Emerging markets equities delivered solid returns in Q2 2025, driven by policy shifts and region-specific initiatives. The MSCI Emerging Markets IMI Index rose approximately 12.7% in the quarter, outperforming the MSCI World (+11.5%) and the S&P 500 (+10.9%). Emerging markets equities are handily outperforming developed markets and U.S. equities year to date. Investors responded positively to signs of stabilization in China, easing inflation in key countries, and select policy changes in India and Brazil. Emerging markets are outperforming both developed and U.S. equities this year, marking a notable reversal of recent relative weakness. Nonetheless, markets remain uneven, with differentiation and stock selection more important than ever.

China: Competition Heats Up, but Stability Returns

The MSCI China Index rose 2.0% in Q2, bringing year-to-date performance to +17.3%. Stock selection within China, primarily in the consumer sector, where competitive dynamics evolved rapidly over the quarter, detracted from the Emerging Markets Fund’s (the portfolio) performance. We observed new entrants and strategic pivots by existing players that intensified price competition and disrupted previously stable industry structures. These shifts weighed on sentiment and reduced earnings visibility for several of our holdings. While such volatility is not uncommon in China’s fast-moving consumer landscape, it reinforces the importance of maintaining a forward-looking perspective and staying agile in our assessment of business model resilience and strategic positioning.

During a recent trip across five Chinese cities, we observed that innovation, especially in AI, robotics, and EV supply chains, is moving full steam ahead. Factory automation is impressive, with engineer-led production and fewer manual tasks, but aggressive pricing and overcapacity are eroding near-term returns.

Technology remains a national priority. The breakthrough of “Deepseek” has catalyzed AI adoption across industries and accelerated investment in underlying infrastructure. Platform companies like Tencent and Alibaba are increasingly being treated as strategic national champions, with growing clarity around their roles in building out AI infrastructure and monetizing AI applications.

Economically, China appears to be in a stabilization phase. Activity is gradually bottoming out, although the recovery remains steady rather than strong. Policymakers remain committed to achieving the government’s 5% GDP growth target, but are doing so through measured, tactical support rather than broad-based stimulus. The property sector remains a pressure point but could serve as a policy lever if growth momentum weakens further.

Externally, the tone has also become more constructive. The recent round of tariff negotiations and a tentative trade deal provided some relief to earlier concerns that peaked in April. While the external environment is still uncertain and long-term tensions persist, the relatively more pragmatic and engagement-oriented stance from both sides has been better than feared and has helped stabilize investor sentiment.

On the ground, we encountered signs of improving corporate confidence and greater openness among management teams. Investor sentiment is also showing signs of life, with increased engagement from global allocators and the return of international tourism. While deflationary pressures and muted consumer demand continue to pose challenges, we believe China's equity market remains attractively valued. The combination of low valuations, excess household savings, and cautious optimism among domestic investors gives us reason to believe the market has further room to re-rate.

Consumer trends continue to evolve as well. Despite an uneven recovery, pockets of consumption are healthy. We are seeing a notable rise in demand for “dopamine consumption”—a term describing spending on small luxuries and instant-gratification experiences, such as branded jewelry, collectibles, and “feel good” beverage items like bubble tea. These trends are partially driven by a younger generation of consumers influenced by both regional and global culture, including the rising popularity of “K-pop” and adjacent aesthetics. Some companies positioned in this segment have performed well, and we continue to evaluate whether these demand shifts represent enduring, defensible growth opportunities.

While this quarter’s underperformance in China was disappointing, we are actively incorporating our on-the-ground learnings into the portfolio. We remain disciplined in our approach and are taking proactive steps to refine our exposure, focusing on structural winners with pricing power, capital discipline, and alignment with long-term policy priorities. At the same time, we are selectively positioning in areas where competitive dynamics are more stable and visibility on shareholder returns is stronger. Despite near-term volatility and ongoing policy and geopolitical complexity, we remain constructive on the long-term opportunity and continue to sharpen our process to stay aligned with our quality-growth investment philosophy.

India: A Well-Timed Turn in the Cycle

The MSCI India Index surged 9.2% in Q2, bringing its year-to-date return to approximately +6.0%. Our positioning and disciplined stock selection in Q1 proved effective, particularly in financials, where we had been adding with conviction ahead of the RBI’s (India’s central bank) surprise 100 basis point (bps) rate cut—double market expectations—which provided a meaningful liquidity boost.

We’ve long viewed India as a compelling structural growth story, underpinned by rising urban consumption, accelerating digitization, and government-backed manufacturing initiatives. Importantly, India’s economy is largely domestically driven, making it relatively less exposed to global trade tensions and tariff risks—an attribute that adds resilience in a more fragmented external environment.

While high valuations had previously tempered our pace of adding, the market pullback in late 2024 to early 2025—sparked by election-related growth concerns—created a window to increase exposure. We used that dislocation to selectively add to existing high-conviction names and initiate new positions with stronger valuation support.

We remain constructive on India’s long-term outlook and believe our increased exposure positions us well to benefit from the country’s enduring structural tailwinds and continued capital inflows.

Brazil: Inflation Eases, Value Remains

The MSCI Brazil Index rose approximately 13.3% in Q2, extending its strong year-to-date performance to around +30%. This rebound follows a volatile second half of 2024, when rising inflation and fiscal concerns spooked investors and prompted Brazil’s central bank to reverse course—shifting from a rate-cutting cycle into hikes. This pivot pressured equities, triggered a reallocation into fixed income, and drove valuations down to multi-year lows.

As we entered 2025, with valuations at attractive levels and signs that the rate cycle was nearing its peak, sentiment began to turn. The most recent 25bp hike in June likely marks the end of the tightening phase. With inflation gradually easing, there is growing optimism that rate cuts could begin later this year or in early 2026—providing a supportive backdrop for equities. Fiscal fears have also moderated, as the government has demonstrated more restraint and discipline than markets initially feared.

Brazil further benefits from favorable external dynamics. The country was among the relative winners of the U.S. tariff adjustments announced in April, facing only a 10% rate compared to steeper hikes for other exporters. Meanwhile, as the "U.S. exceptionalism" narrative loses steam, investor appetite for emerging markets has begun to recover, with Brazil a notable beneficiary.

Against this backdrop, domestically oriented growth companies—particularly in sectors tied to consumption, services, and financials—stand to benefit most. These businesses are poised to thrive in an environment of easing rates, improving consumer sentiment, and ongoing earnings momentum. While we remain mindful of the approaching 2026 presidential election, the political news flow has been benign to date. Overall, we maintain a constructive view on Brazilian equities, especially where bottom-up fundamentals align with supportive macro and capital flow dynamics.

Middle East: Resilience Amid Geopolitical Noise

Regional EM exposure delivered mixed results compared to the broad MSCI EM IMI Index. We remain constructive on our current allocations to the Gulf economies, where structural reform, domestic resilience, and deepening global partnerships continue to underpin a favorable investment outlook.

While geopolitical risks remain elevated, markets across the GCC—particularly the UAE—have proven remarkably resilient. These economies are increasingly underpinned by diversification and reform-driven growth, making them less vulnerable to external shocks. Barring a significant escalation into a broader regional conflict, the UAE and Dubai specifically have continued to benefit from their positioning as stable, business-friendly safe havens—attracting capital, talent, and global companies seeking both security and opportunity.

Saudi Arabia has underperformed, largely due to investor concerns around oil prices. However, we believe this overlooks the strength and momentum in the non-oil economy, driven by sustained social and economic reforms. While lower oil revenues may lead to reprioritization of some megaprojects, the Kingdom remains committed to its transformation agenda. Access to global funding and hard deadlines for flagship events—such as the Asian Winter Games in 2029, Expo 2030, and the FIFA World Cup 2034—support a steady pipeline of infrastructure and service-sector investment, helping to sustain credit growth and non-oil GDP expansion.

In parallel, the region is seeing a new wave of strategic relevance emerge through the lens of technology and digital infrastructure. Strengthening ties between the U.S. and GCC—particularly through high-level economic and technology cooperation—have opened the door for the Gulf to become a regional hub for AI development. The availability of low-cost power, abundant land, and recent agreements with U.S. companies like Nvidia to provide access to cutting-edge GPUs position countries such as the UAE and Saudi Arabia as increasingly attractive destinations for AI infrastructure investment. This evolving dynamic introduces a new layer of growth and diversification potential, which we are actively monitoring.

We have used recent market overreactions to geopolitical events as selective buying opportunities in both the UAE and Saudi Arabia. Our focus remains on high-conviction names supported by long-term policy alignment, attractive valuations, and robust earnings visibility. As the region balances traditional strengths with new economic frontiers, we believe it offers a differentiated and resilient investment proposition.

Latin America (ex-Brazil): Selective Re-engagement on Structural Shifts

MSCI Peru rose approximately +18.8% in Q2, supported by improving political stability and a more favorable economic backdrop. We see scope for earnings momentum to accelerate from here, particularly in the financial sector. In that context, we have been adding to our position in Credicorp, Peru’s leading bank, which also operates the country’s dominant digital banking platform. With strengthening macro fundamentals and a more constructive policy environment, we believe the setup supports both top-line growth and continued leadership in digital financial services.

MSCI Argentina fell around -6.4% in Q2, extending its run of underperformance. The country has long been underinvested, with one of the lowest levels of banking penetration in Latin America. This creates a significant runway for structural growth—provided the reform agenda maintains momentum and macro execution remains credible. We re-initiated exposure for the first time in years, adding to Grupo Financiero Galicia SA, based on increased conviction in the sustainability and effectiveness of President Milei’s economic reforms.

Early signs of macro stabilization and fiscal discipline are encouraging, and we are also seeing positive signals from portfolio companies like MercadoLibre, whose exposure to Argentina through both e-commerce and fintech arms reflects a nascent but exciting growth opportunity. Pent-up demand, improving sentiment, and low baseline formal financial adoption suggest that, if reforms stay on track, Argentina could offer compelling upside over a multi-year horizon. While risks remain, we believe the market is entering a new chapter and we are positioning accordingly.

Macro Outlook

Emerging markets are entering a more favorable phase, supported by a weakening U.S. dollar, fading U.S. exceptionalism, and renewed investor interest in undervalued, under-owned regions. Policy cycles are turning—India has already begun easing, Brazil appears to be at the end of its tightening path, and inflation is broadly moderating, creating a more supportive backdrop for EM equity flows and risk appetite.

China’s economic activity appears to be bottoming, with gradual signs of improving sentiment and renewed investor engagement. Trade tensions have eased, and recent tariff negotiations reflect a more pragmatic external posture. Domestically driven economies like India and the GCC remain resilient, while reform-led stories in Saudi Arabia and Argentina offer underappreciated structural potential. Meanwhile, fiscal expansion in Europe is helping to stabilize global demand, with Eastern Europe particularly well-positioned to benefit via trade and investment linkages. With momentum building around AI infrastructure, digital consumption, and financial inclusion—and valuations still attractive—we see a growing case for selective, fundamentals-driven exposure to EM equities in a recalibrating global landscape.

Fund Performance

The VanEck Emerging Markets Fund (the “Fund”) outperformed the MSCI EM IMI Index on the quarter-to-date basis ending June 30, 2025 (+13.79% for the Fund; +12.71% for the Index). Positive relative performance for the quarter was driven by stock selection in Brazil and India. Negative relative performance was driven by stock selection in China and allocation (weighting) to Kazakhstan.

India and Taiwan were the Fund’s top contributors for the quarter.

Average Annual Total Returns (%) as of June 30, 2025

The table presents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect applicable fee waivers and/or expense reimbursements. Had the Fund incurred all expenses and fees, investment returns would have been reduced. Investment returns and Fund shares values will fluctuate so that investor's shares, when redeemed, may be worth more or less than their original cost. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value (NAV). Index returns assume that dividends of the Index constituents in the Index have been reinvested. Performance information current to the most recent month end is available by calling 800.826.2333 or by visiting vaneck.com.

Expenses: Class A: Gross 1.59%; Net 1.59%; Class I: Gross 1.25%; Net 1.02%. Expenses are capped contractually until 5/1/26 at 1.60% for Class A and 1.00% for Class I. Caps exclude acquired fund fees and expenses, interest, trading, dividends, interest payments of securities sold short, taxes and extraordinary expenses.

Fund Review

On a sector level, Information Technology, Financials and Energy contributed to relative performance, while Industrials and Real Estate detracted. On a country level, Brazil, India and Georgia contributed to relative performance, while China, Kazakhstan and South Korea detracted.

Top Contributors

Top contributors to return on an absolute basis during the quarter:

• Taiwan Semiconductor Manufacturing Co. (“TSMC”) (8.6% of Fund net assets^*): TSMC delivered solid performance in Q2 2025, supported by continued investment in Chip-on-Wafer-Substrate (CoWoS) advanced packaging, a key technology for high-performance AI chips. While expansion is progressing steadily—with capacity expected to reach 115,000 units per month by 2026—the pace may moderate slightly, in line with expectations. Notably, TSMC is advancing its U.S. localization efforts, with plans to shift its AP9 and AP10 packaging facilities from Taiwan to Arizona, marking a strategic move in high-value process steps. Despite these shifts, the company remains on track, and we believe guidance is likely to trend higher through FY25.
• SK hynix (3.9% of Fund net assets^*): SK Hynix continues to be a strong performer, particularly as demand for AI-related memory accelerates and supports the broader semiconductor cycle. As the anchor asset of SK Square, accounting for approximately 80% of its net asset value, Hynix provides a solid foundation of earnings, dividends, and long-term structural exposure to advanced semiconductor technologies. SK Square, which was spun off from SK Telecom to better unlock the value of its portfolio, is now actively refining its strategy with a focused shift toward semiconductor-related investments. The company is streamlining legacy holdings and has maintained a net cash position, allowing flexibility to deploy capital into high-quality assets aligned with AI infrastructure. With ongoing share buybacks, a growing dividend stream from Hynix, and a clearer thematic orientation emerging, SK Square is positioning itself to deliver long-term value as Korea’s broader market reforms take shape.
• MercadoLibre (“MELI”) (3.8% of Fund net assets^*): MercadoLibre delivered strong Q2 results, beating expectations across all major metrics. Revenue grew 37% year over year, led by 32% growth in commerce and 43% in fintech. Ad revenue rose 50%, with room for further penetration. Active users increased 30% to 67 million, the fastest growth since early 2021. The credit portfolio grew 75%, with delinquency at record lows in Brazil and steady improvements in margins and risk metrics. Argentina was a standout, with over 100% revenue growth and improved profitability, helping offset increased investment in Brazil and Mexico. Despite expectations for margin pressure, MELI posted margin expansion, driven by operating leverage and disciplined cost control. Management remains positive on Argentina, highlighting continued GMV growth and strong credit momentum. These results should support upward earnings revisions and reinforce our positive long-term view.

Top Detractors

Top detractors to return on an absolute basis during the quarter:

• Meituan (1.0% of Fund net assets^*) and JD.com (0.7% of Fund net assets^*): Meituan is China’s leading food delivery and local services platform, and it now faces new competition as JD.com begins expanding into the food delivery space through its JD Daojia service. JD’s entry into food delivery in Q2 disrupted industry dynamics and added pressure to sector profitability, leading us to reduce exposure in the near term. The push has been heavily subsidy-driven, and while it gained share quickly, the sustainability of this approach remains to be seen. We believe consumption trends have likely bottomed, and JD’s broader strategy—including efforts in local services and OTA—reflects a proactive move to increase user engagement and build out its ecosystem. Over time, we’re watching for more durable cross-selling opportunities that could emerge as competitive intensity normalizes. Meituan has remained resilient, with stable food delivery volumes and quick commerce momentum despite the heightened competition. Its international expansion is progressing, and we continue to expect Meituan to remain a structural leader in food delivery, supported by logistics scale and ecosystem depth.
• PDD Holdings (1.0% of Fund net assets^*): PDD Holdings is a Chinese e-commerce company that operates Pinduoduo in China and Temu globally, focusing on value-driven online retail through deep discounts and social buying. PDD’s Q1 revenue miss was driven by lower commission rates as it prioritized merchant support and long-term engagement over near-term monetization. Ad trends remain healthy, and user activity continues to grow. We see signs that consumption has stabilized. Temu’s global growth strategy is being recalibrated amid external headwinds, but PDD’s growth remains well above average. With a compelling valuation and improving monetization potential, we see room for upside as strategic execution progresses.
• Kaspi.kz (“KASPI”) (1.9% of Fund net assets^*): Kaspi.kz JSC is Kazakhstan's leading payments, marketplace, and fintech platform, engaging with over 90 % of the country's adult population on a monthly basis. Kaspi's business model is highly profitable, driven by a well-integrated ecosystem that supports growth across its three core segments. Since going public, first in London and more recently in the U.S., Kaspi has consistently exceeded market expectations, demonstrating its ability to leverage scale and its ecosystem to expand into new areas such as online grocery and travel services. The company’s share price has come under some pressure following first-quarter results that missed consensus estimates, due to a combination of softer discretionary spending, higher interest rates raising funding costs and credit loss provisions, and new regulations negatively affecting smartphone demand, which accounts for nearly 18 % of e-commerce GMV. That said, underlying operational metrics including monthly active users, new merchant additions, and transactions per active user continue to rise. We remain confident in Kaspi’s strong growth and earnings potential.

Top Buys & Sells

During the period, we established new positions in the following:

• Aditya Birla Capital Ltd (“AB Capital”) (1.6% of Fund net assets^*): AB Capital is a distinctive player in the Indian financial services landscape, benefiting from its position within the Aditya Birla Group and its strong relationships with a large base of small and medium-sized enterprises across the country. Our investment thesis centers on a turnaround opportunity. Nearly two years ago, the group signaled its commitment to improving the quality and performance of AB Capital by appointing a new management team, well known to us through their previous leadership roles. We followed the company closely for over a year, engaging regularly with the new leadership to assess their strategy for enhancing returns and strengthening the business. We initiated a position once we observed clear and tangible progress in the turnaround, and the recent market weakness in India provided an attractive entry point into what we believe is a high potential, improving financial services platform.
• Emaar Properties (0.8% of Fund net assets^*): Emaar is the largest real estate developer in the UAE, with a broad portfolio that includes residential and commercial projects, malls, hospitality, and entertainment assets. With over 90 % of its revenue generated in Dubai, Emaar is a direct beneficiary of the city’s strong population and tourism growth, driven by the Emirate’s Master Plan 2040, which aims to increase the population by 75% through long-term visa reforms and strategic infrastructure investments. Emaar’s scale, strong execution, and market leadership position it well to capture these secular trends across both property sales and recurring income streams. We initiated a position in the company due to its compelling combination of earnings visibility, rising recurring revenue, and operating leverage. Trading at a discount to regional peers, Emaar offers an attractive way to participate in Dubai’s demographic and economic transformation, with additional downside protection from its stable earnings base and shareholder-friendly capital return policy.
• Grab Holdings (0.8% of Fund net assets^*): Grab Holdings is a Southeast Asian technology company that operates a super app offering services including ride-hailing, food delivery, digital payments, and financial services across multiple countries in the region. Since its SPAC listing in 2021, Grab’s stock has underperformed due to concerns about profitability and its dependence on subsidies. However, 2024 marked a meaningful turning point, as the company delivered $313 million in adjusted EBITDA, implemented stronger cost discipline, and improved transparency through a revamped segment reporting structure. Management has adopted a more credible and conservative communication approach, while shifting the business away from subsidies toward monetization through tiered pricing, ecosystem synergies, and a growing advertising segment. Industry consolidation is supporting better unit economics, and AI is driving faster product development and personalization. With potential upside from a possible GoTo acquisition, Grab is positioning itself as a more durable, margin-accretive platform.
• Grupo Financiero Galicia (0.9% of Fund net assets^*): Grupo Galicia is the most compelling name in Argentina’s banking sector, offering a diversified, high-growth platform that is well positioned to benefit from the country’s macroeconomic turnaround. Under President Milei, inflation is falling, credit demand is rebounding, and structural reforms are advancing, supported by the recent IMF deal and easing of capital controls. Galicia stands out for its strong capital base, cleaner earnings, and exposure to insurance and other financial services, providing broader revenue stability. With upcoming elections, continued reform, and sector consolidation ahead, Galicia offers a compelling mix of growth and re-rating potential.
• Larsen & Toubro (“L&T”) (0.9% of Fund assets^*): L&T is India’s largest construction and engineering firm, with a strong legacy and an expanding international footprint, particularly in the Middle East. What differentiates L&T is its unmatched scale and consistent execution, which have become increasingly valuable as both public and private infrastructure stakeholders shift focus from lowest-cost bids to reliable, on-time delivery. This change is improving pricing power for high-quality operators like L&T. The company is also capturing strong momentum in the Middle East, benefiting from rising public and private capital expenditure. We initiated a position during the market weakness in the first half of FY25, viewing L&T as a high-quality, long-term structural growth opportunity.
• Xiaomi Corporation (0.3% of Fund assets^*): Xiaomi is a Chinese technology company that designs and manufactures smartphones, smart home devices, Internet of Things (IoT) products, and consumer electronics, while also expanding into electric vehicles and other smart hardware. Xiaomi has transformed from a value-focused smartphone maker into a premium technology brand, with the 2024 launch of its SU7 EV serving as a turning point that lifted demand across its smartphone, IoT, and home appliance segments. While much of the 2025 earnings potential may already be priced in, the market underestimates Xiaomi’s long-term upside, particularly from IoT monetization and global expansion. Stronger-than-expected momentum in IoT and improved EV scale could drive both revenue and margin surprises. If execution stays on track, Xiaomi has the potential to become a durable tech compounder, offering attractive risk-reward for long-term investors.

During the period, we exited the following positions:

• Bloomberry Resorts Corporation: Bloomberry is facing structurally deteriorating fundamentals, reflected in recent earnings disappointment and sustained share price weakness. Key headwinds include market share erosion to online gaming platforms, heightened competitive pressure from peers in Metro Manila, and regulatory uncertainty surrounding a potential POGO ban. These challenges suggest ongoing pressure on both revenue growth and profitability, reinforcing a bearish view on the stock.
• Shenzhou International Group Holdings Limited: We exited our position in Shenzhou to reduce exposure to export-oriented names amid rising trade tensions. As an industry leader with strong bargaining power, Shenzhou is well-positioned to pass on most (if not all)of the tariff increases to its customers. However, our greater concern lies with potential weakness in U.S. demand, as higher tariffs may exacerbate inflationary pressures and weigh on consumer spending.
• Delivery Hero SE: During the quarter, we exited our position and consolidated our food delivery exposure through our existing holdings in Prosus and Talabat, which offer more targeted access to the sector’s long-term growth. We believe Delivery Hero faces ongoing margin pressure and growing competitive risks, particularly in South Korea, where local players are gaining share, and in Saudi Arabia, where new entrants like Meituan-backed Keeta are adding uncertainty to the earnings outlook.

Fund Positioning and Outlook

We remain grounded by our investment process and our positioning reflects our convictions from a bottom-up perspective. Our process has created some positioning differentials versus the benchmark. Brazil remains overweight to start the quarter (8.6% Fund weight versus 4.2% Index weight), as does Georgia (2.4% versus 0.0% Index weight).

Taiwan and South Korea remain underweight versus the benchmark.

The Fund’s objective is to find long-term structural growth companies at fair prices (S-GARP). Investments are chosen based on individual company analysis, focusing on quality, governance, innovative business models and low disruption risk, with active management and detailed research guiding our selection process.

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