VanEck Vectors MSCI World ex Australia Quality (Hedged) ETF QHAL

Underlying Index
MSCI World ex Australia Quality 100% Hedged to AUD Index

Overview
The Index is based on a traditional market capitalisation-weighted parent index, the MSCI World ex Australia Index (the ‘Parent Index’), which includes large- and mid-capitalisation stocks. The Index aims to capture the performance of quality growth stocks selected from the Parent Index. The Index reweighs the selected quality growth stocks from the Parent Index to emphasise stocks with the highest quality scores. The components, sectors and countries represented in the Index will change over time.

Index calculation methodology
A four step process is followed to determine the Index constituents:

1. The eligible universe of securities is defined as the securities in the Parent Index.

2. A quality score is calculated for each security in the universe based on the following fundamental variables:
(a) return on equity;
(b) earnings variability; and
(c) debt to equity ratio.
If all three variables are available, a quality score for each security is calculated based on the average scores for the three variables. If (a) is positive and (b) or (c) is unavailable, the quality score is calculated based on the 2 available variables. If (a) is positive but both (b) and (c) are unavailable, the security is ineligible for inclusion.

3. The securities are ranked by quality score and a fixed number required to cover 30% of the Market Capitalisation of the Parent Index rounded up to the nearest 25 are selected, with the aim of attaining a high exposure to the quality factor, while maintaining sufficient Market Capitalisation and number of securities coverage. Individual issuer weight is capped at 5%.

4. Securities eligible for inclusion are weighted as follows: 
Quality weight = Quality score x Market Capitalisation weight in the Parent Index

Currency hedging
MSCI reduces the exposure of the Index to foreign exchange rate fluctuations between the Australian dollar and currencies in which the constituents are denominated by notionally entering into forward foreign exchange contracts on a rolling one-month basis at the end of each month. The Index is not fully hedged and retains some exposure to currency movements.

Rebalances
The Index is rebalanced on a semi-annual basis, usually as of the close of the last business day of May and November. The quality scores are recalculated at the end of April and October and used for May and November rebalances respectively. The updated Index is generally announced nine business days before the effective date.

Index provider
MSCI Inc. MSCI is not a related entity of VanEck Investments Limited.

QHAL is indexed to a MSCI index. QHAL is not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to QHAL or the MSCI Index. The PDS contains a more detailed description of the limited relationship MSCI has with VanEck and QHAL.