As filed with the Securities and Exchange Commission on May 8, 2009
Securities
Act File No. 333-123257
Investment Company Act File No. 811-10325
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FORM N-1A |
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Registration Statement Under the Securities Act of 1933 |
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Pre-Effective Amendment No. |
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Post Effective Amendment No. 49 |
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and/or |
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Registration Statement Under the Investment Company Act of 1940 |
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Amendment No. 53 |
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MARKET VECTORS ETF TRUST |
(Exact Name of Registrant as Specified in its Charter) |
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335 Madison Avenue, 19 th Floor |
New York, New York 10017 |
(Address of Principal Executive Offices) |
(212) 293-2000 |
Registrants Telephone Number |
Joseph J. McBrien, Esq. |
Senior Vice President and General Counsel |
Van Eck Associates Corporation |
335 Madison Avenue, 19 th Floor |
New York, New York 10017 |
(Name and Address of Agent for Service) |
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Copy to: |
Stuart M. Strauss, Esq. |
Clifford Chance US LLP |
31 West 52 nd Street |
New York, New York 10019 |
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Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this registration statement. |
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IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX) |
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Immediately upon filing pursuant to paragraph (b) |
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On May 8, 2009 pursuant to paragraph (b) |
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60 days after filing pursuant to paragraph (a)(1) |
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On [date] pursuant to paragraph (a)(1) |
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75 days after filing pursuant to paragraph (a)(2) |
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On [date] pursuant to paragraph (a)(2) of rule 485 |
MAY 8, 2009
MARKET VECTORS ETF TRUST
The Securities and Exchange Commission (SEC) 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.
This Prospectus offers shares of Market Vectors ETF Trust (the Trust). The
Trust currently has 29 investment portfolios. This Prospectus relates to shares of
only one portfolio: Market Vectors Brazil Small-Cap ETF (the Fund).
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer of the Funds shares, and, if given or made, the information or
representations must not be relied upon as having been authorized by the Fund.
Neither the delivery of this Prospectus nor any sale of shares of the Fund shall
under any circumstance imply that the information contained herein is correct as
of any date after the date of this Prospectus.
Dealers effecting transactions in the Funds shares, whether or not participating
in this distribution, may be generally required to deliver a Prospectus. This is in
addition to any obligation of dealers to deliver the Prospectus when acting as
underwriters.
Market Vectors Brazil Small-Cap ETF is distributed by Van Eck Securities
Corporation and seeks to track the Market Vectors Brazil Small-Cap Index.
The Market Vectors Brazil Small-Cap Index is published by 4asset-management
GmbH (referred to herein as the Index Provider). The Index Provider does not
sponsor, endorse, or promote the Fund and bears no liability with respect to the
Fund or any security.
The information contained herein regarding the Market Vectors Brazil Small-Cap
Index (the Brazil Small-Cap Index) was provided by the Index Provider, while
the information contained herein regarding the securities markets and The
Depository Trust Company (DTC) was obtained from publicly available sources.
This Prospectus, dated May 8, 2009, explains concisely the information you
ought to know before investing in the Fund. We suggest that you keep it for
future reference.
TABLE OF CONTENTS
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Market Vectors ETF Trust (the Trust) is an open-end management investment
company registered under the Investment Company Act of 1940, as amended
(the 1940 Act), currently consisting of 29 investment portfolios. This
Prospectus relates to the following portfolio of the Trust: Market Vectors Brazil
Small-Cap ETF (the Fund). Van Eck Associates Corporation (the Adviser) is
the investment adviser to the Fund.
The shares of the Fund (the Shares) are expected to be approved for listing,
subject to notice of issuance, on NYSE Arca, Inc. (NYSE Arca), and will trade
in the secondary market at prices that may differ to some degree from the net
asset value (NAV) of the Shares. Unlike conventional mutual funds, the Trust
will issue and redeem Shares of the Fund on a continuous basis at NAV only in
large specified blocks each called a Creation Unit. Creation Units are expected
to be issued and redeemed principally for cash. Except when aggregated in
Creation Units, Shares are not redeemable securities of the Trust.
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MARKET VECTORS BRAZIL SMALL-CAP ETF
Principal Investment Objective and Strategies
Investment Objective
.
The Funds investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Brazil Small-Cap Index (the Brazil Small-Cap Index). For a further description of the Brazil Small-Cap Index, see Market Vectors Brazil Small-Cap Index.
Principal Investment Policy
.
The Fund will normally invest at least 80% of its total assets in securities that comprise the Funds benchmark index. This 80% investment policy is non-fundamental and requires 60 days prior written notice to shareholders before it can be changed.
Indexing Investment Approach
.
The Fund is not managed according to traditional methods of active investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, the Fund, utilizing a passive or indexing investment approach, attempts to approximate
the investment performance of the Brazil Small-Cap Index by investing in a portfolio of securities that generally replicates the Brazil Small-Cap Index.
The Adviser anticipates that, generally, the Fund will hold all of the securities that comprise the Brazil Small-Cap Index in proportion to their weightings in the Brazil Small-Cap Index. However, under various circumstances, it may not be possible or practicable to purchase all of those securities in these weightings. In these circumstances, the Fund may
purchase a sample of securities in the Brazil Small-Cap Index. There also may be instances in which the Adviser may choose to overweight a security in the Brazil Small-Cap Index, purchase securities not in the Brazil Small-Cap Index that the Adviser believes are appropriate to substitute for certain securities in the Brazil Small-Cap 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 Brazil Small-Cap Index. The Fund may sell securities that are represented in the Brazil Small-Cap Index in anticipation of their removal from the Brazil Small-Cap Index or purchase securities
not represented in the Brazil Small-Cap Index in anticipation of their addition to the Brazil Small-Cap Index. The Adviser expects that, over time, the correlation between the Funds performance and that of the Brazil Small-Cap Index before fees and expenses will be 95% or better. A figure of 100% would indicate perfect correlation.
The Fund may also utilize derivative instruments, such as swaps, options, warrants, futures contracts, currency forwards (and convertible securities and structured notes), and participation notes to seek performance that corresponds to the Brazil Small-Cap Index. For these purposes, depositary receipts, derivative instruments and participation notes will
count towards the 80% investment policy
1
BRAZIL SMALL-CAP ETF (continued)
discussed above. A lesser percentage may be so invested to the extent that the Adviser needs additional flexibility to comply with the requirements of the U.S. Internal Revenue Code of 1986, as amended (the Internal Revenue Code), and other regulatory requirements.
Sales as a result of Brazil Small-Cap Index changes could result in the realization of short or long-term capital gains by the Fund thereby resulting in a tax liability for shareholders subject to U.S. federal income tax. See Shareholder InformationTax Matters.
Market Capitalization
.
The Brazil Small-Cap Index is comprised of securities of small-capitalization companies selected by the Index Provider on the basis of their relative market capitalization weighting in Brazil. As of May 1, 2009, the Brazil Small-Cap Index included companies with a market capitalization range of between approximately $250 million and
$3.8 billion with an average market capitalization of $1.1 billion across the 52 securities in the Brazil Small-Cap Index at that date. The market capitalization range of companies in the Brazil Small-Cap Index may change at each quarterly rebalance date.
Constituent stocks for the Brazil Small-Cap Index must have a market capitalization of greater than $150 million on a rebalancing date to be eligible for the Brazil Small-Cap Index. Stocks whose market capitalization falls below $75 million as of any rebalancing date will no longer be eligible for the Brazil Small-Cap Index. Stocks must have a three-month
average daily trading volume of at least $1 million to be eligible for the Brazil Small-Cap Index and issuers of such stocks must have traded at least 250,000 shares each month over the last six months.
Borrowing Money
.
The Fund may borrow money from a bank up to a limit of one-third of the market value of its assets, but only for temporary or emergency purposes. To the extent that the Fund borrows money, it may be leveraged; at such times, the Fund may appreciate or depreciate in value more rapidly than its benchmark, the Brazil Small-Cap
Index.
Fundamental and Non-Fundamental Policies
.
The Funds investment objective and each of the other investment policies are non-fundamental policies that may be changed by the Board of Trustees without shareholder approval, except as noted in the SAI under the heading Investment Policies and RestrictionsInvestment Restrictions.
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 Funds Shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk. Therefore, you should consider carefully the following risks before investing in the Fund.
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Risk of Investing in Foreign Securities
.
Investments in the securities of non-U.S. 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. 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 will be available. Securities exchanges or foreign governments may adopt rules or regulations that may negatively
impact the Funds ability to invest in foreign securities or may prevent the Fund from repatriating its investments. 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 them.
Because the Fund may invest in securities denominated in foreign currencies and much of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Funds returns. The values of the currencies of the countries in which the Fund may invest may be subject to a high degree of fluctuation
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. Therefore, the Funds exposure to foreign currencies may result in reduced returns to the Fund. The
Fund does not expect to hedge its currency risk. Moreover, the Fund may incur costs in connection with conversions between U.S. dollars and foreign currencies. The Fund may, but is not obligated to, invest in derivative instruments to lock in certain currency exchange rates from time to time.
Risks of Investing in Brazil
.
The Funds assets will generally be concentrated in Brazil to the same extent that the Brazil Small-Cap Index concentrates in this country. The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. The Brazilian economy has been characterized by frequent, and
occasionally drastic, intervention by the Brazilian government. The Brazilian government has often changed monetary, taxation, credit, tariff and other policies to influence the core of Brazils economy. The Brazilian governments actions to control inflation and affect other economic policies have often involved, among others, the setting of wage and price
controls, blocking access to bank accounts, fluctuation of the base interest rates, imposing exchange controls and limiting imports into Brazil. 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. In the past, the Brazilian
government has maintained domestic price
3
BRAZIL SMALL-CAP ETF (continued)
controls, and no assurances can be given that price controls will not be re-imposed in the future.
Brazil has historically experienced high rates of inflation and may continue to do so in the future. An increase in prices for petroleum, the depreciation of the
real
and future governmental measures seeking to maintain the value of the
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. Inflationary pressures may also limit certain Brazilian issuers ability to access foreign financial markets and may lead to further government intervention in the economy, including the introduction of government policies that may adversely affect the overall performance of the Brazilian economy, which in turn could adversely affect the
Funds investments. In addition, the Brazilian currency has been devalued periodically in relation to the U.S. dollar and other foreign currencies during the past four decades. Throughout these periods the Brazilian government has implemented various economic plans and exchange policies, including sudden devaluations, periodic minor-devaluations
(ranging from daily to month adjustments), floating exchange rate systems, exchange controls and dual exchange rate markets. As a result of such economic plans, there have been at times significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies. Furthermore, the depreciation of the
real
relative to the U.S. dollar generally makes it more difficult to access foreign financial markets and may prompt government intervention, including recessionary economic policies. In addition, the depreciation of the
real
against the U.S. dollar could create additional inflationary pressures in Brazil and lead to increases in interest rates, which may negatively
affect the Brazilian economy as a whole. Conversely, appreciation of the
real
relative to the U.S. dollar may lead to the deterioration of Brazils current account and balance of payments as well as limit the growth of exports.
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. Although there are varying economic conditions in each country, the reaction of investors to developments in one country may cause the capital markets in other
countries to fluctuate. An increase in risk aversion by investors may adversely impact the market value of the securities issued or guaranteed by Brazilian companies. Crises in other emerging market countries may diminish investor interest in securities issued or guaranteed by Brazilian companies, including securities in which the Fund may invest. 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, there has been
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limited access to international capital markets, which may adversely affect an issuers ability to borrow funds at acceptable interest rates, or at all.
Investments in Brazilian securities may be subject to certain restriction on foreign investment. Brazilian law provides that whenever a serious imbalance in Brazils 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 Brazilian currency into foreign currency. The likelihood of such restrictions may be affected by the extent of Brazils foreign currency reserves, the availability of sufficient foreign currency in the foreign exchange markets on the date a payment is due, the size of Brazils debt service burden relative to the economy as a whole and
political constraints to which Brazil may be subject. There can be no assurance that the Brazilian government will not impose restrictions or restrictive exchange control policies in the future, which could have the effect of preventing or restricting access to foreign currency.
Political Risk
.
The Brazilian government 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 Brazil, which could have a negative impact on private sector companies. There is also the possibility of
diplomatic developments that could adversely affect investments in Brazil.
Market Risk
.
The prices of the securities in the Fund are subject to the risk associated with investing in the stock market, including sudden and unpredictable drops in value. An investment in the Fund may lose money.
Index Tracking Risk
.
The Funds return may not match the return of the Brazil Small-Cap Index for a number of reasons. For example, the Fund incurs a number of operating expenses not applicable to the Brazil Small-Cap Index and incurs costs associated with buying and selling securities, especially when rebalancing the Funds securities holdings to
reflect changes in the composition of the Brazil Small-Cap Index. Because the Fund bears the costs and risks associated with buying and selling securities while such costs and risks are not factored into the return of the Brazil Small-Cap Index, the Funds return may deviate significantly from the return of the Brazil Small-Cap Index. 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 meet redemptions and pay expenses. In addition, the Fund may not be able to invest in certain securities included in the Brazil Small-Cap Index due to restrictions or limitations imposed by or a lack liquidity in certain countries and stock
exchanges in which such securities trade or may be delayed in purchasing or selling securities included in the Brazil Small-Cap Index.
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BRAZIL SMALL-CAP ETF (continued)
The Funds intent to engage principally in cash transactions will affect the Funds ability to match the return of the Brazil Small-Cap Index. The Fund is expected to fair value the foreign securities it holds. See Shareholder InformationDetermination of NAV. To the extent the Fund calculates its NAV based on fair value prices and the value of the Brazil
Small-Cap Index is based on the securities closing price on local foreign markets (
i.e.
, the value of the Brazil Small-Cap Index is not based on fair value prices), the Funds ability to track the Brazil Small-Cap Index may be adversely affected. The need to comply with the diversification and other requirements of the Internal Revenue Code may also
impact the Funds ability to replicate the performance of the Brazil Small-Cap Index. In addition, if the Fund utilizes depositary receipts and/or derivative instruments, its return may not correlate as well with the Brazil Small-Cap Index as would be the case if the Fund purchased all the securities in the Brazil Small-Cap Index directly.
Replication Management Risk
.
Unlike many investment companies, the Fund is not actively managed. Therefore, unless a specific security is removed from the Brazil Small-Cap Index, the Fund generally would not sell a security because the securitys issuer was in financial trouble. If a specific security is removed from the Brazil Small-Cap 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 of equity securities traded on exchanges, such as market fluctuations caused by such factors as economic and political developments, changes in interest
rates and perceived trends in security prices. You should anticipate that the value of the Shares will decline, more or less, in correspondence with any decline in value of the Brazil Small-Cap Index. The Brazil Small-Cap Index may not contain the appropriate mix of securities for any particular economic cycle, and the timing of movements from one type
of security to another in seeking to replicate the Brazil Small-Cap 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. This means that based on market
and economic conditions, the Funds performance could be lower than other types of mutual funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline.
Non-Diversified Risk
.
The Fund is a separate investment portfolio of the Trust, which is an open-end investment company registered under the 1940 Act. The Fund is classified as a non-diversified investment company under the 1940 Act. As a result, the Fund is subject to the risk that it will be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest larger proportions of the assets of the Fund in a single
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industry within the industries that comprise the Brazil Small-Cap Index. As of May 1, 2009, the Brazil Small-Cap Index included 52 securities. As a result, the gains and losses on a single security may have a greater impact on the Funds NAV and may make the Fund more volatile than diversified funds.
Concentration Risk
.
The Funds assets will generally be concentrated in a particular sector or sectors or industry or group of industries to the same extent that the Brazil Small-Cap Index concentrates in a particular sector or sectors or industry or group of industries. 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. In addition, the Funds assets will be concentrated in Brazil. Consequently, events affecting Brazil will have a greater impact on the Funds NAV and may make the Fund more volatile than if the Fund were more geographically diverse.
Investing in Small-Capitalization Companies
.
The Fund will invest in small-capitalization companies and, therefore will be subject to certain risks associated with small-capitalization companies. These companies are often subject to less analyst coverage and may be in early and less predictable periods of their corporate existences. 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
larger companies.
Risk of Investing in the Consumer Discretionary Sector
.
The Fund is sensitive to changes in the consumer discretionary sector. Companies engaged 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.
Risk of Investing in the Basic Materials Sector
.
The Fund is sensitive to changes in 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.
Risk of Investing in Depositary Receipts
.
The Fund may invest in depositary receipts, including unsponsored depositary receipts. Unsponsored depositary receipts may be established by a depositary without participation by the
7
BRAZIL SMALL-CAP ETF (continued)
underlying issuer. Holders of an unsponsored depositary receipt generally bear all the costs associated with establishing the unsponsored depositary receipt. These investments may involve additional risks and considerations including, for example, risks related to adverse political and economic developments unique to a country or region, currency
fluctuations or controls and the possibility of expropriation, nationalization or confiscatory taxation. The issuers of the securities underlying unsponsored depositary receipts are not obligated to disclose material information in the United States and, therefore, there may be less information available regarding such issuers and there may not be a correlation
between such information and the market value of the depositary receipts. In addition, the Funds investments may also include depositary receipts that are not purchased in the public markets and are restricted securities that can be offered and sold only to certain buyers. The Adviser will determine the liquidity of such investments pursuant to
guidelines established by the Trusts Board of Trustees. It is possible that depositary receipts purchased by the Fund could have the effect of increasing the level of the Funds illiquidity.
Operational Risks
.
In addition to having a less developed securities market, Brazil has less developed custody and settlement practices than certain developed countries. Rules adopted under the 1940 Act 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 Brazil
that are eligible foreign sub-custodians may be recently organized or otherwise lack extensive operating experience. In addition, in Brazil 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
Brazil are less organized than in 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 of Brazil, 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 Brazil also have a higher risk of failed trades.
Risk of Cash Transactions
.
Unlike most exchange-traded funds (ETFs), the Fund currently intends to effect all creations and redemptions principally for cash, rather than in-kind securities. As a result, an investment in the Fund may be less tax-efficient than an investment in a more conventional ETF. ETFs generally are able to make in-kind redemptions
and avoid being taxed on gain on the distributed portfolio securities at the Fund level. Because the Fund currently intends to effect all redemptions principally for cash, rather than in-kind distributions, it may be required to sell portfolio securities in order to obtain the
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cash needed to distribute redemption proceeds. If the Fund recognizes gain on these sales, this generally will cause the Fund to recognize gain it might not otherwise have recognized, or to recognize such gain sooner than would otherwise be required if it were to distribute portfolio securities in-kind. 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. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively illiquid and may involve considerable brokerage fees and taxes. These brokerage fees and taxes, which will be higher than if the Fund sold and redeemed its shares principally in-kind, will be passed on to purchasers and redeemers of Creation Units in the form of Creation and
Redemption Transaction Fees. Brazil may also impose higher local tax rates on transactions involving certain companies. In addition, these factors may result in wider spreads between the bid and the offered prices of the Funds Shares than for more conventional ETFs.
Risk of Investing in Derivatives
.
Derivatives are financial instruments, such as swaps, options, warrants, futures contracts and currency forwards, whose values are based on the value of one or more indicators, such as a security, asset, currency, interest rate, or index. The Funds 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 indicator, a derivative does not carry the same rights as would be the case if the Fund invested directly in the underlying securities.
Derivatives are subject to a number of risks, such as potential changes in value in response to market developments or as a result of the counterpartys 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 correlate perfectly with the underlying indicator. Derivative transactions can create investment leverage, may be highly volatile, and the Fund could lose more than the amount it invests. Many derivative transactions are entered into over the counter (not on an exchange or contract market); as a result, the value of such
a derivative transaction will depend on the ability and the willingness of the Funds counterparty to perform its obligations under the transaction. If a counterparty were to default on its obligations, the Funds contractual remedies against such counterparty may be subject to bankruptcy and insolvency laws, which could affect the Funds rights as a
creditor (
e.g.
, the Fund may not receive the net amount of payments that it is contractually entitled to receive).
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BRAZIL SMALL-CAP ETF (continued)
A liquid secondary market may not always exist for the Funds derivative positions at any time.
Leverage Risk
.
To the extent that the Fund borrows money, it may be leveraged. Leveraging generally exaggerates the effect on NAV of any increase or decrease in the market value of the Funds portfolio securities.
The Fund has not yet commenced operations and therefore does not have a performance history.
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BRAZIL SMALL-CAP ETF Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold Shares of the Fund.
(a)
Shareholder Expenses
(fees paid directly from your investment, but see Shareholder InformationCreation and Redemption of Creation Units for a discussion of Creation and Redemption Transaction Fees)
None
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fee
0.50
%
Other Operating Expenses
(b)
0.59
%
Total Gross Annual Fund Operating Expenses
(c)
1.09
%
Fee Waivers and Expenses Assumption
(c)
0.36
%
Total Net Annual Fund Operating Expenses
(c)
0.73
%
(a)
When buying or selling Shares through a broker, you will incur customary brokerage commissions and charges.
(b)
Other operating expenses are based on estimated amounts for the current fiscal year and calculated as a percentage of the Funds net assets.
(c)
The Adviser has contractually agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding interest expense, offering costs, trading expenses, taxes and extraordinary expenses) from exceeding 0.73% of the Funds average daily net assets per year at least until May 1, 2010. Offering costs excluded from the 0.73% expense cap
are: (a) legal fees pertaining to the Funds Shares offered for sale; (b) SEC and state registration fees; and (c) initial fees paid for Shares of the Fund to be listed on an exchange.
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 Fund sells and redeems Shares in Creation Units principally on an in-kind basis for portfolio securities of the Brazil Small-Cap Index. Shares in less than Creation Units are not redeemable. An investor purchasing a Creation Unit on an in-kind basis would pay the following expenses on a $10,000 investment (payment with a deposit of securities included in
the Brazil Small-Cap Index), assuming all Shares are redeemed at the end of the periods shown, a 5% annual return and that the Funds operating expenses through May 1, 2010 are the same as those shown above under Total Net Annual Fund Operating Expenses and for all subsequent periods are the same as those shown above under Total Gross
Annual Fund Operating Expenses.
Investors should note that the presentation
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BRAZIL
SMALL-CAP ETF Fees and Expenses (continued)
below of a $10,000 investment is for illustration purposes only as Shares will be issued by the Fund only in Creation Units. Further, the return of 5% and estimated expenses are for illustration purposes only, and should not be considered indicators of expected Fund expenses or performance, which may be greater or less than the estimates. Based on these
assumptions, your costs would be:
YEAR
EXPENSES
1
$ 75
3
$311
Creation Transaction Fees and Redemption Transaction Fees
The Trust will issue and redeem Shares at NAV only in blocks of 50,000 Shares or multiples thereof. As a practical matter, only authorized participants may purchase or redeem these Creation Units. A standard creation transaction fee of $1,000 (the Creation Transaction Fee) is charged to each purchaser of Creation Units. The fee is the same
regardless of the number of Creation Units purchased by an authorized participant on the same day. An authorized participant who holds Creation Units and wishes to redeem at NAV would also pay a standard redemption transaction fee of $1,000 (the Redemption Transaction Fee) on the date of such redemption(s), regardless of the number of
Creation Units redeemed that day. Authorized participants who hold Creation Units will also pay the annual Fund operating expenses described in the table above. Assuming an investment in a Creation Unit of $1,250,000 and a 5% return each year, and assuming that the Funds operating expenses remain the same, the total costs would be $9,375 if
the Creation Unit is redeemed after one year and $38,875 if the Creation Unit is redeemed after three years. Investors should note that this presentation is for illustration purposes only and actual costs may be higher. See Shareholder InformationCreation and Redemption of Creation Units.
If a Creation Unit is purchased or redeemed outside the usual process through the National Securities Clearing Corporation (NSCC), if available, or for cash, a variable fee of up to four times the standard Creation or Redemption Transaction Fee will be charged. An additional variable charge will be assessed for cash creations and redemptions to
compensate the Fund for the costs associated with purchasing and selling the applicable securities. See Shareholder InformationCreation and Redemption of Creation UnitsCreation Transaction Fee and Redemption Transaction Fee.
The Creation Transaction Fee, Redemption Transaction Fee and variable fees are not expenses of the Fund.
12
MARKET VECTORS BRAZIL SMALL-CAP INDEX
The Market Vectors Brazil Small-Cap Index (the Brazil Small-Cap Index) is a rules based, modified capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of publicly traded companies that are domiciled and primarily listed on an exchange in Brazil or that generate at least 50% of their revenues
in Brazil. In exceptional cases, companies with less than 50% of their revenues derived from Brazil may be eligible for inclusion in the Brazil Small-Cap Index.
Constituent stocks for the Brazil Small-Cap Index must have a market capitalization of greater than $150 million on a rebalancing date to be eligible for the Brazil Small-Cap Index. Stocks whose market capitalization falls below $75 million as of any rebalancing date will no longer be eligible for the Brazil Small-Cap Index. Stocks must have a three-month
average daily trading volume of at least $1 million to be eligible for the Brazil Small-Cap Index and issuers of such stocks must have traded at least 250,000 shares each month over the last six months. Only shares that trade on a recognized domestic or international stock exchange may qualify (e.g., National Stock Market stocks must be reported
securities under 11Aa3-1 of the Exchange Act. Similar criteria and standards apply to stocks with foreign listings).
The Brazil Small-Cap Index is calculated and maintained by Standard & Poors Custom Indices on behalf of 4asset-management GmbH. 4asset-management GmbH is not affiliated with the Fund. Index values are calculated daily and are distributed over the Consolidated Tape Associations Network B between the hours of approximately 7:00 p.m. (New York
time) and 6:15 p.m. (New York time) (except from 7:00 p.m. (New York time) Friday through 6:15 p.m. (New York time) Sunday). Index values are disseminated every 15 seconds.
The Brazil Small-Cap 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 Brazil Small-Cap Index is reconstituted quarterly, at the close of business on the third Friday in a quarter-end
month (i.e., March, June, September and December) and companies are added and/or deleted based upon the Brazil Small-Cap Index eligibility criteria. Companies with recent stock exchange listings, i.e., recent initial public offerings, may be added to the Brazil Small-Cap Index on a quarterly basis, provided the companies meet all eligibility criteria and
have been trading for more than 10 trading days. The share weights of the Brazil Small-Cap Index components are adjusted also on a quarterly basis (every third Friday in a quarter-end month).
Rebalancing data, including constituent weights and related information, is posted on the Indexs web site prior to the start of trading on the first business day following the third Friday of the calendar quarter. A press announcement
13
BRAZIL SMALL-CAP INDEX (continued)
identifying additions and deletions to the Brazil Small-Cap Index is issued on the Wednesday prior to a rebalancing date. 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.
14
PORTFOLIO HOLDINGS
A description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio securities is available in the Funds SAI.
ADDITIONAL INVESTMENT STRATEGIES
The Fund may invest its remaining assets in 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 in swaps, options, futures contracts and currency forwards. Swaps, options, futures contracts and currency forwards (and convertible securities and structured notes) may be used by the Fund in seeking performance that corresponds to its Index, and in managing cash flows. The Fund will
not invest in money market instruments as part of a temporary defensive strategy to protect against potential stock market declines.
The 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, the Fund receives 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 the 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 default on its obligation to return the borrowed securities (
e.g.
, the loaned securities may have appreciated beyond the value of the collateral held by the Fund). In addition, the Fund will
bear the risk of loss of any cash collateral that it invests.
ADDITIONAL RISKS OF INVESTING IN THE FUND
Absence of Prior Active Market.
The Fund is a newly organized series of an investment company and thus has no operating history. While the Funds Shares are expected to be listed on NYSE Arca, there can be no assurance that active trading markets for the Shares will develop or be maintained. Van Eck Securities Corporation, the distributor of the
Shares (the Distributor), does not maintain a secondary market in the Shares.
Trading Issues.
Trading in Shares on NYSE Arca may be halted due to market conditions or for reasons that, in the view of NYSE Arca, make trading in Shares inadvisable. In addition, trading in Shares on NYSE Arca is subject to trading halts caused by extraordinary market volatility pursuant to NYSE Arcas circuit breaker rules. There can be no
assurance that the requirements of NYSE Arca
15
MANAGEMENT
necessary to maintain the listing of the Fund will continue to be met or will remain unchanged.
Fluctuation of NAV.
The NAV of the Shares will fluctuate with changes in the market value of the Funds securities holdings. The market prices of Shares will fluctuate in accordance with changes in NAV and supply and demand on NYSE Arca. The Adviser cannot predict whether Shares will trade below, at or above their NAV. 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 will be closely related to, but not identical to, the same forces influencing the prices of the securities of the Brazil Small-Cap Index trading individually or in the aggregate at any point in time. However, given that Shares can be created and
redeemed daily in Creation Units (unlike shares of closed-end funds, which frequently trade at appreciable discounts from, and sometimes at premiums to, their NAV), the Adviser believes that large discounts or premiums to the NAV of the Shares should not be sustained.
Board of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight of the management of the Fund, 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 Manager.
Under the terms of an Investment Management Agreement between the Trust and Van Eck Associates Corporation with respect to the Fund (the Investment Management Agreement), Van Eck Associates Corporation serves as the adviser to the Fund and, subject to the supervision of the Board of Trustees, will be responsible for
the day-to-day investment management of the Fund. As of April 30, 2009, the Adviser managed approximately $10.0 billion in assets. The Advisers principal business address is 335 Madison Avenue, 19th Floor, New York, New York 10017.
A discussion regarding the Board of Trustees approval of the Investment Management Agreement will be available in the Trusts semi-annual report for the period ended June 30, 2009.
For the services provided to the Fund under the Investment Management Agreement, the Fund will pay the Adviser monthly fees based on a percentage of the Funds 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, 2010, the Adviser has contractually agreed
to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding interest expense, offering costs, trading expenses, taxes and
16
extraordinary expenses) from exceeding 0.73% of average daily net assets per year. Offering costs excluded from the expense cap are: (a) legal fees pertaining to the Funds Shares offered for sale; (b) SEC and state registration fees; and (c) initial fees paid for Shares of the Fund to be listed on an exchange.
The Fund 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.
Administrator, Custodian and Transfer Agent.
Van Eck Associates Corporation is the administrator for the Fund (the Administrator), and The Bank of New York Mellon (formerly known as The Bank of New York) is the custodian of the Funds assets and provides transfer agency and fund accounting services to the Fund. The Administrator is responsible
for certain clerical, recordkeeping and/or bookkeeping services which are provided pursuant to the Investment Management Agreement.
Distributor.
Van Eck Securities Corporation is the distributor of the Shares. The Distributor will not distribute Shares in less than Creation Units, and does not maintain a secondary market in the Shares. As noted in the section entitled Shareholder InformationBuying and Selling Exchange-Traded Shares, the Shares are traded in the secondary market.
The portfolio managers who currently share joint responsibility for the day-to-day management of the Funds portfolio are Hao-Hung (Peter) Liao and George Cao. Mr. Liao has been employed by the Adviser since the summer of 2004. Mr. Liao also serves as a portfolio manager for certain other investment companies advised by the Adviser. Mr. Cao has
been employed by the Adviser since December 2007. Prior to joining the Adviser, he served as a Senior Finance Associate followed by Controller of Operations Administrations Division and Corporate Safety for United Airlines. He also served as a Management Consultant to PricewaterhouseCoopers LLP as well as a Financial Analyst for SAM Distribution
Co. Ltd. Because the Fund is new, Messrs. Liao and Cao will be serving as the portfolio managers of the Fund since its inception. See the Funds SAI for additional information about the portfolio managers compensation, other accounts managed by the portfolio managers and their respective ownership of Shares.
17
The NAV per Share for the 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 the Fund is determined each business day as of
close of trading (ordinarily 4:00 p.m. New York time) on the New York Stock
Exchange (NYSE). 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.
The value of the Funds portfolio securities is based on the securities closing
price on local markets when available. If a securitys market price is not readily
available or does not otherwise accurately reflect the fair value of the security,
the security will be valued by another method that the Adviser believes will
better reflect fair value in accordance with the Trusts valuation policies and
procedures approved by the Board of Trustees. The Fund may use fair value
pricing in a variety of circumstances, including but not limited to, situations
when the value of a security in the Funds 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, the Fund currently expects that it will fair value foreign equity
securities held by the Fund each day the Fund calculates its NAV. Accordingly,
the Funds NAV is expected to reflect certain portfolio securities fair values
rather than their market prices. Fair value pricing involves subjective judgments
and it is possible that a fair value determination for a security is materially
different than the value that could be realized upon the sale of the security. In
addition, fair value pricing could result in a difference between the prices used
to calculate the Funds NAV and the prices used by the Brazil Small-Cap Index.
This may adversely affect the Funds ability to track the Brazil Small-Cap Index.
With respect to securities that are primarily listed on foreign exchanges, the
value of the Funds portfolio securities may change on days when you will not be
able to purchase or sell your Shares.
Buying and Selling Exchange-Traded Shares
The
Shares of the Fund are expected to be approved for listing on NYSE Arca,
subject to notice of issuance. 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 between the bid and the offered price in the
secondary
market
on each leg of a round trip (purchase and sale) transaction. It is anticipated
that the Shares will trade in the secondary market at prices that may
18
differ to varying
degrees from the closing NAVs of the Shares. Given, however, that Shares
can be created and redeemed daily in Creation Units, the Adviser believes
that large discounts and premiums to NAV should not be sustained for very
long.
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.
Market Timing and Related Matters.
The Fund imposes no restrictions on the
frequency of purchases and redemptions. The Board of Trustees considered the
nature of the Fund (i.e., a fund whose shares are expected to trade intra-day),
that the Fund fair values all or a substantial portion of its securities, that the
Adviser monitors the trading activity of authorized participants for patterns of or
abusive trading, and that the Fund reserves the right to reject orders that may
be disruptive to the management of or otherwise not in the Funds best
interests. Given this structure, the Board of Trustees determined that it is not
necessary to impost restrictions on the frequency of purchases and redemptions
for the Fund at the present time.
19
SHAREHOLDER INFORMATION (continued)
Creation and Redemption of Creation Units
The Trust will issue and redeem Shares at NAV only in a large specified number
of Shares called a Creation Unit. A Creation Unit consists of 50,000 Shares.
The Fund generally issues and redeems Creation Units principally for cash.
Except when aggregated in Creation Units, the Shares are not redeemable
securities of the Fund.
See Shareholder InformationBuying and Selling Exchange-
Traded Shares and Procedures for Creation of Creation Units. The prices at
which creations and redemptions occur are based on the next calculation of
NAV after an order is received in proper form by the Distributor.
Fund Deposits.
Due to various legal and operational constraints in Brazil, the
consideration for creation of Creation Units of the Fund is principally cash. To
the extent in-kind creations are effected for the Fund, Creation Units of the
Fund will consist of the in-kind deposit of a designated portfolio of equity
securities (the Deposit Securities) constituting a replication of the Funds Index
and an amount of cash computed as described below (the Cash Component)
and, together with the Deposit Securities, the Fund Deposit. The list of the
names and numbers of shares of the Deposit Securities is made available by the
Administrator through the facilities of the NSCC immediately prior to the opening
of business each day of NYSE Arca. The Cash Component represents the
difference between the NAV of a Creation Unit and the market value of the
Deposit Securities and may include a Dividend Equivalent Payment as
described in the Funds SAI. The Fund reserves the right to accept a basket of
securities or cash that differs from the Deposit Securities.
Procedures for Creation of Creation Units.
To be eligible to place orders with the
Distributor to create Creation Units of the Fund, an entity or person either must
be (1) a Participating Party,
i.e.
, a broker-dealer or other participant in the
Clearing Process through the Continuous Net Settlement System of the NSCC;
or (2) a DTC Participant; and, in either case, must have executed an agreement
with the Trust and with the Distributor with respect to creations and
redemptions of Creation Units outside the Clearing Process (Participant
Agreement). All Creation Units of the Fund, however created, will be entered on
the records of DTC in the name of Cede & Co. for the account of a DTC
Participant.
At any given time, there may be only a limited number of broker-dealers that
have executed a Participant Agreement. Those placing orders to create Creation
Units of the Fund through the Clearing Process should afford sufficient time to
permit proper submission of the order to the Distributor prior to the closing time
of the regular trading session on the NYSE (ordinarily 4:00 p.m. New York time)
on the date on which a creation (or redemption order, as discussed below) is
placed (the Transmittal Date).
20
Orders for creation that are effected outside the Clearing Process are likely to
require transmittal by the DTC Participant earlier on the Transmittal Date than
orders effected using the Clearing Process. Those persons placing orders outside
the Clearing Process should ascertain the deadlines applicable to DTC and the
Federal Reserve Bank wire system by contacting the operations department of
the broker or depository institution effectuating such transfer of Deposit
Securities and Cash Component. Investors should refer to Creation and
Redemption of Creation Units in the Funds SAI for details regarding the
logistics of placement of orders through and outside the Clearing Process.
Acceptance of Creation Order.
The Trust reserves the absolute right to reject a
creation order transmitted to it by the Distributor if, for any reason: (a) the order
is not in proper form; (b) the creator or creators, upon obtaining the Shares
ordered, would own 80% or more of the currently outstanding Shares of the
Fund; (c) the Deposit Securities delivered are not as specified by the
Administrator, as described above; (d) acceptance of the Deposit Securities
would have certain adverse tax consequences to the Fund; (e) the acceptance of
the Fund Deposit would, in the opinion of counsel, be unlawful; (f) the
acceptance of the Fund Deposit would otherwise, in the discretion of the Trust
or the Adviser, have an adverse effect on the Trust or the rights of beneficial
owners; or (g) in the event that circumstances outside the control of the Trust,
the Distributor and the Adviser make it for all practical purposes impossible to
process creation orders. Examples of such circumstances include acts of God or
public service or utility problems such as fires, floods, extreme weather
conditions and power outages resulting in telephone, telecopy and computer
failures; market conditions or activities causing trading halts; systems failures
involving computer or other information systems affecting the Trust, the Adviser,
the Distributor, DTC, the NSCC or any other participant in the creation process,
and similar extraordinary events. The Trust shall notify a prospective creator of
its rejection of the order of such person. The Trust and the Distributor are under
no duty, however, to give notification of any defects or irregularities in the
delivery of Fund Deposits nor shall either of them incur any liability for the
failure to give any such notification. The Trust shall notify a prospective creator
of its rejection of the order of such person.
All questions as to the number of Shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Trust, and the Trusts
determination shall be final and binding.
Creation
Transaction Fee.
A
fixed Creation Transaction Fee of $1,000, which is paid to the Fund, is
applicable to each transaction regardless of the number of
Creation
Units purchased in the transaction. In addition, a variable charge of up
to four times the Creation Transaction Fee will be imposed with respect
to
21
SHAREHOLDER INFORMATION (continued)
transactions effected
outside of the Clearing Process (through a DTC Participant) or to the extent
that cash is used in lieu of securities to purchase Creation Units. In the
case of cash creations or where the Trust permits or requires a creator to
substitute cash in lieu of depositing a portion of the Deposit
Securities, the creator will be assessed an additional variable charge for cash
creations on the cash or cash in lieu portion of its investment to compensate
the Fund for the costs associated with purchasing the applicable securities. See
Creation and Redemption of Creation Units in the Funds SAI. The price for
each Creation Unit will equal the daily NAV per Share times the number of
Shares in a Creation Unit plus the fees described above and, if applicable, any
transfer taxes. Shares of the Fund may be issued in advance of receipt of all
Deposit Securities subject to various conditions, including a requirement to
maintain on deposit with the Fund cash at least equal to 115% of the market
value of the missing Deposit Securities. See Creation and Redemption of
Creation Units in the Funds SAI.
Redemption of Creation Units.
Shares may be redeemed only in Creation Units at
their NAV next determined after receipt of a redemption request in proper form
by the Distributor, only on a day on which NYSE Arca is open for trading and
only through a Participating Party or DTC Participant who has executed a
Participant Agreement.
The Trust will not redeem Shares in amounts less than
Creation Units.
Beneficial owners also may sell Shares in the secondary market,
but must accumulate enough Shares to constitute a Creation Unit in order to
have such Shares redeemed by the Trust. There can be no assurance, however,
that there will be sufficient liquidity in the public trading market at any time to
permit assembly of a Creation Unit. Investors should expect to incur brokerage
and other costs in connection with assembling a sufficient number of Shares to
constitute a redeemable Creation Unit.
Redemptions
are effected principally for cash. To the extent redemptions are effected
in-kind, the Administrator, through NSCC, makes available immediately prior
to the opening of business on NYSE Arca (currently 9:30 a.m. New York time)
on each day that NYSE Arca is open for business, the securities held by the
Fund (Fund Securities) that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form (as
defined below) on that day. Fund Securities received on redemption may not
be identical to Deposit Securities which are applicable to purchasers of
Creation Units. The redemption proceeds for a Creation Unit consist of Fund
Securities, plus cash in an amount equal to the difference between the NAV
of the Shares being redeemed, as next determined after a receipt of a request
in proper form,
and
the value of the Fund Securities, less the Redemption Transaction Fee and
variable fees described below. The Fund reserves the right to honor a
22
redemption request by delivering a basket of securities or cash that differs
from the Fund Securities.
Redemption Transaction Fee.
The Redemption Transaction Fee of $1,000 is
deducted from such redemption proceeds. Should the Fund Securities have a
value greater than the NAV of Shares being redeemed, a compensating cash
payment to the Trust equal to the differential, plus the applicable Redemption
Transaction Fee and, if applicable, any transfer taxes will be required to be
arranged for by or on behalf of the redeeming shareholder. The basic
Redemption Transaction Fee is the same no matter how many Creation Units are
being redeemed pursuant to any one redemption request. An additional charge
up to four times the Redemption Transaction Fee will be charged with respect to
cash redemptions or redemptions outside of the Clearing Process. An additional
variable charge for cash redemptions or partial cash redemptions will also be
imposed to compensate the Fund for the costs associated with selling the
applicable securities. The Fund may adjust these fees from time to time based
upon actual experience. Although a shareholder in the Fund may request a cash
redemption in lieu of securities, the Fund may, in its discretion, reject any such
request. Investors who use the services of a broker or other such intermediary
may be charged a fee for such services. Investors should refer to Creation and
Redemption of Creation Units in the Funds SAI for details regarding the
logistics of redemption orders through and outside the Clearing Process.
Redemptions of Shares for Fund Securities will be subject to compliance with
applicable U.S. federal and state securities laws, and the Fund (whether or not it
otherwise permits or requires cash redemptions) reserves the right to redeem
Creation Units for cash to the extent that the Fund could not lawfully deliver
specific Deposit Securities upon redemptions or could not do so without first
registering the Fund Securities under such laws. Deliveries of Fund Securities to
redeeming investors generally will be made within three business days. Due to
the schedule of holidays in certain countries, however, the delivery of in-kind
redemption proceeds may take longer than three business days after the day on
which the redemption request is received in proper form. In such cases, the
local market settlement procedures will not commence until the end of the local
holiday periods. See the Funds SAI for a list of the local holidays in the foreign
countries relevant to the Fund.
The
right of redemption may be suspended or the date of payment postponed (1)
for any period during which the NYSE is closed (other than customary weekend
and holiday closings); (2) for any period during which trading on the NYSE
is suspended or restricted; (3) for any period during which an emergency
exists
as a result of which disposal of the Shares of the Fund or determination
of their NAV is not reasonably practicable; or (4) in such other circumstance
as is permitted by the SEC.
23
SHAREHOLDER INFORMATION (continued)
Investors interested
in creating and/or redeeming Creation Units should refer to the more detailed
information Creation and Redemption of Creation Units in
the Funds SAI.
Net Investment Income and Capital Gains.
As a shareholder of the Fund, you are
entitled to your share of the Funds distributions of net investment income and
net realized capital gains on its investments. The Fund pays out substantially all
of its net earnings to its shareholders as distributions.
The 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. The Fund realizes capital
gains or losses whenever it sells securities. Net capital gains are distributed to
shareholders as capital gain distributions.
Net investment income and net capital gains 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, the Fund may determine
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, in which case
some portion of each distribution may result in a return of capital, which, for tax
purposes, is treated as a return on 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 the
Fund only if the broker through which you purchased Shares makes such option
available.
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 the Fund, including the possible application of foreign,
state and local taxes. Unless your investment in the 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, the Fund expects to distribute net investment income at least
annually, and any net realized long-term or short-
24
term capital gains
annually. The 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 the Fund.
Distributions of net investment income are generally taxable as ordinary income.
Taxes on distributions of capital gains are determined by how long the 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 designated as capital gain dividends are generally
taxable as long-term capital gains. Long-term capital gains of non-corporate
shareholders are taxable at a maximum rate of 15% for taxable years beginning
before January 1, 2011.
For taxable years beginning before January 1, 2011, the Fund may receive
dividends, the distribution of which the Fund may designate as qualified
dividends. In the event that the Fund receives such a dividend and designates
the distribution of such dividend as a qualified dividend, the dividend may be
taxed at the maximum capital gains rate, provided holding period and other
requirements are met at both the shareholder and the Fund level. Given the
nature of the Funds investments, the Fund does not expect to make significant
amounts of distributions eligible for taxation at the reduced rates applicable to
capital gains.
Distributions in excess of the Funds 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 the Funds 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 the 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.
If
more than 50% of the Funds total assets at the end of its taxable year
consist of foreign stock or 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, as an
additional dividend, even
25
SHAREHOLDER INFORMATION (continued)
though not actually received, the investors pro rata share of the Funds foreign income taxes, and (ii) either deduct (in calculating U.S. taxable income) or credit (in calculating U.S. federal income), subject to certain limitations, the investors pro rate share of the Funds foreign income taxes. It is expected that more than 50% of the Funds assets will consist of foreign stock or securities.
If you are not a citizen or resident alien of the United States, the Funds ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate applies or unless such income is effectively connected with a U.S. trade or business. Furthermore, for taxable years beginning before January 1, 2010, the Fund may, under certain circumstances, designate all or a portion of a dividend as an interest related dividend or a short-term capital gain dividend. An interest-related dividend that is received by a nonresident alien or foreign entity generally would be exempt from the 30% U.S. withholding tax, provided certain other requirements are met. A short term capital gain dividend that is received by a nonresident alien or foreign entity generally would be exempt from the 30% U.S. withholding tax, unless the foreign person is a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year. The Fund does not expect to pay significant amounts of interest related dividends. Nonresident shareholders are urged to consult their own tax advisers concerning the applicability of the U.S. withholding tax.
The 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 28%. 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 and 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. A redemption of a shareholders Fund Shares for cash 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 who exchanges securities or securities and cash for Creation
26
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 exchangers 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
exchangers 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 Internal Revenue Service, 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 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.
The foregoing discussion summarizes some of the consequences under current
U.S. federal income tax law of an investment in the Fund. It is not a substitute
for personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in the Fund under all applicable tax laws.
27
The Adviser has entered into a licensing agreement with 4asset-management
GmbH (Licensor) to use the Brazil Small-Cap Index.
The Shares of Market Vectors Brazil Small-Cap ETF are not sponsored, endorsed,
sold or promoted by Licensor. Licensor makes no representation or warranty,
express or implied, to the owners of the Shares of Market Vectors Brazil Small-
Cap ETF or any member of the public regarding the advisability of investing in
securities generally or in the Shares of Market Vectors Brazil Small-Cap ETF
particularly or the ability of the Market Vectors Brazil Small-Cap Index to track
the performance of the Brazilian securities market. Licensors only relationship to
the Adviser is the licensing of certain service marks and trade names of Licensor
and of the Market Vectors Brazil Small-Cap Index that is determined, composed
and calculated by Licensor without regard to the Adviser or the Shares of
Market Vectors Brazil Small-Cap ETF. Licensor has no obligation to take the
needs of the Adviser or the owners of the Shares of Market Vectors Brazil
Small-Cap ETF into consideration in determining, composing or calculating the
Market Vectors Brazil Small-Cap Index. Licensor is not responsible for and has
not participated in the determination of the timing of, prices at, or quantities of
the Shares of Market Vectors Brazil Small-Cap ETF to be issued or in the
determination or calculation of the equation by which the Shares of Market
Vectors Brazil Small-Cap ETF are to be converted into cash. Licensor has no
obligation or liability in connection with the administration, marketing or trading
of the Shares of Market Vectors Brazil Small-Cap ETF.
LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE MARKET VECTORS BRAZIL SMALL-CAP INDEX OR ANY
DATA INCLUDED THEREIN AND LICENSOR SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. LICENSOR MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
ADVISER, OWNERS OF THE SHARES OF MARKET VECTORS BRAZIL SMALL-CAP
ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MARKET
VECTORS BRAZIL SMALL-CAP INDEX OR ANY DATA INCLUDED THEREIN.
LICENSOR 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 MARKET VECTORS
BRAZIL SMALL-CAP INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
The
Shares of Market Vectors Brazil Small-Cap ETF are not sponsored, endorsed,
sold or promoted by Standard & Poors, a division of The McGraw-Hill
Companies, Inc. (S&P) or its third party licensors. Neither
S&P nor its third
28
party licensors
make any representation or warranty, express or implied, to the owners of the
Shares of Market Vectors Brazil Small-Cap ETF or any member of the public
regarding the advisability of investing in securities generally or in the Shares
of Market Vectors Brazil Small-Cap ETF particularly or the ability of the
Market Vectors Brazil Small-Cap Index to track general stock market performance.
S&Ps
and its third party licensors only relationship to Licensor is the licensing of
certain trademarks, service marks and trade names of S&P and/or its third party
licensors and for the providing of calculation and maintenance services related
to the Market Vectors Brazil Small-Cap Index. Neither S&P nor its third party
licensors is responsible for and has not participated in the determination of the
prices and amount of the Shares of Market Vectors Brazil Small-Cap ETF or the
timing of the issuance or sale of the Shares of Market Vectors Brazil Small-Cap
ETF or in the determination or calculation of the equation by which the Shares
of Market Vectors Brazil Small-Cap ETF are to be converted into cash. S&P has
no obligation or liability in connection with the administration, marketing or
trading of the Shares of Market Vectors Brazil Small-Cap ETF.
NEITHER S&P, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE
THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE MARKET
VECTORS BRAZIL SMALL-CAP INDEX OR ANY DATA INCLUDED THEREIN OR
ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN
COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH
RESPECT THERETO. S&P, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS
SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS,
OMISSIONS OR DELAYS THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO ITS TRADEMARKS, THE MARKET VECTORS BRAZIL SMALL-CAP
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P, ITS AFFILIATES OR THEIR
THIRD PARTY LICENSORS 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.
Standard & Poors
®
and S&P
®
are registered trademarks of The McGraw-Hill
Companies, Inc.; Calculated by S&P Custom Indices and its related stylized mark
are service marks of The McGraw-Hill Companies, Inc. These marks have been
licensed for use by Licensor.
29
The Fund had not yet commenced operations as of the date of this Prospectus and therefore does not have a financial history.
30
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 1940 Act and other applicable law. See the Funds SAI for more information concerning the Trusts form of organization. Section 12(d)(1) of the 1940 Act restricts investments by investment companies in the securities of other investment companies, including Shares of the Fund. Registered investment companies are permitted to invest
in the Fund beyond the limits set forth in Section 12(d)(1) subject to certain terms and conditions set forth in an SEC exemptive order issued to the Trust, including that such investment companies enter into an agreement with the Fund.
Clifford Chance US LLP serves as counsel to the Trust, including the Fund. Ernst & Young LLP serves as the Funds independent registered public accounting firm and will audit 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. Information about the Fund can be reviewed and copied at the SECs Public Reference Room and information on the operation of the Public Reference Room may be obtained by calling the SEC at
1.202.942.8090. The Funds Registration Statement, including this Prospectus, the Funds SAI and the exhibits may be examined at the offices of the SEC (100 F Street, NE, Washington, DC 20549) or on the Edgar database at the SECs website (http://www.sec.gov), and copies may be obtained, after paying a duplicating fee, by electronic request at
the following email address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington, DC 20549-0102. These documents and other information concerning the Trust also may be inspected at the offices of NYSE Arca (20 Broad Street, New York, New York 10005).
The SAI for the Fund, which has been filed with the SEC, provides more information about the Fund. The SAI for the Fund is incorporated herein by reference and is legally part of this Prospectus. It may be obtained without charge by writing to the Fund at Van Eck Securities Corporation, the Funds distributor, at 335 Madison Avenue, New York, New York
10017 or by calling the distributor at the following number: Investor Information: 1.888.MKT.VCTR (658-8287).
Shareholder inquiries may be directed to the Fund in writing to 335 Madison Avenue, 19th Floor, New York, New York 10017 or by calling 1.888.MKT.VCTR (658-8287).
The Funds SAI will be available through its website at www.vaneck.com/etf.
(Investment Company Act file no. 811-10325)
31
For more detailed information
about the Fund, see the SAI, which is incorporated by reference into this
Prospectus. Additional information about the Fund's investments will be available
in the Funds annual and semi-annual reports to shareholders. In the Fund's
annual report, when available, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds performance
during its last fiscal year.
Call Van Eck at
1.888.MKT.VCTR
to
request, free of charge, the annual or semi-annual reports, the SAI, or other
information about the Fund or to make shareholder inquiries. You may also obtain
the SAI or the Funds annual or semi-annual reports, when available, by visiting
the Van Eck website at vaneck.com/etf. Information about the Fund (including the
SAI) can also be reviewed and copied at the Securities and Exchange Commission
(SEC) Public Reference Room in Washington, D.C. Information about the operation
of the Public Reference Room may be obtained by calling 1.202.942.8090.
Reports and other information about the Fund are available on the EDGAR Database on the SECs internet site at 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: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington, DC 20549-0102.
Transfer Agent: The Bank of New York Mellon
BRFPRO
MARKET VECTORS ETF TRUST
Dated
May 8, 2009
This
Statement of Additional Information (SAI) is not a Prospectus. It should be
read in conjunction with the Prospectus dated May 8, 2009 (the Prospectus)
for the Market Vectors ETF Trust (the Trust), relating to Market Vectors
Brazil Small-Cap ETF (the Fund), as it may be revised from time to time. A
copy of the Prospectus for the Trust, relating to the Fund, may be obtained
without charge by writing to the Trust or the Distributor. The Trusts address
is 335 Madison Avenue, 19th Floor, New York, New York 10017. Capitalized
terms used herein that are not defined have the same meaning as in the
Prospectus, unless otherwise noted.
TABLE OF CONTENTS
Page
1
2
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9
10
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14
14
15
15
18
18
20
27
28
29
29
29
32
32
33
35
i
G
ENERAL DESCRIPTION OF THE
TRUST
The
Trust is an open-end management investment company. The Trust currently
consists of 29 investment portfolios. This SAI relates to one investment
portfolio: Market Vectors Brazil Small-Cap ETF (the Fund). The Trust was
organized as a Delaware statutory trust on March 15, 2001. The shares of
the Fund are referred to herein as Shares.
The
Fund will offer and issue Shares at their net asset value (NAV) only in
aggregations of a specified number of Shares (each, a Creation Unit),
principally for cash. Similarly, Shares are also redeemable by the Fund only in
Creation Units, and generally in exchange for cash. The Shares of the Fund are
expected to be approved for listing, subject to notice of issuance, on NYSE
Arca, Inc. (NYSE Arca or the Exchange), and will trade in the secondary
market at market prices. Those prices may differ from the Shares NAV. A
Creation Unit consists of 50,000 Shares of the Fund.
The
Trust reserves the right to permit or require a cash option for creations and
redemptions of Shares (subject to applicable legal requirements). In each
instance of such cash creations or redemptions, the Trust may impose
transaction fees based on transaction expenses in the particular exchange that
will be higher than the transaction fees associated with in-kind purchases or
redemptions.
I
NVESTMENT POLICIES AND
RESTRICTIONS
Repurchase Agreements
The
Fund may invest in repurchase agreements with commercial banks, brokers or
dealers to generate income from its excess cash balances and to invest
securities lending cash collateral. A repurchase agreement is an agreement
under which the Fund acquires a money market instrument (generally a security
issued by the U.S. Government or an agency thereof, a bankers acceptance or a
certificate of deposit) from a seller, subject to resale to the seller at an
agreed upon price and date (normally, the next business day). A repurchase
agreement may be considered a loan collateralized by securities. The resale
price reflects an agreed upon interest rate effective for the period the
instrument is held by the Fund and is unrelated to the interest rate on the
underlying instrument.
In
these repurchase agreement transactions, the securities acquired by the Fund
(including accrued interest earned thereon) must have a total value at least
equal to the value of the repurchase agreement and are held by the Trusts
custodian bank until repurchased. In addition, the Trusts Board of Trustees
(Board or Trustees) monitors the Funds repurchase agreement transactions
generally and has established guidelines and standards for review of the
creditworthiness of any bank, broker or dealer counterparty to a repurchase
agreement with the Fund. No more than an aggregate of 15% of the Funds net
assets will be invested in repurchase agreements having maturities longer than
seven days and securities subject to legal or contractual restrictions on
resale, or for which there are no readily available market quotations.
The
use of repurchase agreements involves certain risks. For example, if the other
party to the agreement defaults on its obligation to repurchase the underlying
security at a time when the value of the security has declined, the Fund may
incur a loss upon disposition of the security. If the other party to the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a court may determine that the underlying
security is collateral for a loan by the Fund not within the control of the
Fund and, therefore, the Fund may not be able to substantiate its interest in
the underlying security and may be deemed an unsecured creditor of the other
party to the agreement. While the Trusts management acknowledges these risks,
it is expected that they can be controlled through careful monitoring
procedures.
Futures Contracts and Options
Futures
contracts generally provide for the future sale by one party and purchase by
another party of a specified instrument, index or commodity at a specified
future time and at a specified price. Stock index futures contracts are settled
daily with a payment by one party to the other of a cash amount based on the
difference between the level of the stock index specified in the contract from
one day to the next. Futures contracts are standardized as to maturity date and
underlying instrument and are traded on futures exchanges. The Fund may use
futures contracts and options on futures contracts based on other indexes or
combinations of indexes that the Adviser (defined herein) believes to be
representative of the Funds benchmark index (the Index).
An
option is a contract that provides the holder the right to buy or sell shares
at a fixed price, within a specified period of time. A call option gives the
option holder the right to buy the underlying security from the option writer
at the option exercise price at any time prior to the expiration of the option.
A put option gives the option holder the right to sell the underlying security
to the option writer at the option exercise price at any time prior to the
expiration of the option.
2
Although
futures contracts (other than cash settled futures contracts including most
stock index futures contracts) by their terms call for actual delivery or
acceptance of the underlying instrument or commodity, in most cases the
contracts are closed out before the maturity date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position (buying a contract which has previously been sold or selling a
contract previously purchased) in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract position
is opened or closed.
Futures
traders are required to make a good faith margin deposit in cash or government
securities with a broker or custodian to initiate and maintain open positions
in futures contracts. A margin deposit is intended to assure completion of the
contract (delivery or acceptance of the underlying instrument or commodity or
payment of the cash settlement amount) if it is not terminated prior to the
specified delivery date. Brokers may establish deposit requirements which are
higher than the exchange minimums. Futures contracts are customarily purchased
and sold on margin deposits which may range upward from less than 5% of the
value of the contract being traded.
After
a futures contract position is opened, the value of the contract is
marked-to-market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional variation margin will be required.
Conversely,
a change in the contract value may reduce the required margin, resulting in a
repayment of excess margin to the contract holder. Variation margin payments
are made to and from the futures broker for as long as the contract remains
open. The Fund expects to earn interest income on its margin deposits.
The
Fund may use futures contracts and options thereon, together with positions in
cash and money market instruments, to simulate full investment in the Index.
Under such circumstances, the Adviser may seek to utilize other instruments
that it believes to be correlated to the Index components or a subset of the
components. Liquid futures contracts are not currently available for the Index.
Positions
in futures contracts and options may be closed out only on an exchange that
provides a secondary market therefor. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close a futures or
options position. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Fund may be required to make
delivery of the instruments underlying futures contracts they have sold.
The
Fund will seek to minimize the risk that it will be unable to close out a
futures or options contract by only entering into futures and options for which
there appears to be a liquid secondary market.
The
risk of loss in trading futures contracts or uncovered call options in some strategies
(e.g., selling uncovered stock index futures contracts) is potentially
unlimited. The Fund does not plan to use futures and options contracts in this
way. The risk of a futures position may still be large as traditionally
measured due to the low margin deposits required. In many cases, a relatively
small price movement in a futures contract may result in immediate and
substantial loss or gain to the investor relative to the size of a required
margin deposit. The Fund, however, intends to utilize futures and options
contracts in a manner designed to limit its risk exposure to that which is
comparable to what it would have incurred through direct investment in stocks.
3
Utilization
of futures transactions by the Fund involves the risk of imperfect or even
negative correlation to the Funds Index if the index underlying the futures
contracts differs from the Index. There is also the risk of loss by the Fund of
margin deposits in the event of bankruptcy of a broker with whom the Fund has an
open position in the futures contract or option.
Certain
financial futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous days settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of future positions and
subjecting some futures traders to substantial losses.
Except
as otherwise specified in the Funds Prospectus or this SAI, there are no
limitations on the extent to which the Fund may engage in transactions
involving futures and options thereon. The Fund will take steps to prevent its
futures positions from leveraging its securities holdings. When the Fund has a
long futures position, it will maintain with its custodian bank, cash or liquid
securities having a value equal to the notional value of the contract (less any
margin deposited in connection with the position). When the Fund has a short
futures position as part of a complex stock replication strategy, the Fund will
maintain with its custodian bank assets substantially identical to those
underlying the contract or cash and liquid securities (or a combination of the
foregoing) having a value equal to the net obligation of the Fund under the
contract (less the value of any margin deposits in connection with the
position).
Swaps
Swap
agreements are contracts between parties in which one party agrees to make
payments to the other party based on the change in market value or level of a
specified index or asset. In return, the other party agrees to make payments to
the first party based on the return of a different specified index or asset.
Although swap agreements entail the risk that a party will default on its
payment obligations thereunder, the Fund seeks to reduce this risk by entering
into agreements that involve payments no less frequently than quarterly. The
net amount of the excess, if any, of the Funds obligations over its
entitlements with respect to each swap is accrued on a daily basis and an
amount of cash or high liquid securities having an aggregate value at least
equal to the accrued excess is maintained in an account at the Trusts
custodian bank.
The
use of swap agreements involves certain risks. For example, if the
counterparty, under a swap agreement, defaults on its obligation to make
payments due from it as a result of its bankruptcy or otherwise, the Fund may
lose such payments altogether or collect only a portion thereof, which
collection could involve costs or delay. The Fund intends to utilize swap
agreements in a manner designed to limit its risk exposure to levels comparable
to direct investments in stocks.
Currency Forwards
A
currency forward transaction is a contract to buy or sell a specified quantity
of currency at a specified date in the future at a specified price which may be
any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Currency forward contracts
may be used to increase or reduce exposure to currency price movements.
4
Future Developments
The
Fund may take advantage of opportunities in the area of options, futures
contracts, options on futures contracts, options on the Fund, warrants, swaps
and any other investments which are not presently contemplated for use or which
are not currently available, but which may be developed, to the extent such
investments are considered suitable for the Fund by the Adviser.
Investment Restrictions
The
Trust has adopted the following investment restrictions as fundamental policies
with respect to the Fund. These restrictions cannot be changed without the
approval of the holders of a majority of the Funds outstanding voting
securities. For purposes of the Investment Company Act of 1940, as amended (the
1940 Act), a majority of the outstanding voting securities of the Fund
means the vote, at an annual or a special meeting of the security holders of
the Trust, of the lesser of (1) 67% or more of the voting securities of
the Fund present at such meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy,
or (2) more than 50% of the outstanding voting securities of the Fund.
Under these restrictions:
1.
The Fund may
not make loans, except that the Fund may (i) lend portfolio securities,
(ii) enter into repurchase agreements, (iii) purchase all or a
portion of an issue of debt securities, bank loan or participation interests,
bank certificates of deposit, bankers acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance of
the securities and (iv) participate in an interfund lending program with
other registered investment companies;
2.
The Fund may
not borrow money, except as permitted under the 1940 Act, and as
interpreted or modified by regulation from time to time;
3.
The Fund may
not issue senior securities, except as permitted under the 1940 Act, and
as interpreted or modified by regulation from time to time;
4.
The Fund may
not purchase a security (other than obligations of the U.S. Government, its
agencies or instrumentalities) if, as a result, 25% or more of its total
assets would be invested in a single issuer;
5.
The Fund may
not purchase or sell real estate, except that the Fund may (i) invest in
securities of issuers that invest in real estate or interests therein;
(ii) invest in mortgage-related securities and other securities that are
secured by real estate or interests therein; and (iii) hold and sell
real estate acquired by the Fund as a result of the ownership of securities;
6.
The Fund may
not engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be considered an underwriter within
the meaning of the Securities Act of 1933, as amended (the Securities Act),
in the disposition of restricted securities or in connection with its
investments in other investment companies;
7.
The Fund may
not purchase or sell commodities, unless acquired as a result of owning
securities or other instruments, but it may purchase, sell or enter into
financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments and may
invest in securities or other instruments backed by commodities; or
5
8.
The Fund may
not purchase any security if, as a result of that purchase, 25% or more of
its total assets would be invested in securities of issuers having their
principal business activities in the same industry, except that the Fund may
invest 25% or more of the value of its total assets in securities of issuers
in any one industry or group of industries if the Index that the Fund
replicates concentrates in an industry or group of industries. This limit
does not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
In addition to
the investment restrictions adopted as fundamental policies as set forth above,
the Fund observes the following restrictions, which may be changed by the Board
without a shareholder vote. The Fund will not:
1.
Invest in
securities which are illiquid securities, including repurchase agreements
maturing in more than seven days and options traded over-the-counter, if the
result is that more than 15% of the Funds net assets would be invested in
such securities.
2.
Mortgage,
pledge or otherwise encumber its assets, except to secure borrowing effected
in accordance with the fundamental restriction on borrowing set forth above.
3.
Make short
sales of securities.
4.
Purchase any
security on margin, except for such short-term loans as are necessary for
clearance of securities transactions. The deposit or payment by the Fund or
initial or variation margin in connection with futures contracts or related
options thereon is not considered the purchase of a security on margin.
5.
Participate
in a joint or joint-and-several basis in any trading account in securities,
although transactions for the Fund and any other account under common or
affiliated management may be combined or allocated between the Fund and such
account.
6.
Purchase
securities of open-end or closed-end investment companies except in
compliance with the 1940 Act, although the Fund may not acquire any
securities of registered open-end investment companies or registered unit
investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of
the 1940 Act.
If
a percentage limitation is adhered to at the time of investment or contract, a
later increase or decrease in percentage resulting from any change in value or
total or net assets will not result in a violation of such restriction, except
that the percentage limitations with respect to the borrowing of money and
illiquid securities will be continuously complied with.
As
long as the aforementioned investment restrictions are complied with, the Fund
may invest its remaining assets in money market instruments or funds which
reinvest exclusively in money market instruments, in stocks that are in the
relevant market but not the Index, and/or in combinations of certain stock
index futures contracts, options on such futures contracts, stock options,
stock index options, options on the Shares, and stock index swaps and
swaptions, each with a view towards providing the Fund with exposure to the
securities in the Index. These investments may be made to invest uncommitted
cash balances or, in limited circumstances, to assist in meeting shareholder
redemptions of Creation Units. The Fund will not invest in money market
instruments as part of a temporary defensive strategy to protect against
potential stock market declines.
6
S
PECIAL CONSIDERATIONS AND
RISKS
A
discussion of the risks associated with an investment in the Fund is contained
in the Funds Prospectus under the headings Market Vectors Brazil Small-Cap
ETFPrincipal Risks of Investing in the Fund and Additional Risks of Investing
in the Fund. The discussion below supplements, and should be read in
conjunction with, such sections of the Funds Prospectus.
General
Investment
in the Fund should be made with an understanding that the value of the Funds
portfolio securities may fluctuate in accordance with changes in the financial
condition of the issuers of the portfolio securities, the value of common
stocks generally and other factors.
An
investment in the Fund should also be made with an understanding of the risks
inherent in an investment in equity securities, including the risk that the
financial condition of issuers may become impaired or that the general
condition of the stock market may deteriorate (either of which may cause a
decrease in the value of the portfolio securities and thus in the value of
Shares). Common stocks are susceptible to general stock market fluctuations and
to volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic and banking
crises.
Holders
of common stocks incur more risk than holders of preferred stocks and debt
obligations because common stockholders, as owners of the issuer, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Further, unlike debt securities which typically have a
stated principal amount payable at maturity (whose value, however, will be
subject to market fluctuations prior thereto), or preferred stocks which
typically have a liquidation preference and which may have stated optional or
mandatory redemption provisions, common stocks have neither a fixed principal
amount nor a maturity. Common stock values are subject to market fluctuations
as long as the common stock remains outstanding.
Although
most of the securities in the Index are listed on a national securities
exchange, the principal trading market for some may be in the over-the-counter
market. The existence of a liquid trading market for certain securities may
depend on whether dealers will make a market in such securities. There can be
no assurance that a market will be made or maintained or that any such market
will be or remain liquid. The price at which securities may be sold and the
value of the Funds Shares will be adversely affected if trading markets for
the Funds portfolio securities are limited or absent or if bid/ask spreads are
wide.
The
Fund is not actively managed by traditional methods, and therefore the adverse
financial condition of any one issuer will not result in the elimination of its
securities from the securities held by the Fund unless the securities of such
issuer are removed from the Index.
An
investment in the Fund should also be made with an understanding that the Fund
will not be able to replicate exactly the performance of the Index because the
total return generated by the securities will be reduced by transaction costs
incurred in adjusting the actual balance of the securities and other Fund
expenses, whereas such transaction costs and expenses are not included in the
calculation of the Index. It is also possible that for short periods of time,
the Fund may not fully replicate the performance of the Index due to the
temporary unavailability of certain Index securities in the secondary market or
due
7
to other
extraordinary circumstances. Such events are unlikely to continue for an
extended period of time because the Fund is required to correct such imbalances
by means of adjusting the composition of the securities. It is also possible
that the composition of the Fund may not exactly replicate the composition of
the Index if the Fund has to adjust its portfolio holdings in order to continue
to qualify as a regulated investment company under the U.S. Internal Revenue
Code of 1986, as amended (the Internal Revenue Code).
Shares
are subject to the risk of an investment in a portfolio of equity securities in
an economic sector or industry in which the Index is highly concentrated. In
addition, because it is the policy of the Fund to generally invest in the
securities that comprise its benchmark index, the portfolio of securities held
by the Fund (Fund Securities) also will be concentrated in that economic
sector or industry.
Continuous Offering
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units will be issued and
sold by the Trust on an ongoing basis, at any point a distribution, as such
term is used in the Securities Act, may occur. 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(3)(C) of the Securities Act, would be unable to take advantage
of the prospectus delivery exemption provided by Section 4(3) of the
Securities Act. This is because the prospectus delivery exemption in
Section 4(3) of the Securities Act is not available in respect of such
transactions as a result of Section 24(d) of the 1940 Act. 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(3)(A) of the Securities Act
would be unable to take advantage of the prospectus delivery exemption provided
by Section 4(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.
8
A
discussion of exchange listing and trading matters associated with an
investment in the Fund is contained in the Funds Prospectus under the headings
Market Vectors Brazil Small-Cap ETFPrincipal Risks of Investing in the Fund,
Additional Risks of Investing in the Fund, Shareholder InformationDetermination
of NAV and Shareholder InformationBuying and Selling Exchange-Traded
Shares. The discussion below supplements, and should be read in conjunction
with, such sections of the Funds Prospectus.
The
Shares of the Fund are expected to be approved for listing on NYSE Arca,
subject to notice of issuance, and will trade in the secondary market at prices
that may differ to some degree from their NAV. There can be no assurance that
the requirements of the Exchange necessary to maintain the listing of Shares of
the Fund will continue to be met.
The
Exchange may but is not required to remove the Shares of the Fund from listing
if: (1) following the initial twelve-month period beginning upon the
commencement of trading of the Fund, there are fewer than 50 beneficial
holders of the Shares for 30 or more consecutive trading days, (2) the
value of the Index or portfolio of securities on which the Fund is based is no
longer calculated or available or (3) such other event shall occur or
condition exists that, in the opinion of the Exchange, makes further dealings
on the Exchange inadvisable. In addition, the Exchange will remove the Shares
from listing and trading upon termination of the Trust.
As
in the case of other securities traded on the Exchange, brokers commissions on
transactions will be based on negotiated commission rates at customary levels.
In
order to provide investors with a basis to gauge whether the market price of
the Shares on the Exchange are approximately consistent with the current value
of the assets of the Fund on a per Share basis, an updated Indicative Per Share
Portfolio Value is disseminated intra-day through the facilities of the
Consolidated Tape Associations Network B. Indicative Per Share Portfolio
Values are disseminated every 15 seconds during regular Exchange trading hours
based on the most recently reported prices of Fund Securities. As the
respective international local markets close, the Indicative Per Share
Portfolio Value will continue to be updated for foreign exchange rates for the
remainder of the U.S. trading day at the prescribed 15 second interval. The
Fund is not involved in or responsible for the calculation or dissemination of
the Indicative Per Share Portfolio Value and makes no warranty as to the
accuracy of the Indicative Per Share Portfolio Value.
The
Indicative Per Share Portfolio Value has an equity securities value component
and a net other assets value component, each of which are summed and divided by
the total estimated Fund Shares outstanding, including Shares expected to be
issued by the Fund on that day, to arrive at an Indicative Per Share Portfolio
Value.
The
equity securities value component of the Indicative Per Share Portfolio Value
represents the estimated value of the portfolio securities held by the Fund on
a given day. While the equity securities value component estimates the current
market value of the Funds portfolio securities, it does not necessarily
reflect the precise composition or market value of the current portfolio of
securities held by the Trust for the Fund at a particular point in time.
Therefore, the Indicative Per Share Portfolio Value disseminated during
Exchange trading hours should be viewed only as an estimate of the Funds NAV
per share, which is calculated at the close of the regular trading session on
the New York Stock Exchange (NYSE) (ordinarily 4:00 p.m. New York time)
on each Business Day.
9
In
addition to the equity securities value component described in the preceding
paragraph, the Indicative Per Share Portfolio Value for the Fund includes a net
other assets value component consisting of estimates of all other assets and
liabilities of the Fund including, among others, current day estimates of
dividend income and expense accruals.
Trustees and Officers of the Trust
The
Board has responsibility for the overall management and operations of the
Trust, including general supervision of the duties performed by the Adviser and
other service providers. The Board currently consists of four Trustees.
Independent Trustees
Name, Address
1
Position(s)
Term of
Principal
Number of
Other
David H. Chow,
Trustee
Since 2006
Director and CEO, DanCourt
Management LLC (strategy consulting firm), March 1999 to present.
29
Director, Forward
Management, LLC; Director, ReFlow Management Co., LLC.
R. Alastair Short,
Trustee
Since 2006
President, Apex Capital
Corporation (personal investment vehicle), January 1988 to present; Vice
Chairman, W.P. Stewart & Co., Ltd. (asset management firm), September
2007 to September 2008; and Managing Director, The GlenRock Group, LLC
(private equity investment firm), May 2004 to September 2007.
38
Director, Kenyon Review;
Director, The Medici Archive Project.
Richard D.
Trustee
Since 2006
Director, President and
CEO, SmartBrief, Inc. (media company).
38
None.
1
The address for each Trustee and officer is 335 Madison
Avenue, 19th Floor, New York, New York 10017.
2
Each Trustee serves until resignation, death,
retirement or removal. Officers are elected yearly by the Trustees.
3
The Fund Complex consists of the Van Eck Funds, Van
Eck Worldwide Insurance Trust and the Trust.
*
Member of the Audit Committee.
Member of the Nominating and Corporate Governance
Committee.
10
Interested Trustee
Name, Address
1
Position(s)
Term of
Principal
Number of
Other
Jan F. van Eck,
4
45
Trustee, President and
Chief Executive Officer
Trustee (Since 2006);
President and Chief Executive Officer (Since 2009)
Director and Executive
Director, Executive Vice President and Principal of the Adviser, Van Eck
Associates Corporation; Director and Executive Vice President, Van Eck
Securities Corporation (VESC); Director and President, Van Eck Absolute
Return Advisers Corp. (VEARA).
29
Director, Greylock Capital
Associates LLC.
1
The address for each Trustee and officer is 335
Madison Avenue, 19th Floor, New York, New York 10017.
2
Each Trustee serves until resignation, death,
retirement or removal. Officers are elected yearly by the Trustees.
3
The Fund Complex consists of the Van Eck Funds, Van
Eck Worldwide Insurance Trust and the Trust.
4
Interested person of the Trust within the meaning
of the 1940 Act. Mr. van Eck is an officer of the Adviser.
Officer Information
The
Officers of the Trust, their addresses, positions with the Fund, ages and
principal occupations during the past five years are set forth below.
Officers Name,
Position(s) Held
Term of
Principal Occupation(s) During The Past Five Years
Russell G. Brennan, 44
Assistant Vice President
and Assistant Treasurer
Since 2008
Assistant Vice President
and Assistant Treasurer of the Adviser (Since 2008); Manager (Portfolio
Administration), Van Eck Global (September 2005-October 2008); Vice
President, Robeco Investment Management (July1990-September 2005).
Charles T. Cameron, 49
Vice President
Since 2006
Director of Trading and
Portfolio Manager for the Adviser; Officer of three other investment
companies advised by the Adviser.
Susan C. Lashley, 54
Vice President
Since 2006
Vice President of the
Adviser and VESC; Officer of three other investment companies advised by the
Adviser.
Thomas K. Lynch, 52
Chief Compliance Officer
Since 2007
Chief Compliance Officer
of the Adviser and VEARA (Since December 2006) and of VESC (Since August
2008); Vice President of the Adviser and VEARA;
Treasurer (April 2005 December 2006); Second Vice President of Investment
Reporting, TIAA-CREF (January 1996-April 2005). Officer of other investment
companies advised by the Adviser
11
Officers Name,
Position(s) Held with
Term of
Principal Occupation(s) During The Past Five Years
Laura I. Martínez, 29
Assistant Vice President
and Assistant Secretary
Since 2008
Assistant Vice President
and Associate General Counsel of the Adviser (Since 2008); Associate, Davis
Polk & Wardwell (October 2005-June 2008); Stanford Law School (September
2002-June 2005).
Joseph J. McBrien, 61
Senior Vice President,
Secretary and Chief Legal Officer
Since 2006
Senior Vice President,
General Counsel and Secretary of the Adviser, VESC and VEARA (Since December
2005); Managing Director, Chatsworth Securities LLC (March 2001-November
2005); Officer of three other investment companies advised by the Adviser.
Jonathan R. Simon, 34
Vice President and
Assistant Secretary
Since 2006
Vice President and
Associate General Counsel of the Adviser (Since 2006); Vice President and
Assistant Secretary of VEARA and VESC (Since 2006); Associate, Schulte Roth
& Zabel (July 2004-July 2006); Associate, Carter Ledyard & Milburn
LLP (September 2001-July 2004); Officer of three other investment companies
advised by the Adviser.
Bruce J. Smith, 54
Senior Vice President and
Chief Financial Officer
Since 2006
Senior Vice President and
Chief Financial Officer of the Adviser; Senior Vice President, Chief
Financial Officer, Treasurer and Controller of VESC and VEARA; Officer of
three other investment companies advised by the Adviser.
Derek S. van Eck,
3
44
Executive Vice President
Since 2006
Director, Executive Vice
President, Chief Investment Officer and Principal of the Adviser; Director
and Executive Vice President VESC and VEARA; Director of Greylock Capital
Associates LLC; President and Chief Executive Officer of the Van Eck Funds
and Van Eck Worldwide Insurance Trust; Officer of other investment companies
advised by the Adviser.
1
The address for each Officer is 335 Madison Avenue,
19th Floor, New York, New York 10017.
2
Officers are elected yearly by the Trustees.
3
Messrs. Jan F. van Eck and Derek S. van Eck are
brothers.
The
Board of the Trust met five times during the fiscal year ended
December 31, 2008.
The
Board has an Audit Committee, consisting of three Trustees who are not
interested persons (as defined in the 1940 Act) of the Trust (an
Independent Trustee). Messrs. Chow, Short and Stamberger currently serve as
members of the Audit Committee and each has been designated as an audit committee
financial expert as defined under Item 407 of Regulation S-K of the
Securities Exchange Act of 1934, as amended (the Exchange Act). Mr. Short is
the Chairman of the Audit Committee. The Audit Committee has the
responsibility, among other things, to: (i) oversee the accounting and
financial reporting processes of the Trust and its internal control over
financial reporting
12
and, as the
Audit Committee deems appropriate, to inquire into the internal control over
financial reporting of certain third-party service providers; (ii) oversee
the quality and integrity of the Trusts financial statements and the
independent audit thereof; (iii) oversee or, as appropriate, assist the
Boards oversight of the Trusts compliance with legal and regulatory requirements
that relate to the Trusts accounting and financial reporting, internal control
over financial reporting and independent audit; (iv) approve prior to
appointment the engagement of the Trusts independent registered public
accounting firm and, in connection therewith, to review and evaluate the
qualifications, independence and performance of the Trusts independent
registered public accounting firm; and (v) act as a liaison between the
Trusts independent registered public accounting firm and the full Board. The
Audit Committee met four times during the fiscal year ended December 31,
2008.
The
Board also has a Nominating and Corporate Governance Committee consisting of
three Independent Trustees. Messrs. Chow, Short and Stamberger currently serve
as members of the Nominating and Corporate Governance Committee. The Nominating
and Corporate Governance Committee has the responsibility, among other things,
to: (i) evaluate, as necessary, the composition of the Board, its
committees and sub-committees and make such recommendations to the Board as
deemed appropriate by the Committee; (ii) review and define Independent
Trustee qualifications; (iii) review the qualifications of individuals
serving as Trustees on the Board and its committees; (iv) develop
corporate governance guidelines for the Trust and the Board; (v) evaluate,
recommend and nominate qualified individuals for election or appointment as
members of the Board and recommend the appointment of members and chairs of
each Board committee and subcommittee and (vi) review and assess, from
time to time, the performance of the committees and subcommittees of the Board
and report results to the Board. The Nominating and Corporate Governance
Committee met one time during the fiscal year ended December 31, 2008.
The
officers and Trustees of the Trust, in the aggregate, own less than 1% of the
Shares of the Fund.
For
each Trustee, the dollar range of equity securities beneficially owned by the
Trustee in the Trust and in all registered investment companies advised by the
Adviser (Family of Investment Companies) that are overseen by the Trustee is
shown below.
Name Of
Trustee
Dollar
Range of Equity Securities in Market
Aggregate
Dollar Range Of Equity Securities
David H. Chow
None
$50,001 $100,000
R. Alastair Short
None
$10,001 $50,000
Richard D. Stamberger
None
Over $100,000
Jan F. van Eck
None
Over $100,000
As
to each Independent Trustee and his immediate family members, no person owned
beneficially or of record securities in an investment manager or principal
underwriter of the Fund, or a person (other than a registered investment
company) directly or indirectly controlling, controlled by or under common
control with the investment manager or principal underwriter of the Fund.
13
Remuneration of Trustees
The
Trust pays each Independent Trustee an annual retainer of $20,000, a per
meeting fee of $10,000 for scheduled quarterly meetings of the Board and each
special meeting of the Board and a per meeting fee of $5,000 for telephonic
meetings. The Trust pays the Chairman of the Board an annual retainer of
$15,000, the Chairman of the Audit Committee an annual retainer of $10,000 and
the Chairman of the Governance Committee an annual retainer of $7,500. The
Trust also reimburses each Trustee for travel and other out-of-pocket expenses
incurred in attending such meetings. No pension or retirement benefits are
accrued as part of Trustee compensation.
The
table below shows the estimated compensation that is contemplated to be paid to
the Trustees by the Trust for the fiscal year ended December 31, 2009.
Annual Trustee fees may be reviewed periodically and changed by the Trusts
Board.
Name of
Trustee
Aggregate
Deferred
Pension or Retirement
Estimated
Total
David H. Chow
$
0
$
75,000
N/A
N/A
$
75,000
R. Alastair Short
$
70,000
$
0
N/A
N/A
$
135,000
Richard D. Stamberger
$
50,625
$
16,875
N/A
N/A
$
142,500
Jan F. van Eck
(3)
$
0
$
0
N/A
N/A
$
0
(1)
The Fund Complex consists of Van Eck Funds, Van Eck
Worldwide Insurance Trust and the Trust.
(2)
Because the funds of the Fund Complex have different
fiscal year ends, the amounts shown are presented on a calendar year basis.
(3)
Interested person under the 1940 Act.
P
ORTFOLIO HOLDINGS DISCLOSURE
The
Funds portfolio holdings are publicly disseminated each day the Fund is open
for business through financial reporting and news services, including publicly
accessible Internet web sites. In addition, a basket composition file, which includes
the security names and share quantities to deliver in exchange for Shares,
together with estimates and actual cash components is publicly disseminated
daily prior to the opening of the Exchange via the National Securities Clearing
Corporation (the NSCC), a clearing agency that is registered with the
Securities and Exchange Commission (the SEC). The basket represents one
Creation Unit of the Fund. The Trust, Adviser, Custodian and Distributor will
not disseminate non-public information concerning the Trust.
The
Trust is required to disclose, after its first and third fiscal quarters, the
complete schedule of the Funds portfolio holdings with the SEC on
Form N-Q. Form N-Q for the Fund will be available on the SECs
website at
http://www.sec.gov
. The Funds Form N-Q may also be
reviewed and copied at the SECs Public Reference Room in Washington, D.C. and
information on the operation of the Public Reference Room may be obtained by
calling 202.942.8090. The Funds Form N-Q will be available through the
Funds website, at
www.vaneck.com
or by writing to 335 Madison Avenue,
19th Floor, New York, New York 10017.
The
Fund, the Adviser and the Distributor have each adopted a Code of Ethics pursuant
to Rule 17j-1 under the 1940 Act, designed to monitor personal
securities transactions by their personnel
14
(the
Personnel). The Code of Ethics requires that all trading in securities that
are being purchased or sold, or are being considered for purchase or sale, by
the Fund must be approved in advance by the Head of Trading, the Director of
Research and the Chief Compliance Officer of the Adviser. Approval will be
granted if the security has not been purchased or sold or recommended for purchase
or sale for the Fund on the day that the Personnel of the Adviser requests
pre-clearance, or otherwise if it is determined that the personal trading
activity will not have a negative or appreciable impact on the price or market
of the security, or is of such a nature that it does not present the dangers or
potential for abuses that are likely to result in harm or detriment to the
Fund. At the end of each calendar quarter, all Personnel must file a report of
all transactions entered into during the quarter. These reports are reviewed by
a senior officer of the Adviser.
Generally,
all Personnel must obtain approval prior to conducting any transaction in
securities. Independent Trustees, however, are not required to obtain prior
approval of personal securities transactions. Personnel may purchase securities
in an initial public offering or private placement,
provided
that he or she
obtains preclearance of the purchase and makes certain representations.
P
ROXY VOTING POLICIES AND
PROCEDURES
The
Funds proxy voting record will be available upon request and on the SECs
website at
http://www.sec.gov
. Proxies for the Funds portfolio
securities are voted in accordance with the Advisers proxy voting policies and
procedures, which are set forth in Appendix A to this SAI.
The
Trust is required to disclose annually the Funds complete proxy voting record
on Form N-PX covering the period July 1 through June 30 and file
it with the SEC no later than August 31. Form N-PX for the Fund will
be available through the Funds website, at www.vaneck.com, or by writing to
335 Madison Avenue, 19th Floor, New York, New York 10017. The Funds
Form N-PX will also be available on the SECs website at
www.sec.gov
.
The
following information supplements and should be read in conjunction with the
section in the Prospectus entitled Management.
The Investment
Manager
Van
Eck Associates Corporation (the Adviser) acts as investment manager to the
Trust and, subject to the supervision of the Board, is responsible for the
day-to-day investment management of the Fund. The Adviser is a private company
with headquarters in New York and manages other mutual funds and separate
accounts.
The
Adviser serves as investment manager to the Fund pursuant to the Investment
Management Agreement between the Trust and the Adviser. Under the Investment
Management Agreement, the Adviser, subject to the supervision of the Board and
in conformity with the stated investment policies of the Fund, manages the
investment of the Funds assets. The Adviser is responsible for placing
purchase and sale orders and providing continuous supervision of the investment
portfolio of the Fund.
Pursuant
to the Investment Management Agreement, the Trust has agreed to indemnify the
Adviser for certain liabilities, including certain liabilities arising under
the federal securities laws, unless such loss or liability results from willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties.
15
Compensation
. As
compensation for its services under the Investment Management Agreement, the
Adviser is paid a monthly fee based on a percentage of the Funds 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 fees. Until at least May 1, 2010, the Adviser has
contractually agreed to waive fees and/or pay Fund expenses to the extent
necessary to prevent the operating expenses of the Fund (excluding interest
expense, offering costs, trading expenses, taxes and extraordinary expenses)
from exceeding 0.73% of average daily net assets per year. Offering costs
excluded from the expense cap are: (a) legal fees pertaining to the Funds
Shares offered for sale; (b) SEC and state registration fees; and
(c) initial fees paid for Shares of the Fund to be listed on an exchange.
Term
. The Investment
Management Agreement continues in effect until June 30, 2009. Thereafter,
the Investment Management Agreement is subject to annual approval by
(1) the Board or (2) a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund,
provided
that in either
event such continuance also is approved by a majority of the Board who are not
interested persons (as defined in the 1940 Act) of the Trust by a vote
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Management Agreement is terminable without penalty, on 60 days
notice, by the Board or by a vote of the holders of a majority (as defined in
the 1940 Act) of the Funds outstanding voting securities. The Investment
Management Agreement is also terminable upon 60 days notice by the Adviser and
will terminate automatically in the event of its assignment (as defined in the
1940 Act).
The Administrator
Van
Eck Associates Corporation also serves as administrator for the Trust pursuant
to the Investment Management Agreement. Under the Investment Management
Agreement, the Adviser is obligated on a continuous basis to provide such
administrative services as the Board of the Trust reasonably deems necessary
for the proper administration of the Trust and the Fund. The Adviser will
generally assist in all aspects of the Trusts and the Funds operations;
supply and maintain office facilities, statistical and research data, data
processing services, clerical, bookkeeping and record keeping services
(including without limitation the maintenance of such books and records as are
required under the 1940 Act and the rules thereunder, except as maintained
by other agents), internal auditing, executive and administrative services, and
stationery and office supplies; prepare reports to shareholders or investors; prepare
and file tax returns; supply financial information and supporting data for
reports to and filings with the SEC and various state Blue Sky authorities;
supply supporting documentation for meetings of the Board; provide monitoring
reports and assistance regarding compliance with the Declaration of Trust,
by-laws, investment objectives and policies and with federal and state
securities laws; arrange for appropriate insurance coverage; calculate NAVs,
net income and realized capital gains or losses; and negotiate arrangements
with, and supervise and coordinate the activities of, agents and others to
supply services.
Custodian and
Transfer Agent
The
Bank of New York Mellon (formerly known as The Bank of New York) (The Bank of
New York), located at 101 Barclay Street, New York, NY 10286, serves as
custodian for the Fund pursuant to a Custodian Agreement. As Custodian, The
Bank of New York holds the Funds assets. The Bank of New York serves as the
Funds transfer agent pursuant to a Transfer Agency Agreement. The Bank of New
York may be reimbursed by the Fund for its out-of-pocket expenses. In addition,
The Bank of New York provides various accounting services to the Fund pursuant
to a fund accounting agreement.
16
The Distributor
Van
Eck Securities Corporation (the Distributor) is the principal underwriter and
distributor of Shares. Its principal address is 335 Madison Avenue, New York,
New York 10017 and investor information can be obtained by calling
1-888-MKT-VCTR. The Distributor has entered into an agreement with the Trust
which will continue from its effective date unless terminated by either party
upon 60 days prior written notice to the other party by the Trust and the
Adviser, or by the Distributor, or until termination of the Trust or the Fund
offering its Shares, and which is renewable annually thereafter (the
Distribution Agreement), pursuant to which it distributes Shares. Shares will
be continuously offered for sale by the Trust through the Distributor only in
Creation Units, as described below under Creation and Redemption of Creation
UnitsProcedures for Creation of Creation Units. Shares in less than Creation
Units are not distributed by the Distributor. The Distributor will deliver a
prospectus to persons purchasing Shares in Creation Units and will maintain
records of both orders placed with it and confirmations of acceptance furnished
by it. The Distributor is a broker-dealer registered under the Exchange Act and
a member of the Financial Industry Regulatory Authority (FINRA). The
Distributor has no role in determining the investment policies of the Trust or
which securities are to be purchased or sold by the Trust.
The
Distributor may also enter into sales and investor services agreements with
broker-dealers or other persons that are Participating Parties and DTC
Participants (as defined below) to provide distribution assistance, including
broker-dealer and shareholder support and educational and promotional services
but must pay such broker-dealers or other persons, out of its own assets.
The
Distribution Agreement provides that it may be terminated at any time, without
the payment of any penalty: (i) by vote of a majority of the Independent
Trustees or (ii) by vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of the Fund, on at least 60 days written
notice to the Distributor. The Distribution Agreement is also terminable upon
60 days notice by the Distributor and will terminate automatically in the event
of its assignment (as defined in the 1940 Act).
Other Accounts
Managed by the Portfolio Managers
Other Accounts Managed
Accounts with respect to which the
advisory fee is
Name of
Category of
Number of
Total Assets in
Number of Accounts in
Total Assets in Accounts
Hao-Hung (Peter) Liao
Registered investment companies
2
$
6,182,892
0
$
0
Other pooled investment
vehicles
0
$
0
0
$
0
Other accounts
0
$
0
0
$
0
George Cao
Registered investment
companies
0
$
0
0
$
0
Other pooled investment
vehicles
0
$
0
0
$
0
Other accounts
0
$
0
0
$
0
17
Although
the funds in the Trust that are managed by Messrs. Liao and Cao may have
different investment strategies, each has an investment objective of seeking to
replicate, before fees and expenses, its respective underlying index. The
Adviser does not believe that management of the various accounts presents a
material conflict of interest for Messrs. Liao and Cao or the Adviser.
Portfolio Manager
Compensation
The
portfolio managers are paid a fixed base salary and a bonus. The bonus is based
upon the quality of investment analysis and the management of the funds. The
quality of management of the funds includes issues of replication, rebalancing,
portfolio monitoring and efficient operation, among other factors. Portfolio
managers who oversee accounts with significantly different fee structures are
generally compensated by discretionary bonus rather than a set formula to help
reduce potential conflicts of interest. At times, the Adviser and its
affiliates manage accounts with incentive fees.
Portfolio Manager
Share Ownership
As
of the date of this SAI, Messrs. Liao and Cao do not beneficially own any
Shares of the Fund.
When
selecting brokers and dealers to handle the purchase and sale of portfolio
securities, the Adviser looks for prompt execution of the order at a favorable
price. Generally, the Adviser works with recognized dealers in these
securities, except when a better price and execution of the order can be
obtained elsewhere. The Fund will not deal with affiliates in principal
transactions unless permitted by exemptive order or applicable rule or
regulation. The Adviser owes a duty to its clients to provide best execution on
trades effected. Since the investment objective of the Fund is investment
performance that corresponds to that of the Index, the Adviser does not intend
to select brokers and dealers for the purpose of receiving research services in
addition to a favorable price and prompt execution either from that broker or
an unaffiliated third party.
The
Adviser assumes general supervision over placing orders on behalf of the Trust
for the purchase or sale of portfolio securities. If purchases or sales of
portfolio securities of the Trust and one or more other investment companies or
clients supervised by the Adviser are considered at or about the same time,
transactions in such securities are allocated among the several investment
companies and clients in a manner deemed equitable to all by the Adviser. In
some cases, this procedure could have a detrimental effect on the price or
volume of the security so far as the Trust is concerned. However, in other
cases, it is possible that the ability to participate in volume transactions
and to negotiate lower brokerage commissions will be beneficial to the Trust.
The primary consideration is best execution.
Portfolio
turnover may vary from year to year, as well as within a year. High turnover
rates are likely to result in comparatively greater brokerage expenses. The
overall reasonableness of brokerage commissions is evaluated by the Adviser
based upon its knowledge of available information as to the general level of
commissions paid by other institutional investors for comparable services.
The
following information supplements and should be read in conjunction with the
section in the Funds Prospectus entitled Shareholder InformationBuying and
Selling Exchange-Traded Shares.
18
The
Depository Trust Company (DTC) acts as securities depositary for the Shares.
Shares of the Fund are represented by securities registered in the name of DTC
or its nominee and deposited with, or on behalf of, DTC. Certificates will not
be issued for Shares.
DTC,
a limited-purpose trust company, was created to hold securities of its
participants (the DTC Participants) and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the NYSE and FINRA. Access to the DTC
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the Indirect Participants).
Beneficial
ownership of Shares is limited to DTC Participants, Indirect Participants and
persons holding interests through DTC Participants and Indirect Participants.
Ownership of beneficial interests in Shares (owners of such beneficial
interests are referred to herein as Beneficial Owners) is shown on, and the
transfer of ownership is effected only through, records maintained by DTC (with
respect to DTC Participants) and on the records of DTC Participants (with
respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of Shares.
Conveyance
of all notices, statements and other communications to Beneficial Owners is
effected as follows. Pursuant to the Depositary Agreement between the Trust and
DTC, DTC is required to make available to the Trust upon request and for a fee
to be charged to the Trust a listing of the Shares holdings of each DTC
Participant. The Trust shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding Shares, directly or indirectly, through
such DTC Participant. The Trust shall provide each such DTC Participant with
copies of such notice, statement or other communication, in such form, number
and at such place as such DTC Participant may reasonably request, in order that
such notice, statement or communication may be transmitted by such DTC
Participant, directly or indirectly, to such Beneficial Owners. In addition,
the Trust shall pay to each such DTC Participant a fair and reasonable amount
as reimbursement for the expenses attendant to such transmittal, all subject to
applicable statutory and regulatory requirements.
Share
distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all Shares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants accounts with
payments in amounts proportionate to their respective beneficial interests in
Shares as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of Shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in a street name, and will be the
responsibility of such DTC Participants.
The
Trust has no responsibility or liability for any aspects of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such Shares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests or for
any other aspect of the relationship between DTC and the DTC Participants or
the relationship between such DTC Participants and the Indirect Participants
and Beneficial Owners owning through such DTC Participants.
19
DTC
may determine to discontinue providing its service with respect to the Shares
at any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership
of Shares, unless the Trust makes other arrangements with respect thereto
satisfactory to the Exchange.
C
REATION AND REDEMPTION OF
CREATION UNITS
General
The
Trust issues and sells Shares only in Creation Units on a continuous basis
through the Distributor, without an initial sales load, at their NAV next
determined after receipt, on any Business Day (as defined herein), of an order
in proper form.
A
Business Day with respect to the Fund is any day on which the NYSE is open
for business. As of the date of the Prospectus, the NYSE observes the following
holidays: New Years Day, Martin Luther King, Jr. Day, Presidents Day
(Washingtons Birthday), Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Fund Deposit
Due
to various legal and operational constraints in Vietnam, the consideration for
a purchase of Creation Units is principally cash. To the extent in-kind
creations are effected for the Fund, Creation Units of the Fund will consist of
the in-kind deposit of a designated portfolio of equity securities (the
Deposit Securities) constituting a replication of the Funds Index and an
amount of cash computed as described below (the Cash Component). The Cash
Component together with the Deposit Securities, as applicable, are referred to
as the Fund Deposit, which represents the minimum initial and subsequent
investment amount for Shares. The Cash Component represents the difference
between the NAV of a Creation Unit and the market value of Deposit Securities
and may include a Dividend Equivalent Payment. The Dividend Equivalent
Payment enables the Fund to make a complete distribution of dividends on the
next dividend payment date, and is an amount equal, on a per Creation Unit
basis, to the dividends on all the securities held by the Fund (Fund
Securities) with ex-dividend dates within the accumulation period for such
distribution (the Accumulation Period), net of expenses and liabilities for
such period, as if all of the Fund Securities had been held by the Trust for
the entire Accumulation Period. The Accumulation Period begins on the
ex-dividend date for the Fund and ends on the next ex-dividend date.
The
Administrator, through the NSCC, makes available on each Business Day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m. New York time), the list of the names and the required number of
shares of each Deposit Security to be included in the current Fund Deposit
(based on information at the end of the previous Business Day) as well as the
Cash Component for the Fund. Such Fund Deposit is applicable, subject to any
adjustments as described below, in order to effect creations of Creation Units
of the Fund until such time as the next-announced Fund Deposit composition is
made available.
The
identity and number of shares of the Deposit Securities required for the Fund
Deposit for the Fund changes as rebalancing adjustments and corporate action
events are reflected from time to time by the Adviser with a view to the
investment objective of the Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
securities constituting the Index. In addition, the Trust reserves the right to
accept a basket of securities or cash that
20
differs from
Deposit Securities or to permit or require the substitution of an amount of
cash (
i.e.
,
a cash in lieu amount) to be added to the Cash Component to replace any
Deposit Security which may, among other reasons, not be available in sufficient
quantity for delivery, not be permitted to be re-registered in the name of the
Trust as a result of an in-kind creation order pursuant to local law or market
convention or which may not be eligible for transfer through the Clearing
Process (described below), or which may not be eligible for trading by a
Participating Party (defined below). In light of the foregoing, in order to
seek to replicate the in-kind creation order process, the Trust expects to
purchase the Deposit Securities represented by the cash in lieu amount in the
secondary market (Market Purchases). In such cases where the Trust makes
Market Purchases because a Deposit Security may not be permitted to be
re-registered in the name of the Trust as a result of an in-kind creation order
pursuant to local law or market convention, or for other reasons, the
Authorized Participant will reimburse the Trust for, among other things, any
difference between the market value at which the securities were purchased by
the Trust and the cash in lieu amount (which amount, at the Advisers
discretion, may be capped), applicable registration fees and taxes. Brokerage
commissions incurred in connection with the Trusts acquisition of Deposit
Securities will be at the expense of the Fund and will affect the value of all
Shares of the Fund but the Adviser may adjust the transaction fee to the extent
the composition of the Deposit Securities changes or cash in lieu is added to
the Cash Component to protect ongoing shareholders. The adjustments described
above will reflect changes, known to the Adviser on the date of announcement to
be in effect by the time of delivery of the Fund Deposit, in the composition of
the Index or resulting from stock splits and other corporate actions.
In
addition to the list of names and numbers of securities constituting the
current Deposit Securities of a Fund Deposit, the Administrator, through the
NSCC, also makes available (i) on each Business Day, the Dividend
Equivalent Payment, if any, and the estimated Cash Component effective through
and including the previous Business Day, per outstanding Shares of the Fund,
and (ii) on a continuous basis throughout the day, the Indicative Per
Share Portfolio Value.
Procedures for
Creation of Creation Units
To
be eligible to place orders with the Distributor to create Creation Units of
the Fund, an entity or person either must be (1) a Participating Party,
i.e.
,
a broker-dealer or other participant in the Clearing Process through the
Continuous Net Settlement System of the NSCC; or (2) a DTC Participant
(see Book Entry Only System); and, in either case, must have executed an
agreement with the Trust and with the Distributor with respect to creations and
redemptions of Creation Units outside the Clearing Process (Participant
Agreement) (discussed below). All Creation Units of the Fund, however created,
will be entered on the records of the Depository in the name of Cede & Co.
for the account of a DTC Participant.
All
orders to create Creation Units must be placed in multiples of 50,000 Shares (
i.e.
,
a Creation Unit). All orders to create Creation Units, whether through the
Clearing Process or outside the Clearing Process, must be received by the
Distributor no later than the closing time of the regular trading session on
the NYSE (Closing Time) (ordinarily 4:00 p.m. New York time) on the date
such order is placed in order for creation of Creation Units to be effected
based on the NAV of the Fund as determined on such date. A Custom Order may
be placed by an Authorized Participant in the event that the Trust permits or
requires the substitution of an amount of cash to be added to the Cash
Component to replace any Deposit Security which may not be available in
sufficient quantity for delivery or which may not be eligible for trading by
such Authorized Participant or the investor for which it is acting, or other
relevant reason. The date on which a creation order (or order to redeem as
discussed below) is placed is herein referred to as the Transmittal Date.
Orders must be transmitted by telephone or other transmission method acceptable
to the Distributor pursuant to procedures set forth in the Participant Agreement,
as described below (see Placement of Creation Orders Using Clearing
Process). Severe economic or
21
market
disruptions or changes, or telephone or other communication failure, may impede
the ability to reach the Distributor, a Participating Party or a DTC
Participant.
Creation
Units may be created in advance of the receipt by the Trust of all or a portion
of the Fund Deposit. In such cases, the Participating Party will remain liable
for the full deposit of the missing portion(s) of the Fund Deposit and will be
required to post collateral with the Trust consisting of cash at least equal to
a percentage of the marked-to-market value of such missing portion(s) that is
specified in the Participant Agreement. The Trust may use such collateral to
buy the missing portion(s) of the Fund Deposit at any time and will subject
such Participating Party to liability for any shortfall between the cost to the
Trust of purchasing such securities and the value of such collateral. The Trust
will have no liability for any such shortfall. The Trust will return any unused
portion of the collateral to the Participating Party once the entire Fund
Deposit has been properly received by the Distributor and deposited into the
Trust.
Orders
to create Creation Units of the Fund shall be placed with a Participating Party
or DTC Participant, as applicable, in the form required by such Participating
Party or DTC Participant. Investors should be aware that their particular
broker may not have executed a Participant Agreement, and that, therefore,
orders to create Creation Units of the Fund may have to be placed by the
investors broker through a Participating Party or a DTC Participant who has
executed a Participant Agreement. At any given time there may be only a limited
number of broker-dealers that have executed a Participant Agreement. Those
placing orders to create Creation Units of the Fund through the Clearing
Process should afford sufficient time to permit proper submission of the order
to the Distributor prior to the Closing Time on the Transmittal Date.
Orders
for creation that are effected outside the Clearing Process are likely to
require transmittal by the DTC Participant earlier on the Transmittal Date than
orders effected using the Clearing Process. Those persons placing orders
outside the Clearing Process should ascertain the deadlines applicable to DTC
and the Federal Reserve Bank wire system by contacting the operations
department of the broker or depository institution effectuating such transfer
of Deposit Securities and Cash Component.
Orders
to create Creation Units of the Fund may be placed through the Clearing Process
utilizing procedures applicable to domestic funds for domestic securities
(Domestic Funds) (see Placement of Creation Orders Using Clearing Process)
or outside the Clearing Process utilizing the procedures applicable to either
Domestic Funds or foreign funds for foreign securities (see Placement of
Creation Orders Outside Clearing ProcessDomestic Funds and Placement of
Creation Orders Outside Clearing ProcessForeign Funds). In the event that the
Fund includes both domestic and foreign securities, the time for submitting
orders is as stated in the Placement of Creation Orders Outside Clearing
ProcessForeign Funds and Placement of Redemption Orders Outside Clearing
ProcessForeign Funds sections below shall operate.
Placement of Creation
Orders Using Clearing Process
Fund
Deposits created through the Clearing Process, if available, must be delivered
through a Participating Party that has executed a Participant Agreement with
the Distributor and with the Trust (as the same may be from time to time
amended in accordance with its terms).
The
Participant Agreement authorizes the Distributor to transmit to NSCC on behalf
of the Participating Party such trade instructions as are necessary to effect
the Participating Partys creation order. Pursuant to such trade instructions
from the Distributor to NSCC, the Participating Party agrees to transfer the
requisite Deposit Securities (or contracts to purchase such Deposit Securities
that are expected to be delivered in a regular way manner by the third (3rd)
Business Day) and the Cash Component to the Trust, together with such
additional information as may be required by the Distributor. An order to
22
create
Creation Units of the Fund through the Clearing Process is deemed received by
the Distributor on the Transmittal Date if (i) such order is received by
the Distributor not later than the Closing Time on such Transmittal Date and
(ii) all other procedures set forth in the Participant Agreement are
properly followed.
Placement of Creation
Orders Outside Clearing ProcessDomestic Funds
Fund
Deposits created outside the Clearing Process must be delivered through a DTC
Participant that has executed a Participant Agreement with the Distributor and
with the Trust. A DTC Participant who wishes to place an order creating
Creation Units of the Fund to be effected outside the Clearing Process need not
be a Participating Party, but such orders must state that the DTC Participant
is not using the Clearing Process and that the creation of Creation Units will
instead be effected through a transfer of securities and cash. The Fund Deposit
transfer must be ordered by the DTC Participant in a timely fashion so as to
ensure the delivery of the requisite number of Deposit Securities through DTC
to the account of the Trust by no later than 11:00 a.m. New York time, of
the next Business Day immediately following the Transmittal Date. All questions
as to the number of Deposit Securities to be delivered, and the validity, form
and eligibility (including time of receipt) for the deposit of any tendered
securities, will be determined by the Trust, whose determination shall be final
and binding. The cash equal to the Cash Component must be transferred directly
to the Distributor through the Federal Reserve wire system in a timely manner
so as to be received by the Distributor no later than 2:00 p.m. New York
time, on the next Business Day immediately following the Transmittal Date. An
order to create Creation Units of the Fund outside the Clearing Process is
deemed received by the Distributor on the Transmittal Date if (i) such
order is received by the Distributor not later than the Closing Time on such
Transmittal Date; and (ii) all other procedures set forth in the
Participant Agreement are properly followed. However, if the Distributor does
not receive both the requisite Deposit Securities and the Cash Component in a
timely fashion on the next Business Day immediately following the Transmittal
Date, such order will be cancelled. Upon written notice to the Distributor,
such cancelled order may be resubmitted the following Business Day using a Fund
Deposit as newly constituted to reflect the current NAV of the Fund. The
delivery of Creation Units so created will occur no later than the third (3rd)
Business Day following the day on which the creation order is deemed received
by the Distributor.
Additional
transaction fees may be imposed with respect to transactions effected outside
the Clearing Process (through a DTC participant) and in circumstances in which
any cash can be used in lieu of Deposit Securities to create Creation Units.
(See Creation Transaction Fee section below.)
Placement of Creation
Orders Outside Clearing ProcessForeign Funds
An
order must be placed by 4:00 p.m. New York time for purchases of Shares.
The Distributor will inform the Transfer Agent, the Adviser and the Custodian
upon receipt of a Creation Order. The Custodian will then provide such
information to the appropriate custodian. For the Fund, the Custodian will
cause the subcustodian of the Fund to maintain an account into which the
Deposit Securities (or the cash value of all or part of such securities, in the
case of a permitted or required cash purchase or cash in lieu amount) will be
delivered. Deposit Securities must be delivered to an account maintained at the
applicable local custodian. The Trust must also receive, on or before the
contractual settlement date, immediately available or same day funds estimated
by the Custodian to be sufficient to pay the Cash Component next determined
after receipt in proper form of the purchase order, together with the creation transaction
fee described below.
Once
the Trust has accepted a creation order, the Trust will confirm the issuance of
a Creation Unit of the Fund against receipt of payment, at such NAV as will
have been calculated after receipt in proper form of such order. The
Distributor will then transmit a confirmation of acceptance of such order.
23
Creation
Units will not be issued until the transfer of good title to the Trust of the
Deposit Securities and the payment of the Cash Component have been completed.
When the subcustodian has confirmed to the Custodian that the required Deposit
Securities (or the cash value thereof) have been delivered to the account of
the relevant subcustodian, the Distributor and the Adviser will be notified of
such delivery and the Trust will issue and cause the delivery of the Creation
Units.
Acceptance of
Creation Order
The
Trust reserves the absolute right to reject a creation order transmitted to it
by the Distributor if, for any reason, (a) the order is not in proper
form; (b) the creator or creators, upon obtaining the Shares ordered,
would own 80% or more of the currently outstanding Shares of the Fund;
(c) the Deposit Securities delivered are not as specified by the
Administrator, as described above; (d) acceptance of the Deposit
Securities would have certain adverse tax consequences to the Fund;
(e) the acceptance of the Fund Deposit would, in the opinion of counsel,
be unlawful; (f) the acceptance of the Fund Deposit would otherwise, in
the discretion of the Trust or the Adviser, have an adverse effect on the Trust
or the rights of beneficial owners; or (g) in the event that circumstances
outside the control of the Trust, the Distributor and the Adviser make it for
all practical purposes impossible to process creation orders. Examples of such
circumstances include acts of God or public service or utility problems such as
fires, floods, extreme weather conditions and power outages resulting in
telephone, telecopy and computer failures; market conditions or activities
causing trading halts; systems failures involving computer or other information
systems affecting the Trust, the Adviser, the Distributor, DTC, the NSCC or any
other participant in the creation process, and similar extraordinary events. The
Trust shall notify a prospective creator of its rejection of the order of such
person. The Trust and the Distributor are under no duty, however, to give
notification of any defects or irregularities in the delivery of Fund Deposits
nor shall either of them incur any liability for the failure to give any such
notification.
All
questions as to the number of shares of each security in the Deposit Securities
and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Trust, and the Trusts
determination shall be final and binding.
Creation Transaction
Fee
A
fixed creation transaction fee of $1,000 payable to the Custodian is imposed on
each creation transaction regardless of the number of Creation Units purchased
in the transaction. In addition, a variable charge for cash creations or for
creations outside the Clearing Process currently of up to four times the basic
creation transaction fee will be imposed. In the case of cash creations or
where the Trust permits or requires a creator to substitute cash in lieu of
depositing a portion of the Deposit Securities, the creator will be assessed an
additional variable charge for cash creations on the cash or cash in lieu
portion of its investment to compensate the Fund for the costs associated with
purchasing the applicable securities. (See Fund Deposit section above.) As a
result, in order to seek to replicate the in-kind creation order process, the
Trust expects to purchase, in the secondary market, the portfolio securities
that could have been delivered as a result of an in-kind creation order
pursuant to local law or market convention, or for other reasons (Market
Purchases). In such cases where the Trust makes Market Purchases, the
Authorized Participant will reimburse the Trust for, among other things, any
difference between the market value at which the securities were purchased by
the Trust and the cash in lieu amount (which amount, at the Advisers
discretion, may be capped), applicable registration fees, brokerage commissions
and taxes. To the extent applicable, brokerage commissions incurred in
connection with the Trusts purchase of portfolio securities will be at the
expense of the Fund and will affect the value of all Shares of the Fund; but
the Adviser may adjust the transaction fee to the extent the composition of the
creation securities changes or cash in lieu is added to the Cash Component to
protect ongoing
24
shareholders.
Creators of Creation Units are responsible for the costs of transferring the
securities constituting the Deposit Securities to the account of the Trust.
Redemption of
Creation Units
Shares
may be redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in proper form by the Distributor, only on a
Business Day and only through a Participating Party or DTC Participant who has
executed a Participant Agreement.
The Trust will not redeem Shares in amounts less than
Creation Units.
Beneficial Owners also may sell Shares in the
secondary market, but must accumulate enough Shares to constitute a Creation
Unit in order to have such Shares redeemed by the Trust. There can be no
assurance, however, that there will be sufficient liquidity in the public trading
market at any time to permit assembly of a Creation Unit. Investors should
expect to incur brokerage and other costs in connection with assembling a
sufficient number of Shares to constitute a redeemable Creation Unit. See
Market Vectors Brazil Small-Cap ETFPrincipal Risks of Investing in the Fund
in the Funds Prospectus.
Redemptions
are effected principally for cash. To the extent redemptions are effected
in-kind, the Administrator, through NSCC, makes available immediately prior to
the opening of business on the Exchange (currently 9:30 a.m. New York time) on
each day that the Exchange is open for business, the Fund Securities that will
be applicable (subject to possible amendment or correction) to redemption
requests received in proper form (as defined below) on that day. The redemption
proceeds for a Creation Unit consist of Fund Securities, as announced by the
Administrator on the Business Day of the request for redemption, plus cash in
an amount equal to the difference between the NAV of the Shares being redeemed,
as next determined after a receipt of a request in proper form, and the value
of the Fund Securities, less the redemption transaction fee and variable fees
described below. The redemption transaction fee of $1,000 is deducted from such
redemption proceeds. Should the Fund Securities have a value greater than the
NAV of the Shares being redeemed, a compensating cash payment to the Trust
equal to the differential plus the applicable redemption transaction fee will
be required to be arranged for by or on behalf of the redeeming shareholder.
The Fund reserves the right to honor a redemption request by delivering a
basket of securities or cash that differs from the Fund Securities.
Redemption
Transaction Fee
The
basic redemption transaction fee is the same no matter how many Creation Units
are being redeemed pursuant to any one redemption request. An additional charge
up to four times the redemption transaction fee will be charged with respect to
cash redemptions or redemptions outside of the Clearing Process. An additional
variable charge for cash redemptions or partial cash redemptions will also be
imposed to compensate the Fund for the costs associated with selling the
applicable securities. The Fund may adjust these fees from time to time based
upon actual experience. As a result, in order to seek to replicate the in-kind
redemption order process, the Trust expects to sell, in the secondary market,
the portfolio securities that may not be permitted to be re-registered in the
name of the Participating Party as a result of an in-kind redemption order
pursuant to local law or market convention, or for other reasons (Market
Sales). In such cases where the Trust makes Market Sales, the Authorized
Participant will reimburse the Trust for, among other things, any difference
between the market value at which the securities were sold by the Trust and the
cash in lieu amount (which amount, at the Advisers discretion, may be capped),
applicable registration fees, brokerage commissions and taxes. To the extent
applicable, brokerage commissions incurred in connection with the Trusts
disposition of portfolio securities will be at the expense of the Fund and will
affect the value of all Shares of the Fund; but the Adviser may adjust the transaction
fee to the extent the composition of the redemption securities changes or cash
in lieu is added to the Cash Component to protect ongoing shareholders.
25
Placement of
Redemption Orders Using Clearing Process
Orders
to redeem Creation Units of the Fund through the Clearing Process, if
available, must be delivered through a Participating Party that has executed
the Participant Agreement with the Distributor and with the Trust (as the case
may be from time to time amended in accordance with its terms). An order to
redeem Creation Units of the Fund using the Clearing Process is deemed received
on the Transmittal Date if (i) such order is received by the Distributor
not later than 4:00 p.m. New York time on such Transmittal Date; and
(ii) all other procedures set forth in the Participant Agreement are
properly followed; such order will be effected based on the NAV of the Fund as
next determined. An order to redeem Creation Units of the Fund using the
Clearing Process made in proper form but received by the Fund after
4:00 p.m. New York time, will be deemed received on the next Business Day
immediately following the Transmittal Date. The requisite Fund Securities (or
contracts to purchase such Fund Securities which are expected to be delivered
in a regular way manner) will be transferred by the third (3rd) NSCC Business
Day following the date on which such request for redemption is deemed received,
and the applicable cash payment.
Placement of
Redemption Orders Outside Clearing ProcessDomestic Funds
Orders
to redeem Creation Units of the Fund outside the Clearing Process must be
delivered through a DTC Participant that has executed the Participant Agreement
with the Distributor and with the Trust. A DTC Participant who wishes to place
an order for redemption of Creation Units of the Fund to be effected outside
the Clearing Process need not be a Participating Party, but such orders must
state that the DTC Participant is not using the Clearing Process and that
redemption of Creation Units of the Fund will instead be effected through
transfer of Creation Units of the Fund directly through DTC. An order to redeem
Creation Units of the Fund outside the Clearing Process is deemed received by
the Administrator on the Transmittal Date if (i) such order is received by
the Administrator not later than 4:00 p.m. New York time on such
Transmittal Date; (ii) such order is preceded or accompanied by the
requisite number of Shares of Creation Units specified in such order, which
delivery must be made through DTC to the Administrator no later than
11:00 a.m. New York time, on such Transmittal Date (the DTC
Cut-Off-Time); and (iii) all other procedures set forth in the
Participant Agreement are properly followed.
After
the Administrator has deemed an order for redemption outside the Clearing
Process received, the Administrator will initiate procedures to transfer the
requisite Fund Securities (or contracts to purchase such Fund Securities) which
are expected to be delivered within three Business Days and the cash redemption
payment to the redeeming Beneficial Owner by the third Business Day following
the Transmittal Date on which such redemption order is deemed received by the
Administrator. An additional variable redemption transaction fee of up to four
times the basic transaction fee is applicable to redemptions outside the
Clearing Process.
Placement of
Redemption Orders Outside Clearing ProcessForeign Funds
An
order for redemption must be received by 4:00 p.m. New York time for redemptions
of Shares. Arrangements satisfactory to the Trust must be in place for the
Participating Party to transfer the Creation Units through DTC on or before the
settlement date. Redemptions of Shares for Fund Securities will be subject to
compliance with applicable U.S. federal and state securities laws and the Fund
(whether or not it otherwise permits or requires cash redemptions) reserves the
right to redeem Creation Units for cash to the extent that the Fund could not
lawfully deliver specific Fund Securities upon redemptions or could not do so
without first registering the Deposit Securities under such laws.
26
In
connection with taking delivery of Shares of Fund Securities upon redemption of
Creation Units, a redeeming shareholder or entity acting on behalf of a
redeeming shareholder must maintain appropriate custody arrangements with a
qualified broker-dealer, bank or other custody providers in each jurisdiction
in which any of the Fund Securities are customarily traded, to which account
such Fund Securities will be delivered. If neither the redeeming shareholder
nor the entity acting on behalf of a redeeming shareholder has appropriate
arrangements to take delivery of the Fund Securities in the applicable foreign
jurisdiction and it is not possible to make other such arrangements, or if it
is not possible to effect deliveries of the Fund Securities in such
jurisdictions, the Trust may, in its discretion, exercise its option to redeem
such Shares in cash, and the redeeming shareholder will be required to receive
its redemption proceeds in cash.
Deliveries
of redemption proceeds generally will be made within three business days. Due
to the schedule of holidays in certain countries, however, the delivery of
in-kind redemption proceeds may take longer than three business days after the
day on which the redemption request is received in proper form. In such cases,
the local market settlement procedures will not commence until the end of the
local holiday periods.
The
holidays applicable to the Fund are listed below. The proclamation of new
holidays, the treatment by market participants of certain days as informal
holidays (
e.g.
,
days on which no or limited securities transactions occur, as a result of
substantially shortened trading hours), the elimination of existing holidays or
changes in local securities delivery practices, could affect the information
set forth herein at some time in the future. The dates in calendar year 2009 in
which the regular holidays affecting the Brazilian securities markets are as
follows (the following holiday schedule is subject to potential changes in the
securities market):
BRAZIL
Jan. 1
April 21
October 12
Feb. 23
May 1
Nov. 2
Feb. 24
May 11
Dec. 25
April 10
Sep. 7
The
right of redemption may be suspended or the date of payment postponed
(1) for any period during which the NYSE is closed (other than customary
weekend and holiday closings); (2) for any period during which trading on
the NYSE is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the Shares of the Fund or
determination of its NAV is not reasonably practicable; or (4) in such
other circumstance as is permitted by the SEC.
D
ETERMINATION OF NET ASSET
VALUE
The
following information supplements and should be read in conjunction with the
section in the Funds Prospectus entitled Shareholder
InformationDetermination of NAV.
The
NAV per share for the 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, rounded to the nearest cent.
Expenses and fees, including the management fee, are accrued daily and taken
into account for purposes of determining NAV. The NAV of the Fund is determined
as of the close of the regular trading session on the NYSE (ordinarily
4:00 p.m. New York time) on each day that such exchange is open. 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.
27
The
value of the Funds portfolio securities is based on the securities closing
price on local markets when available. If a securitys market price is not
readily available or does not otherwise accurately reflect the fair value of
the security, the security will be valued by another method that the Adviser
believes will better reflect fair value in accordance with the Trusts
valuation policies and procedures approved by the Board of Trustees. The Fund
may use fair value pricing in a variety of circumstances, including but not
limited to, situations where the value of a security in the Funds 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, the Fund currently expects
that it will fair value foreign equity securities held by the Fund each day the
Fund calculates its NAV. Accordingly, the Funds NAV is expected to reflect
certain portfolio securities fair values rather than their market prices. Fair
value pricing involves subjective judgments and it is possible that a fair
value determination for a security is materially different than the value that
could be realized upon the sale of the security. In addition, fair value
pricing could result in a difference between the prices used to calculate the
Funds NAV and the prices used by the Index. This may adversely affect the
Funds ability to track the Index. With respect to securities that are
primarily listed on foreign exchanges, the value of the Funds portfolio
securities may change on days when you will not be able to purchase or sell
your Shares.
In
computing the Funds NAV, the Funds securities holdings are valued based on
market quotations. When market quotations are not readily available for a
portfolio security the Fund must use the securitys fair value as determined in
good faith in accordance with the Funds Fair Value Pricing Procedures, which
are approved by the Board of Trustees.
The
following information supplements and should be read in conjunction with the
section in the Funds Prospectus entitled Shareholder
InformationDistributions.
General Policies
Dividends
from net investment income are declared and paid at least annually by the Fund.
Distributions of net realized capital gains, if any, generally are declared and
paid once a year, but the Trust may make distributions on a more frequent basis
for the Fund to improve its Index tracking or to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the 1940 Act. In addition, the Trust may distribute
at least annually amounts representing the full dividend yield on the
underlying portfolio securities of the Fund, net of expenses of the Fund, as if
the Fund owned such underlying portfolio securities for the entire dividend
period in which case some portion of each distribution may result in a return
of capital for tax purposes for certain shareholders.
Dividends
and other distributions on Shares are distributed, as described below, on a pro
rata basis to Beneficial Owners of such Shares. Dividend payments are made
through DTC Participants and Indirect Participants to Beneficial Owners then of
record with proceeds received from the Trust. The Trust makes additional
distributions to the minimum extent necessary (i) to distribute the entire
annual taxable income of the Trust, plus any net capital gains and (ii) to
avoid imposition of the excise tax imposed by Section 4982 of the Internal
Revenue Code. Management of the Trust reserves the right to declare special
dividends if, in its reasonable discretion, such action is necessary or
advisable to preserve the status of the Fund as a regulated investment company
(RIC) or to avoid imposition of income or excise taxes on undistributed
income.
28
D
IVIDEND REINVESTMENT
SERVICE
No
reinvestment service is provided by the Trust. Broker-dealers may make available
the DTC book-entry Dividend Reinvestment Service for use by Beneficial Owners
of the Fund through DTC Participants for reinvestment of their dividend
distributions. If this service is used, dividend distributions of both income
and realized gains will be automatically reinvested in additional whole Shares
of the Fund. Beneficial Owners should contact their broker to determine the
availability and costs of the service and the details of participation therein.
Brokers may require Beneficial Owners to adhere to specific procedures and
timetables.
As
of the date of this SAI, no entity beneficially owned any voting securities of
the Fund.
The
following information also supplements and should be read in conjunction with
the section in the Prospectus entitled Shareholder InformationTax Matters.
The Fund
intends to qualify for and to elect treatment as a RIC under Subchapter M of
the Internal Revenue Code. As a RIC, the Fund will not be subject
to U.S. federal income tax on the portion of its taxable investment income and
capital gains that it distributes to its shareholders. To qualify for treatment as a RIC, a company
must annually distribute at least 90% of its net investment company taxable
income (which includes dividends, interest and net short-term capital gains)
and meet several other requirements relating to the nature of its income and
the diversification of its assets, among others. If the Fund fails to
qualify for any taxable year as a RIC, all of its taxable income will be
subject to tax at regular corporate income tax rates without any deduction for
distributions to shareholders, and such distributions generally will be taxable
to shareholders as ordinary dividends to the extent of the Funds current and
accumulated earnings and profits.
The Fund
will be subject to a 4% excise tax on certain undistributed income if it does
not distribute to its shareholders in each calendar year at least 98% of its
ordinary income for the calendar year plus 98% of its capital gain net income
for the twelve months ended October 31 of such years. The Fund intends to
declare and distribute dividends and distributions in the amounts and at the
times necessary to avoid the application of this 4% excise tax.
As a result
of U.S. federal income tax requirements, the Trust on behalf of the Fund, has
the right to reject an order for a creation of Shares if the creator (or group
of creators) would, upon obtaining the Shares so ordered, own 80% or more of
the outstanding Shares of the Fund and if, pursuant to Section 351 of the
Internal Revenue Code, the Fund would have a basis in the Deposit Securities
different from the market value of such securities on the date of deposit. The
Trust also has the right to require information necessary to determine
beneficial share ownership for purposes of the 80% determination. See Creation
and Redemption of Creation UnitsProcedures for Creation of Creation Units.
Dividends
and interest received by the Fund from a non-U.S. investment may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
The Fund
will report to shareholders annually the amounts of dividends received from
ordinary income, the amount of distributions received from capital gains and
the portion of dividends which may qualify for the dividends received
deduction. Certain ordinary dividends paid to non-corporate
29
shareholders may qualify for taxation at a lower tax rate applicable to
long-term capital gains. Given the nature of the Funds investments, the Fund
does not expect to make significant amounts of distributions eligible for
taxation at the reduced rates applicable to capital gains.
In general,
a sale of Shares results in capital gain or loss, and for individual
shareholders, is taxable at a federal rate dependent upon the length of time
the Shares were held. A redemption of a shareholders Fund Shares is normally
treated as a sale for tax purposes. Fund Shares held for a period of one year
or less at the time of such sale or redemption will, for tax purposes,
generally result in short-term capital gains or losses, and those held for more
than one year will generally result in long-term capital gains or losses. Under
current law, the maximum tax rate on long-term capital gains available to
non-corporate shareholders generally is 15%. Without future congressional
action, the maximum tax rate on long-term capital gains will return to 20% for
taxable years beginning on or after January 1, 2011.
Special tax
rules may change the normal treatment of gains and losses recognized by the
Fund if the Fund makes certain investments such as investments in structured
notes, swaps, options, futures transactions, and non-U.S. corporations
classified as passive foreign investment companies. Those special tax rules
can, among other things, affect the treatment of capital gain or loss as
long-term or short-term and may result in ordinary income or loss rather than
capital gain or loss and may accelerate when the Fund has to take these items
into account for tax purposes.
Gain or
loss on the sale or redemption of Fund Shares is measured by the difference
between the amount of cash received (or the fair market value of any property
received) and the adjusted tax basis of the Shares. Shareholders should keep
records of investments made (including Shares acquired through reinvestment of
dividends and distributions) so they can compute the tax basis of their Shares.
A loss
realized on a sale or exchange of Shares of the Fund may be disallowed if other
Fund Shares or substantially identical shares are acquired (whether through the
automatic reinvestment of dividends or otherwise) within a sixty-one
(61) day period beginning thirty (30) days before and ending thirty
(30) days after the date that the Shares are disposed of. In such a case,
the basis of the Shares acquired will be adjusted to reflect the disallowed
loss. Any loss upon the sale or exchange of Shares held for six (6) months
or less will be treated as long-term capital loss to the extent of any capital
gain dividends received by the shareholders. Distribution of ordinary income
and capital gains may also be subject to foreign, state and local taxes.
The Fund
may make investments in which it recognizes income or gain prior to receiving
cash with respect to such investment. For example, under certain tax rules, the
Fund may be required to accrue a portion of any discount at which certain
securities are purchased as income each year even though the Fund receives no
payments in cash on the security during the year. To the extent that the Fund
makes such investments, it generally would be required to pay out such income
or gain as a distribution in each year to avoid taxation at the Fund level.
Distributions
reinvested in additional Fund Shares through the means of the service (see
Dividend Reinvestment Service) will nevertheless be taxable dividends to
Beneficial Owners acquiring such additional Shares to the same extent as if
such dividends had been received in cash.
If more
than 50% of the Funds total assets at the end of its taxable year consist of
foreign stock or 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, as an additional dividend, even
though not actually received, the investors pro rata share of the Funds
foreign income taxes, and (ii) either deduct (in calculating U.S. taxable
income) or credit (in calculating U.S. federal income),
30
subject to certain limitations, the investors pro rate share of the
Funds foreign income taxes. It is expected that more than 50% of the Funds
assets will consist of foreign stock or securities.
Distributions
of ordinary income paid to shareholders who are nonresident aliens or foreign
entities will be subject to a 30% U.S. withholding tax unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Furthermore, for taxable years beginning before January 1, 2010, the Fund may,
under certain circumstances, designate all or a portion of a dividend as an
interest related dividend or a short-term capital gain dividend. An
interest-related dividend that is received by a nonresident alien or foreign
entity generally would be exempt from the 30% U.S. withholding tax, provided
certain other requirements are met. A short term capital gain dividend that is
received by a nonresident alien or foreign entity generally would be exempt
from the 30% U.S. withholding tax, unless the foreign person is a nonresident
alien individual present in the United States for a period or periods
aggregating 183 days or more during the taxable year. The Fund does not expect
to pay significant amounts of interest related dividends. Prospective investors
are urged to consult their tax advisors regarding the specific tax consequences
discussed above.
Some
shareholders may be subject to a withholding tax on distributions of ordinary
income, capital gains and any cash received on redemption of Creation Units
(backup withholding). The backup withholding rate for individuals is
currently 28%. Generally, shareholders subject to backup withholding will be
those for whom no certified taxpayer identification number is on file with the
Fund or who, to the Funds knowledge, have furnished an incorrect number. When
establishing an account, an investor must certify under penalty of perjury that
such number is correct and that such investor is not otherwise subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld will be allowed as a credit against shareholders U.S. federal income
tax liabilities, and may entitle them to a refund,
provided
that the required information is timely furnished
to the Internal Revenue Service.
The
foregoing discussion is a summary only and is not intended as a substitute for
careful tax planning. Purchasers of Shares of the Trust should consult their
own tax advisers as to the tax consequences of investing in such Shares,
including under state, local and other tax laws. Finally, the foregoing
discussion is based on applicable provisions of the Internal Revenue Code,
regulations, judicial authority and administrative interpretations in effect on
the date hereof. Changes in applicable authority could materially affect the
conclusions discussed above, and such changes often occur.
Reportable
Transactions
Under
promulgated Treasury regulations, if a shareholder recognizes a loss on
disposition of the Funds Shares of $2 million or more in any one taxable year
(or $4 million or more over a period of six taxable years) for an individual
shareholder or $10 million or more in any taxable year (or $20 million or more
over a period of six taxable years) for a corporate shareholder, the
shareholder must file with the IRS a disclosure statement on Form 8886. Direct
shareholders of portfolio securities are in many cases excepted from this
reporting requirement, but under current guidance, shareholders of a RIC that
engaged in a reportable transaction are not excepted. Future guidance may
extend the current exception from this reporting requirement to shareholders of
most or all RICs. In addition, pursuant to recently enacted legislation,
significant penalties may be imposed for the failure to comply with the
reporting requirements. The fact that a loss is reportable under these
regulations does not affect the legal determination of whether the taxpayers
treatment of the loss is proper. Shareholders should consult their tax advisors
to determine the applicability of these regulations in light of their individual
circumstances.
31
C
APITAL STOCK AND
SHAREHOLDER REPORTS
The
Trust currently is comprised of 29 investment funds. The Trust issues Shares of
beneficial interest with no par value. The Board may designate additional funds
of the Trust.
Each
Share issued by the Trust has a pro rata interest in the assets of the Fund.
Shares have no pre-emptive, exchange, subscription or conversion rights and are
freely transferable. Each Share is entitled to participate equally in dividends
and distributions declared by the Board with respect to the Fund, and in the
net distributable assets of the Fund on liquidation.
Each
Share has one vote with respect to matters upon which a shareholder vote is
required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder and each fractional share has a proportional fractional
vote. Shares of all funds vote together as a single class except that if the
matter being voted on affects only a particular fund it will be voted on only
by that fund, and if a matter affects a particular fund differently from other
funds, that fund will vote separately on such matter. Under Delaware law, the
Trust is not required to hold an annual meeting of shareholders unless required
to do so under the 1940 Act. The policy of the Trust is not to hold an
annual meeting of shareholders unless required to do so under the
1940 Act. All Shares of the Trust have noncumulative voting rights for the
election of Trustees. Under Delaware law, Trustees of the Trust may be removed
by vote of the shareholders.
Under
Delaware law, shareholders of a statutory trust may have similar limitation
liabilities as shareholders of a corporation.
The
Trust will issue through DTC Participants to its shareholders semi-annual
reports containing unaudited financial statements and annual reports containing
financial statements audited by an independent auditor approved by the Trusts
Trustees and by the shareholders when meetings are held and such other information
as may be required by applicable laws, rules and regulations. Beneficial Owners
also receive annually notification as to the tax status of the Trusts
distributions.
Shareholder
inquiries may be made by writing to the Trust, c/o Van Eck Associates
Corporation, 335 Madison Avenue, 19th Floor, New York, New York 10017.
C
OUNSEL AND INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Clifford
Chance US LLP, 31 West 52nd Street, New York, New York 10019, is counsel to the
Trust and has passed upon the validity of the Funds Shares.
Ernst
& Young LLP, 5 Times Square, New York, New York 10036, is the Trusts
independent registered public accounting firm and audits the Funds financial
statements and performs other related audit services.
32
The
information contained herein regarding Market Vectors Brazil Small-Cap Index
(the Index) was provided by 4asset-management GmbH (Licensor), while the
information contained herein regarding the securities markets and DTC was
obtained from publicly available sources.
The
Shares of Market Vectors Brazil Small-Cap ETF are not sponsored, endorsed, sold
or promoted by Licensor. Licensor makes no representation or warranty, express
or implied, to the owners of the Shares of Market Vectors Brazil Small-Cap ETF
or any member of the public regarding the advisability of investing in
securities generally or in the Shares of Market Vectors Brazil Small-Cap ETF
particularly or the ability of the Market Vectors Brazil Small-Cap Index to
track the performance of the Brazilian securities market. Licensors only
relationship to the Adviser is the licensing of certain service marks and trade
names of Licensor and of the Market Vectors Brazil Small-Cap Index that is
determined, composed and calculated by Licensor without regard to the Adviser
or the Shares of Market Vectors Brazil Small-Cap ETF. Licensor has no
obligation to take the needs of the Adviser or the owners of the Shares of
Market Vectors Brazil Small-Cap ETF into consideration in determining,
composing or calculating the Market Vectors Brazil Small-Cap Index. Licensor is
not responsible for and has not participated in the determination of the timing
of, prices at, or quantities of the Shares of Market Vectors Brazil Small-Cap
ETF to be issued or in the determination or calculation of the equation by
which the Shares of Market Vectors Brazil Small-Cap ETF are to be converted
into cash. Licensor has no obligation or liability in connection with the
administration, marketing or trading of the Shares of Market Vectors Brazil
Small-Cap ETF.
LICENSOR
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE MARKET VECTORS
BRAZIL SMALL-CAP INDEX OR ANY DATA INCLUDED THEREIN AND LICENSOR SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. LICENSOR MAKES
NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER,
OWNERS OF THE SHARES OF MARKET VECTORS BRAZIL SMALL-CAP ETF, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE MARKET VECTORS BRAZIL SMALL-CAP INDEX OR
ANY DATA INCLUDED THEREIN. LICENSOR 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 MARKET VECTORS BRAZIL SMALL-CAP
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT,
OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
The
Shares of Market Vectors Brazil Small-Cap ETF are not sponsored, endorsed, sold
or promoted by Standard & Poors, a division of The McGraw-Hill Companies,
Inc. (S&P) or its third party licensors. Neither S&P nor its third
party licensors make any representation or warranty, express or implied, to the
owners of the Shares of Market Vectors Brazil Small-Cap ETF or any member of
the public regarding the advisability of investing in securities generally or
in the Shares of Market Vectors Brazil Small-Cap ETF particularly or the
ability of the Market Vectors Brazil Small-Cap Index to track general stock
market performance. S&Ps and its third party licensors only relationship
to Licensor is the licensing of certain trademarks, service marks and trade
names of S&P and/or its third party licensors and for the providing of
calculation and maintenance services related to the Market Vectors Brazil
Small-Cap Index. Neither S&P nor its third party licensors is responsible
for and has not participated in the determination of the prices and amount of
the Shares of Market Vectors Brazil Small-Cap ETF or the timing of the issuance
or sale of the Shares of Market Vectors Brazil Small-Cap ETF or in the
33
determination
or calculation of the equation by which the Shares of Market Vectors Brazil
Small-Cap ETF are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Shares of Market Vectors Brazil Small-Cap ETF.
NEITHER
S&P, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY,
ACCURACY, TIMELINESS OR COMPLETENESS OF THE MARKET VECTORS BRAZIL SMALL-CAP
INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT
LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC
COMMUNICATIONS) WITH RESPECT THERETO. S&P, ITS AFFILIATES AND THEIR THIRD
PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY
ERRORS, OMISSIONS OR DELAYS THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO ITS TRADEMARKS, THE
MARKET VECTORS BRAZIL SMALL-CAP INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P, ITS
AFFILIATES OR THEIR THIRD PARTY LICENSORS 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.
Standard
& Poors® and S&P® are registered trademarks of The McGraw-Hill
Companies, Inc.; Calculated by S&P Custom Indices and its related
stylized mark are service marks of The McGraw-Hill Companies, Inc. These marks
have been licensed for use by Licensor.
34
APPENDIX A
V
AN ECK GLOBAL PROXY VOTING
POLICIES
INTRODUCTION
Effective
March 10, 2003, the Securities and Exchange Commission (the Commission)
adopted Rule 206(4)-6 under the Investment Advisers Act of 1940 (Advisers
Act), requiring each investment adviser registered with the Commission to
adopt and implement written policies and procedures for voting client proxies,
to disclose information about the procedures to its clients, and to inform
clients how to obtain information about how their proxies were voted. The
Commission also amended Rule 204-2 under the Advisers Act to require
advisers to maintain certain proxy voting records. Both rules apply to all
investment advisers registered with the Commission that have proxy voting
authority over their clients securities. An adviser that exercises voting
authority without complying with Rule 206(4)-6 will be deemed to have
engaged in a fraudulent, deceptive, or manipulative act, practice or course
of business within the meaning of Section 206(4) of the Advisers Act.
When an
adviser has been granted proxy voting authority by a client, the adviser owes
its clients the duties of care and loyalty in performing this service on their
behalf. The duty of care requires the adviser to monitor corporate actions and
vote client proxies. The duty of loyalty requires the adviser to cast the proxy
votes in a manner that is consistent with the best interests of the client.
PROXY VOTING POLICIES AND PROCEDURES
Resolving Material Conflicts Of Interest
A material
conflict means the existence of a business relationship between a portfolio
company or an affiliate and Van Eck Associates Corporation, any affiliate or
subsidiary (individually and together, as the context may require,
Adviser), or an affiliated person of a Van Eck mutual fund in excess of
$60,000. Examples of when a material conflict exists include the situation
where the adviser provides significant investment advisory, brokerage or
other services to a company whose management is soliciting proxies; an officer
of the Adviser serves on the board of a charitable organization that receives
charitable contributions from the portfolio company and the charitable
organization is a client of the Adviser; a portfolio company that is a
significant selling agent of Van Ecks products and services solicits
proxies; a broker-dealer or insurance company that controls 5% or more of the
Advisers assets solicits proxies; the Adviser serves as an investment
adviser to the pension or other investment account of the portfolio company;
the Adviser and the portfolio company have a lending relationship. In each of
these situations voting against management may cause the Adviser a loss of
revenue or other benefit.
Conflict
Resolution. When a material conflict exists proxies will be voted in the
following manner:
Where the
written guidelines set out a pre-determined voting policy, proxies will be
voted in accordance with that policy, with no deviations (if a deviation is
advisable, one of the other methods may be used);
35
Where the
guidelines permit discretion and an independent third party has been retained
to vote proxies, proxies will be voted in accordance with the predetermined
policy based on the recommendations of that party; or
The
potential conflict will be disclosed to the client (a) with a request
that the client vote the proxy, (b) with a recommendation that the
client engage another party to determine how the proxy should be voted or
(c) if the foregoing are not acceptable to the client disclosure of how
VEAC intends to vote and a written consent to that vote by the client.
Any
deviations from the foregoing voting mechanisms must be approved by the
Compliance Officer with a written explanation of the reason for the
deviation.
Reasonable Research Efforts
When
determining whether a vote is in the best interest of the client, the Adviser
will use reasonable research efforts. Investment personnel may rely on public
documents about the company and other readily available information, which is
easily accessible to the investment personnel at the time the vote is cast.
Information on proxies by foreign companies may not be readily available.
Voting Client Proxies
The Adviser
generally will vote proxies on behalf of clients, unless clients instruct
otherwise. There may be times when refraining from voting a proxy is in a
clients best interest, such as when the Adviser determines that the cost of
voting the proxy exceeds the expected benefit to the client. (For example,
casting a vote on a foreign security may involve additional costs such as
hiring a translator or traveling to a foreign country to vote the security in
person).
The
portfolio manager or analyst covering the security is responsible for making
voting decisions.
Portfolio
Administration, in conjunction with the portfolio manager and the custodian,
is responsible for monitoring corporate actions and ensuring that corporate
actions are timely voted.
Client Inquiries
All
inquiries by clients as to how Van Eck has voted proxies must immediately be
forwarded to Portfolio Administration.
DISCLOSURE TO CLIENTS
Notification
of Availability of Information Client Brochure.
The
Client Brochure or Part II of Form ADV will inform clients that they
can obtain information from VEAC on how their proxies were voted. The Client
Brochure or Part II of Form ADV will be mailed to each client
annually.
The
Legal Department will be responsible for coordinating the mailing with
Sales/Marketing Departments.
36
Availability
of Proxy Voting Information at the clients request or if the information is
not available on VEACs website, a hard copy of the accounts proxy votes
will be mailed to each client.
Recordkeeping Requirements
VEAC will
retain the following documentation and information for each matter relating
to a portfolio security with respect to which a client was entitled to vote:
proxy
statements received;
identifying
number for the portfolio security;
shareholder
meeting date;
brief
identification of the matter voted on;
whether the
vote was cast on the matter and how the vote was cast;
how the vote
was cast (
e.g.
,
for or against proposal, or abstain; for or withhold regarding election of
directors);
records of
written client requests for information on how VEAC voted proxies on behalf
of the client;
a copy of
written responses from VEAC to any written or oral client request for information
on how VEAC voted proxies on behalf of the client; and
any
documents prepared by VEAC that were material to the decision on how to vote
or that memorialized the basis for the decision, if such documents were
prepared.
Copies of proxy
statements filed on EDGAR, and proxy statements and records of proxy votes
maintained with a third party (
i.e.
, proxy voting service) need not be
maintained. The third party must agree in writing to provide a copy of the
documents promptly upon request.
If
applicable, any document memorializing that the costs of voting a proxy
exceed the benefit to the client or any other decision to refrain from
voting, and that such abstention was in the clients best interest.
Proxy voting
records will be maintained in an easily accessible place for five years, the
first two at the office of VEAC. Proxy statements on file with EDGAR or
maintained by a third party and proxy votes maintained by a third party are
not subject to these particular retention requirements.
37
Proxy Voting Guidelines
1.
General Information
Generally, the
Adviser will vote in accordance with the following guidelines. Where the proxy
vote decision maker determines, however, that voting in such a manner would not
be in the best interest of the client, the investment personnel will vote
differently.
If there is a
conflict of interest on any management or shareholder proposals that are voted
on a case by case basis, we will follow the recommendations of an independent
proxy service provider.
2.
Officers and Directors
1.
The Board of
Directors
Director
Nominees in Uncontested Elections
Vote on a
case-by-case basis for director nominees, examining factors such as:
long-term
corporate performance record relative to a market index;
composition
of board and key board committees;
nominees
investment in the company;
whether a
retired CEO sits on the board; and
whether the
chairman is also serving as CEO.
In cases of
significant votes and when information is readily available, we also review:
corporate
governance provisions and takeover activity;
board
decisions regarding executive pay;
director
compensation;
number of
other board seats held by nominee; and
interlocking
directorships.
2.
Chairman and
CEO are the Same Person
Vote on a
case-by-case basis on shareholder proposals that would require the positions
of chairman and CEO to be held by different persons.
3.
Majority of
Independent Directors
Vote on a
case-by-case basis shareholder proposals that request that the board be
comprised of a majority of independent directors.
38
Vote for
shareholder proposals that request that the board audit, compensation and/or
nominating committees include independent directors exclusively.
4.
Stock
Ownership Requirements
Vote on a
case-by-case basis shareholder proposals requiring directors to own a minimum
amount of company stock in order to qualify as a director, or to remain on
the board.
5.
Term of
Office
Vote on a
case-by-case basis shareholder proposals to limit the tenure of outside
directors.
6.
Director and
Officer Indemnification and Liability Protection
Vote on a
case-by-case basis proposals concerning director and officer indemnification
and liability protection.
Generally,
vote against proposals to eliminate entirely director and officer liability for
monetary damages for violating the duty of care.
Vote for only
those proposals that provide such expanded coverage in cases when a directors
or officers legal defense was unsuccessful if: (1) the director was found
to have acted in good faith and in a manner that he reasonably believed was in
the best interests of the company, AND (2) only if the directors legal expenses
would be covered.
7.
Director
Nominees in Contested Elections
Vote on a
case-by-case basis when the election of directors is contested, examining the
following factors:
long-term
financial performance of the target company relative to its industry;
managements
track record;
background
to the proxy contest;
qualifications
of director nominees (both slates);
evaluation
of what each side is offering shareholders, as well as the likelihood that
the proposed objectives and goals can be met; and
stock
ownership positions.
8.
Board
Structure: Staggered vs. Annual Elections
Generally,
vote against proposals to stagger board elections.
Generally,
vote for proposals to repeal classified boards and to elect all directors
annually.
9.
Shareholder
Ability to Remove Directors
Vote against
proposals that provide that directors may be removed only for cause.
39
Vote for
proposals to restore shareholder ability to remove directors with or without
cause.
Vote against
proposals that provide that only continuing directors may elect replacements to
fill board vacancies.
Vote for
proposals that permit shareholders to elect directors to fill board vacancies.
10.
Shareholder
Ability to Alter the Size of the Board
Vote for
proposals that seek to fix the size of the board.
Vote against
proposals that give management the ability to alter the size of the board
without shareholder approval.
3.
Proxy Contests
1.
Reimburse
Proxy Solicitation Expenses
Vote on a
case-by-case basis proposals to provide full reimbursement for dissidents
waging a proxy contest.
4.
Auditors
2.
Ratifying
Auditors
Vote for
proposals to ratify auditors, unless information that is readily available to
the vote decision-maker demonstrates that an auditor has a financial interest
in or association with the company, and is therefore clearly not independent;
or such readily available information creates a reasonable basis to believe
that the independent auditor has rendered an opinion which is neither accurate
nor indicative of the companys financial position.
Vote for
shareholder proposals asking for audit firm rotation unless the rotation period
is so short (less than five years) that it would be unduly burdensome to the
company.
5.
Shareholder Voting and Control Issues
3.
Cumulative
Voting
Generally,
vote against proposals to eliminate cumulative voting.
Generally,
vote for proposals to permit cumulative voting.
4.
Shareholder
Ability to Call Special Meetings
Generally,
vote against proposals to restrict or prohibit shareholder ability to call
special meetings.
Generally,
vote for proposals that remove restrictions on the right of shareholders to act
independently of management.
40
5.
Shareholder
Ability to Act by Written Consent
Generally,
vote against proposals to restrict or prohibit shareholder ability to take
action by written consent.
Generally,
vote for proposals to allow or make easier shareholder action by written
consent.
6.
Poison Pills
Vote for
shareholder proposals that ask a company to submit its poison pill for
shareholder ratification. Vote on a case-by-case basis shareholder proposals to
redeem a companys poison pill.
Vote on a
case-by-case basis management proposals to ratify a poison pill.
7.
Fair Price
Provision
Vote on a
case-by-case basis when examining fair price proposals, (where market
quotations are not readily available) taking into consideration whether the
shareholder vote requirement embedded in the provision is no more than a
majority of disinterested Shares.
Generally,
vote for shareholder proposals to lower the shareholder vote requirement in
existing fair price provisions.
8.
Greenmail
Generally,
vote for proposals to adopt anti-greenmail charter or bylaw amendments or
otherwise restrict a companys ability to make greenmail payments.
Generally,
vote on a case-by-case basis anti-greenmail proposals when they are bundled
with other charter or bylaw amendments.
9.
Unequal
Voting Rights
Vote against
dual class exchange offers.
Vote against
dual class recapitalizations.
10.
Supermajority
Shareholder Vote Requirement to Amend the Charter or Bylaws
Vote against
management proposals to require a supermajority shareholder vote to approve
charter and bylaw amendments.
Vote for
shareholder proposals to lower supermajority shareholder vote requirements for
charter and bylaw amendments.
11.
Supermajority
Shareholder Vote Requirement to Approve Mergers
Vote against
management proposals to require a supermajority shareholder vote to approve
mergers and other significant business combinations.
41
12.
White Knight
Placements
Vote for
shareholder proposals to require approval of blank check preferred stock issues
for other than general corporate purposes or similar corporate actions.
13.
Confidential
Voting
Generally,
vote for shareholder proposals that request corporations to adopt confidential
voting, use independent tabulators and use independent inspectors of election
as long as the proposals include clauses for proxy contests as follows: In the
case of a contested election, management is permitted to request that the
dissident group honor its confidential voting policy. If the dissidents agree,
the policy remains in place. If the dissidents do not agree, the confidential
voting policy is waived.
Generally,
vote for management proposals to adopt confidential voting.
14.
Equal Access
Generally,
vote for shareholders proposals that would allow significant company
shareholders equal access to managements proxy material in order to evaluate
and propose voting recommendations on proxy proposals and director nominees,
and in order to nominate their own candidates to the board.
15.
Bundled
Proposals
Generally,
vote on a case-by-case basis bundled or conditioned proxy proposals. In the
case of items that are conditioned upon each other, we examine the benefits and
costs of the packaged items. In instances when the joint effect of the
conditioned items is not in shareholders best interests, we vote against the
proposals. If the combined effect is positive, we support such proposals.
16.
Shareholder
Advisory Committees
Vote on a
case-by-case basis proposals to establish a shareholder advisory committee.
6.
Capital Structure
17.
Common Stock
Authorization
Vote on a
case-by-case basis proposals to increase the number of Shares of common stock
authorized for issue.
Generally,
vote against proposed common stock authorizations that increase the existing
authorization by more than 100% unless a clear need for the excess Shares is
presented by the company.
18.
Stock
Distributions: Splits and Dividends
Generally,
vote for management proposals to increase common share authorization for a
stock split,
provided
that the split does not result in an increase of
authorized but unissued Shares of more than 100% after giving effect to the
Shares needed for the split.
42
19.
Reverse
Stock Splits
Generally,
vote for management proposals to implement a reverse stock split,
provided
that the reverse split does not result in an increase of authorized but
unissued Shares of more than 100% after giving effect to the Shares needed for
the reverse split.
20.
Blank Check
Preferred Authorization
Generally,
vote for proposals to create blank check preferred stock in cases when the
company expressly states that the stock will not be used as a takeover defense
or carry superior voting rights.
Vote on a
case-by-case basis proposals that would authorize the creation of new classes
of preferred stock with unspecified voting, conversion, dividend and
distribution, and other rights.
Vote on a
case-by-case basis proposals to increase the number of authorized blank check
preferred Shares.
21.
Shareholder
Proposals Regarding Blank Check Preferred Stock
Generally,
vote for shareholder proposals to have blank check preferred stock placements,
other than those Shares issued for the purpose of raising capital or making
acquisitions in the normal course of business, submitted for shareholder
ratification.
22.
Adjust Par
Value of Common Stock
Vote on a
case-by-case basis management proposals to reduce the par value of common
stock.
23.
Preemptive
Rights
Vote on a
case-by-case basis proposals to create or abolish preemptive rights. In
evaluating proposals on preemptive rights, we look at the size of a company and
the characteristics of its shareholder base.
24.
Debt
Restructurings
Vote on a
case-by-case basis proposals to increase common and/or preferred Shares and to
issue Shares as part of a debt restructuring plan. We consider the following
issues:
Dilution -
How much will ownership interest of existing shareholders be reduced, and how
extreme will dilution to any future earnings be?
Change In
Control - Will the transaction result in a change in control of the company?
Bankruptcy -
Is the threat of bankruptcy, which would result in severe losses in
shareholder value, the main factor driving the debt restructuring?
Generally,
we approve proposals that facilitate debt restructurings unless there are
clear signs of self-dealing or other abuses.
43
25.
Share
Repurchase Programs
Vote for
management proposals to institute open-market share repurchase plans in which
all shareholders may participate on equal terms.
7.
Executive Compensation
In general, we
vote on a case-by-case basis on executive compensation plans, with the view
that viable compensation programs reward the creation of stockholder wealth by
having a high payout sensitivity to increases in shareholder value.
8.
Compensation Proposals
26.
Amendments
That Place a Cap on Annual Grants
Vote for plans
that place a cap on the annual grants any one participant may receive.
27.
Amend
Administrative Features
Vote for
plans that simply amend shareholder-approved plans to include administrative
features.
28.
Amendments
to Added Performance-Based Goals
Generally,
vote for amendments to add performance goals to existing compensation plans.
29.
Amendments
to Increase Shares and Retain Tax Deductions
Vote on amendments
to existing plans to increase Shares reserved and to qualify the plan for
favorable tax treatment should be evaluated on a case-by-case basis.
30.
Approval of
Cash or Cash-and-Stock Bonus Plans
Vote for
cash or cash-and-stock bonus plans to exempt the compensation from taxes.
31.
Shareholder
Proposals to Limit Executive Pay
Vote on a
case-by-case basis all shareholder proposals that seek additional disclosure
of executive pay information.
Vote on a
case-by-case basis all other shareholder proposals that seek to limit
executive pay.
Vote for
shareholder proposals to expense options, unless the company has already
publicly committed to expensing options by a specific date.
32.
Golden and
Tin Parachutes
Vote for
shareholder proposals to have golden and tin parachutes submitted for
shareholder ratification.
Vote on a
case-by-case basis all proposals to ratify or cancel golden or tin parachutes.
44
33.
Employee
Stock Ownership Plans (ESOPS)
Vote on a
case-by-case basis proposals that request shareholder approval in order to
implement an ESOP or to increase authorized Shares for existing ESOPs, except
in cases when the number of Shares allocated to the ESOP is excessive (
i.e.
,
generally greater than 5% of outstanding Shares).
34.
401(k)
Employee Benefit Plans
Generally,
vote for proposals to implement a 401(k) savings plan for employees.
9.
State Of Incorporation
35.
Voting on
State Takeover Statutes
Vote on a
case-by-case basis proposals to opt in or out of state takeover statutes
(including control share acquisition statutes, control share cash-out statutes,
freezeout provisions, fair price provisions, stakeholder laws, poison pill
endorsements, severance pay and labor contract provisions, anti-greenmail provisions,
and disgorgement provisions).
36.
Voting on
Reincorporation Proposals
Vote on a
case-by-case basis proposals to change a companys state of incorporation.
10.
Mergers and Corporate Restructurings
37.
Mergers and
Acquisitions
Vote on a
case-by-case basis proposals related to mergers and acquisitions, taking into
account at least the following:
anticipated
financial and operating benefits;
offer price
(cost vs. premium);
prospects of
the combined companies;
how the deal
was negotiated; and
changes in
corporate governance and their impact on shareholder rights.
38.
Corporate
Restructuring
Vote on a
case-by-case basis proposals related to a corporate restructuring, including
minority squeezeouts, leveraged buyouts, spin-offs, liquidations and asset
sales.
39.
Spin-Offs
Vote on a
case-by-case basis proposals related to spin-offs depending on the tax and
regulatory advantages, planned use of sale proceeds, market focus and
managerial incentives.
45
40.
Asset Sales
Vote on a
case-by-case basis proposals related to asset sales after considering the
impact on the balance sheet/working capital, value received for the asset,
and potential elimination of diseconomies.
41.
Liquidations
Vote on a
case-by-case basis proposals related to liquidations after reviewing
managements efforts to pursue other alternatives, appraisal value of assets,
and the compensation plan for executives managing the liquidation.
42.
Appraisal
Rights
Vote for
proposals to restore, or provide shareholders with, rights of appraisal.
43.
Changing
Corporate Name
Vote on a
case-by-case basis proposal to change the corporate name.
11.
Mutual Fund Proxies
44.
Election of
Trustees
Vote on
trustee nominees on a case-by-case basis.
45.
Investment
Advisory Agreement
Vote on
investment advisory agreements on a case-by-case basis.
46.
Fundamental
Investment Restrictions
Vote on
amendments to the funds fundamental investment restrictions on a
case-by-case basis.
47.
Distribution
Agreements
Vote on
distribution agreements on a case-by-case basis.
12.
Social and Environmental Issues
In general we
vote on a case-by-case basis on shareholder social and environmental proposals,
on the basis that their impact on share value can rarely be anticipated with
any high degree of confidence.
In most cases,
however, we vote for disclosure reports that seek additional information,
particularly when it appears companies have not adequately addressed
shareholders social and environmental concerns.
In determining
our vote on shareholder social and environmental proposals, we analyze factors
such as:
whether
adoption of the proposal would have either a positive or negative impact on
the companys short-term or long-term share value;
the
percentage of sales, assets and earnings affected;
46
the degree
to which the companys stated position on the issues could affect its
reputation or sales, or leave it vulnerable to boycott or selective
purchasing; whether the issues presented should be dealt with through
government or companyspecific action;
whether the
company has already responded in some appropriate manner to the request
embodied in a proposal;
whether the
companys analysis and voting recommendation to shareholders is persuasive;
what other
companies have done in response to the issue;
whether the
proposal itself is well framed and reasonable; whether implementation of the
proposal would achieve the objectives sought in the proposal; and
whether the
subject of the proposal is best left to the discretion of the board.
47
PART C: OTHER INFORMATION
Item 23. Exhibits:
(a)
Amended and
Restated Declaration of Trust.
(b)
Bylaws of
the Trust.
(c)
Not
applicable.
(d)(1)
Form of
Investment Management Agreement between the Trust and Van Eck Associates
Corporation (with respect to Market VectorsGold Miners ETF).
*
(d)(2)
Form of
Investment Management Agreement between the Trust and Van Eck Associates
Corporation (with respect to all portfolios except for Market VectorsGold
Miners ETF).
***
(e)(1)
Form of
Distribution Agreement between the Trust and Van Eck Securities Corporation.
**
(e)(2)
Form of
Participant Agreement.
*
(f)
Not
applicable.
(g)
Form of
Custodian Agreement between the Trust and The Bank of New York.
*
(h)(1)
Form of Fund
Accounting Agreement between the Trust and The Bank of New York.
*
(h)(2)
Form of
Transfer Agency Services Agreement between the Trust and The Bank of New
York.
*
(h)(3)
Form of
Sub-License Agreement between the Trust and the Van Eck Associates Corp.
*
(i)(1)
Opinion and consent
of Clifford Chance US LLP (with respect to Market VectorsEnvironmental
Services ETF, Market VectorsGold Miners ETF and Market VectorsSteel ETF).
***
(i)(2)
Opinion of
Clifford Chance US LLP (with respect to Market VectorsGlobal Alternative Energy
ETF and Market VectorsRussia ETF).
****
(i)(3)
Opinion of
Clifford Chance US LLP (with respect to Market VectorsGlobal Agribusiness
ETF and Market VectorsGlobal Nuclear Energy ETF).
*****
(i)(4)
Opinion of
Clifford Chance US LLP (with respect to Market VectorsLehman Brothers
Intermediate Municipal ETF, Market VectorsLehman Brothers Long Municipal
ETF, Market VectorsLehman Brothers 1-5 Year Municipal ETF, Market
VectorsLehman Brothers Non-Investment Grade Municipal ETF, Market
VectorsLehman Brothers California Municipal ETF and Market VectorsLehman
Brothers New York Municipal ETF).
*******
(i)(5)
Opinion of
Clifford Chance US LLP (with respect to Market VectorsCoal ETF and Market
VectorsGaming ETF).
(i)(6)
Opinion of
Clifford Chance US LLP (with respect to Market VectorsLehman Brothers
AMT-Free Massachusetts Municipal Index ETF, Market VectorsLehman Brothers
AMT-Free New Jersey Municipal Index ETF, Market VectorsLehman Brothers
AMT-Free Ohio Municipal Index ETF and Market VectorsLehman Brothers AMT-Free
Pennsylvania Municipal Index ETF).
(i)(7)
Opinion of
Clifford Chance US LLP (with respect to Market VectorsHard Assets ETF and
Market VectorsSolar Energy ETF).
(i)(8)
Opinion and
consent of Clifford Chance US LLP with respect to Market VectorsAfrica Index
ETF, Market VectorsEmerging Eurasia Index ETF, Market VectorsGlobal
Frontier Index ETF and Market VectorsGulf States Index ETF).
(i)(9)
Consent of
Clifford Chance US LLP (with respect to Market VectorsLehman Brothers
High-Yield Municipal Index ETF).
(i)(10)
Consent of
Clifford Chance US LLP (with respect to Market VectorsLehman Brothers
AMT-Free California Long Municipal Index ETF, Market VectorsLehman Brothers
AMT-Free Intermediate Municipal Index ETF, Market VectorsLehman Brothers
AMT-Free
Long
Municipal Index ETF, Market VectorsLehman Brothers AMT-Free Massachusetts
Municipal Index ETF, Market VectorsLehman Brothers AMT-Free New Jersey
Municipal Index ETF, Market VectorsLehman Brothers AMT-Free New York Long
Municipal Index ETF, Market VectorsLehman Brothers AMT-Free Ohio Municipal
Index ETF, Market VectorsLehman Brothers AMT-Free Pennsylvania Municipal
Index ETF and Market VectorsLehman Brothers AMT-Free Short Municipal Index
ETF).
(i)(11)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Indonesia
Index ETF).
(i)(12)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Vietnam
Plus ETF).
(i)(13)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors
Pre-Refunded Municipal Index ETF).
(i)(14)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Egypt Index
ETF and Market Vectors Kuwait Index ETF). ^
(i)(15)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Fixed
Income I ETF and Market Vectors Fixed Income II ETF). ^
(i)(16)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Regional
Sector ETF). ^
(i)(17)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors China A
Share ETF). ^
(i)(18)
Consent of
Clifford Chance US LLP (with respect to Market Vectors Africa Index ETF,
Market Vectors Agribusiness ETF, Market Vectors Coal ETF, Market Vectors
Environmental Services ETF, Market Vectors Gaming ETF, Market Vectors Global
Alternative Energy ETF, Market Vectors Gold Miners ETF, Market Vectors Gulf
States Index ETF, Market Vectors Indonesia Index ETF, Market Vectors Nuclear
Energy ETF, Market Vectors Russia ETF, Market Vectors RVE Hard Assets
Producers ETF, Market Vectors Solar Energy ETF and Market Vectors Steel ETF).
(i)(19)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Brazil
Small-Cap ETF).
(j)(1)
Consent of
Ernst & Young, independent registered public accounting firm (with
respect to Market VectorsLehman Brothers AMT-Free Intermediate Municipal
Index ETF, Market VectorsLehman Brothers AMT-Free Long Municipal Index ETF
and Market VectorsLehman Brothers AMT-Free Short Municipal Index ETF).
(j)(2)
Consent of
Ernst & Young, independent registered public accounting firm (with
respect to Market Vectors Africa Index ETF, Market Vectors Agribusiness ETF,
Market Vectors Coal ETF, Market Vectors Environmental Services ETF, Market
Vectors Gaming ETF, Market Vectors Global Alternative Energy ETF, Market
Vectors Gold Miners ETF, Market Vectors Gulf States Index ETF, Market Vectors
Indonesia Index ETF, Market Vectors Nuclear Energy ETF, Market Vectors Russia
ETF, Market Vectors RVE Hard Assets Producers ETF, Market Vectors Solar
Energy ETF and Market Vectors Steel ETF).
(k)
Not
applicable.
(l)
Not
applicable.
(m)
Not
applicable.
(n)
Not
applicable.
(o)
Not
applicable.
(p)(1)
Code of
Ethics.
*
Incorporated by the
reference to the Registrants Registration Statement filed on April 28, 2006.
**
Incorporated by reference
to the Registrants Registration Statement filed on May 11, 2006.
***
Incorporated by reference
to the Registrants Registration Statement filed on October 6, 2006.
****
Incorporated by reference
to the Registrants Registration Statement filed on April 9, 2007.
*****
Incorporated by reference
to the Registrants Registration Statement filed on April 27, 2007.
******
Incorporated by reference
to the Registrants Registration Statement filed on July 30, 2007.
*******
Incorporated by reference
to the Registrants Registration Statement filed on November 2, 2007.
Incorporated by reference
to the Registrants Registration Statement filed on December 31, 2007.
Incorporated by reference
to the Registrants Registration Statement filed on February 15, 2008.
Incorporated by reference
to the Registrants Registration Statement filed on April 21, 2008.
Incorporated by reference
to the Registrants Registration Statement filed on July 8, 2008.
Incorporated by reference
to the Registrants Registration Statement filed on August 8, 2008.
Incorporated by reference
to the Registrants Registration Statement filed on August 25, 2008..
Incorporated by reference
to the Registrants Registration Statement filed on November 25, 2008.
Incorporated by reference
to the Registrants Registration Statement filed on December 23, 2008.
Incorporated by reference
to the Registrants Registration Statement filed on January 28, 2009.
Incorporated by reference
to the Registrants Registration Statement filed on February 6, 2009.
Incorporated by reference
to the Registrants Registration Statement filed on April 21, 2009.
Filed herewith.
^
To be filed by amendment.
Item 24. Persons Controlled by or Under
Common Control with Registrant
None.
Item 25. Indemnification
Pursuant to
Section 10.2 of the Amended and Restated Declaration of Trust, all persons that
are or have been a Trustee or officer of the Trust (collectively, the Covered
Persons) shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit, or proceeding in which he or
she becomes involved as a party or otherwise by virtue of his being or having
been a Trustee or officer and against amounts paid or incurred by him in the
settlement thereof. No indemnification will be provided to a Covered Person who
shall have been adjudicated by a court or body before which the proceeding was
brought to be liable to the Trust or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office or not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or in the event
of a settlement, unless there has been a determination that such Trustee or
officer did not engage in willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Article XII of
the Trusts Bylaws, to the maximum extent permitted by Delaware law in effect
from time to time, the Trust shall indemnify and, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall
pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former trustee or officer
of the Trust and who is made a party to the proceeding by reason of his or her
service in that capacity or (b) any individual who, while a director of the Trust
and at the request of the Trust, serves or has served as a trustee, officer,
partner or trustee of another corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
and who is made a party to the proceeding by reason of his or her service in
that capacity. The Trust may, with the approval of its Board of Trustees,
provide such indemnification and advance for expenses to a person who served a
predecessor of the Trust in any of the capacities described in (a) or (b) above
and to any employee or agent of the Trust or a predecessor of the Trust;
provided
that no provision of Article XII
shall be effective to protect or purport to protect any trustee or officer of
the Trust against liability to the Trust or its stockholders to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.
The Trust has
agreed to indemnify and hold harmless the Trustees against any and all expenses
actually and reasonably incurred by the Trustee in any proceeding arising out
of or in connection with the Trustees service to the Trust, to the fullest
extent permitted by the Amended and Restated Agreement and Declaration of Trust
and Bylaws of the Fund and Title 12, Part V, Chapter 38 of the Delaware Code,
and applicable law.
Item 26. Business and Other Connections of
Investment Manager
See
Management in the Statement of Additional Information. Information as to the
directors and officers of the Adviser is included in its Form ADV filed with
the SEC and is incorporated herein by reference thereto.
Item 27. Principal Underwriters
(a)
Van Eck
Securities Corporation is the Trusts principal underwriter. Van Eck
Securities Corporation also acts as a principal underwriter, depositor, or
investment manager for the following other investment companies: Van Eck
Funds (which is comprised of four series: Emerging Markets Fund, Global Hard
Assets Fund, Multi-Manager Alternatives Fund and International Investors Gold
Fund); and Worldwide Insurance Trust (which is comprised of five series:
Worldwide Multi-Manager Alternatives Fund, Worldwide Bond Fund, Worldwide
Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide Real Estate
Fund).
(b)
The
following is a list of the executive officers, directors and partners of Van
Eck Securities Corporation:
Name and
Principal
Positions
and
Positions
and Offices with Trust
Thomas K.
Lynch
Chief
Compliance Officer
Chief
Compliance Officer
335 Madison
Avenue
New York, NY
10017
Joseph
McBrien
Senior Vice
President, General
Senior Vice
President, Secretary and
335 Madison
Avenue
Counsel and
Secretary
Chief Legal
Officer
New York, NY
10017
Bruce J.
Smith
Senior Vice
President, Chief Financial
Senior Vice
President and Chief
335 Madison
Avenue
Officer,
Treasurer and Controller
Financial
Officer
New York, NY
10017
Jan F. van
Eck
Director and
Executive Vice President
President,
Chief Executive Officer
335 Madison
Avenue
and Trustee
New York, NY
10017
Derek S. van
Eck
Director and
Executive Vice President
Executive
Vice President
335 Madison
Avenue
New York, NY
10017
Item 28. Location of Accounts and Records
All accounts,
books and other documents required to be maintained by Section 31(a) of the
1940 Act and the Rules thereunder will be maintained at the offices of The Bank
of New York Mellon, 101 Barclay Street, New York, New York 10286.
Item 29. Management Services
Not
applicable.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 49
to the Registration Statement No. 811-10325 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of
New York on the 8th day of May 2009.
MARKET
VECTORS ETF TRUST
By:
/s/ Jan F.
van Eck*
Jan F. van
Eck
President
and Chief Executive Officer
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following person in the capacities and on the date
indicated.
/s/ David H.
Chow*
Trustee
May 8, 2009
David H.
Chow
/s/ R.
Alastair Short*
Trustee
May 8, 2009
R. Alastair
Short
/s/ Richard
D. Stamberger*
Trustee
May 8, 2009
Richard D.
Stamberger
President,
May 8, 2009
Chief
Executive Officer and
/s/ Jan F.
van Eck*
Trustee
Jan F. van
Eck
/s/ Bruce J.
Smith*
Chief
Financial Officer
May 8, 2009
Bruce J.
Smith
*By: /s/
Jonathan R. Simon
Jonathan
R. Simon
Attorney-in-Fact
EXHIBIT INDEX
(i)(19)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Brazil
Small-Cap ETF).
SEC Registration Number: 333-123257
The Trusts registration number under the 1940 Act: 811-10325
and Age
Held with
the Trust
Office
2
and
Length of
Time Served
Occupation(s) During
Past Five Years
Portfolios in
Fund
Complex
3
Overseen
Directorships
Held by
Trustee
51*
55*
Stamberger, 49*
and Age
Held with
the Trust
Office
2
and
Length of
Time Served
Occupation(s) During
Past Five Years
Portfolios in
Fund
Complex
3
Overseen
Directorships
Held by
Trustee
Address
1
and Age
with
the Trust
Office
2
and
Length of
Time Served
Address
1
and Age
the Trust
Office
2
and
Length of
Time Served
Vectors Brazil Small-Cap ETF
(As of December 31, 2008)
in all Registered Investment Companies
Overseen By Trustee In Family of Investment
Companies (As of December 31, 2008)
Compensation
From the Trust
Compensation
From the Trust
Benefits Accrued as
Part of the Trusts
Expenses
(2)
Annual
Benefits
Upon
Retirement
Compensation
From the Trust
and the Fund
Complex
(1)
Paid
to Trustee
(2)
(As of December 31, 2008)
based on the performance of the account
Portfolio
Manager
Account
Accounts in
Category
Accounts in Category
Category
in Category
Business Address
Offices with Underwriter
Exhibit(i)(19)
May 8, 2009
Market Vectors ETF Trust
335 Madison Avenue, 19
th
Floor
New York, New York 10017
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Re: |
Opinion of Counsel regarding Post-Effective
Amendment No. 49 to the Registration
|
|
(File Nos. 333-123257; 811-10325) |
Dear Ladies and Gentlemen:
We have acted as counsel to Market Vectors ETF Trust (the Fund), in connection with the above-referenced Registration Statement (as amended, the Registration Statement), which relates to the shares of beneficial interest of the Market Vectors Brazil Small-Cap ETF, no par value (collectively, the Shares). This opinion is being delivered to you in connection with the Funds filing of Post-Effective Amendment No. 49 to the Registration Statement (the Amendment) to be filed with the Securities and Exchange Commission pursuant to Rule 485(b) of the Securities Act of 1933, as amended (the 1933 Act), and Amendment No. 53 pursuant to the Investment Company Act of 1940, as amended, in connection with the effectiveness of the Market Vectors Brazil Small-Cap ETF. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. We have reviewed the Funds Declaration of Trust, as amended, and such other documents and matters as we have deemed necessary to enable us to render this opinion.
Based upon, and subject to, the foregoing, we are of the opinion that the Shares proposed to be sold pursuant to the Amendment, when effective, will have been duly authorized and, when sold in accordance with the terms of the Amendment and the requirements of applicable federal and state law and delivered by the Fund against receipt of the net asset value of the Shares, will have been legally issued, fully paid and non-assessable by the Fund (except for the potential liability of shareholders described in the Funds current Statement of Additional Information under the caption Capital Stock and Shareholder Reports).
We are attorneys licensed to practice only in the State of New York. The foregoing opinion is limited to the Federal laws of the United States and the Delaware Statutory Trust Act, and we are expressing no opinion as to the effect of the laws of any other jurisdiction.
We have consented to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the headings General Information in the Prospectus and Counsel and Independent Registered Public Accounting Firm in the Statement of Additional Information, each forming a part of the Registration Statement. In giving this consent, we do not concede that we are in the category of persons whose consent is required under Section 7 of the 1933 Act.
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Very truly yours, |
|
|
|
/s/ Clifford Chance US LLP |