositary receipts which involve similar risks to those associated with
investments in foreign securities. In addition, the Fund may not receive
shareholder communications or be permitted to vote the securities that it holds,
as the issuers may be under no legal obligation to distribute shareholder
communications.
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, organizations, entities
and/or individuals, changes in international trade patterns, trade barriers, and
other protectionist or retaliatory measures. The United States and other nations
or international organizations may impose economic sanctions or take other
actions that may adversely affect issuers of specific countries. Economic
sanctions could, among other things, effectively restrict or eliminate the
Fund’s ability to purchase or sell securities or groups of securities for a
substantial period of time, and may make the Fund’s investments in such
securities harder to value. These sanctions, any future sanctions or other
actions, or even the threat of further sanctions or other actions, may
negatively affect the value and liquidity of the Fund.
Also,
certain issuers located in foreign countries in which the Fund invests may
operate in, or have dealings with, countries subject to sanctions and/or
embargoes imposed by the U.S. Government and the United Nations and/or countries
identified by the U.S. Government as state sponsors of terrorism. As a result,
an issuer may sustain damage to its reputation if it is identified as an issuer
which operates in, or has dealings with, such countries. The Fund, as an
investor in such issuers, will be indirectly subject to those
risks.
Fund Shares Trading, Premium/Discount Risk and Liquidity of
Fund Shares. Disruptions
to creations and redemptions, the existence of market volatility or potential
lack of an active trading market for Shares (including through a trading halt),
as well as
other
factors, may result in Shares trading at a significant premium or discount to
net asset value or to the intraday value of the Fund’s holdings. The net asset
value of the Shares will fluctuate with changes in the market value of the
Fund’s securities holdings. The market price of Shares may fluctuate, in some
cases materially, in accordance with changes in net asset value and the intraday
value of the Fund’s holdings, as well as supply and demand on the Exchange.
Shares may trade below, at or above their net asset value. While the
creation/redemption feature is designed to make it likely that Shares normally
will trade close to the value of the Fund’s holdings, market prices are not
expected to correlate exactly to the Fund’s net asset value due to timing
reasons, supply and demand imbalances and other factors. The price differences
may be due, in large part, to the fact that supply and demand forces at work in
the secondary trading market for Shares may be closely related to, but not
necessarily identical to, the same forces influencing the prices of the
securities of the Fund’s portfolio of investments trading individually or in the
aggregate at any point in time. If a shareholder purchases Shares at a time when
the market price is at a premium to the net asset value or sells Shares at a
time when the market price is at a discount to the net asset value, the
shareholder may pay significantly more or receive significantly less than the
underlying value of the Shares that were bought or sold or the shareholder may
be unable to sell his or her Shares. Any of these factors, discussed above and
further below, may lead to the Shares trading at a premium or discount to the
Fund’s net asset value. In addition, because certain of the Fund’s underlying
securities may trade on exchanges that are closed when the exchange that Shares
of the Fund trade on is open, there are likely to be deviations between the
expected value of an underlying security and the closing security’s price
(i.e.,
the last quote from its closed foreign market) resulting in premiums or
discounts to net asset value that may be greater than those experienced by other
ETFs. In addition, the securities held by the Fund may be traded in markets that
close at a different time than the Exchange. Liquidity in those securities may
be reduced after the applicable closing times. Accordingly, during the time when
the Exchange is open but after the applicable market closing, fixing or
settlement times, bid/ask spreads and the resulting premium or discount to the
Shares’ net asset value may widen. Additionally, in stressed market conditions,
the market for the Fund’s Shares may become less liquid in response to
deteriorating liquidity in the markets for the Fund’s underlying portfolio
holdings.
When
you buy or sell Shares of the Fund through a broker, you will likely incur a
brokerage commission or other charges imposed by brokers. In addition, the
market price of Shares, like the price of any exchange-traded security, includes
a bid/ask spread charged by the market makers or other participants that trade
the particular security. The spread of the Fund’s Shares varies over time based
on the Fund’s trading volume and market liquidity and may increase if the Fund’s
trading volume, the spread of the Fund’s underlying securities, or market
liquidity decrease. In times of severe market disruption, including when trading
of the Fund’s holdings may be halted, the bid/ask spread may increase
significantly. This means that Shares may trade at a discount to the Fund’s net
asset value, and the discount is likely to be greatest during significant market
volatility.
Gold
and Silver Mining Companies Risk.
The Fund invests in stocks and depositary receipts of U.S. and foreign companies
that are involved in the gold mining and silver mining industries, which are
considered speculative and are affected by a variety of factors. Competitive
pressures may have a significant effect on the financial condition of gold
mining and silver mining companies. Also, gold and silver mining companies are
highly dependent on the price of gold bullion and silver bullion, respectively,
but may also be adversely affected by a variety of worldwide economic, financial
and political factors. The price of gold and silver may fluctuate substantially
over short periods of time so the Fund’s Share price may be more volatile than
other types of investments. Fluctuation in the prices of gold and silver may be
due to a number of factors, including changes in inflation, changes in currency
exchange rates and changes in industrial and commercial demand for metals
(including fabricator demand). Additionally, increased environmental or labor
costs may depress the value of metal investments.
The
securities of gold or silver mining companies may under- or over-perform
commodities themselves over the short-term or long-term. Gold bullion and silver
bullion prices may fluctuate substantially over short periods of time, even
during periods of rising prices, so the Fund’s Share price may be more volatile
than other types of investments. To the extent the Fund invests in gold bullion,
such investments may incur higher storage and custody costs as compared to
purchasing, holding and selling more traditional investments. A drop in the
price of gold and/or silver bullion would particularly adversely affect the
profitability of small- and medium- capitalization mining companies and their
ability to secure financing. Mining operations have varying expected life spans,
and companies that have mines with short expected life spans may experience more
stock price volatility. A significant number of the companies in the Fund may be
early stage mining companies that are in the exploration stage only or that hold
properties that might not ultimately produce gold or silver. The exploration and
development of mineral deposits involve significant financial risks over a
significant period of time which even a combination of careful evaluation,
experience and knowledge may not eliminate. Few properties which are explored
are ultimately developed into producing mines. Major expenditures may be
required to establish reserves by drilling and to construct mining and
processing facilities at a site. In addition, many early stage miners operate at
a loss and are dependent on securing equity and/or debt financing, which might
be more difficult to secure for an early stage mining company than for a more
established counterpart. Furthermore, companies that are only in the exploration
stage are typically unable to adopt specific strategies for controlling the
impact of the price of gold or silver.
The
prices of gold and precious metals operation companies are affected by the price
of gold or other precious metals such as platinum, palladium and silver, as well
as other prevailing market conditions. These prices may be volatile, fluctuating
substantially over short periods of time. The prices of precious metals may also
be influenced by macroeconomic conditions, including confidence in the global
monetary system and the relative strength of various currencies, as well as
demand in the industrial and jewelry sectors. In times of significant inflation
or great economic uncertainty, gold, silver and other precious metals may
outperform
traditional investments such as bonds and stocks. However, in times of stable
economic growth, traditional equity and debt investments could offer greater
appreciation potential and the value of gold, silver and other precious metals
may be adversely affected, which could in turn affect the Fund’s returns.
Gold-related investments as a group have not performed as well as the stock
market in general during periods when the U.S. dollar is strong, inflation is
low and general economic conditions are stable. Additionally, returns on
gold-related investments have traditionally been more volatile than investments
in broader equity or debt markets. In addition, some gold and precious metals
mining companies have hedged, to varying degrees, their exposure to decreases in
the prices of gold or precious metals by selling forward future production,
which could limit the company’s benefit from future rises in the prices of gold
or precious metals or increase the risk that the company could fail to meet its
contractual obligations.
A
significant portion of the world’s gold reserves are held by governments,
central banks and related institutions. The production, purchase and sale of
precious metals by governments or central banks or other larger holders can be
negatively affected by various economic, financial, social and political
factors, which may be unpredictable and may have a significant adverse impact on
the supply and prices of precious metals.
The
principal supplies of metal industries also may be concentrated in a small
number of countries and regions, the governments of which may pass laws or
regulations limiting metal investments for strategic or other policy reasons.
Economic, social and political conditions in those countries that are the
largest producers of gold and silver may have a direct negative effect on the
production and marketing of gold and silver and on sales of central bank gold
holdings. Some gold, silver and precious metals mining operation companies may
hedge their exposure to declines in gold, silver and precious metals prices by
selling forward future production, which may result in lower returns during
periods when the prices of gold, silver and precious metals
increase.
The
gold, silver and precious metals industries can be significantly adversely
affected by events relating to international political developments, the success
of exploration projects, commodity prices, tax and government regulations and
intervention (including government restrictions on private ownership of gold and
mining land), changes in inflation or expectations regarding inflation in
various countries and investment speculation. If a natural disaster or other
event with a significant economic impact occurs in a region where the companies
in which the Fund invests operate, such disaster or event could negatively
affect the profitability of such companies and, in turn, the Fund’s investment
in them. Gold and silver mining companies may also be significantly adversely
affected by import controls, worldwide competition, environmental hazards,
liability for environmental damage, depletion of resources, industrial
accidents, underground fires, seismic activity, labor disputes, unexpected
geological formations, availability of appropriately skilled persons,
unanticipated ground and water conditions and mandated expenditures for safety
and pollution control devices.
“Green”
Metals Risk. Investments
in companies involved in the production, refining, processing and recycling of
green metals used to facilitate the energy transition from fossil fuels to
cleaner energy sources and technologies are subject to a variety of risks. Under
certain market conditions, the Fund may underperform as compared to funds that
invest in a broader range of investments. There may be significant differences
in interpretations of what is considered a “green” metal and the definition used
by the Index Provider may differ with those used by other investors, investment
advisers or index providers. In addition, some companies that rely on green
metals may be dependent on government tax incentives and subsidies and on
political support for certain environmental technologies and companies. The
“green” sector may also have challenges such as a limited number of issuers and
limited liquidity in the market. Additionally, there may be a limited supply of
companies involved in green metals, which may adversely affect the
Fund.
Health
Care Sector Risk.
Companies in the health care sector may be affected by extensive government
regulation, restrictions on government reimbursement for medical expenses,
rising costs of medical products and services, pricing pressure, an increased
emphasis on outpatient services, limited number of products, industry
innovation, changes in technologies and other market developments. Many health
care companies are heavily dependent on patent protection. The expiration of
patents may adversely affect the profitability of these companies. Many health
care companies are subject to extensive litigation based on product liability
and similar claims.
Health
care companies are subject to competitive forces that may make it difficult to
raise prices and, in fact, may result in price discounting. Many new products in
the health care sector may be subject to regulatory approvals. The process of
obtaining such approvals may be long and costly. Companies in the health care
sector may be thinly capitalized and may be susceptible to product
obsolescence.
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.
Index-Related
Concentration Risk. The
Fund’s assets may be concentrated in a particular sector or sectors or industry
or group of industries to reflect the Index’s allocation to those types of
securities. The securities of many or all of the companies in the same sector or
industry may decline in value due to developments adversely affecting such
sector or industry. By concentrating its assets in a particular sector or
sectors or industry or group of industries, the Fund is subject to the risk that
economic,
political or other conditions that have a negative effect on those sectors
and/or industries may negatively impact the Fund to a greater extent than if the
Fund’s assets were invested in a wider variety of securities.
Index Tracking Risk. The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs operating expenses, including taxes, not applicable to
the Index and incurs costs associated with buying and selling securities and
entering into derivatives transactions (if applicable), especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index, or (if applicable) raising cash to meet redemptions or deploying
cash in connection with inflows into the Fund. Transaction costs, including
brokerage costs, may decrease the Fund’s net asset value.
Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Index. Unusual market conditions may cause the Index provider to postpone a
scheduled rebalance, which could cause the Index to vary from its normal or
expected composition. There is no assurance that the Index provider or any
agents that may act on its behalf will compile the Index accurately, or that the
Index will be determined, composed or calculated accurately. Errors in respect
of the quality, accuracy and completeness of the data used to compile the Index
may occur from time to time and may not be identified and corrected by the Index
provider, particularly where the indices are less commonly used as benchmarks by
funds or managers. Therefore, gains, losses or costs associated with errors of
the Index provider or its agents will generally be borne by the Fund and its
shareholders. For example, during a period where the Index contains incorrect
constituents, the Fund would have market exposure to such constituents and would
be underexposed to the Index’s other constituents. Such errors may negatively or
positively impact the Fund and its shareholders.
When
the Index is rebalanced and the Fund in turn rebalances its portfolio to attempt
to increase the correlation between the Fund’s portfolio and the Index, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne directly by the Fund and its shareholders. The Fund may not be
fully invested at times either as a result of cash flows into the Fund or
reserves of cash held by the Fund to pay expenses or to meet redemptions. In
addition, the Fund may not invest in certain securities and/or other assets
included in the Index, or invest in them in the exact proportions in which they
are represented in the Index. The Fund’s performance may also deviate from the
return of the Index for a variety of reasons, including legal restrictions or
limitations imposed by the governments of certain countries, certain exchange
listing standards (where applicable), a lack of liquidity in markets in which
such securities trade, potential adverse tax consequences or other regulatory
reasons (such as diversification requirements). A lack of liquidity may be due
to various events, including market events, economic conditions or investor
perceptions. Illiquid securities may be difficult to value and their value may
be lower than the market price of comparable liquid securities, which would
negatively affect the Fund’s performance. Moreover, the Fund may be delayed in
purchasing or selling securities included in the Index. When markets are
volatile, the ability to sell securities at fair value prices may be adversely
impacted and may result in additional trading costs and/or increase the index
tracking risk. To the extent the Fund encounters any issues with regard to
currency convertibility (including the cost of borrowing funds, if any),
repatriation or economic sanctions, such issues may also increase index tracking
risk. The Fund may also need to rely on borrowings to meet redemptions, which
may lead to increased expenses. For tax efficiency purposes, the Fund may sell
certain securities, and such sale may cause the Fund to realize a loss and
deviate from the performance of the Index. The Fund’s performance may also
deviate from the performance of the Index due to the impact of withholding
taxes, late announcements relating to changes to the Index and high turnover of
the Index.
The
Fund may fair value certain of its investments, underlying currencies and/or
other assets. To the extent the Fund calculates its net asset value based on
fair value prices and the value of the Index is based on securities’ closing
prices on local foreign markets (i.e.,
the value of the Index is not based on fair value prices) or if the Fund
otherwise calculates its net asset value based on prices that differ from those
used in calculating the Index, the Fund’s ability to track the Index may be
adversely affected. The need to comply with the tax diversification and other
requirements of the Internal Revenue Code may also impact the Fund’s ability to
track the performance of the Index. In addition, if the Fund utilizes depositary
receipts or other derivative instruments, its return may not correlate as well
with the return of the Index as would be the case if the Fund purchased all the
securities in the Index directly. To the extent the Fund utilizes depositary
receipts, the purchase of depositary receipts may negatively affect the Fund’s
ability to track the performance of the Index and increase tracking error, which
may be exacerbated if the issuer of the depositary receipt discontinues issuing
new depositary receipts or withdraws existing depositary receipts. Actions taken
in response to proposed corporate actions could also result in increased
tracking error. In light of the factors discussed above, the Fund’s return may
deviate significantly from the return of the Index.
Apart
from scheduled rebalances, the Index provider or its agents may carry out
additional ad hoc rebalances to the Index in order, for example, to correct an
error in the selection of index constituents. When the Index is rebalanced and
the Fund in turn rebalances its portfolio to attempt to increase the correlation
between the Fund’s portfolio and the Index, any transaction costs and market
exposure arising from such portfolio rebalancing will be borne directly by the
Fund and its shareholders. Therefore, errors and additional ad hoc rebalances
carried out by the Index provider to the Index may increase the costs to and the
tracking error risk of the Fund.
Index
tracking risk may be heightened during times of increased market volatility or
other unusual market conditions. Changes to the composition of the Index in
connection with a rebalancing or reconstitution of the Index may cause the Fund
to experience increased volatility, during which time the Fund’s index tracking
risk may be heightened.
Industrials
Sector Risk.
The industrials sector comprises companies who produce capital goods used in
construction and manufacturing, such as companies that make and sell machinery,
equipment and supplies that are used to produce other goods. Companies in the
industrials sector may be adversely affected by changes in government
regulation, world events and economic conditions. In addition, companies in the
industrials sector be adversely affected by environmental damages, product
liability claims and exchange rates.
The
stock prices of companies in the industrials sector are affected by supply and
demand both for their specific product or service and for industrial sector
products in general. The products of manufacturing companies may face product
obsolescence due to rapid technological developments and frequent new product
introduction. In addition, the industrials sector may also be adversely affected
by changes or trends in commodity prices, which may be influenced or
characterized by unpredictable factors.
Industry
Concentration Risk.
The Fund’s assets may be concentrated in an industry or group of industries. As
such, the Fund may be subject to greater risks and market fluctuations than a
fund whose portfolio has exposure to a broader range of industries. The Fund may
be susceptible to financial, economic, political or market events, as well as
government regulation, impacting a particular industry.
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.
Initial
Public Offerings Risk.
The Fund may invest in initial public offerings (“IPOs”) of common stock or
other primary or secondary syndicated offerings of equity or debt securities
issued by a corporate issuer. A purchase of IPO securities often involves higher
transaction costs than those associated with the purchase of securities already
traded on exchanges or markets. IPO securities are subject to market risk and
liquidity risk. The market value of recently issued IPO securities may fluctuate
considerably due to factors such as the absence of a prior public market,
unseasoned trading and speculation, a potentially small number of securities
available for trading, limited information about the issuer, and other factors.
The Fund may hold IPO securities for a period of time, or may sell them soon
after the purchase. Investments in IPOs could have a magnified impact – either
positive or negative – on the Fund’s performance while the Fund’s assets are
relatively small. The impact of an IPO on the Fund’s performance may tend to
diminish as the Fund’s assets grow. In circumstances when investments in IPOs
make a significant contribution to the Fund’s performance, there can be no
assurance that similar contributions from IPOs will continue in the
future.
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.
Low
Carbon Energy Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of low carbon (i.e.,
renewable) energy companies. Low carbon energy refers to the generation of power
through environmentally friendly sources that can replace or supplement
traditional fossil-fuel sources and that may reduce the global carbon footprint.
It includes power derived principally from bio fuels (such as ethanol), wind,
solar, hydro and geothermal sources and also includes the various technologies
that support the production, use and storage of these sources.
Renewable
energy companies may be significantly affected by the competition from new and
existing market entrants, obsolescence of technology, short product cycles,
production spending, varying prices and profits, commodity price volatility,
changes in exchange rates, imposition of import controls, depletion of
resources, seasonal weather conditions, technological developments and general
economic conditions, market sentiment, fluctuations in energy prices and supply
and demand of renewable energy fuels, fluctuations in the price of oil and gas,
energy conservation efforts, the success of exploration projects, tax and other
government regulations (such as incentives and subsidies) and international
political events. Additionally, adverse weather conditions may cause
fluctuations in renewable energy generation and adversely affect the cash flows
associated with these assets.
Further,
renewable energy companies may be subject to risks associated with hazardous
materials and can be significantly and adversely affected by legislation
resulting in more strict government regulations and enforcement policies and
specific expenditures for environmental cleanup efforts. There are also risks
associated with a failure to enforce environmental law. If the government
reduces environmental regulations or their enforcement, companies that produce
products designed to provide a clean environment are less likely to prosper.
Renewable energy companies may be more volatile than companies operating in more
established
industries. Certain valuation methods used to value renewable energy companies
have not been in widespread use for a significant period of time. As a result,
the use of these valuation methods may serve to further increase the volatility
of certain renewable and transitional energy company share prices. If government
subsidies and incentives for renewable energy sources are reduced or eliminated,
the demand for renewable energy may decline and cause corresponding declines in
the revenues and profits of renewable energy companies. In addition, changes in
U.S., European and other governments’ policies towards renewable energy
technology also may have an adverse effect on the Fund’s performance.
Furthermore, the Fund may invest in the shares of companies with a limited
operating history, some of which may never have operated profitably. Investment
in young companies with a short operating history is generally riskier than
investing in companies with a longer operating history. The Fund will carry
greater risk and may be more volatile than a portfolio composed of securities
issued by companies operating in a wide variety of different or more established
industries.
Market
Risk.
The prices of securities are subject to the risks associated with investing in
the securities market, including general economic conditions, sudden and
unpredictable drops in value, exchange trading suspensions and closures and
public health risks. These risks may be magnified if certain social, political,
economic and other conditions and events (such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest) adversely interrupt the
global economy; in these and other circumstances, such events or developments
might affect companies world-wide. Overall securities values could decline
generally or underperform other investments. An investment may lose
money.
Medium-Capitalization
Companies Risk.
The Fund may invest in medium-capitalization companies and, therefore will be
subject to certain risks associated with medium- capitalization companies. These
companies are often subject to less analyst coverage and may be in early and
less predictable periods of their corporate existences, with little or no record
of profitability. In addition, these companies often have greater price
volatility, lower trading volume and less liquidity than larger more established
companies. These companies tend to have smaller revenues, narrower product
lines, less management depth and experience, smaller shares of their product or
service markets, fewer financial resources and less competitive strength than
large-capitalization companies. Returns on investments in securities of
medium-capitalization companies could trail the returns on investments in
securities of larger companies.
Micro-Capitalization
Companies Risk.
The Fund may invest in micro-capitalization companies. These companies are
subject to substantially greater risks of loss and price fluctuations because
their earnings and revenues tend to be less predictable (and some companies may
be experiencing significant losses), and their share prices tend to be more
volatile and their markets less liquid than companies with larger market
capitalizations. Micro-capitalization companies may be newly formed or in the
early stages of development, with limited product lines, markets or financial
resources and may lack management depth. In addition, there may be less public
information available about these companies. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell these securities. Also, it may take a long time before
the Fund realizes a gain, if any, on an investment in a micro-capitalization
company.
Mining
Industry Risk.
Companies operating in the mining industry invest in stocks and depositary
receipts of U.S. and foreign companies that are involved in mining and are
subject to certain risks associated with such companies. Investments in mining
companies may be speculative. Competitive pressures may have a significant
effect on the financial condition of such companies. Mining companies are highly
dependent on the price of the underlying metal or element. These prices may
fluctuate substantially over short periods of time so the Fund’s Share price may
be more volatile than other types of investments. In particular, a drop in the
price of gold, silver bullion, steel or rare earth/strategic metals would
particularly adversely affect the profitability of small- and
medium-capitalization mining companies and their ability to secure financing.
Furthermore, companies that are only in the exploration stage are typically
unable to adopt specific strategies for controlling the impact of such price
changes.
Some
of the companies in the Fund’s Index may be early stage mining companies that
are in the exploration stage only or that hold properties that might not
ultimately produce these metals. Exploration and development involves
significant financial risks over a significant period of time which even a
combination of careful evaluation, experience and knowledge may not eliminate.
Few properties which are explored are ultimately developed into producing mines.
Major expenditures may be required to establish reserves by drilling and to
construct mining and processing facilities at a site. In addition, many early
stage miners operate at a loss and are dependent on securing equity and/or debt
financing, which might be more difficult to secure for an early stage mining
company than for a more established counterpart.
MLP
Risk.
An investment in MLP units involves risks that differ from a similar investment
in equity securities, such as common stock, of a corporation. Holders of MLP
units have the rights typically afforded to limited partners in a limited
partnership. Holders of MLP units are subject to certain risks inherent in the
structure of MLPs, including (i) tax risks (described further below), (ii) the
limited ability to elect or remove management or the general partner or managing
member, (iii) limited voting rights, except with respect to extraordinary
transactions, (iv) conflicts of interest between the general partner or managing
member and its affiliates, on the one hand, and the limited partners or members,
on the other hand, including those arising from incentive distribution payments
or corporate opportunities, (v) dilution risks and risks related to the general
partner’s right to require unit-holders to sell their common units at an
undesirable time or price, resulting from regulatory changes or other reasons
and (vi) cash flow risks, as described in more detail in this Prospectus.
General partners typically have limited fiduciary duties to an MLP, which could
allow a
general
partner to favor its own interests over the MLP’s interests. In addition,
general partners of MLPs often have limited call rights that may require
unitholders to sell their common units at an undesirable time or price. MLPs may
issue additional common units without unitholder approval, which would dilute
the interests of existing unitholders, including the Fund’s ownership
interest.
MLP
common units and other equity securities can be affected by factors affecting
the stock market in general, expectations of interest rates, investor sentiment
towards MLPs or the energy sector, changes in a particular issuer’s financial
condition, or unfavorable or unanticipated poor performance of a particular
issuer (in the case of MLPs, generally measured in terms of distributable cash
flow). MLPs holding credit-related investments are subject to interest rate risk
and the risk of default on payment obligations by debt issuers. Certain MLP
securities may trade in lower volumes due to their smaller capitalizations, and
may be subject to more abrupt or erratic price movements and lower market
liquidity. MLP securities are generally considered interest-rate sensitive
investments. During periods of interest rate volatility, these investments may
not provide attractive returns. Prices of common units of individual MLPs and
other equity securities also can be affected by fundamentals unique to the
partnership or company, including cash flow growth, cash generating power and
distribution coverage.
The
Fund derives a significant portion of its cash flow from investments in equity
securities of MLPs. Therefore, the amount of cash that the Fund will have
available to pay or distribute will depend on the ability of the MLPs that the
Fund owns to make distributions to their partners and the tax character of those
distributions. Neither the Fund nor the Adviser has control over the actions of
underlying MLPs. MLPs are subject to various risks related to the underlying
operating companies they control, including dependence upon specialized
management skills and the risk that such companies may lack or have limited
operating histories. Certain MLPs in which the Fund may invest depend upon their
parent or sponsor entities for the majority of their revenues. If the parent or
sponsor entities fail to make payments or satisfy their obligations to an MLP,
the revenues and cash flows of that MLP and ability of that MLP to make
distributions to unit holders such as the Fund would be adversely affected. The
amount of cash that each individual MLP can distribute to its partners will
depend on the amount of cash it generates from operations, which will vary from
quarter to quarter depending on factors affecting the energy infrastructure
market generally and on factors affecting the particular business lines of the
MLP. Available cash will also depend on the MLPs’ level of operating costs
(including incentive distributions to the general partner), level of capital
expenditures, debt service requirements, acquisition costs (if any),
fluctuations in working capital needs and other factors. The Fund expects to
generate significant investment income, and the Fund’s investments may not
distribute the expected or anticipated levels of cash, resulting in the risk
that the Fund may not have the ability to make cash distributions as investors
expect from MLP- focused investments.
Natural
Resources Companies Risk.
Investments in natural resources and natural resources companies, which include
companies engaged in agriculture, alternatives (e.g.,
water and alternative energy), base and industrial metals, energy, forest
products and precious metals, can be significantly affected by events relating
to these industries, including international political and economic
developments, embargoes, tariffs, inflation, weather and natural disasters,
livestock diseases, limits on exploration, rapid changes in the supply of and
demand for natural resources and other factors. The Fund’s portfolio securities
may experience substantial price fluctuations as a result of these factors, and
may move independently of the trends of other operating companies. Companies
engaged in these industries may be adversely affected by changes in government
policies and regulations, technological advances and/or obsolescence,
environmental damage claims, energy conservation efforts, the success of
exploration projects, limitations on the liquidity of certain natural resources
and commodities and competition from new market entrants. Changes in general
economic conditions, including commodity price volatility, changes in exchange
rates, imposition of import controls, rising interest rates, prices of raw
materials and other commodities, depletion of resources and labor relations,
could adversely affect the Fund’s portfolio companies.
Political
risks and the other risks to which foreign securities are subject may also
affect domestic natural resource companies if they have significant operations
or investments in foreign countries. The highly cyclical nature of the natural
resources sector may affect the earnings or operating cash flows of natural
resources companies.
Natural
resources companies engaged in crude oil and natural gas exploration,
development, or production, natural gas gathering and processing, crude oil
refining and transportation and coal mining or sales may be directly affected by
their respective natural resources’ commodities prices. The volatility of, and
interrelationships between, commodity prices can also indirectly affect certain
natural resources companies due to the potential impact on the volume of
commodities transported, processed, stored or distributed. In addition, the
companies in which the Fund invests may also be subject to the risks associated
with the energy and basic materials sectors, including the risks generally
associated with the extraction of natural resources, such as the risks of mining
and drilling. Securities of companies within natural resources can perform
differently than the overall market. This may be due to changes in such things
as the regulatory or competitive environment or to changes in investor
perceptions regarding a particular type of natural resource. Because the Fund
may allocate relatively more assets to certain types of natural resources than
others, the Fund’s performance may be more sensitive to developments which
affect the types of natural resources focused on by the Fund.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and Authorized
Participants
may
step away from making a market in the Shares and in executing creation and
redemption orders, which could cause a material deviation in the Fund’s market
price from its net asset value.
Van
Eck Securities Corporation, the distributor of the Shares, does not maintain a
secondary market in the Shares. Investors purchasing and selling Shares in the
secondary market may not experience investment results consistent with those
experienced by those Authorized Participants creating and redeeming directly
with the Fund.
Decisions
by market makers or Authorized Participants to reduce their role or “step away”
from these activities in times of market stress could inhibit the effectiveness
of the arbitrage process in maintaining the relationship between the underlying
value of the Fund’s portfolio securities and the Fund’s market price. This
reduced effectiveness could result in Fund Shares trading at a price which
differs materially from net asset value and also in greater than normal intraday
bid/ask spreads for Fund Shares.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified” fund under the Investment Company
Act of 1940. The Fund is subject to the risk that it will be more volatile than
a diversified fund because the Fund may invest a relatively high percentage of
its assets in a smaller number of issuers or may invest a larger proportion of
its assets in a single issuer. Moreover, the gains and losses on a single
investment may have a greater impact on the Fund’s net asset value and may make
the Fund more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Nuclear
Energy Companies Risk.
Nuclear energy companies may face considerable risk as a result of incidents and
accidents, breaches of security, ill-intentioned acts of terrorism, natural
disasters (such as floods or earthquakes), equipment malfunctions or mishandling
in storage, handling, transportation, treatment or conditioning of substances
and nuclear materials. Such events could have serious consequences, especially
in case of radioactive contamination and irradiation of the environment, for the
general population, as well as a material, negative impact on the Fund’s
portfolio companies and thus the Fund’s financial situation. In addition,
nuclear energy companies are subject to competitive risk associated with the
prices of other energy sources, such as natural gas and oil, obsolescence of
existing technology, short product cycles, falling prices and profits,
competition from new market entrants and general economic conditions. The price
of uranium may be affected by changes in inflation rates, interest rates,
monetary policy, economic conditions and political stability. In addition,
uranium mining companies may also be significantly affected by import controls,
energy conservation efforts, the success of energy exploration projects,
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control devices. Consumers of nuclear
energy may have the ability to switch between nuclear energy and other energy
sources and, as a result, during periods when competing energy sources are less
expensive, the revenues of nuclear energy companies may decline with a
corresponding impact on earnings.
Nuclear
activity is also subject to particularly detailed and restrictive regulations,
with a scheme for the monitoring and periodic re-examination of operating
authorization, which primarily takes into account nuclear safety, environmental
and public health protection, and also national security considerations
(terrorist threats in particular). These regulations and any future regulations
may be subject to significant tightening by national and international
authorities. There are substantial differences among the regulatory practices
and policies of various jurisdictions, and any given regulatory agency may make
major shifts in policy from time to time. There is no assurance that regulatory
authorities will, in the future, grant rate increases or that such increases
will be adequate to permit the payment of dividends on common stocks issued by a
utility company. Additionally, existing and possible future regulatory
legislation may make it even more difficult for utilities to obtain adequate
relief. Governmental authorities may from time to time review existing policies
and impose additional requirements governing the licensing, construction and
operation of nuclear power plants. This could result in increased operating
costs, which would have a negative impact on the Fund’s portfolio companies and
may cause operating businesses related to nuclear energy to become unprofitable
or impractical to operate.
Uranium
prices are subject to fluctuation. The price of uranium may be affected by
numerous factors beyond the Fund’s control. Such factors include the demand for
nuclear power, political and economic conditions in uranium producing and
consuming countries, uranium supply from secondary sources and uranium
production levels and costs of production. In addition, the prices of crude oil,
natural gas and electricity produced from traditional hydro power and possibly
other undiscovered energy sources could potentially have a negative impact on
the competitiveness of nuclear energy companies in which the Fund
invests.
Securities
of the companies involved in this industry have been significantly more volatile
than securities of companies operating in other more established industries.
Certain valuation methods currently used to value companies involved in the
nuclear power and power technology sectors, particularly those companies that
have not yet traded profitably, have not been in widespread use for a
significant period of time. As a result, the use of these valuation methods may
serve to increase further the volatility of certain alternative power and power
technology company share prices.
Oil
Refining Companies Risk. The
profitability of oil refining companies is related to supply and demand of all
sources of energy. The price of energy, the earnings of oil refining companies,
and the value of such companies’ securities, are subject to significant
volatility. Additionally, the price of oil may experience significant
volatility, which may materially impact oil refining companies. Such companies
are also subject to risks of natural declines in the production of oil and
natural gas fields (which utilize their gathering and processing facilities as a
way to market their production), prolonged declines in the price of natural gas
or crude oil (which curtails drilling activity and therefore production) and
declines in the prices of natural gas liquids and refined petroleum products
(which cause lower processing margins). Changes in commodity prices, exploration
and production spending, interest rates and
exchange
rates, government regulation, the imposition of import controls, world events,
negative perception, depletion of resources, development of alternative energy
sources, technological developments, labor relations and general economic
conditions, as well as market, economic and political risks of the countries
where oil refining companies are located or do business, fluctuations caused by
events relating to international politics, including political instability,
expropriation, social unrest and acts of war, acts of terrorism, economic
sanctions, energy conservation, the success of exploration projects and tax and
other governmental regulatory policies. Changes to U.S. trading policies could
cause friction with certain oil-producing countries and between the governments
of the United States and other major exporters of oil to the United
States.
Oil
refining companies are also subject to risks related to environmental damage,
injury to persons and loss of life or the destruction of property, any of which
could expose such companies to the risk of litigation, clean-up or other
remedial costs and disruption of operations. Additionally, oil refining
companies are vulnerable to disruptions in operations, including those due to
weather-related events such as hurricanes and transportation-related disruptions
that may affect the flow of oil to the oil refining companies. Oil refining
companies operate in a highly competitive and cyclical industry, with intense
price competition. The operations of oil refineries are subject to stringent and
complex federal, state and local environmental laws and regulations. New and
more stringent environmental and health and safety laws, regulations and permit
requirements or stricter interpretations of current laws or regulations could
impose substantial additional costs on companies in which the Fund invests. On
the other hand, even regulatory changes such as the implementation of policies
with less stringent environmental protection standards and those geared away
from sustainable energy development could lead to fluctuations in supply, demand
and prices of oil and gas. Moreover, failure to comply with any such
requirements could have a material adverse effect on a company, and there can be
no assurance that companies will at all times comply with all applicable
environmental laws, regulations and permit requirements. A significant portion
of an oil refining company’s revenues may depend on a relatively small number of
customers, including governmental entities and utilities.
Oil
Services Companies Risk. The
profitability of oil services companies is related to worldwide energy prices,
including all sources of energy, and exploration and production costs. The price
of energy, the earnings of oil services companies, and the value of such
companies’ securities are subject to significant volatility. Oil services
companies may have significant capital investments in, or engage in transactions
involving, emerging market countries, which may heighten these risks. Oil
services companies are also subject to risks of changes in exchange rates and
the price of oil and gas, changes in prices for competitive energy services,
changes in the global supply of and demand for oil and gas, the imposition of
import controls, world events, actions of OPEC, negative perception and
publicity, depletion of resources and general economic conditions, development
of alternative energy sources, energy conservation efforts, technological
developments and labor relations, as well as market, economic, social and
political risks of the countries where oil services companies are located or do
business. The values of securities of oil services companies are subject to
swift price and supply fluctuations caused by events relating to international
politics, including political instability, expropriation, social unrest and acts
of war, energy conservation, the success of exploration projects and tax and
other governmental regulatory policies. Oil services companies may also be
subject to contractual fixed pricing, which may increase the cost of business
and limit these companies’ earnings. Additionally, a significant portion of the
revenues of these companies depend on a relatively small number of customers,
including governmental entities and utilities. As a result, governmental budget
restraints may have a material adverse effect on the stock prices of companies
in the industry. Oil services companies operate in a highly competitive and
cyclical industry, with intense price competition.
Oil
services companies are exposed to significant and numerous operating hazards.
Oil services companies’ operations are subject to hazards inherent in the oil
and gas industry, such as fire, explosion, blowouts, loss of well control, oil
spills, pipeline and equipment leaks and ruptures and discharges or releases of
toxic or hazardous gases. Oil and gas exploration and production can be
significantly affected by natural disasters and adverse weather conditions in
the regions in which they operate. The revenues of oil services companies may be
negatively impacted by contract termination and renegotiation. In the oil
services sector, it is customary for contracts to provide for either automatic
termination or termination at the option of the customer if the drilling unit is
destroyed or lost or if drilling operations are suspended for a specified period
of time as a result of events beyond the control of either party or because of
equipment breakdowns. In periods of depressed market conditions, the customers
of oil services companies may not honor the terms of existing contracts and may
terminate contracts or seek to renegotiate contract rates and terms to reduce
their obligations.
Oil
services companies are subject to, and may be adversely affected by, extensive
federal, state, local and foreign laws, rules and regulations. Oil services
companies may also be adversely affected by environmental damage claims and
other types of litigation. Laws and regulations protecting the environment may
expose oil services companies to liability for the conduct of or conditions
caused by others or for acts that complied with all applicable laws at the time
they were performed. Changes to environmental protection laws, including the
implementation of policies with less stringent environmental protection
standards and those geared away from sustainable energy development, could lead
to fluctuations in supply, demand and prices of oil and gas. The international
operations of oil services companies expose them to risks associated with
instability and changes in economic and political conditions, foreign currency
fluctuations, changes in interest rates, changes in foreign regulations and
other risks inherent to international business. Additionally, changes to U.S.
trading policies could cause friction with certain oil producing countries and
between the governments of the United States and other major exporters of oil to
the United States. Some oil services companies are engaged in other lines of
business unrelated to oil services, and they may experience problems with these
lines of business
which
could adversely affect their operating results. The operating results of these
companies may fluctuate as a result of these additional risks and events in the
other lines of business. In addition, a company’s ability to engage in new
activities may expose it to business risks with which it has less experience
than it has with the business risks associated with its traditional businesses.
Despite a company’s possible success in traditional oil services activities,
there can be no assurance that the other lines of business in which these
companies are engaged will not have an adverse effect on a company’s business or
financial condition.
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.
Rare
Earth and Strategic Metals Companies Risk. Rare
earth/strategic metals are industrial metals that are typically mined as
by-products or secondary metals in operations focused on precious metals and
base metals. Compared to base metals, they have more specialized uses and are
often more difficult to extract. Rare earth metals (or rare earth elements), a
subset of strategic metals, are a collection of chemical elements that are
crucial to many of the world’s most advanced technologies. Rare earth/strategic
metals are used in a variety of technologies including, but not limited to,
cellular phones, high performance batteries, flat screen televisions, and green
energy technology such as wind, solar and geothermal, and are expected to be
critical to the future of hybrid and electric cars, high-tech military
applications including radar, missile guidance systems, navigation and night
vision, and superconductors and fiber-optic communication systems.
The
demand for strategic metals has from time to time strained supply, and there is
a risk of a shortage of such materials in the world, which could adversely
affect the companies in the Fund’s portfolio. Competitive pressures may have a
significant effect on the financial condition of companies involved in the
various activities that are related to the producing, refining and recycling of
rare earth/strategic metals. Also, these companies are highly dependent on the
demand for and price of rare earth/strategic metals, which may fluctuate
substantially over short periods of time, so the Fund’s Share price may be more
volatile than other types of investments.
Companies
involved in the various activities that are related to the producing, refining
and recycling of rare earth/strategic metals tend to be small- to
medium-capitalization companies with volatile share prices and can be
significantly affected by events relating to changes in the level of industrial
activity, disruptions in mining, storing and refining the metals, adjustments to
inventory, variations in production costs, regulatory compliance costs,
international political and economic developments, energy conservation efforts,
the success of exploration projects, commodity prices, tax and other government
regulations, depletion of resources, and mandated expenditures for safety and
pollution control devices. Moreover, some companies may be subject to the risks
generally associated with extraction of natural resources, such as the risks of
mining, and the risks of the hazards associated with metals and mining, such as
fire, drought, and increased regulatory and environmental costs. These companies
may also be significantly affected by the conditions and events that occur in
the regions that the companies to which the Fund has exposure operate. The
producing, refining and recycling of rare earth/strategic metals can be capital
intensive and, if companies involved in such activities are not managed well,
the share prices of such companies could decline even as prices for the
underlying rare earth/strategic metals are rising. In addition, companies
involved in the various activities that are related to the producing, refining
and recycling of rare earth/strategic metals may be at risk for environmental
damage claims. Furthermore, demand for rare earth/strategic metals may change
rapidly and unpredictably, including as a result of the development of less
expensive alternatives.
Regulatory
Action and Changes in Governments Risk.
The producing, refining and recycling of rare earth/strategic metals will be
significantly affected by regulatory action and changes in governments. Actions
by countries essential to the producing, refining and recycling of rare
earth/strategic metals to limit exports could have a significant adverse effect
on industries around the globe and on the values of the businesses in which the
Fund invests.
Relationship
to Commodities.
The Fund’s Index measures the performance of equity securities of companies in
the gold and silver mining, rare earth/strategic metals, steel, oil & gas
and uranium industries, as applicable. Commodities markets have historically
been extremely volatile, and commodity prices are affected by various factors,
including changes in overall market movements, commodity index volatility,
changes in interest rates, or factors affecting a particular industry or
commodity, such as
weather,
embargoes, tariffs and international economic, political and regulatory
developments. The Fund’s Index does not measure the performance of direct
investments in gold, silver, rare earth/strategic metals, steel or uranium (as
applicable) and, therefore, may not move in the same direction and to the same
extent as direct investments in the underlying commodities.
Shareholder
Risk. Certain
shareholders, including other funds advised by the Adviser, may from time to
time own a substantial amount of the Fund’s Shares. In addition, a third party
investor, the Adviser or an affiliate of the Adviser, an Authorized Participant,
a market maker, or another entity may invest in the Fund and hold its investment
for a limited period of time. There can be no assurance that any large
shareholder would not redeem its investment. Redemptions by shareholders could
have a negative impact on the Fund. In addition, transactions by large
shareholders may account for a large percentage of the trading volume on the
exchange and may, therefore, have a material effect on the market price of the
Shares.
Small-
and Medium-Capitalization Companies Risk.
The Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and medium-
capitalization companies. These companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Special
Purpose Acquisition Companies Risk.
Equity securities in which the Fund invests include stock, rights, warrants, and
other interests in special purpose acquisition companies (“SPACs”) or similar
special purpose entities. A SPAC is typically a publicly traded company that
raises investment capital via an initial public offering for the purpose of
acquiring one or more existing companies (or interests therein) via merger,
combination, acquisition or other similar transactions. If the Fund purchases
shares of a SPAC in an initial public offering it will generally bear a sales
commission, which may be significant. The shares of a SPAC are often issued in
“units” that include one share of common stock and one right or warrant (or
partial right or warrant) conveying the right to purchase additional shares or
partial shares. In some cases, the rights and warrants may be separated from the
common stock at the election of the holder, after which they may become freely
tradeable. After going public and until a transaction is completed, a SPAC
generally invests the proceeds of its initial public offering (less a portion
retained to cover expenses) in U.S. Government securities, money market
securities and cash. To the extent the SPAC is invested in cash or similar
securities, this may impact the Fund’s ability to meet its investment objective.
If a SPAC does not complete a transaction within a specified period of time
after going public, the SPAC is typically dissolved, at which point the invested
funds are returned to the SPAC’s shareholders (less certain permitted expenses)
and any rights or warrants issued by the SPAC expire worthless. SPACs generally
provide their investors with the option of redeeming an investment in the SPAC
at or around the time of effecting a transaction. In some cases, the Fund may
forfeit its right to receive additional warrants or other interests in the SPAC
if it redeems its interest in the SPAC in connection with a transaction. Because
SPACs often do not have an operating history or ongoing business other than
seeking a transaction, the value of their securities may be particularly
dependent on the quality of its management and on the ability of the SPAC’s
management to identify and complete a profitable transaction. Some SPACs may
pursue transactions only within certain industries or regions, which may
increase the volatility of an investment in them. In addition, the securities
issued by a SPAC, which may be traded in the over-the-counter market, may become
illiquid and/or may be subject to restrictions on resale. Other risks of
investing in SPACs include that a significant portion of the monies raised by
the SPAC may be expended during the search for a target transaction; an
attractive transaction may not be identified at all (or any requisite approvals
may not be obtained) and the SPAC may be required to return any remaining monies
to shareholders; a transaction once identified or effected may prove
unsuccessful and an investment in the SPAC may lose value; the warrants or other
rights with respect to the SPAC held by the Fund may expire worthless or may be
repurchased or retired by the SPAC at an unfavorable price; and an investment in
a SPAC may be diluted by additional later offerings of interests in the SPAC or
by other investors exercising existing rights to purchase shares of the
SPAC.
Special
Risk Considerations of Investing in African Issuers. Investments
in securities of African issuers, including issuers located outside of Africa
that generate significant revenues from Africa, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in
international trade, confiscatory taxation, political instability, including
authoritarian and/or military involvement in governmental decision making, armed
conflict, terrorism, infectious disease outbreaks, strained international
relations related to border disputes, the impact on the economy as a result of
civil war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest and, in certain countries, genocidal warfare. Unanticipated
political or social developments may result in sudden and significant investment
losses. Additionally, Africa is located in a part of the world that has
historically been prone to natural disasters, such as droughts, and is
economically sensitive to environmental events.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than those markets located in more
developed countries or geographic regions. A subset of African emerging market
countries are considered to be “frontier markets.” Frontier market countries
generally have smaller economies and less developed capital markets than
traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in
frontier
market countries. In addition, there may be no single centralized securities
exchange on which securities are traded. As a result, securities markets in
Africa are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. Additionally,
certain countries in Africa generally have less developed capital markets than
traditional emerging market countries and, consequently, the risks of investing
in foreign securities are magnified in such countries. There may also be a high
concentration of trading volume in a small number of issuers, investors and
financial intermediaries representing a limited number of sectors or industries.
Brokers may be fewer in number and less well capitalized than brokers in more
developed regions. Moreover, trading on securities markets may be suspended
altogether.
Certain
economies in African countries depend to a significant degree upon exports of
primary commodities such as agricultural products, gold, silver, copper,
diamonds and oil. These economies therefore are vulnerable to changes in
commodity prices, which in turn may be affected by a variety of factors.
Additionally, certain issuers in which the Fund invests may operate in, or have
dealings with, countries subject to sanctions and/or embargoes imposed by the
U.S. government and the United Nations. As a result, an issuer may sustain
damage to its reputation if it is identified as an issuer which operates in, or
had dealings with, such countries. The Fund, as an investor in such issuers,
will be indirectly subject to those risks.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. For example, there may be prohibitions or substantial
restrictions on foreign investing in the capital markets of certain countries in
Africa or in certain sectors or industries of such countries. Moreover, certain
countries in Africa may require governmental approval or special licenses prior
to investments by foreign investors and may limit the amount of investments by
foreign investors in a particular industry and/or issuer and may limit such
foreign investment to a certain class of securities of an issuer that may have
less advantageous rights than the classes available for purchase by
domiciliaries of those countries and/or impose additional taxes on foreign
investors. A delay in obtaining a government approval or a license would delay
investments in a particular country, and, as a result, the Fund may not be able
to invest in certain securities while approval is pending. The government of a
particular country may also withdraw or decline to renew a license that enables
the Fund to invest in such country.
The
governments of certain countries in Africa may exercise substantial influence
over many aspects of the private sector and may own or control many companies.
Future government actions could have a significant effect on the economic
conditions in such countries, which could have a negative impact on private
sector companies. There is also the possibility of diplomatic developments that
could adversely affect investments in certain countries in Africa. Some
countries in Africa may be affected by a greater degree of public corruption and
crime.
Some
investors have suffered losses due to the inability of the newly privatized
entities to adjust quickly to a competitive environment or to changing
regulatory and legal standards. Additionally, certain African countries, such as
South Africa, are characterized by a two-tiered economy, with one rivaling
developed countries and the other exhibiting many characteristics of developing
countries. This accounts for an uneven distribution of wealth and income and
high rates of unemployment. Although economic reforms have been enacted to
promote growth and foreign investments, there can be no assurance that these
programs will achieve the desired results.
Investing
in certain African countries involves risks of less uniformity in accounting and
reporting requirements, less reliable securities valuation, and greater risk
associated with custody of securities than investing in developed countries.
Less information may be available about companies in which the Fund invests
because many African companies are not subject to uniform accounting, auditing
and financial reporting standards, or to other regulatory practices and
requirements required of U.S. companies. These factors, among others, make
investing in issuers located or operating in countries in Africa significantly
riskier than investing in issuers located or operating in more developed
countries, and any one of them could cause a decline in the value of the Fund’s
Shares.
There
may be a risk of loss due to the imposition of restrictions on repatriation of
capital invested. In addition, certain African countries have currencies pegged
to the U.S. dollar. If such currency pegs are abandoned, such abandonment could
cause sudden and significant currency adjustments, which could impact the Fund’s
investment returns in those countries. There may be limitations or delays in the
convertibility or repatriation of certain African currencies, which would
adversely affect the U.S. dollar value and/or liquidity of the Fund’s
investments denominated in such African currencies, may impair the Fund’s
ability to achieve its investment objective and/or may impede the Fund’s ability
to satisfy redemption requests in a timely manner. For these or other reasons,
the Fund could seek to suspend redemptions of Creation Units, including in the
event that an emergency exists in which it is not reasonably practicable for the
Fund to dispose of its securities or to determine its net asset value. The Fund
could also, among other things, limit or suspend creations of Creation Units.
During the period that creations or redemptions are affected, the Fund’s shares
could trade at a significant premium or discount to their net asset value. In
the case of a period during which creations are suspended, the Fund could
experience substantial redemptions, which may exacerbate the discount to net
asset value at which the Fund’s shares trade, cause the Fund to experience
increased transaction costs, and cause the Fund to make greater taxable
distributions to shareholders of the Fund. When the Fund holds illiquid
investments, its portfolio may be harder to value. Political and social unrest
in certain regions of Africa may negatively affect the value of an investment in
the Fund.
Special
Risk Considerations of Investing in Asian Issuers. Investments
in securities of Asian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Many Asian
economies have experienced rapid growth and industrialization in recent years,
but there is no assurance that this growth rate will be maintained. Certain
Asian economies have experienced over-extension of credit, currency devaluations
and restrictions, high unemployment, high inflation, decreased exports and
economic recessions. Geopolitical hostility, political instability, as well as
economic or environmental events in any one Asian country can have a significant
effect on the entire Asian region as well as on major trading partners outside
Asia, and any adverse effect on some or all of the Asian countries and regions
in which the Fund invests. The securities markets in some Asian economies are
relatively underdeveloped and may subject the Fund to higher action costs or
greater uncertainty than investments in more developed securities markets. Such
risks may adversely affect the value of the Fund’s investments. Certain Asian
countries have also developed increasingly strained relationships with the U.S.,
and if these relations were to worsen, they could adversely affect Asian issuers
that rely on the U.S. for trade.
Governments
of many Asian countries have implemented significant economic reforms in order
to liberalize trade policy, promote foreign investment in their economies,
reduce government control of the economy and develop market mechanisms. There
can be no assurance these reforms will continue or that they will be effective.
Despite recent reform and privatizations, significant regulation of investment
and industry is still pervasive in many Asian countries and may restrict foreign
ownership of domestic corporations and repatriation of assets, which may
adversely affect the Fund’s investments. Governments in some Asian countries are
authoritarian in nature, have been installed or removed as a result of military
coups or have periodically used force to suppress civil dissent. Disparities of
wealth, the pace and success of democratization, and ethnic, religious and
racial disaffection have led to social turmoil, violence and labor unrest in
some countries. Unanticipated or sudden political or social developments may
result in sudden and significant investment losses. Investing in certain Asian
countries involves risk of loss due to expropriation, nationalization, or
confiscation of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested. In addition, several
countries in Asia may be impacted by the occurrence of global events such as
war, terrorism, environmental disasters, natural disasters or events, country
instability, and infectious disease epidemics and pandemics.
Special
Risk Considerations of Investing in Australian Issuers. Investments
in securities of Australian issuers, including issuers located outside of
Australia that generate significant revenues from Australia, involve risks
and special considerations not typically associated with investments in the U.S.
securities markets. Investments in Australian issuers may subject the Fund to
regulatory, political, currency, security, and economic risk specific to
Australia. The Australian economy is heavily dependent on exports from the
agricultural and mining sectors. As a result, the Australian economy is
susceptible to fluctuations in the commodity markets. The Australian economy is
also becoming increasingly dependent on its growing services industry. The
Australian economy is dependent on trading with key trading partners, including
the United States, China, Japan, Singapore and certain European countries.
Reduction in spending on Australian products and services, or changes in any of
the economies, may cause an adverse impact on the Australian
economy.
Additionally,
Australia is located in a part of the world that has historically been prone to
natural disasters, such as hurricanes, droughts and bushfires, and is
economically sensitive to environmental events. Any such event may adversely
impact the Australian economy, causing an adverse impact on the value of the
Fund.
Special
Risk Considerations of Investing in 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 Canadian Issuers. Investments
in securities of Canadian issuers, including issuers located outside of Canada
that generate significant revenue from Canada, involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. The Canadian economy is very dependent on the demand for, and supply
and price of, natural resources. The Canadian market is relatively concentrated
in issuers involved in the production and distribution of natural resources.
There is a risk that any changes in natural resources sectors could have an
adverse impact on the Canadian economy. Additionally, the Canadian economy is
heavily dependent on relationships with certain key trading partners, including
the United States, countries in the European Union and China. Because the United
States is Canada’s largest trading partner and foreign investor, the Canadian
economy is dependent on and may be significantly affected by the U.S. economy.
Reduction in spending on Canadian products and services or changes in the U.S.
economy may adversely impact the Canadian economy. Trade agreements may further
increase Canada’s dependency on the U.S. economy, and uncertainty as to the
future of such trade agreements may cause a decline in the value of the Fund’s
Shares. Past periodic demands by the Province of Quebec for sovereignty have
significantly affected equity valuations and foreign currency movements in the
Canadian market and such demands may have this effect in the future. In
addition, certain sectors of Canada’s economy may be subject to foreign
ownership limitations. This may negatively impact the Fund’s ability to
invest in Canadian issuers and to pursue its investment objective.
Special
Risk Considerations of Investing in Chinese Issuers. Investments
in securities of Chinese issuers, including issuers outside of China that
generate significant revenues from China, involve certain risks and
considerations not typically associated with investments in U.S securities.
These risks include among others (i) more frequent (and potentially widespread)
trading suspensions and government interventions with respect to Chinese issuers
resulting in a lack of liquidity and in price volatility, (ii) currency
revaluations and other currency exchange rate fluctuations or blockage, (iii)
the nature and extent of intervention by the Chinese government in the Chinese
securities markets, whether such intervention will continue and the impact of
such intervention or its discontinuation, (iv) the risk of nationalization or
expropriation of assets, (v) the risk that the Chinese government may decide not
to continue to support economic reform programs, (vi) limitations on the use of
brokers, (vii) higher rates of inflation, (viii) greater political, economic and
social uncertainty, (ix) market volatility caused by any potential regional or
territorial conflicts or natural or other disasters, and (x) the risk of
increased trade tariffs, embargoes, sanctions, investment restrictions and other
trade limitations. Certain securities are, or may in the future become
restricted, and the Fund may be forced to sell such securities and incur a loss
as a result. In addition, the economy of China differs, often unfavorably, from
the U.S. economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, interest
rates, allocation of resources and capital reinvestment, among others. The
Chinese central government has historically exercised substantial control over
virtually every sector of the Chinese economy through administrative regulation
and/or state ownership and actions of the Chinese central and local government
authorities continue to have a substantial effect on economic conditions in
China. In addition, the Chinese government has from time to time taken actions
that influence the prices at which certain goods may be sold, encourage
companies to invest or concentrate in particular industries, induce mergers
between companies in certain industries and induce private companies to publicly
offer their securities to increase or continue the rate of economic growth,
control the rate of inflation or otherwise regulate economic expansion. The
Chinese government may do so in the future as well, potentially having a
significant adverse effect on economic conditions in China.
Special
Risk Considerations of Investing in European Issuers. Investments
in securities of European issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. The
Economic and Monetary Union of the European Union requires member countries to
comply with restrictions on inflation rates, deficits, interest rates, debt
levels and fiscal and monetary controls, each of which may significantly affect
every country in Europe. Decreasing imports or exports, changes in governmental
or European Union regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by a European Union member country on its
sovereign debt, and/or an economic recession in a European Union member country
may have a significant adverse effect on the economies of other European Union
countries and on major trading partners outside Europe. If any member country
exits the Economic and Monetary Union, the departing country would face the
risks of currency devaluation and its trading partners and banks and others
around the world that hold the departing country’s debt would face the risk of
significant losses. The European financial markets have previously experienced,
and may continue to experience, volatility and have been adversely affected, and
may in the future be affected, by concerns about economic downturns, credit
rating downgrades, rising government debt levels and possible default on or
restructuring of government debt in several European countries. These events
have adversely affected, and may in the future affect, the value and exchange
rate of the euro and may continue to significantly affect the economies of every
country in Europe, including European Union member countries that do not use the
euro and non-European Union member countries. The United Kingdom withdrew from
the European Union on January 31, 2020, which has resulted in ongoing market
volatility and caused additional market disruption on a global basis. On
December 30, 2020, the United Kingdom and the European Union signed the EU-UK
Trade and Cooperation Agreement, which is an agreement on the terms governing
certain aspects of the European Union's and the United Kingdom's relationship
post Brexit. Notwithstanding the EU-UK Trade and Cooperation Agreement,
following the transition period, there is likely to be considerable uncertainty
as to the United Kingdom’s post-transition framework.
Responses
to the financial problems by European governments, central banks and others,
including austerity measures and reforms, may not work, may result in social
unrest and may limit future growth and economic recovery or have other
unintended consequences. The governments of European Union countries may be
subject to change and such countries may experience social and political unrest.
Unanticipated or sudden political or social developments may result in sudden
and significant investment losses. The occurrence of terrorist incidents,
outbreaks of war or ongoing regional armed conflict throughout Europe also could
impact financial markets. Further defaults or restructurings by governments and
other entities of their debt could have additional adverse effects on economies,
financial markets and asset valuations around the world. In addition, one or
more countries may abandon the euro and/or withdraw from the European Union. The
impact of these actions, especially if they occur in a disorderly fashion, is
not clear but could be significant and far-reaching.
Special
Risk Considerations of Investing in Japanese Issuers.
Investments in securities of Japanese issuers, including issuers located outside
of Japan that generate significant revenues from Japan, involve risks and
special considerations not typically associated with investments in the U.S.
securities markets. The Fund’s performance is expected to be closely tied to
social, political, and economic conditions within Japan and to be more volatile
than the performance of more geographically diversified funds. The risks of
investing in the securities of Japanese issuers include lack of natural
resources, fluctuations or shortages in the commodity markets, new trade
regulations, decreasing U.S. imports and changes in the U.S. dollar exchange
rates. Japan is located in a part of the world that has historically been prone
to natural disasters such as earthquakes, volcanoes and tsunamis and is
economically sensitive to environmental events. Any such event could result in a
significant adverse impact on the Japanese economy. In addition, such disasters,
and the resulting damage, could impair the long-term ability of issuers in which
the Fund invests to conduct their businesses in the manner normally
conducted.
Because
the Fund’s assets will be invested primarily in securities of Japanese issuers,
a significant portion of its assets will be denominated in Japanese yen. The
Fund’s exposure to the Japanese yen and changes in value of the Japanese yen
versus the U.S. dollar may result in reduced returns for the Fund. Moreover, the
Fund may incur costs in connection with conversions between U.S. dollars and
Japanese yen.
Special
Risk Considerations of Investing in 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 South African Issuers.
Investments in securities of South African issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. South Africa’s economy exhibits characteristics of both a developed
country and a developing country and has historically experienced extremely
uneven distribution of wealth and income and high rates of unemployment. This
may cause civil and social unrest, which could adversely impact the South
African economy. Although economic reforms such as privatization have been
enacted to promote growth and foreign investments, there can be no assurance
that these programs will achieve the desired results. The securities markets in
South Africa are subject to greater risks associated with market volatility,
lower market capitalization, lower trading volume, illiquidity, inflation,
greater price fluctuations, uncertainty regarding the existence of trading
markets, governmental control and heavy regulation of labor and industry. In
addition, South Africa’s currency has at times been at risk of devaluation due
to inadequate foreign currency reserve. While economic reforms have been enacted
in recent periods, there can be no assurance that these reforms will achieve the
intended results. Furthermore, adverse social and economic conditions in a
neighboring country may have a significant adverse effect on South Africa.
Additionally, the agriculture and mining sectors of South Africa’s economy
account for a large portion of its exports, and thus the South African economy
is susceptible to fluctuations in these commodity markets. South Africa is
located in a part of the world that has historically been prone to natural
disasters, such as droughts, and is economically sensitive to environmental
events. Any such event may adversely impact South Africa’s economy or business
operations of companies in South Africa, causing an adverse impact on the value
of the Fund.
Steel
Companies Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of steel companies. Because the Fund primarily
invests in stocks and depositary receipts of companies that are involved in a
variety of activities related to steel production, it is subject to certain
risks associated with such companies. Competitive pressures may have a
significant effect on the financial condition of steel companies. Also, these
companies are highly dependent on the price of steel. These prices may fluctuate
substantially over short periods of time, so the Fund’s Share price may be more
volatile than other types of investments. These companies are also affected by
changes in government regulation, tariffs and trade disputes, world events and
economic conditions. Steel companies may benefit from government subsidies or
certain trade protections. If those subsidies or trade protections are reduced
or removed, the profits of steel companies may be affected, potentially
drastically. In addition, these companies are at risk for environmental damage
claims. Weather conditions, a strong or weak domestic economy, political
instability and conservation efforts may affect the demand for steel. Companies
involved in the manufacturing and storage of iron and steel products are also
impacted by the level and volatility of commodity prices, the exchange value of
the dollar, changing government regulations, import controls, worldwide
competition, innovation within the industry that may render a company’s products
obsolete, depletion of resources and mandated expenditures for safety and
pollution control devices. Production of industrial materials such as steel
often exceeds demand as a result of over-building or economic downturns, which
may lead to poor investment returns.
Stock
Connect Risk. The
Fund may invest in A-shares listed and traded on the Shanghai Stock Exchange and
the Shenzhen Stock Exchange through Stock Connect, or on such other stock
exchanges that participate in Stock Connect from time to time or in the future.
Trading through Stock Connect is subject to a number of restrictions that may
affect the Fund’s investments and returns. For example, trading through Stock
Connect is subject to daily quotas that limit the maximum daily net purchases on
any particular day, which may restrict or preclude the Fund’s ability to invest
in Stock Connect A-shares. In addition, investments made through Stock Connect
are subject to trading, clearance and settlement procedures that are relatively
untested in the PRC, which could pose risks to the Fund. Furthermore, securities
purchased via Stock Connect will be held via a book entry omnibus account in the
name of HKSCC, Hong Kong’s clearing entity, at the CSDCC. The Fund’s ownership
interest in Stock Connect securities will not be reflected directly in book
entry with CSDCC and will instead only be reflected on the books of its Hong
Kong sub-custodian. The Fund may therefore depend on HKSCC’s ability or
willingness as record-holder of Stock Connect securities to enforce the Fund’s
shareholder rights. PRC law did not historically recognize the concept of
beneficial ownership; while PRC regulations and the Hong Kong Stock Exchange
have issued clarifications and guidance supporting the concept of beneficial
ownership via Stock Connect, the interpretation of beneficial ownership in the
PRC by regulators and courts may continue to evolve. Moreover, Stock Connect
A-shares generally may not be sold, purchased or otherwise transferred other
than through Stock Connect in accordance with applicable rules.
A
primary feature of Stock Connect is the application of the home market’s laws
and rules applicable to investors in A-shares. Therefore, the Fund’s investments
in Stock Connect A-shares are generally subject to PRC securities regulations
and listing rules,
among
other restrictions. The Fund will not benefit from access to Hong Kong investor
compensation funds, which are set up to protect against defaults of trades, when
investing through Stock Connect. Stock Connect is only available on days when
markets in both the PRC and Hong Kong are open, which may limit the Fund’s
ability to trade when it would be otherwise attractive to do so. Since the
inception of Stock Connect, foreign investors (including the Fund) investing in
A-shares through Stock Connect have been temporarily exempt from the PRC
corporate income tax and value-added tax on the gains on disposal of such
A-shares. Dividends are subject to PRC corporate income tax on a withholding
basis at 10%, unless reduced under a double tax treaty with China upon
application to and obtaining approval from the competent tax authority. Aside
from these temporary measures, uncertainties in permanent PRC tax rules
governing taxation of income and gains from investments in Stock Connect
A-shares could result in unexpected tax liabilities for the Fund.
The
Stock Connect program is a relatively new program and may be subject to further
interpretation and guidance. There can be no assurance as to the program’s
continued existence or whether future developments regarding the program may
restrict or adversely affect the Fund’s investments or returns. In addition, the
application and interpretation of the laws and regulations of Hong Kong and the
PRC, and the rules, policies or guidelines published or applied by relevant
regulators and exchanges in respect of the Stock Connect program are uncertain,
and they may have a detrimental effect on the Fund’s investments and
returns.
Trading
Issues Risk.
Trading in shares on the exchange may be halted due to market conditions or for
reasons that, in the view of the exchange, make trading in shares inadvisable.
In addition, trading in shares on the exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the relevant exchange’s
“circuit breaker” rules. If a trading halt or unanticipated early close of the
exchange occurs, a shareholder may be unable to purchase or sell Shares of the
Fund. There can be no assurance that requirements of the exchange necessary to
maintain the listing of the Fund will continue to be met or will remain
unchanged.
Utilities
Sector Risk.
The Fund will be sensitive to, and its performance will depend to a greater
extent on, the overall condition of the utilities sector. Issuers in the
utilities sector are subject to a variety of factors that may adversely affect
their business or operations, including high interest costs in connection with
capital construction and improvement programs, difficulty in raising capital in
adequate amounts on reasonable terms in periods of high inflation and unsettled
capital markets, and the effects of economic slowdowns and surplus capacity.
Companies in the utilities sector are subject to extensive regulation, including
governmental regulation of rates charged to customers, and may face difficulty
in obtaining regulatory approval of new technologies. The effects of a U.S.
national energy policy and lengthy delays and greatly increased costs and other
problems associated with the design, construction, licensing, regulation and
operation of nuclear facilities for electric generation, including, among other
considerations, the problems associated with the use of radioactive materials
and the disposal of radioactive wastes, may adversely affect companies in the
utilities sector. Certain companies in the utilities sector may be inexperienced
and may suffer potential losses resulting from a developing deregulatory
environment. Technological innovations may render existing plants, equipment or
products obsolete. Companies in the utilities sector may face increased
competition from other providers of utility services. The potential impact of
terrorist activities on companies in the utilities sector and its customers and
the impact of natural or man-made disasters may adversely affect the utilities
sector. Issuers in the utilities sector also may be subject to regulation by
various governmental authorities and may be affected by the imposition of
special tariffs and changes in tax laws, regulatory policies and accounting
standards.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
Each
Fund may invest in securities not included in its 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. A Fund may invest in master
limited partnerships (“MLPs”) to the extent they are included in its Index. MLPs
are limited partnerships that are operated under the supervision of one or more
managing general partners. The ownership interests/common units of an MLP are
listed and publicly traded on securities exchanges or in the over-the-counter
market. Depositary receipts not included in a Fund’s Index may be used by the
Fund in seeking performance that corresponds to the Index and in managing cash
flows, and may count towards compliance with a Fund’s 80% policy. Each Fund may
also invest, to the extent permitted by the Investment Company Act of 1940, in
other affiliated and unaffiliated funds, such as open-end or closed-end
management investment companies, including other ETFs.
BORROWING
MONEY
Each
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. Each Fund has entered or intends to enter into a credit facility
to borrow money for temporary, emergency or other purposes, including the
funding of shareholder redemption requests, trade settlements and as necessary
to distribute to shareholders any income required to maintain such Fund’s status
as a regulated investment company. To the extent that a Fund borrows money, it
may be leveraged; at such times, the Fund will appreciate or depreciate in value
more rapidly than its Index. Leverage generally has the effect of increasing the
amount of loss or gain a Fund might realize, and may increase volatility in the
value of such Fund’s investments.
LENDING
PORTFOLIO SECURITIES
Each
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, a Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Funds’
bank lending agent liquid collateral 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.
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ADVANTAGED PRODUCT STRUCTURE |
Unlike
many conventional mutual funds which are only bought and sold at closing NAVs,
the Shares of each Fund have been designed to be tradable in a secondary market
on an intra-day basis and to be created and redeemed in-kind, except for VanEck
Agribusiness ETF, VanEck Green Metals ETF, VanEck Low Carbon Energy ETF, VanEck
Natural Resources ETF, VanEck Oil Refiners ETF, VanEck Rare Earth/Strategic
Metals ETF and VanEck Uranium+Nuclear Energy ETF, whose Shares are created and
redeemed partially for cash, in Creation Units at each day’s market close. These
in-kind arrangements are designed to mitigate the adverse effects on a Fund’s
portfolio that could arise from frequent cash purchase and redemption
transactions that affect the NAV of the Fund. Moreover, in contrast to
conventional mutual funds, where frequent redemptions can have an adverse tax
impact on taxable shareholders because of the need to sell portfolio securities
which, in turn, may generate taxable gain, the in-kind redemption mechanism of
certain Funds, to the extent used, generally is not expected to lead to a tax
event for shareholders whose Shares are not being redeemed.
A
description of each Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Funds’
SAI.
Board
of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight
of the management of the Funds, including general supervision of the Adviser and
other service providers, but is not involved in the day-to-day management of the
Trust. A list of the Trustees and the Trust officers, and their present
positions and principal occupations, is provided in the Funds’ SAI.
Investment
Adviser.
Under the terms of an investment management agreement between the Trust and Van
Eck Associates Corporation with respect to VanEck Gold Miners ETF (the “Gold
Miners Investment Management Agreement”) and an investment management agreement
between the Trust and Van Eck Associates Corporation with respect to each of the
other Funds (the “Investment Management Agreement” and, together with the Gold
Miners Investment Management Agreement, the “Investment Management Agreements”),
Van Eck Associates Corporation serves as the adviser to each Fund and, subject
to the supervision of the Board of Trustees, is responsible for the day-to-day
investment management of the Funds. Under the Gold Miners Investment Management
Agreement (but not the Investment Management Agreement), the Adviser is
obligated to provide certain fund accounting services to VanEck Gold Miners ETF.
As of December 31, 2022, the Adviser managed approximately $69.03 billion in
assets. The Adviser has been an investment adviser since 1955 and also acts as
adviser or sub-adviser to mutual funds, other ETFs, other pooled investment
vehicles and separate accounts. The Adviser’s principal business address is 666
Third Avenue, 9th Floor, New York, New York 10017.
A
discussion regarding the Board of Trustees’ approval of the Investment
Management Agreements is available in the Trust’s semi-annual report for the
period ended June 30, 2022.
For
the services provided to each of VanEck Agribusiness ETF, VanEck Gold Miners
ETF, VanEck Junior Gold Miners ETF, VanEck Low Carbon Energy ETF, VanEck Oil
Refiners ETF, VanEck Rare Earth/Strategic Metals ETF, VanEck Steel ETF, and
VanEck Uranium+Nuclear Energy ETF under the Investment Management Agreements,
each Fund pays the Adviser monthly fees based on a percentage of each Fund’s
average daily net assets at the annual rate of 0.50%.
From
time to time, the Adviser may waive all or a portion of its fee. Until at least
May 1, 2024 the Adviser has agreed to waive fees and/or pay Fund expenses
to the extent necessary to prevent the operating expenses of each Fund
(excluding acquired fund fees and expenses, interest expense, trading expenses,
taxes and extraordinary expenses) from exceeding 0.53% (with respect to VanEck
Gold Miners ETF), 0.55% (with respect to VanEck Steel ETF), 0.56% (with respect
to VanEck Agribusiness ETF and VanEck Junior Gold Miners ETF), 0.57% (with
respect to VanEck Rare Earth/Strategic Metals ETF), 0.59% (with respect to
VanEck Oil Refiners ETF), 0.60% (with respect to VanEck Uranium+Nuclear Energy
ETF) and 0.62% (with respect to VanEck Low Carbon Energy ETF) of its average
daily net assets per year.
Each
of VanEck Agribusiness ETF, VanEck Gold Miners ETF, VanEck Junior Gold Miners
ETF, VanEck Low Carbon Energy ETF, VanEck Oil Refiners ETF, VanEck Rare
Earth/Strategic Metals ETF, VanEck Steel ETF, and VanEck Uranium+Nuclear Energy
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 VanEck Future of Food ETF, VanEck Green Metals ETF, VanEck Natural
Resources ETF and VanEck Oil Services 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 as a percentage of the average
daily net assets equal to 0.69% (with respect of VanEck Future of Food ETF),
0.59% (with respect to VanEck Green Metals ETF), 0.49% (with respect to VanEck
Natural Resources ETF), and 0.35% (with respect to VanEck Oil Services ETF).
Offering costs excluded from the annual unitary management fee are: (a) legal
fees pertaining to a Fund’s Shares offered for sale; (b) SEC and state
registration fees; and (c) initial fees paid for Shares of a Fund to be listed
on an exchange. Notwithstanding the foregoing, the Adviser has agreed to pay all
such offering costs until at least May 1, 2024 with respect to VanEck
Future of Food ETF, VanEck Green Metals ETF, VanEck Natural Resources ETF and
VanEck Oil Services ETF.
Prior
to January 1, 2022, for the services provided to VanEck Natural Resources ETF
under the Investment Management Agreement, the Fund paid the Adviser monthly
fees based on a percentage of the Fund’s average daily net assets at the annual
rate of 0.50%, and for services provided to VanEck Oil Services ETF under the
Investment Management Agreement, the Fund paid the Adviser monthly fees based on
a percentage of the Fund’s average daily net assets at the annual rate of 0.35%.
Manager
of Managers Structure.
With respect to VanEck Future of Food ETF, VanEck Green Metals ETF and VanEck
Oil Refiners ETF, the Adviser and the Trust may rely on an exemptive order (the
“Order”) from the SEC that permits the Adviser to enter into investment
sub-advisory agreements with unaffiliated sub-advisers without obtaining
shareholder approval. The Adviser, subject to the review and approval of the
Board of Trustees, may select one or more sub-advisers for the Fund and
supervise, monitor and evaluate the performance of each
sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Fund and
its shareholders. The Adviser thus would have the responsibility (subject to the
oversight of the Board of Trustees) to recommend the hiring and replacement of
sub-advisers as well
as
the discretion to terminate any sub-adviser and reallocate the Fund’s assets for
management among any other sub-adviser(s) and itself. This means that the
Adviser would be able to reduce the sub-advisory fees and retain a larger
portion of the management fee, or increase the sub-advisory fees and retain a
smaller portion of the management fee. The Adviser would compensate each
sub-adviser out of its management fee.
Administrator,
Custodian and Transfer Agent. Van
Eck Associates Corporation is the administrator for the Funds (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
each Fund’s assets and provides transfer agency and fund accounting services to
the Funds. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
Distributor.
Van Eck Securities Corporation is the distributor of the Shares (the
"Distributor"). The Distributor will not distribute Shares in less than a
specified number of Shares, each called a "Creation Unit," and does not maintain
a secondary market in the Shares. The Shares are traded in the secondary market.
The
portfolio manager currently responsible for the day-to-day management of each
Fund’s portfolio (except for VanEck Future of Food ETF) is Peter H. Liao, CFA.
Mr. Liao has been employed by the Adviser as an analyst since the summer of 2004
and has been a portfolio manager since 2006. Mr. Liao graduated from New York
University in 2004 with a Bachelor of Arts in Economics and Mathematics. Mr.
Liao also serves as portfolio manager for certain other investment companies and
pooled investment vehicles advised by the Adviser. See the Funds' SAI for
additional information about the portfolio manager’s compensation, other
accounts managed and ownership of Shares.
The
portfolio managers who currently share joint responsibility for the day-to-day
management of VanEck Future of Food ETF’s portfolio are Shawn Reynolds and Ammar
James. Mr. Reynolds is Portfolio Manager of the Fund and is primarily
responsible for company research and portfolio construction. He has been with
the Adviser since 2005 and has over 30 years of experience in the international
and financial markets. Prior to joining the Adviser, Mr. Reynolds was an analyst
covering U.S. oil and gas exploration and production companies at Petrie Parkman
& Co. He has also served as an analyst with Credit Suisse First Boston,
Goldman Sachs and Lehman Brothers. Mr. James is deputy portfolio manager of the
Fund. He has been employed by the Adviser as an analyst since 2019 and has been
a portfolio manager since 2021. Mr. James graduated from the State University of
New York at Stony Brook with a Bachelor of Science in Mathematics. Mr. Reynolds
also serves as portfolio manager for certain other investment companies and
pooled investment vehicles advised by the Adviser. See the Fund’s SAI for
additional information about the portfolio managers’ compensation, other
accounts managed by the portfolio managers and their respective ownership of
Shares.
DETERMINATION
OF NAV
The
NAV per Share for each Fund is computed by dividing the value of the net assets
of the Fund (i.e.,
the value of its total assets less total liabilities) by the total number of
Shares outstanding. Expenses and fees, including the management fee, are accrued
daily and taken into account for purposes of determining NAV. The NAV of each
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of each Fund’s portfolio securities are based on the securities’ closing
prices on the markets on which the securities trade, when available. Due to the
time differences between the United States and certain countries in which
certain Funds invest, securities on these exchanges may not trade at times when
Shares of the Fund will trade. In the absence of a last reported sales price, or
if no sales were reported, and for other assets for which market quotes are not
readily available, values may be based on quotes obtained from a quotation
reporting system, established market makers or by an outside independent pricing
service. Debt instruments with remaining maturities of more than 60 days are
valued at the evaluated mean price provided by an outside independent pricing
service. If an outside independent pricing service is unable to provide a
valuation, the instrument is valued at the mean of the highest bid and the
lowest asked quotes obtained from one or more brokers or dealers selected by the
Adviser. Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values obtained
from yield data related to investments or securities with similar
characteristics and may use a computerized grid matrix of securities and its
evaluations in determining what it believes is the fair value of the portfolio
securities. Short-term debt instruments having a maturity of 60 days or less are
valued at amortized cost. Any assets or liabilities denominated in currencies
other than the U.S. dollar are converted into U.S. dollars at the current market
rates on the date of valuation as quoted by one or more sources. If a market
quotation for a security or other asset is not readily available or the Adviser
believes it does not otherwise accurately reflect the market value of the
security or asset at the time a Fund calculates its NAV, the Board of Trustees
has designated the Adviser as the valuation designee pursuant to Rule 2a-5 under
the Investment Company Act of 1940 to perform fair valuation for such security
or asset in accordance with the Trust’s and Adviser’s valuation policies and
procedures approved by the Board of Trustees. Each Fund may also use fair value
pricing in a variety of circumstances, including but not limited to, situations
when the value of a security in the Fund’s portfolio has been materially
affected by events occurring after the close of the market on which the security
is principally traded (such as a corporate action or other news that may
materially affect the price of a security) or trading in a security has been
suspended or halted. In addition, each Fund that holds foreign equity securities
currently expects that it will fair value certain of the foreign equity
securities held by the Fund each day the Fund calculates its NAV, except those
securities principally traded on exchanges that close at the same time the Fund
calculates its NAV.
Accordingly,
a Fund’s NAV may reflect certain portfolio securities’ fair values rather than
their market prices at the time the exchanges on which they principally trade
close. Fair value pricing involves subjective judgments and it is possible that
a fair value determination for a security or other asset is materially different
than the value that could be realized upon the sale of such security or asset.
In addition, fair value pricing could result in a difference between the prices
used to calculate a Fund’s NAV and the prices used by such Fund’s respective
Index. This may adversely affect a Fund’s ability to track its Index. With
respect to securities that are principally traded on foreign exchanges, the
value of a Fund’s portfolio securities may change on days when you will not be
able to purchase or sell your Shares.
INTRADAY
VALUE
The
trading prices of the Funds’ Shares in the secondary market generally differ
from the Funds’ daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by each Fund,
economic conditions and other factors. Information regarding the intraday value
of the Funds’ Shares (“IIV”) may be disseminated throughout each trading day by
an Exchange or by market data vendors or other information providers. The IIV is
based on the current market value of the securities and/or cash required to be
deposited in exchange for a Creation Unit. The IIV does not necessarily reflect
the precise composition of the current portfolio of securities held by each Fund
at a particular point in time or the best possible valuation of the current
portfolio. Therefore, the IIV should not be viewed as a “real-time” update of
the Funds’ NAV, which is computed only once a day. The IIV is generally
determined by using current market quotations and/or price quotations obtained
from broker-dealers and other market intermediaries that may trade in the
portfolio securities held by each Fund and valuations based on current market
rates. The quotations and/or valuations of certain Fund holdings may not be
updated during U.S. trading hours if such holdings do not trade in the United
States. Each Fund is not involved in, or responsible for, the calculation or
dissemination of the IIV and makes no warranty as to its accuracy.
RULE
144A AND OTHER UNREGISTERED SECURITIES
An
AP (i.e., a person eligible to place orders with the Distributor to create or
redeem Creation Units of a Fund) that is not a “qualified institutional buyer,”
as such term is defined under Rule 144A of the Securities Act of 1933, as
amended (the “Securities Act”), will not be able to receive, as part of a
redemption, restricted securities eligible for resale under Rule 144A or other
unregistered securities.
BUYING
AND SELLING EXCHANGE-TRADED SHARES
The
Shares of the Funds are listed on an Exchange. If you buy or sell Shares in the
secondary market, you will incur customary brokerage commissions and charges and
may pay some or all of the “spread,” which is any difference between the bid
price and the ask price. The spread varies over time for a Fund’s Shares based
on the Fund’s trading volume and market liquidity, and is
generally
lower if the Funds have high trading volume and market liquidity, and generally
higher if the Funds have little trading volume and market liquidity (which is
often the case for funds that are newly launched or small in size). In times of
severe market disruption or low trading volume in a Fund’s Shares, this spread
can increase significantly. It is anticipated that the Shares will trade in the
secondary market at prices that may differ to varying degrees from the NAV of
the Shares. During periods of disruptions to creations and redemptions or the
existence of extreme market volatility, the market prices of Shares are more
likely to differ significantly from the Shares’ NAV.
The
Depository Trust Company (“DTC”) serves as securities depository for the Shares.
(The Shares may be held only in book- entry form; stock certificates will not be
issued.) DTC, or its nominee, is the record or registered owner of all
outstanding Shares. Beneficial ownership of Shares will be shown on the records
of DTC or its participants (described below). Beneficial owners of Shares are
not entitled to have Shares registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and are
not considered the registered holder thereof. Accordingly, to exercise any
rights of a holder of Shares, each beneficial owner must rely on the procedures
of: (i) DTC; (ii) “DTC Participants,” i.e., securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own DTC; and (iii) “Indirect
Participants,” i.e., brokers, dealers, banks and trust companies that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly, through which such beneficial owner holds its interests.
The Trust understands that under existing industry practice, in the event the
Trust requests any action of holders of Shares, or a beneficial owner desires to
take any action that DTC, as the record owner of all outstanding Shares, is
entitled to take, DTC would authorize the DTC Participants to take such action
and that the DTC Participants would authorize the Indirect Participants and
beneficial owners acting through such DTC Participants to take such action and
would otherwise act upon the instructions of beneficial owners owning through
them. As described above, the Trust recognizes DTC or its nominee as the owner
of all Shares for all purposes. For more information, see the section entitled
“Book Entry Only System” in the Funds’ SAI.
Each
Exchange is open for trading Monday through Friday and is closed on weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because
non-U.S. exchanges may be open on days when a Fund does not price its Shares,
the value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell a Fund’s Shares.
The
right of redemption by an AP may be suspended or the date of payment postponed
(1) for any period during which the an Exchange is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on the an
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of a Fund or
determination of its net asset value is not reasonably practicable; or (4) in
such other circumstance as is permitted by the SEC.
Market
Timing and Related Matters.
The Funds impose no restrictions on the frequency of purchases and redemptions.
Frequent purchases and redemptions of Fund Shares may attempt to take advantage
of a potential arbitrage opportunity presented by a lag between a change in the
value of a Fund’s portfolio securities after the close of the primary markets
for a Fund’s portfolio securities and the reflection of that change in a Fund’s
NAV (“market timing”). The Board of Trustees considered the nature of each Fund
(i.e., a fund whose shares are expected to trade intraday), that the Adviser
monitors the trading activity of APs for patterns of abusive trading, that the
Funds reserve the right to reject orders that may be disruptive to the
management of or otherwise not in the Funds’ best interests, and that each Fund
may fair value certain of its securities. Given this structure, the Board of
Trustees determined that it is not necessary to impose restrictions on the
frequency of purchases and redemptions for the Funds at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains.
As a shareholder of a Fund, you are entitled to your share of such Fund’s
distributions of net investment income and net realized capital gains on its
investments. Each Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
Each
Fund typically earns income dividends from stocks and interest from debt
securities. These amounts, net of expenses, are typically passed along to Fund
shareholders as dividends from net investment income. Each Fund realizes capital
gains or losses whenever it sells securities. Net capital gains are distributed
to shareholders as “capital gain distributions.”
Net
investment income, if any, and net capital gains,
if
any, are typically distributed to shareholders at least annually. Dividends may
be declared and paid more frequently to improve index tracking or to comply with
the distribution requirements of the Internal Revenue Code. In addition, in
situations where a Fund acquires investment securities after the beginning of a
dividend period, a Fund may elect to distribute at least annually amounts
representing the full dividend yield net of expenses on the underlying
investment securities, as if the Fund owned the underlying investment securities
for the entire dividend period. If a Fund so elects, some portion of each
distribution may result in a return of capital, which, for tax purposes, is
treated as a return of your investment in Shares. You will be notified regarding
the portion of the distribution which represents a return of
capital.
Distributions
in cash may be reinvested automatically in additional Shares of a Fund only if
the broker through which you purchased Shares makes such option
available.
TAX
INFORMATION
As
with any investment, you should consider how your Fund investment will be taxed.
The tax information in this Prospectus is provided as general information. You
should consult your own tax professional about the tax consequences of an
investment in a Fund, including the possible application of foreign, state and
local taxes. Unless your investment in a Fund is through a tax-exempt entity or
tax-deferred retirement account, such as a 401(k) plan, you need to be aware of
the possible tax consequences when: (i) the Fund makes distributions, (ii) you
sell Shares in the secondary market or (iii) you create or redeem Creation
Units.
Taxes
on Distributions. As
noted above, each Fund expects to distribute net investment income, if any, at
least annually, and any net realized long-term or short-term capital gains, if
any, annually. Each Fund may also pay a special distribution at any time to
comply with U.S. federal tax requirements.
In
general, your distributions are subject to U.S. federal income tax when they are
paid, whether you take them in cash or reinvest them in a Fund. Distributions of
net investment income, including net short-term gains, if any, are generally
taxable as ordinary income. Whether distributions of capital gains represent
long-term or short-term capital gains is determined by how long a Fund owned the
investments that generated them, rather than how long you have owned your
Shares. Distributions of net short-term capital gains in excess of net long—term
capital losses, if any, are generally taxable as ordinary income. Distributions
of net long-term capital gains in excess of net short-term capital losses, if
any, that are properly reported as capital gain dividends are generally taxable
as long-term capital gains. Long-term capital gains of a non-corporate
shareholder are generally taxable at a maximum rate of 15% or 20%, depending on
whether the shareholder’s income exceeds certain threshold amounts.
The
Funds may receive dividends, the distribution of which a Fund may report as
qualified dividends. In the event that a Fund receives such a dividend and
reports the distribution of such dividend as a qualified dividend, the dividend
may be taxed at the maximum capital gains rates of 15% or 20%, provided holding
period and other requirements are met at both the shareholder and the Fund
level. There can be no assurance that any significant portion of a Fund’s
distributions will be eligible for qualified dividend treatment.
Distributions
in excess of a Fund’s current and accumulated earnings and profits are treated
as a tax-free return of your investment to the extent of your basis in the
Shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce a Fund’s NAV per Share and may
be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of
capital.
Dividends,
interest and gains from non-U.S. investments of a Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may, in some cases, reduce or
eliminate such taxes.
Each
Fund may make investments in companies classified as passive foreign investment
companies (“PFICs”) for U.S. federal income tax purposes. Investments in PFICs
are subject to special tax rules which may result in adverse tax consequences to
the Fund and its shareholders. Each Fund generally intends to elect to “mark to
market” these investments at the end of each taxable year. By making this
election, a Fund will recognize as ordinary income any increase in the value of
such shares as of the close of the taxable year over their adjusted basis and as
ordinary loss any decrease in such investment (but only to the extent of prior
income from such investment under the mark to market rules). Gains realized with
respect to a disposition of a PFIC that a Fund has elected to mark to market
will be ordinary income. By making the mark to market election, a Fund may
recognize income in excess of the distributions that it receives from its
investments. Accordingly, a Fund may need to borrow money or dispose of some of
its investments in order to meet its distribution requirements. If a Fund does
not make the mark to market election with respect to an investment in a PFIC,
the Fund could become subject to U.S. federal income tax with respect to certain
distributions from, and gain on the dispositions of, the PFIC which cannot be
avoided by distributing such amounts to the Fund’s shareholders.
If
more than 50% of a Fund’s total assets at the end of its taxable year consist of
foreign securities, the Fund may elect to “pass through” to its investors
certain foreign income taxes paid by the Fund, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor’s pro rata share of the Fund’s foreign income taxes, and (ii)
either deduct (in calculating U.S. taxable income) or credit (in calculating
U.S. federal income), subject to certain holding period and other limitations,
the investor’s pro rata share of the Fund’s foreign income taxes. It is expected
that more than 50% of each Fund’s (except for VanEck Agribusiness ETF’s, VanEck
Future of Food ETF's, VanEck Natural Resources ETF’s, VanEck Oil Services ETF’s,
and VanEck Steel ETF’s) assets will consist of foreign securities.
Backup
Withholding.
Each Fund may be required to withhold a percentage of your distributions and
proceeds if you have not provided a taxpayer identification number or social
security number or otherwise established a basis for exemption from backup
withholding. The backup withholding rate for individuals is currently 24%. This
is not an additional tax and may be refunded, or credited against your U.S.
federal income tax liability, provided certain required information is furnished
to the Internal Revenue Service).
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares.
Currently, any capital gain or loss realized upon a sale of Shares is generally
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as a short term capital gain or loss if held for one year or
less. However, any capital loss on a sale of Shares held for six months or less
is
treated as long term capital loss to the extent that capital gain dividends were
paid with respect to such Shares. The ability to deduct capital losses may be
limited. To the extent that a Fund shareholder’s Shares are redeemed for cash,
this is normally treated as a sale for tax purposes.
Taxes
on In-Kind Creations and In-Kind Redemptions of Creation Units.
To the extent a person exchanges securities or securities and cash for Creation
Units, such person 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 or securities and cash 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 and the amount of any cash received for such
Creation Units. 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 primarily securities
for Creation Units or redeeming Creation Units should consult their own tax
adviser with respect to whether wash sale rules apply and when a loss might be
deductible and the tax treatment of any creation or redemption
transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units held as capital assets is generally
treated as long-term capital gain or loss if the Shares (or securities
surrendered) have been held for more than one year and as a short-term capital
gain or loss if the Shares (or securities surrendered) have been held for one
year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax.
An additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Non-U.S.
Shareholders.
Dividends paid by the Funds to Non-U.S. shareholders are generally subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty to the extent derived from investment income and short-term
capital gains. Dividends paid by the Funds from net tax-exempt income or
long-term capital gains are generally not subject to such withholding tax.
Properly-reported dividends are generally exempt from U.S. federal withholding
tax where they (i) are paid in respect of the Funds’ “qualified net interest
income” (generally, the Funds’ U.S. source interest income, other than certain
contingent interest and interest from obligations of a corporation or
partnership in which the Fund is at least a 10% shareholder, reduced by expenses
that are allocable to such income); or (ii) are paid in respect of the Funds’
“qualified short-term capital gains” (generally, the excess of the Funds’ net
short-term capital gain over the Fund’s long-term capital loss for such taxable
year). However, depending on its circumstances, the Funds may report all, some
or none of its potentially eligible dividends as such qualified net interest
income or as qualified short-term capital gains and/or treat such dividends, in
whole or in part, as ineligible for this exemption from
withholding.
Any
capital gain realized by a Non-U.S. shareholder upon a sale of Shares of a Fund
will generally not be subject to U.S. federal income or withholding tax unless
(i) the gain is effectively connected with the shareholder’s trade or business
in the United States, or in the case of a shareholder who is a nonresident alien
individual, the shareholder is present in the United States for 183 days or more
during the taxable year and certain other conditions are met or (ii) the Fund is
or has been a U.S. real property holding corporation, as defined below, at any
time within the five-year period preceding the date of disposition of the Fund’s
Shares or, if shorter, within the period during which the Non-U.S. shareholder
has held the Shares. Generally, a corporation is a U.S. real property holding
corporation if the fair market value of its U.S. real property interests, as
defined in the Internal Revenue Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. A
Fund may be, or may prior to a Non-U.S. shareholder’s disposition of Shares
become, a U.S. real property holding corporation. If a Fund is or becomes a U.S.
real property holding corporation, so long as the Fund’s Shares are regularly
traded on an established securities market, only a Non-U.S. shareholder who
holds or held (at any time during the shorter of the five year period preceding
the date of disposition or the holder’s holding period) more than 5% (directly
or indirectly as determined under applicable attribution rules of the Internal
Revenue Code) of the Fund’s Shares will be subject to United States federal
income tax on the disposition of Shares.
As
part of the Foreign Account Tax Compliance Act, (“FATCA”), a Fund may be
required to withhold 30% tax on certain types of U.S. sourced income
(e.g.,
dividends, interest, and other types of passive income), paid to (i) foreign
financial institutions (“FFIs”), including non-U.S. investment funds, unless
they agree to collect and disclose to the 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
Gold Miners Index and Steel Index are published by ICE Data Indices, LLC (“ICE
Data”). The Agribusiness Index, Clean-Tech Metals Index, Junior Gold Miners
Index, Low Carbon Energy Index, Oil Refiners Index, Oil Services Index, Rare
Earth/Strategic Metals Index and Nuclear Energy Index are published by
MarketVector IndexesTM
GmbH (“MarketVector”), which is an indirectly wholly owned subsidiary of the
Adviser. The Natural Resources Index is published by S-Network Global Indexes,
LLC (“S-Network”).
ICE
Data, MarketVector and S-Network are each referred to herein as an “Index
Provider” and collectively the “Index Providers.” The Index Providers do not
sponsor, endorse, or promote the Funds and bear no liability with respect to the
Funds or any security.
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MVIS®
GLOBAL AGRIBUSINESS INDEX |
The
Agribusiness Index is a rules based index intended to give investors a means of
tracking the overall performance of the companies in the global agribusiness
segment which includes: agri-chemicals, animal health and fertilizers, seeds and
traits, from farm/irrigation equipment and farm machinery, aquaculture and
fishing, livestock, cultivation and plantations (including grain, oil palms,
sugar cane, tobacco leafs, grapevines etc.) and trading of agricultural
products. Companies that produce the majority of their revenues from the
distribution and/or sale of packaged food products or goods, Biodiesel and
Ethanol or Forestry are not included in the Agribusiness Index.
To
be initially eligible for the Agribusiness Index, (i) companies must generate at
least 50% of their revenues from agribusiness (as defined above) and (ii) all
stocks must have a market capitalization of greater than $150 million as of the
end of the month prior to the month in which a rebalancing date
occurs.
The
Agribusiness Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Agribusiness Index.
Solactive AG uses its best efforts to ensure that the Agribusiness Index is
calculated correctly. Irrespective of its obligations towards MarketVector,
Solactive AG has no obligation to point out errors in the Agribusiness Index to
third parties. VanEck Agribusiness ETF is not sponsored, endorsed, sold or
promoted by MarketVector and MarketVector makes no representation regarding the
advisability of investing in the VanEck Agribusiness ETF.
The
Agribusiness Index is reconstituted and rebalanced quarterly. MarketVector may
delay or change a scheduled rebalancing or reconstitution of the Agribusiness
Index or the implementation of certain rules at its sole
discretion.
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| NYSE
ARCA GOLD MINERS INDEX |
The
NYSE Arca Gold Miners Index is a modified market capitalization weighted index
primarily comprised of publicly traded companies involved in the mining for gold
and silver. The NYSE Arca Gold Miners Index includes common stocks, ADRs and
GDRs of selected companies that are involved in mining for gold and silver and
that are listed for trading and electronically quoted on a major stock market
that is accessible by foreign investors. Only companies with market
capitalizations greater than $750 million that have an average daily volume of
at least 50,000 shares over the past three months and an average daily value
traded of at least $1 million over the past three months are eligible for
inclusion in the NYSE Arca Gold Miners Index. The weight of companies whose
revenues are more significantly exposed to silver mining will not exceed 20% of
the NYSE Arca Gold Miners Index at rebalance.
The
NYSE Arca Gold Miners Index is calculated using a modified market-capitalization
weighting methodology. The NYSE Arca Gold Miners Index is weighted based on the
market capitalization of each of the component securities, modified to conform
to the following asset diversification requirements, which are applied in
conjunction with the scheduled quarterly adjustments to the NYSE Arca Gold
Miners Index:
(1)
the weight of any single component security may not
account for more than 20% of the total value of the NYSE Arca Gold Miners
Index;
(2)
the component securities are split into two
subgroups-large and small, which are ranked by market capitalization weight in
the NYSE Arca Gold Miners Index. Large stocks are defined as having a starting
NYSE Arca Gold Miners Index weight greater than or equal to 5%. Small securities
are defined as having a starting NYSE Arca Gold Miners Index weight below 5%.
The large group and small group will represent 45% and 55%, respectively, of the
NYSE Arca Gold Miners Index; and
(3)
the final aggregate weight of those component securities
which individually represent more than 4.5% of the total value of the NYSE Arca
Gold Miners Index may not account for more than 45% of the total NYSE Arca Gold
Miners Index value.
The
information utilized in this modification process is taken from the close of
trading on the second Friday of the rebalance month.
The
NYSE Arca Gold Miners Index is reviewed quarterly so that the NYSE Arca Gold
Miners Index components continue to represent the universe of companies involved
in the gold mining industry. Companies will be removed from the NYSE Arca Gold
Miners Index if the market capitalization is lower than $450 million, or the
average daily volume for the past three months is lower than 30,000 shares and
the average daily value traded for the past three months is lower than $600,000.
ICE Data Indices, LLC (“ICE Data”), as the NYSE Arca Gold Miners Index
Administrator, may at any time and from time to time change the number of
securities comprising the group by adding or deleting one or more securities, or
replacing one or more securities contained in the group with one or more
substitute securities of its choice, if in ICE Data’s discretion such addition,
deletion or substitution is necessary or appropriate to maintain the quality
and/or character of the NYSE Arca Gold Miners Index. Changes to the NYSE Arca
Gold Miners Index compositions and/or the component share weights in the NYSE
Arca Gold Miners Index typically take effect at the open of the first trading
day after the third Friday of each calendar quarter end month in connection with
the quarterly index rebalance. ICE Data may delay or change a scheduled
rebalancing or reconstitution of the NYSE Arca Gold Miners Index or the
implementation of certain rules at its sole discretion.
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MVIS®
GLOBAL CLEAN-TECH METALS
INDEX |
The
Clean-Tech Metals Index is a rules based, modified capitalization weighted,
float adjusted index intended to give investors a means of tracking the overall
performance of companies involved in the green metals segment which includes:
“Processors” and “Producers” of green metals. “Green metals” are metals used in
the applications, products and processes that enable the energy transition from
fossil fuels to cleaner energy sources and technologies.
To
be initially eligible for the Clean-Tech Metals Index, (i) companies must
generate at least 50% of their revenues from green metals (as defined above) or
have mining projects that have the potential to generate at least 50% of their
revenues from green metals when developed and (ii) all stocks must have a market
capitalization of greater than $150 million as of the end of the month prior to
the month in which a rebalancing date occurs. Companies that are current
components of the Clean-Tech Metals Index must generate at least 25% of their
revenues from green metals or have mining projects with the potential to
generate at least 25% of their revenues from green metals when developed in
order to remain in the Clean-Tech Metals Index. The Clean-Tech Metals Index
currently includes a minimum of 25 Index components.
The
Clean-Tech Metals Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Clean-Tech Metals
Index. Solactive AG uses its best efforts to ensure that the Clean-Tech Metals
Index is calculated correctly. Irrespective of its obligations towards
MarketVector, Solactive AG has no obligation to point out errors in the
Clean-Tech Metals Index to third parties. The Fund is not sponsored, endorsed,
sold or promoted by MarketVector and MarketVector makes no representation
regarding the advisability of investing in the Fund.
The
Clean-Tech Metals Index is reconstituted and rebalanced quarterly. MarketVector
may delay or change a scheduled rebalancing or reconstitution of the Clean-Tech
Metals Index or the implementation of certain rules at its sole
discretion.
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MVIS®
GLOBAL JUNIOR GOLD MINERS
INDEX |
The
Junior Gold Miners Index is a rules based, modified capitalization weighted,
float adjusted index intended to give investors a means of tracking the overall
performance of small-capitalization companies that are involved primarily in the
mining for gold and/or silver.
To
be initially eligible for the Junior Gold Miners Index, (i) companies must
generate at least 50% of their revenues from gold and/or silver
mining/royalties/streaming or have mining projects with the potential to
generate at least 50% of their revenues from gold and/or silver when developed,
and (ii) all stocks must have a market capitalization of greater than $150
million as of the end of the month prior to the month in which a rebalancing
date occurs.
The
Junior Gold Miners Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Junior Gold Miners
Index. Solactive AG uses its best efforts to ensure that the Junior Gold Miners
Index is calculated correctly. Irrespective of its obligations towards
MarketVector, Solactive AG has no obligation to point out errors in the Junior
Gold Miners Index to third parties. VanEck Junior Gold Miners ETF is not
sponsored, endorsed, sold or promoted by MarketVector and MarketVector makes no
representation regarding the advisability of investing in the VanEck Junior Gold
Miners ETF.
The
Junior Gold Miners Index is currently reconstituted and rebalanced quarterly.
Effective June 2023, the Junior Gold Miners Index will be reconstituted in March
and September. MarketVector may delay or change a scheduled rebalancing or
reconstitution of the Junior Gold Miners Index or the implementation of certain
rules at its sole discretion.
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MVIS®
GLOBAL
LOW CARBON ENERGY INDEX |
The
Low Carbon Energy Index is a rules based index intended to give investors a
means of tracking the overall performance of renewable energy companies which
may include, but is not limited to: wind, solar, hydro, hydrogen, bio-fuel or
geothermal technology, lithium-ion batteries, electric vehicles and related
equipment, waste-to-energy production, smart grid technologies, or building or
industrial materials that reduce carbon emissions or energy
consumption.
To
be initially eligible for the Low Carbon Energy Index, (i) companies must
generate at least 50% of their revenues, operating activity or energy generation
capacity from renewable energy (as defined above) and (ii) all stocks must have
a market capitalization of greater than $150 million as of the end of the month
prior to the month in which a rebalancing date occurs.
The
Low Carbon Energy Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Low Carbon Energy
Index. Irrespective of its obligations towards MarketVector, Solactive AG has no
obligation to point out errors in the Low Carbon Energy Index to third parties.
VanEck Low Carbon Energy ETF is not sponsored, endorsed, sold or promoted by
MarketVector and MarketVector makes no representation regarding the advisability
of investing in the VanEck Low Carbon Energy ETF.
The
Low Carbon Energy Index is reconstituted and rebalanced quarterly. MarketVector
may delay or change a scheduled rebalancing or reconstitution of the Low Carbon
Energy Index or the implementation of certain rules at its sole
discretion.
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VANECK®
NATURAL RESOURCES INDEX |
The
Natural Resources Index is a rules based index intended to give investors a
means of tracking the overall performance of a global universe of listed
companies engaged in the production and distribution of commodities and
commodity-related products and services. The Natural Resources Index is a
modified capitalization weighted, float adjusted index comprising publicly
traded companies engaged in the production and distribution of commodities and
commodity-related products and services in the following sectors: 1)
Agriculture; 2) Alternatives (Water & Alternative Energy); 3) Base and
Industrial Metals; 4) Energy; 5) Forest Products; and 6) Precious Metals. Index
constituents include certain companies that produce products and services
directly related to the production of commodities, but not the commodities
themselves.
The
six sectors are weighted based on estimates of the global consumption of various
commodities included in each of the sectors. Sector weightings are determined on
the last Friday of May of each year and applied to the upcoming index
rebalancing that occurs on the third Friday of June. These same sector
weightings are then applied on each successive rebalancing until the June
rebalancing of the following year, when revised sector weightings are applied.
The Natural Resources Index includes companies worldwide that are principally
engaged (derive greater than 50% of revenues from applicable sources or greater
than 25% in the case of water) in the production and/or distribution of
commodities and commodity-related products and services.
The
Natural Resources Index strives to capture at least 90% of the global investable
market capitalization of its various sectors except for the agriculture and
alternatives sectors where the Natural Resources Index strives to capture 100%
and 95% respectively of the global investable market capitalization. Constituent
stocks must have a market capitalization of greater than $500 million on a
rebalancing date to be added to the Natural Resources Index. Stocks whose market
capitalizations fall below $400 million as of any rebalancing date will be
deleted from the Natural Resources Index. The minimum free float modified
capitalization for any stock will be greater than $250 million. Stocks whose
free float modified market capitalization falls below $200 million at any
rebalancing date will be removed from the index. Stocks must have a three-month
trading volume equal to or greater than $1 million per day to be included in the
Natural Resources Index. Stocks whose three-month trading volume falls below
$600 thousand per day as of any rebalancing date will be deleted from the
Natural Resources Index. Only shares that trade on a recognized domestic or
international stock exchange that provides a “last closing price” may qualify
(e.g., National Stock Market stocks must be “reported securities” under Rule
11Aa3-1 of the Exchange Act. Similar criteria and standards apply to stocks with
foreign listings).
S-Network
Global Indexes Inc. (“S-Network”), an independent third party (the “Calculation
Agent”) owned by VettaFi LLC, is responsible for the ongoing maintenance,
compilation, calculation, and administration of the VanEck Natural Resources
Index. Real-time index values are provided by Thomson Reuters. Index values are
calculated daily, except Saturdays and Sundays, and are distributed over the New
York Stock Exchange Global Index Feed (GIF) between the hours of approximately
9:30 a.m. and 4:15 p.m. (New York time), under the symbol “RVEIT.” Index values
are disseminated every 15 seconds.
The
Natural Resources Index is calculated using a capitalization weighting
methodology, adjusted for float, which is modified so as to ensure compliance
with the diversification requirements of Subchapter M of the Internal Revenue
Code. The Natural Resources Index is reconstituted quarterly, at the close of
business on the third Friday of the last month of each calendar quarter, and
companies are added and/or deleted based upon the Natural Resources Index
eligibility criteria. Companies with recent stock exchange listings, i.e.,
recent initial public offerings, may be added to the Natural Resources Index on
any rebalancing date, provided the companies meet all eligibility criteria and
have been trading for more than 22 trading days. The share weights of the
Natural Resources Index components are adjusted on each rebalancing
date.
Rebalancing
data, including constituent weights and related information, is posted on the
Natural Resources Index’s web site prior to the start of trading on the first
business day following the third Friday of the last month of each calendar
quarter. Share weights of the constituents remain constant between quarters
except in the event of certain types of corporate actions, including stock
splits and reverse stock splits. Share weights of the Natural Resources Index
are not adjusted between rebalancing dates for shares issued or shares
repurchased. S-Network may delay or change the scheduled rebalancing or
reconstitution of the Natural Resources Index or the implementation of certain
rules at its sole discretion.
|
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|
MVIS®
GLOBAL OIL REFINERS INDEX |
The
Oil Refiners Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of companies involved in crude oil refining which may include:
gasoline, diesel, jet fuel, fuel oil, naphtha, and other petrochemicals.
Companies which operate in the marketing and distribution of these products may
be included in the Oil Refiners Index if refining is performed in company-owned
refineries.
To
be initially eligible for the Oil Refiners Index, (i) companies must generate at
least 50% of their revenues from crude oil refining (as defined above) and (ii)
all stocks must have a market capitalization of greater than $150 million as of
the end of the month prior to the month in which a rebalancing date
occurs.
The
Oil Refiners Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Oil Refiners Index.
Solactive AG uses its best efforts to ensure that the Oil Refiners Index is
calculated correctly. Irrespective of its obligations towards MarketVector,
Solactive AG has no obligation to point out errors in the Oil Refiners Index to
third parties. VanEck Oil Refiners ETF is not sponsored, endorsed, sold or
promoted by MarketVector and MarketVector makes no representation regarding the
advisability of investing in the VanEck Oil Refiners ETF.
The
Oil Refiners Index is reconstituted and rebalanced quarterly. MarketVector may
delay or change a scheduled rebalancing or reconstitution of the Oil Refiners
Index or the implementation of certain rules at its sole
discretion.
|
|
|
|
MVIS®
US LISTED OIL SERVICES 25
INDEX |
The
Oil Services Index is a rules based, modified capitalization weighted, float
adjusted index intended to give investors a means of tracking the overall
performance of the largest and the most liquid common stocks and depositary
receipts of U.S. exchange-listed companies involved in: oil services to the
upstream oil sector, which includes companies engaged primarily in oil
equipment, oil services or oil drilling.
To
be initially eligible for the Oil Services Index, (i) companies must generate at
least 50% of their revenues from oil services (as defined above) and (ii) all
stocks must have a market capitalization of greater than $150 million as of the
end of the month prior to the month in which a rebalancing date
occurs.
The
Oil Services Index is the exclusive property of MarketVector, which has
contracted with Solactive AG to maintain and calculate the Oil Services Index.
Solactive AG uses its best efforts to ensure that the Oil Services Index is
calculated correctly. Irrespective of its obligations towards MarketVector,
Solactive AG has no obligation to point out errors in the Oil Services Index to
third parties. VanEck Oil Services ETF is not sponsored, endorsed, sold or
promoted by MarketVector and MarketVector makes no representation regarding the
advisability of investing in the VanEck Oil Services ETF.
The
Oil Services Index is reconstituted semi-annually and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Oil Services Index or the implementation of certain rules at its sole
discretion.
|
|
|
|
MVIS®
GLOBAL RARE EARTH/STRATEGIC METALS
INDEX |
The
Rare Earth/Strategic Metals Index is a rules based, modified capitalization
weighted, float adjusted index intended to give investors a means of tracking
the overall performance of companies involved in the rare earth and strategic
metals segment which includes: “Refiners,” “Recyclers” and “Producers” of rare
earth/strategic metals and minerals.
To
be initially eligible for the Rare Earth/Strategic Metals Index, (i) companies
must generate at least 50% of their revenues from rare earth/strategic metals
(as defined above) or have mining projects that have the potential to generate
at least 50% of their revenues from rare earth/strategic metals when developed,
and (ii) all stocks must have a market capitalization of greater than $150
million as of the end of the month prior to the month in which a rebalancing
date occurs and may include Shanghai-Listed companies trading via Shanghai-Hong
Kong Stock Connect.
The
Rare Earth/Strategic Metals Index is the exclusive property of MarketVector,
which has contracted with Solactive AG to maintain and calculate the Rare
Earth/Strategic Metals Index. Solactive AG uses its best efforts to ensure that
the Rare Earth/Strategic Metals Index is calculated correctly. Irrespective of
its obligations towards MarketVector, Solactive AG has no obligation to point
out errors in the Rare Earth/Strategic Metals Index to third parties. VanEck
Rare Earth/Strategic Metals ETF is not sponsored, endorsed, sold or promoted by
MarketVector and MarketVector makes no representation regarding the advisability
of investing in the VanEck Rare Earth/Strategic Metals ETF.
The
Rare Earth/Strategic Metals Index is reconstituted and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Rare Earth/Strategic Metals Index or the implementation of certain rules at
its sole discretion.
The
NYSE Arca Steel Index is a modified market capitalization weighted index
comprised of common stocks and ADRs of selected companies that are primarily
involved in a variety of activities that are related to steel production,
including the operation of mills manufacturing steel, the fabrication of steel
shapes or products, or the extraction and reduction of iron ore, and that are
listed for trading on the New York Stock Exchange®
(“NYSE”),
NYSE American®
or the NASDAQ. Only companies with market capitalizations greater than $100
million that have a daily average trading volume of at least $1 million over the
past three months are eligible for inclusion in the NYSE Arca Steel Index. The
NYSE Arca Steel Index is weighted based on the market capitalization of each of
the component securities, modified to conform to the following asset
diversification requirements, which are applied in conjunction with the
scheduled quarterly adjustments to the NYSE Arca Steel Index:
(1) the
weight of any single component security may not account for more than 20% of the
total value of the NYSE Arca Steel Index; and
(2) the
aggregate weight of those component securities which individually represent more
than 5% of the total value of the NYSE Arca Steel Index may not account for more
than 50% of the total NYSE Arca Steel Index value.
The
NYSE Arca Steel Index is reviewed quarterly so that the NYSE Arca Steel Index
components continue to represent the universe of companies involved in iron ore
mining or steel production. ICE Data Indices, LLC (“ICE Data”), as the NYSE Arca
Steel Index Administrator, may at any time and from time to time change the
number of stocks comprising the group by adding or deleting one or more stocks,
or replace one or more stocks contained in the group with one or more substitute
stocks of its choice, if in ICE Data’s discretion, such addition, deletion or
substitution is necessary or appropriate to maintain the quality and/or
character of the index to which the group relates. Changes to the NYSE Arca
Steel Index compositions and/or the component share weights in the NYSE Arca
Steel Index typically take effect as of the market open on the last business day
of each calendar quarter end month in connection with the quarterly index
rebalance. ICE Data may delay or change a scheduled rebalancing or
reconstitution of the NYSE Arca Steel Index or the implementation of certain
rules at its sole discretion.
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MVIS®
GLOBAL URANIUM & NUCLEAR ENERGY
INDEX |
The
Uranium & Nuclear Energy Index is a rules based, modified capitalization
weighted, float adjusted index intended to give investors a means of tracking
the overall performance of companies involved in uranium and nuclear energy
which include: uranium mining, the construction, engineering and maintenance of
nuclear power facilities and nuclear reactors, the production of electricity
from nuclear sources, or equipment and technology as well as services to the
nuclear power industry.
To
be initially eligible for the Uranium & Nuclear Energy Index, (i) companies
must generate at least 50% of their revenues from uranium and nuclear energy (as
defined above) or mining projects that have the potential to generate at least
50% of their revenues from uranium when developed and (ii) all stocks must have
a market capitalization of greater than $150 million as of the end of the month
prior to the month in which a rebalancing date occurs. In exceptional cases,
companies with less than 50% of their revenues derived from uranium and nuclear
energy may be eligible for inclusion in the Uranium & Nuclear Energy
Index.
The
Uranium & Nuclear Energy Index is the exclusive property of MarketVector,
which has contracted with Solactive AG to maintain and calculate the Uranium
& Nuclear Energy Index. Solactive AG uses its best efforts to ensure that
the Uranium & Nuclear Energy Index is calculated correctly. Irrespective of
its obligations towards MarketVector, Solactive AG has no obligation to point
out errors in the Uranium & Nuclear Energy Index to third parties. VanEck
Uranium+Nuclear Energy ETF is not sponsored, endorsed, sold or promoted by
MarketVector and MarketVector makes no representation regarding the advisability
of investing in the VanEck Uranium+Nuclear Energy ETF.
The
Uranium & Nuclear Energy Index is reconstituted and rebalanced quarterly.
MarketVector may delay or change a scheduled rebalancing or reconstitution of
the Uranium & Nuclear Energy Index or the implementation of certain rules at
its sole discretion.
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| LICENSE
AGREEMENTS AND DISCLAIMERS |
The
Adviser has entered into a licensing agreement with ICE Data Indices, LLC to use
the NYSE Arca Gold Miners Index and NYSE Arca Steel Index. Each of VanEck Gold
Miners ETF and VanEck Steel ETF is entitled to use its respective Index pursuant
to a sub-licensing arrangement with the Adviser.
Source
ICE Data Indices, LLC (“ICE Data”) is used with permission.
“ICE”
is a registered trademark of ICE Data or its affiliates. “NYSE”, “NYSE Arca Gold
Miners Index” and “NYSE Arca” are registered trademarks of NYSE Group, Inc., and
are used by ICE Data with permission and under a license. These trademarks have
been licensed, along with the NYSE Arca Gold Miners Index and the NYSE Arca
Steel Index (the “Indices”) for use by the Adviser in connection with the VanEck
Gold Miners ETF and the VanEck Steel ETF (the “Products”). Neither the Adviser,
the Trust nor the Products, as applicable, are sponsored, endorsed, sold or
promoted by ICE Data, its affiliates or its and 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 Trust or the ability of
the Indices to track general 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 Adviser 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 Adviser or
the Products or their holders. ICE Data has no obligation to take the needs of
the Adviser 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 Adviser 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.
In
addition, and although ICE Data shall obtain information for inclusion in or for
use in the calculation of each of the Indices from sources which it considers
reliable, ICE Data and its Suppliers do not guarantee the accuracy and/or the
completeness of the component data of each of the Indices obtained from
independent sources. Without limiting any of the foregoing, in no event shall
ICE Data and its Suppliers have any liability for any direct, indirect, special,
punitive, consequential or any other damages (including lost profits) even if
notified of an Index’s possibility of such damages.
The
Adviser has entered into a licensing agreement with MarketVector to use each of
the Agribusiness Index, Clean-Tech Metals Index, Junior Gold Miners Index, Low
Carbon Energy Index, Oil Refiners Index, Oil Services Index, Rare
Earth/Strategic Metals Index and Nuclear Energy Index (each a
“MarketVectorTM
Index,” and together, the “MarketVectorTM
Indexes”). The Index Provider is a wholly owned subsidiary of the Adviser. The
Adviser has also granted MarketVector a license to use the phrase “VanEck” in
connection with the MarketVectorTM
Indexes. VanEck Agribusiness ETF, VanEck Green Metals ETF, VanEck Junior Gold
Miners ETF, VanEck Low Carbon Energy ETF, VanEck Oil Refiners ETF, VanEck Oil
Services ETF, VanEck Rare Earth/Strategic Metals ETF and VanEck Uranium+Nuclear
Energy ETF (each an “MarketVectorTM
Index ETF,” and together, the “MarketVectorTM
Index ETFs”) are entitled to use their Indexes pursuant to a sublicensing
arrangement with the Adviser.
Shares
of the MarketVectorTM
Index ETFs are not sponsored, endorsed, sold or promoted by MarketVector.
MarketVector makes no representation or warranty, express or implied, to the
owners of the Shares of the MarketVectorTM
Index ETFs or any member of the public regarding the advisability of investing
in securities generally or in the Shares of the MarketVectorTM
Index ETFs particularly or the ability of the MarketVectorTM
Indexes to track the performance of its respective securities markets. Each of
the MarketVectorTM
Indexes is determined and composed by MarketVector without regard to the Adviser
or the Shares of the MarketVectorTM
Index ETFs. MarketVector has no obligation to take the needs of the Adviser or
the owners of the Shares of the MarketVectorTM
Index ETFs into consideration in determining or composing the
MarketVectorTM
Indexes. MarketVector is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Shares of the
MarketVectorTM
Index ETFs to be issued or in the determination or calculation of the equation
by which the Shares of the MarketVectorTM
Index ETFs are to be converted into cash. MarketVector has no obligation or
liability in connection with the administration, marketing or trading of the
Shares of the MarketVectorTM
Index ETFs.
The
MarketVectorTM
Indexes are the exclusive property of MarketVector, which has contracted with
Solactive AG to maintain and calculate the MarketVectorTM
Indexes. Solactive AG uses its best efforts to ensure that the
MarketVectorTM
Indexes are calculated correctly. Irrespective of its obligations towards
MarketVector, Solactive AG has no obligation to point out errors in the
MarketVectorTM
Indexes to third parties including but not limited to investors and/or financial
intermediaries of the financial instrument.
MarketVectorTM
Index 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
MarketVectorTM
Indexes and/or their trademarks or their prices at any time or in any other
respect. The MarketVectorTM
Indexes are calculated and maintained by Solactive AG. Solactive AG uses its
best efforts to ensure that the MarketVectorTM
Indexes are calculated correctly. Irrespective of its obligations towards
MarketVector, Solactive AG has no obligation to point out errors in the
MarketVectorTM
Indexes to third parties including but not limited to investors and/or financial
intermediaries of the MarketVectorTM
Index ETFs. Neither publication of the MarketVectorTM
Indexes by Solactive AG nor the licensing of the MarketVectorTM
Indexes or its trade mark for the purpose of use in connection with the
MarketVectorTM
Index ETFs constitutes a recommendation by Solactive AG to invest capital in the
MarketVectorTM
Index ETFs nor does it in any way represent an assurance or opinion of Solactive
AG with regard to any investment in the MarketVectorTM
Index ETFs. Solactive AG is not responsible for fulfilling the legal
requirements concerning the accuracy and completeness of the prospectus of the
MarketVectorTM
Index ETFs.
MARKETVECTOR
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
MARKETVECTORTM
INDEXES
OR ANY DATA INCLUDED THEREIN AND MARKETVECTOR SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. MARKETVECTOR MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF
SHARES OF THE MARKETVECTORTM
INDEX ETFS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
MARKETVECTORTM
INDEXES,
OR MARKETVECTORTM
INDEX ETFS OR ANY DATA INCLUDED THEREIN. MARKETVECTOR MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
MARKETVECTORTM
INDEXES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MARKETVECTOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
The
Adviser has entered into a licensing agreement with S-Network to use the Natural
Resources Index. The Adviser has also granted S-Network a license to use the
VanEck name in connection with the Natural Resources Index and S-Network will
pay the Adviser a share of the revenues received by S-Network from the licensing
of the Natural Resources Index. VanEck Natural Resources ETF is entitled to use
its Natural Resources Index pursuant to a sub-licensing arrangement with the
Adviser.
S-Network®
is a service mark of S-Network and has been licensed for use by the Adviser in
connection with VanEck Natural Resources ETF. VanEck Natural Resources ETF is
not sponsored, endorsed, sold or promoted by S-Network, which makes no
representation regarding the advisability of investing in VanEck Natural
Resources ETF.
“S-Network
Global Indexes, LLCSM,” is a service mark of S-Network and have been licensed
for use by the Adviser.
The
Shares of VanEck Natural Resources ETF are not sponsored, endorsed, sold or
promoted by S-Network. S-Network makes no representation or warranty, express or
implied, to the owners of Shares of VanEck Natural Resources ETF or any member
of the public regarding the advisability of investing in securities generally or
in the Shares of VanEck Natural Resources ETF particularly or the ability of the
Natural Resources Index to track the performance of the physical commodities
market. S-Network’s only relationship to the Adviser (“Licensee”) is the
licensing of certain service marks and trade names of S-Network and of the
Natural Resources Index that are determined, composed and calculated by
S-Network without regard to the Licensee or the Shares of VanEck Natural
Resources ETF. S-Network has no obligation to take the needs of the Licensee or
the owners of Shares of VanEck Natural Resources ETF into consideration in
determining, composing or calculating the Natural Resources Index. S-Network is
not responsible for and has not participated in the determination of the timing
of, prices at, or quantities of the Shares of VanEck Natural Resources ETF to be
issued or in the determination or calculation of the equation by which the
Shares of VanEck Natural Resources ETF are to be converted into cash. S-Network
has no obligation or liability in connection with the administration, marketing
or trading of the Shares of VanEck Natural Resources ETF.
S-NETWORK
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE NATURAL RESOURCES
INDEX OR ANY DATA INCLUDED THEREIN AND S-NETWORK SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S-NETWORK MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF SHARES
OF VANECK NATURAL RESOURCES ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE NATURAL RESOURCES INDEX OR ANY DATA INCLUDED THEREIN. S-NETWORK 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
NATURAL RESOURCES INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF
THE FOREGOING, IN NO EVENT SHALL S-NETWORK HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
VANECK
AND ITS AFFILIATES SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS, AND MAKES NO WARRANTY, EXPRESS OR IMPLIED AS TO RESULTS TO BE
OBTAINED BY OWNERS OF VANECK NATURAL RESOURCES ETF, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE NATURAL RESOURCES INDEX. WITHOUT
LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL VANECK OR ANY OF ITS AFFILIATES HAVE ANY
LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL
DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
THOMSON
REUTERS PLC, ITS AFFILIATES, SOURCES AND DISTRIBUTION AGENTS (TOGETHER, THE
“INDICATIVE VALUE CALCULATION AGENT”) SHALL NOT BE LIABLE TO THE ADVISER, ANY
CUSTOMER OR ANY THIRD PARTY FOR ANY LOSS OR DAMAGE, DIRECT, INDIRECT OR
CONSEQUENTIAL, ARISING FROM (I) ANY INACCURACY OR INCOMPLETENESS IN, OR DELAYS,
INTERRUPTIONS, ERRORS OR OMISSIONS IN THE DELIVERY OF THE INTRA-DAY INDICATIVE
VALUE WITH RESPECT TO VANECK URANIUM+NUCLEAR ENERGY ETF (THE “INDICATIVE VALUE”)
OR ANY DATA RELATED THERETO (THE “DATA”) OR (II) ANY DECISION MADE OR ACTION
TAKEN BY THE ADVISER, ANY CUSTOMER OR THIRD PARTY IN RELIANCE UPON THE DATA. THE
INDICATIVE VALUE CALCULATION AGENT DOES NOT MAKE ANY WARRANTIES, EXPRESS OR
IMPLIED, TO THE ADVISER, ANY INVESTOR IN VANECK URANIUM+NUCLEAR ENERGY ETF OR
ANY ONE ELSE REGARDING THE DATA, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES
WITH RESPECT TO THE TIMELINESS, SEQUENCE, ACCURACY, COMPLETENESS, CORRECTNESS,
MERCHANTABILITY, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTIES
AS TO THE RESULTS TO BE OBTAINED BY THE ADVISER, ANY INVESTORS IN VANECK
URANIUM+NUCLEAR ENERGY ETF OR OTHER PERSON IN CONNECTION WITH THE USE OF THE
DATA. THE INDICATIVE VALUE CALCULATION AGENT SHALL NOT BE LIABLE TO THE ADVISER,
ANY INVESTOR IN VANECK URANIUM+NUCLEAR ENERGY ETF OR OTHER THIRD PARTIES FOR ANY
DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF BUSINESS REVENUES, LOST PROFITS
OR ANY INDIRECT, CONSEQUENTIAL, SPECIAL OR SIMILAR DAMAGES WHATSOEVER, WHETHER
IN CONTRACT, TORT OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
The
S&P 500®
Index included in each Fund’s performance table is a product of S&P Dow
Jones Indices LLC and/or its affiliates and has been licensed for use by the
Adviser. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P
Global, Inc., and/or its affiliates. All rights reserved. Redistribution or
reproduction in whole or in part are prohibited without written permission of
S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones
Indices LLC’s indices please visit www.spdji.com. S&P®
is a registered trademark of S&P Global and Dow Jones®
is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P
Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor
their third party licensors make any representation or warranty, express or
implied, as to the ability of any index to accurately represent the asset class
or market sector that it purports to represent and neither S&P Dow Jones
Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third
party licensors shall have any liability for any errors, omissions, or
interruptions of any index or the data included therein.
S&P
DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR
THE COMPLETENESS OF EACH INDEX OR ANY DATA RELATED THERETO, OR ANY COMMUNICATION
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL
NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF EACH INDEX, OR WITH RESPECT TO ANY DATA
RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER
SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF
PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY,
OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR
ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND THE ADVISER, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
The
financial highlights tables which follow are intended to help you understand the
Funds’ financial performance for the past five years or as indicated. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in a Fund (assuming reinvestment of all dividends and
distributions).
The
information for the fiscal year ended December 31, 2022 has been audited by
PricewaterhouseCoopers LLP, the Trust's independent registered public accounting
firm, whose report, along with the Funds' financial statements, is included in
the Funds' Annual Report, which is available upon request. The information for
periods prior to the fiscal year ended December 31, 2022 was audited by another
independent registered public accounting firm.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agribusiness
ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
95.38 |
|
|
$ |
77.82 |
|
|
$ |
68.59 |
|
|
$ |
57.11 |
|
|
$ |
61.63 |
|
|
|
|
| Net
investment income (a) |
1.71 |
|
1.14 |
|
0.90 |
|
0.83 |
|
0.83 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(9.28) |
|
17.54 |
|
9.19 |
|
11.56 |
|
(4.39) |
|
|
|
| Total
from investment operations |
(7.57) |
|
18.68 |
|
10.09 |
|
12.39 |
|
(3.56) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(1.85) |
|
(1.12) |
|
(0.86) |
|
(0.91) |
|
(0.96) |
|
|
|
| Net
asset value, end of year |
$ |
85.96 |
|
|
$ |
95.38 |
|
|
$ |
77.82 |
|
|
$ |
68.59 |
|
|
$ |
57.11 |
|
|
|
|
| Total
return (b) |
(7.95) |
|
% |
23.99 |
|
% |
14.73 |
|
% |
21.70 |
|
% |
(5.76) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenses |
0.53 |
|
% |
0.52 |
|
% |
0.55 |
|
% |
0.56 |
|
% |
0.54 |
|
% |
|
|
| Net
investment income |
1.84 |
|
% |
1.25 |
|
% |
1.41 |
|
% |
1.29 |
|
% |
1.32 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$1,341 |
|
|
$1,183 |
|
|
$794 |
|
|
$717 |
|
|
$757 |
|
|
|
|
| Portfolio
turnover rate (c) |
24 |
|
% |
17 |
|
% |
13 |
|
% |
21 |
|
% |
16 |
|
% |
|
|
__________
(a) Calculated
based upon average shares outstanding
(b) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
of Food ETF |
|
|
Year
Ended
December
31, 2022 |
|
Period
Ended
December
31,
2021(a) |
|
| Net
asset value, beginning of period |
$ |
24.70 |
|
|
$ |
24.33 |
|
|
| Net
investment income (b) |
0.29 |
|
|
0.02 |
|
|
| Net
realized and unrealized gain (loss) on investments |
(6.74) |
|
|
0.35 |
|
|
| Total
from investment operations |
(6.45) |
|
0.37 |
|
| Distributions
from: |
|
|
|
|
| Net
investment income |
(0.26) |
|
— |
|
| Net
asset value, end of period |
$ |
17.99 |
|
|
$ |
24.70 |
|
|
| Total
return (c) |
(26.14) |
|
% |
1.53 |
|
%(d) |
| Ratios
to average net assets |
|
|
|
|
| Expenses
|
0.69 |
|
% |
0.69 |
|
%(e) |
| Net
investment income |
1.44 |
|
% |
0.93 |
|
%(e) |
| Supplemental
data |
|
|
|
|
| Net
assets, end of period (in millions) |
$3 |
|
|
$2 |
|
|
| Portfolio
turnover rate (f) |
4 |
|
% |
0 |
|
%(d) |
__________
(a) For
the period December 1, 2021 (commencement of operations) through December 31,
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 year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold
Miners ETF |
|
|
Year
Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
| Net
asset value, beginning of year |
$ |
32.00 |
|
|
$ |
35.98 |
|
|
$ |
29.34 |
|
|
$ |
21.07 |
|
|
$ |
23.25 |
|
|
| Net
investment income (a) |
0.48 |
|
0.52 |
|
0.21 |
|
0.19 |
|
0.14 |
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
| investments |
(3.31) |
|
(3.97) |
|
6.62 |
|
8.27 |
|
(2.21) |
|
| Total
from investment operations |
(2.83) |
|
(3.45) |
|
6.83 |
|
8.46 |
|
(2.07) |
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.48) |
|
(0.53) |
|
(0.19) |
|
(0.19) |
|
(0.11) |
|
| Net
asset value, end of year |
$ |
28.69 |
|
|
$ |
32.00 |
|
|
$ |
35.98 |
|
|
$ |
29.34 |
|
|
$ |
21.07 |
|
|
| Total
return (b) |
(8.87) |
|
% |
(9.56) |
|
% |
23.30 |
|
% |
40.15 |
|
% |
(8.92) |
|
% |
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
| Expenses |
0.51 |
|
% |
0.51 |
|
% |
0.51 |
|
% |
0.52 |
|
% |
0.52 |
|
% |
| Net
investment income |
1.61 |
|
% |
1.53 |
|
% |
0.61 |
|
% |
0.76 |
|
% |
0.66 |
|
% |
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$11,934 |
|
|
$13,273 |
|
|
$16,504 |
|
|
$12,999 |
|
|
$10,576 |
|
|
| Portfolio
turnover rate (c) |
17 |
|
% |
15 |
|
% |
13 |
|
% |
14 |
|
% |
15 |
|
% |
__________
(a) Calculated
based upon average shares outstanding
(b) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Green
Metals ETF |
|
|
Year
Ended December 31, 2022 |
|
Period
Ended
December
31,
2021(a) |
|
| Net
asset value, beginning of period |
$ |
34.88 |
|
|
$ |
34.67 |
|
|
| Net
investment income (loss) (b) |
0.73 |
|
|
(0.01) |
|
|
| Net
realized and unrealized gain (loss) on investments |
(6.64) |
|
|
0.22 |
|
|
| Total
from investment operations |
(5.91) |
|
0.21 |
|
| Distributions
from: |
|
|
|
|
| Net
investment income |
(0.73) |
|
— |
|
| Net
asset value, end of period |
$ |
28.24 |
|
|
$ |
34.88 |
|
|
|
Total
return (c)
|
(16.99) |
|
% |
0.61 |
|
%(d) |
| Ratios
to average net assets |
|
|
|
|
| Expenses |
0.63 |
|
% |
0.60 |
|
%(e) |
| Expenses
excluding interest and taxes |
0.59 |
|
% |
0.59 |
|
%(e) |
| Net
investment income (loss) |
2.33 |
|
% |
(0.30) |
|
%(e) |
| Supplemental
data |
|
|
|
|
| Net
assets, end of period (in millions) |
$23 |
|
|
$16 |
|
|
| Portfolio
turnover rate (f) |
32 |
|
% |
10 |
|
%(d) |
__________
(a) For
the period November 10, 2021 (commencement of operations) through December 31,
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 year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior
Gold Miners ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
41.88 |
|
|
$ |
54.26 |
|
|
$ |
42.39 |
|
|
$ |
30.11 |
|
|
$ |
34.21 |
|
|
|
|
| Net
investment income (a) |
0.24 |
|
0.39 |
|
0.22 |
|
0.08 |
|
0.14 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(6.31) |
|
(12.02) |
|
12.51 |
|
12.36 |
|
(4.10) |
|
|
|
| Total
from investment operations |
(6.07) |
|
(11.63) |
|
12.73 |
|
12.44 |
|
(3.96) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.18) |
|
(0.75) |
|
(0.86) |
|
(0.16) |
|
(0.14) |
|
|
|
| Net
asset value, end of year |
$ |
35.63 |
|
|
$ |
41.88 |
|
|
$ |
54.26 |
|
|
$ |
42.39 |
|
|
$ |
30.11 |
|
|
|
|
| Total
return (b) |
(14.48) |
|
% |
(21.44) |
|
% |
30.07 |
|
% |
41.31 |
|
% |
(11.58) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Expenses |
0.52 |
|
% |
0.52 |
|
% |
0.52 |
|
% |
0.53 |
|
% |
0.53 |
|
% |
|
|
| Net
investment income |
0.64 |
|
% |
0.84 |
|
% |
0.46 |
|
% |
0.24 |
|
% |
0.45 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$3,737 |
|
|
$4,495 |
|
|
$6,315 |
|
|
$5,219 |
|
|
$4,273 |
|
|
|
|
| Portfolio
turnover rate (c) |
27 |
|
% |
24 |
|
% |
34 |
|
% |
19 |
|
% |
28 |
|
% |
|
|
__________
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
Carbon Energy ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
159.69 |
|
|
$ |
165.41 |
|
|
$ |
75.70 |
|
|
$ |
55.10 |
|
|
$ |
60.94 |
|
|
|
|
| Net
investment income (a) |
1.45 |
|
0.78 |
|
0.16 |
|
0.05 |
|
0.26 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(48.57) |
|
(5.79) |
|
89.64 |
|
20.55 |
|
(5.76) |
|
|
|
| Total
from investment operations |
(47.12) |
|
(5.01) |
|
89.80 |
|
20.60 |
|
(5.50) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(1.46) |
|
|
(0.71) |
|
|
(0.09) |
|
|
— |
|
|
(0.34) |
|
|
|
| Net
asset value, end of year |
$ |
111.11 |
|
|
$ |
159.69 |
|
|
$ |
165.41 |
|
|
$ |
75.70 |
|
|
$ |
55.10 |
|
|
|
|
| Total
return (b) |
(29.52) |
|
% |
(3.02) |
|
% |
118.65 |
|
% |
37.38 |
|
% |
(9.02) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.61 |
|
% |
0.55 |
|
% |
0.64 |
|
% |
0.65 |
|
% |
0.65 |
|
% |
|
|
| Net
expenses |
0.61 |
|
% |
0.55 |
|
% |
0.62 |
|
% |
0.62 |
|
% |
0.63 |
|
% |
|
|
| Net
expenses excluding interest and taxes |
0.61 |
|
% |
0.55 |
|
% |
0.62 |
|
% |
0.62 |
|
% |
0.62 |
|
% |
|
|
| Net
investment income |
1.13 |
|
% |
0.49 |
|
% |
0.16 |
|
% |
0.08 |
|
% |
0.44 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$198 |
|
|
$301 |
|
|
$270 |
|
|
$105 |
|
|
$79 |
|
|
|
|
| Portfolio
turnover rate (c) |
16 |
|
% |
77 |
|
% |
84 |
|
% |
40 |
|
% |
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) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
Resources ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
47.44 |
|
|
$ |
38.65 |
|
|
$ |
37.10 |
|
|
$ |
32.20 |
|
|
$ |
37.09 |
|
|
|
|
| Net
investment income (a) |
1.66 |
|
1.21 |
|
0.84 |
|
0.96 |
|
0.81 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
1.71 |
|
8.60 |
|
1.65 |
(b) |
4.94 |
|
(4.78) |
|
|
|
| Total
from investment operations |
3.37 |
|
9.81 |
|
2.49 |
|
5.90 |
|
(3.97) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(1.61) |
|
(1.02) |
|
(0.94) |
|
(1.00) |
|
(0.92) |
|
|
|
| Net
asset value, end of year |
$ |
49.20 |
|
|
$ |
47.44 |
|
|
$ |
38.65 |
|
|
$ |
37.10 |
|
|
$ |
32.20 |
|
|
|
|
| Total
return (c) |
7.10 |
|
% |
25.38 |
|
% |
6.73 |
|
% |
18.34 |
|
% |
(10.69) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses (d) |
0.50 |
|
% |
0.78 |
|
% |
0.90 |
|
% |
0.79 |
|
% |
0.72 |
|
% |
|
|
| Net
expenses (d) |
0.50 |
|
% |
0.49 |
|
% |
0.49 |
|
% |
0.50 |
|
% |
0.50 |
|
% |
|
|
| Net
expenses excluding interest and taxes (d) |
0.49 |
|
% |
0.49 |
|
% |
0.49 |
|
% |
0.49 |
|
% |
0.49 |
|
% |
|
|
| Net
investment income |
3.36 |
|
% |
2.63 |
|
% |
2.59 |
|
% |
2.70 |
|
% |
2.21 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$143 |
|
|
$97 |
|
|
$52 |
|
|
$70 |
|
|
$77 |
|
|
|
|
| Portfolio
turnover rate (e) |
37 |
|
% |
26 |
|
% |
26 |
|
% |
24 |
|
% |
23 |
|
% |
|
|
__________
(a) Calculated
based upon average shares outstanding
(b) The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(c) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d) Periods
after December 31, 2021 reflect a unitary management fee structure.
(e) Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Refiners ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
27.14 |
|
|
$ |
25.01 |
|
|
$ |
29.01 |
|
|
$ |
26.95 |
|
|
$ |
30.40 |
|
|
|
|
| Net
investment income (a) |
1.07 |
|
|
0.66 |
|
|
0.58 |
|
|
0.56 |
|
|
0.74 |
|
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
3.94 |
|
|
2.12 |
|
|
(3.92) |
|
|
1.91 |
|
|
(3.54) |
|
|
|
|
| Total
from investment operations |
5.01 |
|
|
2.78 |
|
|
(3.34) |
|
|
2.47 |
|
|
(2.80) |
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.96) |
|
|
(0.65) |
|
|
(0.64) |
|
|
(0.41) |
|
|
(0.52) |
|
|
|
|
| Net
realized capital gains |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(0.13) |
|
|
|
|
| Return
of capital |
— |
|
|
— |
|
|
(0.02) |
|
|
— |
|
|
— |
|
|
|
|
| Total
distributions |
(0.96) |
|
|
(0.65) |
|
|
(0.66) |
|
|
(0.41) |
|
|
(0.65) |
|
|
|
|
| Net
asset value, end of year |
$ |
31.19 |
|
|
$ |
27.14 |
|
|
$ |
25.01 |
|
|
$ |
29.01 |
|
|
$ |
26.95 |
|
|
|
|
| Total
return (b) |
18.50 |
|
% |
11.10 |
|
% |
(11.50) |
|
% |
9.19 |
|
% |
(9.22) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.78 |
|
% |
1.02 |
|
% |
1.29 |
|
% |
1.03 |
|
% |
0.72 |
|
% |
|
|
| Net
expenses |
0.61 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
0.60 |
|
% |
0.60 |
|
% |
|
|
| Net
expenses excluding interest and taxes |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
0.59 |
|
% |
|
|
| Net
investment income |
3.54 |
|
% |
2.32 |
|
% |
2.56 |
|
% |
1.97 |
|
% |
2.32 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$39 |
|
|
$20 |
|
|
$18 |
|
|
$35 |
|
|
$49 |
|
|
|
|
| Portfolio
turnover rate (c) |
40 |
|
% |
18 |
|
% |
37 |
|
% |
30 |
|
% |
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) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Services ETF(a) |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
| Net
asset value, beginning of year |
$ |
184.74 |
|
|
$ |
153.90 |
|
|
$ |
265.47 |
|
|
$ |
280.60 |
|
|
$ |
520.40 |
|
|
|
|
| Net
investment income (b) |
2.14 |
|
2.41 |
|
2.26 |
|
6.60 |
|
7.00 |
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
120.04 |
|
30.24 |
(c) |
(111.94) |
|
(15.93) |
(c) |
(240.80) |
|
|
|
| Total
from investment operations |
122.18 |
|
32.65 |
|
(109.68) |
|
(9.33) |
|
(233.80) |
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(2.89) |
|
(1.81) |
|
(1.89) |
|
(5.80) |
|
(6.00) |
|
|
|
| Net
asset value, end of year |
$ |
304.03 |
|
|
$ |
184.74 |
|
|
$ |
153.90 |
|
|
$ |
265.47 |
|
|
$ |
280.60 |
|
|
|
|
| Total
return (d) |
66.14 |
|
% |
21.18 |
|
% |
(41.31) |
|
% |
(3.35) |
|
% |
(44.93) |
|
% |
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses (e) |
0.35 |
|
% |
0.36 |
|
% |
0.40 |
|
% |
0.39 |
|
% |
0.38 |
|
% |
|
|
| Net
expenses (e) |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
0.35 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
0.83 |
|
% |
1.21 |
|
% |
1.68 |
|
% |
2.28 |
|
% |
1.44 |
|
% |
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$2,584 |
|
|
$2,143 |
|
|
$723 |
|
|
$773 |
|
|
$1,045 |
|
|
|
|
| Portfolio
turnover rate (f) |
17 |
|
% |
28 |
|
% |
33 |
|
% |
29 |
|
% |
22 |
|
% |
|
|
__________
(a) On
April 15, 2020, the Fund effected a 1 for 20 reverse share split. Per share data
has been adjusted to reflect the reverse share split.
(b) Calculated
based upon average shares outstanding
(c) The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(d) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(e) Periods
after December 31, 2021 reflect a unitary management fee structure.
(f) Portfolio
turnover rate excludes in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rare
Earth/Strategic Metals ETF(a) |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
| Net
asset value, beginning of year |
$ |
111.72 |
|
|
$ |
65.41 |
|
|
$ |
40.41 |
|
|
$ |
40.68 |
|
|
$ |
89.25 |
|
|
|
|
|
|
| Net
investment income (b) |
0.68 |
|
0.08 |
|
0.58 |
|
0.90 |
|
1.98 |
|
|
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
(34.93) |
|
52.12 |
|
24.95 |
|
(0.54) |
(c) |
(45.48) |
|
|
|
|
|
| Total
from investment operations |
(34.25) |
|
52.20 |
|
25.53 |
|
0.36 |
|
(43.50) |
|
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(1.19) |
|
(5.89) |
|
(0.53) |
|
(0.63) |
|
(5.07) |
|
|
|
|
|
| Net
asset value, end of year |
$ |
76.28 |
|
|
$ |
111.72 |
|
|
$ |
65.41 |
|
|
$ |
40.41 |
|
|
$ |
40.68 |
|
|
|
|
|
|
| Total
return (d) |
(30.68) |
|
% |
80.09 |
|
% |
63.22 |
|
% |
0.91 |
|
% |
(48.70) |
|
% |
|
|
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.54 |
|
% |
0.53 |
|
% |
0.63 |
|
% |
0.64 |
|
% |
0.63 |
|
% |
|
|
|
|
| Net
expenses |
0.54 |
|
% |
0.53 |
|
% |
0.59 |
|
% |
0.60 |
|
% |
0.59 |
|
% |
|
|
|
|
| Net
expenses excluding interest and taxes |
0.54 |
|
% |
0.53 |
|
% |
0.57 |
|
% |
0.57 |
|
% |
0.57 |
|
% |
|
|
|
|
| Net
investment income |
0.70 |
|
% |
0.08 |
|
% |
1.44 |
|
% |
2.14 |
|
% |
2.73 |
|
% |
|
|
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$ |
631 |
|
|
$ |
1,014 |
|
|
$ |
322 |
|
|
$ |
193 |
|
|
$ |
93 |
|
|
|
|
|
|
| Portfolio
turnover rate (e) |
40 |
|
% |
74 |
|
% |
70 |
|
% |
64 |
|
% |
68 |
|
% |
|
|
|
|
__________
(a) On
April 15, 2020, the Fund effected a 1 for 3 reverse share split. Per share data
has been adjusted to reflect the reverse share split.
(b) Calculated
based upon average shares outstanding
(c) The
amount shown does not correspond with the aggregate net gain (loss) on
investments for the period due to the timing of sales and repurchase of shares
in relation to fluctuating market values of the investments of the
Fund.
(d) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(e) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel
ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
| Net
asset value, beginning of year |
$ |
53.25 |
|
|
$ |
44.57 |
|
|
$ |
37.74 |
|
|
$ |
34.87 |
|
|
$ |
45.74 |
|
|
|
|
|
|
| Net
investment income (a) |
2.71 |
|
3.19 |
|
0.71 |
|
1.16 |
|
1.30 |
|
|
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
4.72 |
|
9.25 |
|
6.95 |
|
2.75 |
|
(9.99) |
|
|
|
|
|
| Total
from investment operations |
7.43 |
|
12.44 |
|
7.66 |
|
3.91 |
|
(8.69) |
|
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(2.87) |
|
(3.76) |
|
(0.77) |
|
(1.04) |
|
(2.18) |
|
|
|
|
|
| Return
of capital |
(0.01) |
|
— |
|
(0.06) |
|
— |
|
|
— |
|
|
|
|
|
|
| Total
distributions |
(2.88) |
|
(3.76) |
|
(0.83) |
|
(1.04) |
|
(2.18) |
|
|
|
|
|
| Net
asset value, end of year |
$ |
57.80 |
|
|
$ |
53.25 |
|
|
$ |
44.57 |
|
|
$ |
37.74 |
|
|
$ |
34.87 |
|
|
|
|
|
|
| Total
return (b) |
13.88 |
|
% |
27.91 |
|
% |
20.57 |
|
% |
11.02 |
|
% |
(18.94) |
|
% |
|
|
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.58 |
|
% |
0.56 |
|
% |
0.95 |
|
% |
0.71 |
|
% |
0.61 |
|
% |
|
|
|
|
| Net
expenses |
0.56 |
|
% |
0.55 |
|
% |
0.56 |
|
% |
0.56 |
|
% |
0.56 |
|
% |
|
|
|
|
| Net
expenses excluding interest and taxes |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
0.55 |
|
% |
|
|
|
|
| Net
investment income |
4.72 |
|
% |
5.48 |
|
% |
2.31 |
|
% |
3.11 |
|
% |
2.80 |
|
% |
|
|
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$100 |
|
|
$112 |
|
|
$77 |
|
|
$66 |
|
|
$58 |
|
|
|
|
|
|
| Portfolio
turnover rate (c) |
20 |
|
% |
25 |
|
% |
34 |
|
% |
19 |
|
% |
16 |
|
% |
|
|
|
|
__________
(a) Calculated
based upon average shares outstanding
(b) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(c) Portfolio
turnover rate excludes in-kind transactions.
For
a share outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uranium+Nuclear
Energy ETF |
|
|
|
|
Year
Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
| Net
asset value, beginning of year |
$ |
54.90 |
|
|
$ |
49.35 |
|
|
$ |
48.71 |
|
|
$ |
49.67 |
|
|
$ |
49.09 |
|
|
|
|
|
|
| Net
investment income (a) |
0.86 |
|
1.44 |
|
0.89 |
|
1.07 |
|
1.30 |
|
|
|
|
|
| Net
realized and unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| investments |
0.29 |
|
5.20 |
|
0.85 |
|
(0.85) |
|
1.22 |
|
|
|
|
|
| Total
from investment operations |
1.15 |
|
6.64 |
|
1.74 |
|
0.22 |
|
2.52 |
|
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(1.11) |
|
(1.09) |
|
(1.10) |
|
(1.18) |
|
(1.94) |
|
|
|
|
|
| Net
asset value, end of year |
$ |
54.94 |
|
|
$ |
54.90 |
|
|
$ |
49.35 |
|
|
$ |
48.71 |
|
|
$ |
49.67 |
|
|
|
|
|
|
| Total
return (b) |
2.10 |
|
% |
13.48 |
|
% |
3.59 |
|
% |
0.44 |
|
% |
5.15 |
|
% |
|
|
|
|
| Ratios
to average net assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross
expenses |
0.67 |
|
% |
0.89 |
|
% |
1.25 |
|
% |
0.93 |
|
% |
0.85 |
|
% |
|
|
|
|
| Net
expenses |
0.61 |
|
% |
0.60 |
|
% |
0.60 |
|
% |
0.61 |
|
% |
0.60 |
|
% |
|
|
|
|
| Net
expenses excluding interest and taxes |
0.60 |
|
% |
0.60 |
|
% |
0.60 |
|
% |
0.60 |
|
% |
0.60 |
|
% |
|
|
|
|
| Net
investment income |
1.56 |
|
% |
2.70 |
|
% |
1.97 |
|
% |
2.13 |
|
% |
2.58 |
|
% |
|
|
|
|
| Supplemental
data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in millions) |
$54 |
|
|
$35 |
|
|
$18 |
|
|
$23 |
|
|
$26 |
|
|
|
|
|
|
| Portfolio
turnover rate (c) |
53 |
|
% |
25 |
|
% |
25 |
|
% |
15 |
|
% |
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) Portfolio
turnover rate excludes in-kind transactions.
|
|
|
| PREMIUM/
DISCOUNT INFORMATION |
Information
regarding how often the closing trading price of the Shares of each Fund was
above (i.e., at a premium) or below (i.e., at a discount) the NAV of the Fund
for the most recently completed calendar year and the most recently completed
calendar quarter(s) since that year (or the life of the Fund, if shorter) can be
found at www.vaneck.com.
CONTINUOUS
OFFERING
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the Investment Company Act of 1940. As a result, broker dealer
firms should note that dealers who are not underwriters but are participating in
a distribution (as contrasted with ordinary secondary market transactions) and
thus dealing with the Shares that are part of an overallotment within the
meaning of Section 4(a)(3)(A) of the Securities Act would be unable to take
advantage of the prospectus delivery exemption provided by Section 4(a)(3) of
the Securities Act. Firms that incur a prospectus delivery obligation with
respect to Shares are reminded that, under Rule 153 of the Securities Act, a
prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed
to an exchange member in connection with a sale on the Exchange is satisfied by
the fact that the prospectus is available at the Exchange upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
In
addition, certain affiliates of the Funds and the Adviser may purchase and
resell Fund shares pursuant to this Prospectus.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on March 15, 2001. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of shareholders will not be held except as required by the Investment Company
Act of 1940 and other applicable law. See the Funds’ SAI for more information
concerning the Trust’s form of organization. Section 12(d)(1) of the Investment
Company Act of 1940 restricts investments by investment companies in the
securities of other investment companies, including Shares of a Fund. Registered
investment companies are permitted to invest in the Funds beyond the limits set
forth in Section 12(d)(1) subject to certain terms and conditions set forth in
SEC regulations, including that such investment companies enter into an
agreement with such Fund.
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the Funds' shareholders and the Trust, the Funds, the
Adviser and/or the Trustees. Further, shareholders are not intended third-party
beneficiaries of any contracts entered into by (or on behalf of) any Fund,
including contracts with the Adviser or other parties who provide services to
the Funds.
Dechert
LLP serves as counsel to the Trust, including the Funds. PricewaterhouseCoopers
LLP serves as the Trust’s independent registered public accounting firm and
audits the Funds' financial statements annually.
ADDITIONAL
INFORMATION
This
Prospectus does not contain all the information included in the Registration
Statement filed with the SEC with respect to the Funds’ Shares. The Funds’
Registration Statement, including this Prospectus, the Funds’ SAI and the
exhibits are available on the EDGAR database at the SEC’s website
(http://www.sec.gov), and copies may be obtained, after paying a duplicating
fee, by electronic request at the following email address: [email protected].
The
SAI for the Funds, which has been filed with the SEC, provides more information
about the Funds. The SAI for the Funds is incorporated herein by reference and
is legally part of this Prospectus. Additional information about the Funds’
investments is available in each Fund’s annual and semi-annual reports to
shareholders. In each Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year. The SAI and the Funds’ annual
and semi-annual reports may be obtained without charge by writing to the Funds
at Van Eck Securities Corporation, the Funds’ Distributor, at 666 Third Avenue,
9th Floor, New York, New York 10017 or by calling the Distributor at the
following number: Investor Information: 800.826.2333.
Shareholder
inquiries may be directed to the Funds in writing to 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling 800.826.2333.
The
Funds’ SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
For
more detailed information about the Funds, see the SAI dated May 1, 2023, as may
be supplemented from time to time. Additional information about 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
SEC’s internet site at http://www.sec.gov. In addition, copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following email address: [email protected].
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Transfer
Agent: State Street Bank and Trust Company
SEC Registration Number:
333-123257
1940 Act Registration Number: 811-10325 |
800.826.2333
vaneck.com |
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