Van Eck Global announced today that it has commenced its exchange offers for six Merrill Lynch-sponsored HOLDRS: Oil Service (OIH), Semiconductor (SMH), Pharmaceutical (PPH), Biotech (BBH), Retail (RTH), and Regional Bank (RKH). Van Eck is offering investors in these six HOLDRS the opportunity to exchange their receipts in these HOLDRS Trusts for shares of new Market Vectors exchange-traded funds (ETFs). The new ETFs are expected to trade under the corresponding HOLDRS’ ticker symbols. The exchange offers, which require affirmative action on the part of individual HOLDRS investors who wish to participate, are expected to expire at 11 AM EST on December 20, 2011, unless the offers are extended.
Investors in the six HOLDRS can expect to receive an information package shortly. Investors interested in participating are encouraged to speak to their securities intermediaries or follow the instructions for participation that are contained in the exchange offer materials.
“We have structured the offers, in our view, to be investor friendly,” said Adam Phillips, Managing Director of ETFs at Van Eck Global. “Potential benefits of participation include the opportunity for uninterrupted exposure to target industries, a partially tax-advantaged exchange, and no costs associated with the offers.” Furthermore, Van Eck believes that ETFs offer a more dynamic, diversified investment vehicle than HOLDRS since ETFs are better able to reflect changes in the composition of industry sectors that inevitably occur over time. HOLDRS use a depositary trust structure which means that their initial portfolio of securities generally remains static over time. In comparison, ETFs generally are able to rebalance their portfolios periodically and thereby track an underlying index.
Van Eck notes that investors should consult their financial advisors to review the risks involved with participating in the offers, including the possibility of securities intermediary fees as well as higher fund expenses associated with ETFs versus HOLDRS Trusts.
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