Market Fundamentals, Tax Rate Increases Combine to Strengthen Case for Closed-End Municipal Bond Funds
Market Vectors CEF Municipal Income ETF (XMPT) announced its most recent distribution on April 30
NEW YORK--(BUSINESS WIRE)-- A number of factors that came to the forefront in March continue to support a strong market for municipal bonds and closed-end funds (CEFs) investing in municipal bonds, according to Jim Colby, senior municipal strategist with Market Vectors ETFs.
“The underlying market for municipal bonds continues to look favorable,” said Colby. “In my opinion, Federal spending cuts are not likely to affect municipal credits and the U.S. economy continues to grow at a moderate rate, which is also good for this asset class. In addition, this year's tax rate increase for the wealthiest Americans and the potential for further rate hikes or losses of deductions helps support investor interest level in the municipal marketplace as well.”
Colby pointed to the Market Vectors CEF Municipal Income ETF (NYSE Arca: XMPT), which on April 30, announced a monthly dividend of $0.126 per share, and which had a 30-day SEC yield of 5.26% as of April 30 (or 8.71% taxable-equivalent yield for investors in the highest tax bracket). XMPT is currently among the highest-yielding ETFs providing exposure to the municipal bond market.
Distribution Information* (as of April 30, 2013):
|Ex-Date: May 1, 2013; Record Date: May 3, 2013; Payable Date: May 7, 2013|
|Distribution||Dividend Amount||Short Term||Long Term|
|Fund||Ticker||Frequency||Per Share||Capital Gain||Capital Gain|
|Market Vectors CEF Municipal Income ETF||XMPT||Monthly||$0.126||$0.00||$0.00|
Taxable-Equivalent Yield** (as of April 30, 2013):
|Marginal Tax Bracket|
|30 Day SEC Yield: 5.26%||6.19%||7.01%||7.31%||7.85%||8.71%|
Performance Information (as of April 30, 2013):
|Fund||Month-End 4/30/2013||Quarter-End 3/28/2013||Expenses***|
|Ticker: XMPT||1 Mo||3 Mo||YTD||1Yr||3Yr†||5Yr†||Life†||Gross||Net||Incept.|
|Market Vectors CEF Municipal Income ETF||Price||0.82%||-2.43%||1.85%||8.90%||-||-||13.04%||3.63%||1.67%||7/12/11|
“Credit quality remains high in the municipal space,” added Colby, “and we continue to see municipal bonds as offering the sort of stability and tax-exempt income generation capability that has been such a draw to investors continuing to search for yield.”
XMPT is intended to track, before fees and expenses, the price and yield performance of the S-Network Municipal Bond Closed-End Fund Index℠ (CEFMX), an index comprised of shares of municipal bond closed-end funds listed in the United States that are principally engaged in asset management processes designed to produce federally tax-exempt annual yield. XMPT expects to distribute net investment income at least monthly, and any net realized long-term or short-term capital gains annually. The Fund may also pay a special distribution at any time to comply with U.S. federal tax requirements. The Fund normally invests at least 80% of its total assets in investments the income from which is exempt from U.S. federal income tax (other than federal alternative minimum tax (“AMT”).
XMPT is one of six ETFs in Market Vectors municipal income ETF family — High-Yield Municipal Index ETF (HYD), Intermediate Municipal Index ETF (ITM), Long Municipal Index ETF (MLN), Pre-Refunded Municipal Index ETF (PRB), and Short Municipal Index ETF (SMB).
The performance quoted represents past performance. Past performance is no guarantee of future results. Performance information for the Fund reflects temporary waivers of expenses and/or fees. Had the Fund incurred all expenses, investment returns would have been reduced. The investment return and value of shares of the Fund will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV.
Please call 888.MKT.VCTR or visit our website for the most recent month-end performance of Market Vectors ETFs. This information will be available no later than seven business days after the most recent month end.
*The majority, and possibly all, of the distributions will be paid out of net investment income earned by the Fund. A portion of this distribution may come from net short‐term realized capital gains or return of capital. The amount of dividends paid by each fund may vary from time to time. Past amounts of dividends are no guarantee of future dividend payment amounts.
** 30-Day SEC Yield is a standard calculation developed by the Securities and Exchange Commission that allows for fairer comparisons among bond funds. It is based on the most recent 30-day period. This yield figure reflects the interest earned during the period after deducting the fund’s expenses for the period. Tax Equivalent 30-Day SEC Yield or tax equivalent yield (TEY) is used by investors to compare yields on taxable and tax-exempt securities after accounting for taxes. TEY represents the yield a taxable bond would have to earn in order to match – after taxes – the yield available on a tax-exempt municipal bond. TEY = Tax Free Municipal Bond Yield/(1 -Tax Rate).
***The Adviser has agreed to waive fees and/or pay fund expenses from exceeding 0.40% of average daily net assets per year until at least 9/1/13. The expense limitations are expected to continue until the Funds’ Board of Trustees acts to discontinue all or a portion of such expense limitation.
The "Net Asset Value" (NAV) of a Market Vectors Exchange Traded Fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV.
Van Eck Associates Corporation does not provide tax, legal or accounting advice. Investors should discuss their individual circumstances with appropriate professionals before making any decisions.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $26.1 billion in assets under management, making it the fifth largest ETP family in the U.S. and ninth largest worldwide as of March 31, 2013.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $35.0 billion in investor assets as of March 31, 2013.
XMPT is subject to the risks associated with an investment in a fund of funds, closed-end funds and non-diversified funds, among others. XMPT also may be subject to additional risks as a result of its investment in the underlying funds. Those risks include municipal securities risk, high yield securities risk, fixed income securities risk, tax risk, liquidity risk, leverage risk and anti-takeover measures risk.
Municipal bonds are subject to risks related to litigation, legislation, political change, conditions in underlying sectors or in local business communities and economies, bankruptcy or other changes in the issuer’s financial condition, and/or the discontinuance of taxes supporting the project or assets or the inability to collect revenues for the project or from the assets. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Interest and principal payments for pre-refunded bonds are funded from securities in an escrow account. The escrowed securities do not guarantee the price of these bonds. Municipal bonds may be less liquid than taxable bonds. There is no guarantee that the Funds’ income will be exempt from federal or state income taxes, and changes in those tax rates or in alternative minimum tax rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Capital gains, if any, are subject to capital gains tax. Some portions of the distributions from HYD and XMPT may be subject to the Alternative Minimum Tax (AMT).
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit vaneck.com/etf. Please read the prospectus and summary prospectus carefully before investing.
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335 Madison Avenue, New York, NY 10017
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