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United States Securities and Exchange Commission |
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Washington, D.C. 20549 |
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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. 312 |
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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. 316 |
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MARKET VECTORS ETF TRUST |
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(Exact Name of Registrant as Specified in its Charter) |
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335 Madison Avenue, 19 th Floor |
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New York, New York 10017 |
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(Address of Principal Executive Offices) |
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(212) 293-2000 |
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Registrants Telephone Number |
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Joseph J. McBrien, Esq. |
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Senior Vice President and General Counsel |
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Van Eck Associates Corporation |
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335 Madison Avenue, 19 th Floor |
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New York, New York 10017 |
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(Name and Address of Agent for Service) |
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Copy to: |
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Stuart M. Strauss, Esq. |
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Dechert LLP |
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1095 Avenue of the Americas |
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New York, New York 10036 |
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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 [date] 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 |
, 2011
Principal U.S. Listing Exchange: NYSE Arca, Inc.
The U.S. Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Prospectus. Shares of the Funds (Shares) involve investment risks, including the loss of principal.
Table of Contents
1
1
Additional Information About the Funds Investment Strategies and Risks
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MARKET VECTORS RUSSIA SMALL-CAP ETF
INVESTMENT OBJECTIVE
Market Vectors Russia Small-Cap ETF (the Fund) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Russia Small-Cap Index (the Index).
FUND FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold Shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
None
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fee
0.50
%
Other Expenses
(a)
0.25
%
Total Annual Fund Operating Expenses
(b)
0.75
%
Fee Waivers and Expense Reimbursement
(b)
0.08
%
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement
(a)
0.67
%
(a)
Other Expenses are based on estimated amounts for the current fiscal year.
(b)
Van Eck Associates Corporation (the Adviser) has 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 0.67% of the Funds average daily net assets per year until at least May 1, 2012. During such time, the expense
limitation is expected to continue until the Funds Board of Trustees acts to discontinue all or a portion of such expense limitation.
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example does not take into account brokerage commissions that you pay when purchasing or selling Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your Shares at the end of those periods. The example also assumes that your investment has a 5% annual return and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
YEAR
EXPENSES
1
$
68
3
$
232
PORTFOLIO TURNOVER
The Fund will pay transaction costs, such as commissions, when it purchases and sells securities (or turns over its portfolio). A higher portfolio turnover will cause the Fund to incur additional transaction costs and may result in higher taxes when Fund Shares are held in a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, may affect the Funds performance. Because the Fund is newly organized, no portfolio turnover figures are available.
PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 80% of its total assets in securities that comprise the Funds benchmark index. The Funds benchmark index is comprised of securities and depositary receipts of Russian small-capitalization companies. The Fund will normally
invest at least 80% of its total assets in securities of small-capitalization Russian companies.
The Funds 80% investment policy is non-fundamental and requires 60 days prior written notice to shareholders before it can be changed.
The Fund, using a passive or indexing investment approach, attempts to approximate the investment performance of the Index by investing in a portfolio of securities that generally replicates the Index.. The Adviser expects that, over time, the correlation between the Funds performance and that of the Index before fees and expenses will be 95% or
better. A figure of 100% would indicate perfect correlation.
The Fund may concentrate its investments in a particular industry or group of industries to the extent that the Index concentrates in an industry or group of industries. As of the date of this Prospectus, the following industries represent a significant portion of the Index: energy, industrials, telecommunication services and utilities.
1
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.
Special Risk Considerations of Investing in Russian Issuers.
Investment in securities of Russian issuers involves risks not typically associated with investments in securities of issuers in more developed countries that may negatively affect the value of your investment in the Fund. Such heightened risks include, among others, expropriation and/or
nationalization of assets, restrictions on and government intervention in international trade, confiscatory taxation, political instability, including authoritarian and/or military involvement in governmental decision making, armed conflict, the impact on the economy as a result of civil war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest.
The securities markets of Russia are underdeveloped and are often considered to be less correlated to global economic cycles than those markets located in more developed countries. As a result, securities markets in Russia are subject to greater risks associated with market volatility, lower market capitalization, lower trading volume, illiquidity, inflation,
greater price fluctuations, uncertainty regarding the existence of trading markets, governmental control and heavy regulation of labor and industry. Moreover, trading on securities markets may be suspended altogether.
The government in Russia may restrict or control to varying degrees the ability of foreign investors to invest in securities of issuers located or operating in Russia. These restrictions and/or controls may at times limit or prevent foreign investment in securities of issuers located or operating in Russia. Moreover, governmental approval or special licenses
may be required prior to investments by foreign investors and may limit the amount of investments by foreign investors in a particular industry and/or issuer and may limit such foreign investment to a certain class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of Russia and/or
impose additional taxes on foreign investors. These factors, among others, make investing in issuers located or operating in Russia significantly riskier than investing in issuers located or operating in more developed countries, and any one of them could cause a decline in the value of the Funds Shares.
Additionally, because Russia produces and exports large volumes of oil and gas, the Russian economy is particularly sensitive to the price of oil and gas on the world market, and a decline in the price of oil and gas could have a significant negative impact on the Russian economy.
The value of the Russian Ruble may be subject to a high degree of fluctuation. The Funds assets will be invested primarily in equity securities of Russian issuers and the income received by the Fund will be principally in Russian Rubles. The Funds exposure to the Russian Ruble and changes in value of the Russian Ruble versus the U.S. dollar may result
in reduced returns to the Fund. Moreover, the Fund may incur costs in connection with conversions between U.S. dollars and the Russian Ruble. In addition, the current economic turmoil in Russia and the effects on the current global economic crisis on the Russian economy may have significant adverse effects on the Russian Ruble.
Risk of Investing in the Energy Sector.
To the extent the Index includes securities of issuers in the energy sector, the Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the energy sector. Companies operating in the energy sector
are subject to risks including, but not limited to, economic growth, worldwide demand, political instability in the regions that the companies operate, government regulation stipulating rates charged by utilities, interest rate sensitivity, oil price volatility and the cost of providing the specific utility services. In addition, these companies are at risk of civil
liability from accidents resulting in injury, loss of life or property, pollution or other environmental damage claims and risk of loss from terrorism and natural disasters.
Risks of Investing in the Industrials Sector.
To the extent the Index includes securities of issuers in the industrials sector, the Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the industrials sector. Companies in the industrials
sector may be adversely affected by changes in government regulation, world events and economic conditions. In addition, companies in the industrials sector may be adversely affected by environmental damages, product liability claims and exchange rates. The stock prices of companies in the industrials sector are affected by supply and demand both
for their specific product or service and for industrial sector products in general. The products of manufacturing companies may face product obsolescence due to rapid technological developments and frequent new product introduction. In addition, the industrials sector may also be adversely affected by changes or trends in commodity prices, which
may be influenced or characterized by unpredictable factors.
Risk
of Investing in the Telecommunications Sector.
To
the extent the Index includes securities of issuers in the telecommunications
sector, the Fund will invest in companies in such sector. As such, the
Fund will be sensitive to changes in, and its performance will depend to
a greater extent on, the overall condition of the telecommunications sector.
The telecommunications sector is characterized by increasing competition
and regulation. Companies in the telecommunications sector may encounter
distressed cash flows due to the need to commit substantial capital to
meet increasing competition,
2
particularly in formulating new products and services using new technology. Technological innovations may make the products and services of telecommunications companies obsolete.
Risks of Investing in the Utilities Sector.
The To the extent the Index includes securities of issuers in the utilities sector, the Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the utilities sector. Companies in the utilities sector
may be adversely affected by changes in exchange rates, domestic and international competition, and governmental limitation on rates charged to customers.
Market Risk.
The prices of the securities in the Fund are subject to the risk associated with investing in the stock market, including general economic conditions and 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 Index for a number of reasons. For example, the Fund incurs a number of operating expenses not applicable to the 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 Index and raising cash to meet redemptions or deploying cash in connection with newly created Creation Units (defined herein). 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 Index, the Funds return may deviate significantly from the return
of the Index. In addition, the Fund may not be able to invest in certain securities included in the Index, or invest in them in the exact proportions they represent of the Index, due to legal restrictions or limitations imposed by the government of Russia or a lack of liquidity on stock exchanges in which such securities trade. The Fund is expected to value
some or all of its investments based on fair value prices. To the extent the Fund calculates its net asset value (NAV) based on fair value prices and the value of the Index is based on securities closing price on local foreign markets (
i.e
., the value of the Index is not based on fair value prices), the Funds ability to track the Index may be adversely
affected.
Replication Management Risk.
An investment in the Fund involves risks similar to those of investing in any fund of equity securities traded on an exchange, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in security prices. However, because the Fund is not
actively managed, unless a specific security is removed from the Index, the Fund generally would not sell a security because the securitys issuer was in financial trouble. Therefore, 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 or a decline in the value of one or more issuers.
Risk of Investing in Small-Capitalization Companies.
Small-capitalization companies may be more volatile and more likely than large- and medium-capitalization companies to have narrower product lines, fewer financial resources, less management depth and experience and less competitive strength. Returns on investments in stocks of these companies
could trail the returns on investments in stocks of larger companies. As of the date of this Prospectus, the Index
included 24 securities of companies with a market capitalization range of between approximately $330 million and $3.1 billion with an average
market capitalization of $1.6 billion. These amounts are subject to change.
Risk of Cash Transactions.
Unlike most exchange-traded funds (ETFs), the Fund expects to effect a portion of its creations and redemptions for cash, rather than in-kind securities. As such, investments in Shares may be less tax-efficient than an investment in a conventional ETF.
Non-Diversified Risk.
The Fund is classified as a non-diversified investment company under the Investment Company Act of 1940, as amended (1940 Act). Therefore, the Fund may invest a relatively high percentage of its assets in a smaller number of issuers or may invest a larger proportion of its assets in a single company. As a result, the gains
and losses on a single investment may have a greater impact on the Funds NAV and may make the Fund more volatile than more diversified funds.
Concentration Risk.
The Funds assets may be concentrated in a particular sector or sectors or industry or group of industries to the extent the Index concentrates in a particular sector or sectors or industry or group of industries. In addition, the Funds assets will be concentrated in Russia. To the extent that the Funds investments are concentrated in
a particular sector, industry or country, the Fund will be susceptible to loss due to adverse occurrences affecting that sector, industry or country.
PERFORMANCE
The Fund has not yet commenced operations and therefore does not have a performance history. Once available, the Funds performance information will be accessible on the Funds website at vaneck.com/etf.
PORTFOLIO MANAGEMENT
Investment Adviser.
Van Eck Associates Corporation.
3
Portfolio Managers.
The following individuals are jointly and primarily responsible for the day-to-day management of the Funds portfolio:
Name
Title with Adviser
Date Began Managing the Fund
Hao-Hung (Peter) Liao
Portfolio Manager
Since inception
George Cao
Portfolio Manager
Since inception
PURCHASE AND SALE OF FUND SHARES
The Fund issues and redeems Shares at NAV only in a large specified number of Shares each called a Creation Unit, or multiples thereof. A Creation Unit consists of 50,000 Shares.
Individual Shares of the Fund may only be purchased and sold in secondary market transactions through brokers. Shares of the Fund are expected to be approved for listing, subject to notice of issuance, on NYSE Arca, Inc. (NYSE Arca) and because Shares will trade at market prices rather than NAV, Shares of the Fund may trade at a price greater
than or less than NAV.
TAX INFORMATION
The Funds distributions are taxable and will generally be taxed as ordinary income or capital gains.
4
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS
ADDITIONAL INVESTMENT STRATEGIES
The Adviser anticipates that, generally, the Fund will hold all of the securities that comprise the Index in proportion to their weightings in the Index. However, under various circumstances, it may not be possible or practicable to purchase all of those securities in those weightings. In these circumstances, the Fund may purchase a sample of securities in
the Index. There also may be instances in which the Adviser may choose to underweight or overweight a security in the Index, purchase securities not in the Index that the Adviser believes are appropriate to substitute for certain securities in the 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 Index. The Fund may sell securities that are represented in the Index in anticipation of their removal from the Index or purchase securities not represented in the Index in anticipation of their addition to the Index.
The Fund may invest its remaining assets in securities not included in the Index, 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), other investment companies, swaps, options, futures contracts, currency forwards and participation notes (P-Notes). Depositary receipts may be used by the Fund in seeking performance that corresponds to the 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 also invest in, to the extent permitted by Section 12(d)(1) of the 1940 Act, other affiliated and unaffiliated funds, such as open-end or closed-end management investment companies, including other
ETFs.
An authorized participant that is not a qualified institutional buyer, as such term is defined under Rule 144A of the Securities Exchange Act of 1933, as amended, will not be able to receive, as part of a redemption, restricted securities eligible for resale under Rule 144A.
BORROWING MONEY
The Fund may borrow money from a bank up to a limit of one-third of the market value of its assets. To the extent that the Fund borrows money, it will be leveraged; at such times, the Fund will appreciate or depreciate in value more rapidly than the 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 Statement of Additional Information (SAI) under the section entitled Investment Policies and RestrictionsInvestment Restrictions.
LENDING PORTFOLIO SECURITIES
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.
RISKS OF INVESTING IN THE FUND
The following section provides additional information regarding certain of the principal risks identified under Principal Risks of Investing in the Fund in the Funds Summary Information section along with additional risk information.
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.
Risks 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 may be available or reliable. 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 shareholder communications.
5
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS (continued)
Because the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will generally 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. 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 Emerging Market Issuers.
The Fund may invest its assets in securities of emerging market issuers. Investment in securities of emerging market issuers involves risks not typically associated with investments in securities of issuers in more developed countries that may negatively affect the value of your investment in the Fund. Such
heightened risks may include, among others, expropriation and/or nationalization of assets, restrictions on and government intervention in international trade, confiscatory taxation, political instability, including authoritarian and/or military involvement in governmental decision making, armed conflict, the impact on the economy as a result of civil war, and
social instability as a result of religious, ethnic and/or socioeconomic unrest. Issuers in certain emerging market countries are subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping than are issuers in more developed markets, and therefore, all material information may not be available or reliable.
Additionally, each of the factors described below could have a negative impact on the Funds performance and increase the volatility of the Fund.
Securities Markets.
Securities markets in emerging market countries are underdeveloped and are often considered to be less correlated to global economic cycles than those markets located in more developed countries. Securities markets in emerging market countries are subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price fluctuations, uncertainty regarding the existence of trading markets, governmental control and heavy regulation of labor and industry. The prices of certain securities listed on stock markets in emerging market countries have been subject to sharp fluctuations and sudden declines,
and no assurance can be given as to the future performance of listed securities in general. Volatility of prices may be greater than in more developed stock markets. Moreover, trading on securities markets may be suspended altogether. Market volatility may also be heightened by the actions of a small number of investors. Brokerage firms in
emerging market countries may be fewer in number and less established than brokerage firms in more developed markets. Since the Fund may need to effect securities transactions through these brokerage firms, the Fund is subject to the risk that these brokerage firms will not be able to fulfill their obligations to the Fund. This risk is magnified to
the extent the Fund effects securities transactions through a single brokerage firm or a small number of brokerage firms. In addition, the infrastructure for the safe custody of securities and for purchasing and selling securities, settling trades, collecting dividends, initiating corporate actions, and following corporate activity is not as well developed in
emerging market countries as is the case in certain more developed markets.
Political and Economic Risk.
Certain emerging market countries have historically been subject to political instability and prospects are tied to the continuation of economic and political liberalization in the region. Instability may result from factors such as government or military intervention in decision making, terrorism, civil unrest, extremism or
hostilities between neighboring countries. An outbreak of hostilities could negatively impact the Funds returns. Limited political and democratic freedoms in emerging market countries might cause significant social unrest. These factors may have a significant adverse effect on an emerging market countrys economy.
Many emerging market countries may be heavily dependent upon international trade and, consequently, may continue to be negatively affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which it trades. They also have been,
and may continue to be, adversely affected by economic conditions in the countries with which they trade. In addition, certain issuers located in emerging market countries in which the Fund invests may operate in, or have dealings with, countries subject to sanctions and/or embargoes imposed by the U.S. Government and the United Nations
and/or countries identified by the U.S. Government as state sponsors of terrorism. As a result, an issuer may sustain damage to its reputation if it is identified as an issuer which operates in, or has dealings with, such countries. The Fund, as an investor in such issuers, will be indirectly subject to those risks.
Investment and Repatriation Restrictions.
The government in an emerging market country may restrict or control to varying degrees the ability of foreign investors to invest in securities of issuers located or operating in such emerging market countries. These restrictions and/or controls may at times limit or prevent foreign investment in securities of
issuers located or operating in emerging market countries and may inhibit the Funds ability to track the Index. In addition, the Fund may not be able to buy or sell securities or receive full value for such securities. Moreover, certain emerging market countries may require governmental approval or special licenses prior to investments by foreign
investors and may limit the
6
amount of investments by foreign investors in a particular industry and/or issuer; may limit such foreign investment to a certain class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of such emerging market countries; and/or may impose additional taxes on foreign investors.
A delay in obtaining a required government approval or a license would delay investments in those emerging market countries, and, as a result, the Fund may not be able to invest in certain securities while approval is pending. The government of certain emerging market countries may also withdraw or decline to renew a license that enables the
Fund to invest in such country. These factors make investing in issuers located or operating in emerging market countries significantly riskier than investing in issuers located or operating in more developed countries, and any one of them could cause a decline in the value of the Funds Shares.
Additionally, investments in issuers located in certain emerging market countries may be subject to a greater degree of risk associated with governmental approval in connection with the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. Moreover, there is the risk that if the balance of payments in
an emerging market country declines, the government of such country may impose temporary restrictions on foreign capital remittances. Consequently, the Fund could be adversely affected by delays in, or a refusal to grant, required governmental approval for repatriation of capital, as well as by the application to the Fund of any restrictions on
investments. Furthermore, investments in emerging market countries may require the Fund to adopt special procedures, seek local government approvals or take other actions, each of which may involve additional costs to the Fund.
Available Disclosure About Emerging Market Issuers.
Issuers located or operating in emerging market countries are not subject to the same rules and regulations as issuers located or operating in more developed countries. Therefore, there may be less financial and other information publicly available with regard to issuers located or operating in
emerging market countries and such issuers are not subject to the uniform accounting, auditing and financial reporting standards applicable to issuers located or operating in more developed countries.
Foreign Currency Considerations.
The Funds assets will be invested primarily in securities of issuers in emerging market countries, which will generally be denominated in foreign currencies, and the income received by the Fund will be principally in foreign currencies. The value of an emerging market countrys currency may be subject to a high
degree of fluctuation. This fluctuation may be 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. The economies of certain emerging market
countries can be significantly affected by currency devaluations. Certain emerging market countries may also have managed currencies which are maintained at artificial levels relative to the U.S. dollar rather than at levels determined by the market. This type of system can lead to sudden and large adjustments in the currency which, in turn, can
have a disruptive and negative effect on foreign investors.
The Funds exposure to an emerging market countrys currency and changes in value of such foreign currencies versus the U.S. dollar may reduce the Funds investment performance and the value of your investment in the Fund. Meanwhile, the Fund will compute and expects to distribute its income in U.S. dollars, and the computation of income
will be made on the date that the income is earned by the Fund at the foreign exchange rate in effect on that date. Therefore, if the value of the respective emerging market countrys currency falls relative to the U.S. dollar between the earning of the income and the time at which the Fund converts the relevant emerging market countrys
currency to U.S. dollars, the Fund may be required to liquidate certain positions in order to make distributions if the Fund has insufficient cash in U.S. dollars to meet distribution requirements under the U.S. Internal Revenue Code of 1986, as amended (the Internal Revenue Code). The liquidation of investments, if required, could be at
disadvantageous prices or otherwise have an adverse impact on the Funds performance.
Certain emerging market countries also restrict the free conversion of their currency into foreign currencies, including the U.S. dollar. There is no significant foreign exchange market for many such currencies and it would, as a result, be difficult for the Fund to engage in foreign currency transactions designed to protect the value of the Funds
interests in securities denominated in such currencies. Furthermore, if permitted, the Fund may incur costs in connection with conversions between U.S. dollars and an emerging market countrys currency. Foreign exchange dealers realize a profit based on the difference between the prices at which they are buying and selling various currencies.
Thus, a dealer normally will offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire immediately to resell that currency to the dealer. The Fund will conduct its foreign currency exchange transactions either on a spot (
i.e
., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward, futures or options contracts to purchase or sell foreign currencies.
Operational and Settlement Risk.
In addition to having less developed securities markets, emerging market countries have less developed custody and settlement practices than certain developed countries. Rules adopted under the 1940 Act
7
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS (continued)
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 emerging market countries that are eligible foreign sub custodians may be recently organized or otherwise lack extensive operating experience. In addition, in certain emerging market countries 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 emerging market countries may be less organized than in other 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 in many emerging market countries, 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 emerging market countries also have a higher risk of failed trades and back to back settlements may not be possible.
The Fund may not be able to convert a foreign currency to U.S. dollars in time for the settlement of redemption requests. In the event of a redemption request from an authorized participant, the Fund will be required to deliver U.S. dollars to the authorized participant on the settlement date. In the event that the Fund is not able to convert the
foreign currency to U.S. dollars in time for settlement, which may occur as a result of the delays described above, the Fund may be required to liquidate certain investments and/or borrow money in order to fund such redemption. The liquidation of investments, if required, could be at disadvantageous prices or otherwise have an adverse impact on
the Funds performance (
e.g
., by causing the Fund to overweight foreign currency denominated holdings and underweight other holdings which were sold to fund redemptions). In addition, the Fund will incur interest expense on any borrowings and the borrowings will cause the Fund to be leveraged, which may magnify gains and losses on its
investments.
Certain issuers in emerging market countries may utilize share blocking schemes. Share blocking refers to a practice, in certain foreign markets, where voting rights related to an issuers securities are predicated on these securities being blocked from trading at the custodian or sub-custodian level for a period of time around a shareholder meeting.
These restrictions have the effect of barring the purchase and sale of certain voting securities within a specified number of days before and, in certain instances, after a shareholder meeting where a vote of shareholders will be taken. Share blocking may prevent the Fund from buying or selling securities for a period of time. During the time that
shares are blocked, trades in such securities will not settle. The blocking period can last up to several weeks. The process for having a blocking restriction lifted can be quite onerous with the particular requirements varying widely by country. In addition, in certain countries, the block cannot be removed. As a result of the ramifications of voting
ballots in markets that allow share blocking, the Adviser, on behalf of the Fund, reserves the right to abstain from voting proxies in those markets.
Corporate and Securities Laws.
Securities laws in emerging market countries are relatively new and unsettled and, consequently, there is a risk of rapid and unpredictable change in laws regarding foreign investment, securities regulation, title to securities and shareholder rights. Accordingly, foreign investors may be adversely affected by new or
amended laws and regulations. In addition, the systems of corporate governance to which emerging market issuers are subject may be less advanced than those systems to which issuers located in more developed countries are subject, and therefore, shareholders of issuers located in emerging market countries may not receive many of the
protections available to shareholders of issuers located in more developed countries. In circumstances where adequate laws and shareholder rights exist, it may not be possible to obtain swift and equitable enforcement of the law. In addition, the enforcement of systems of taxation at federal, regional and local levels in emerging market countries
may be inconsistent and subject to sudden change.
Risks of Investing in Depositary Receipts.
Depositary receipts are issued by banks or trust companies, and entitle the holder to all dividends and capital gains that are paid out on the underlying foreign shares. Investments in depositary receipts may be less liquid than the underlying shares in their primary trading market.
Risk of 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, with little or no
record of profitability. 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.
8
Index Tracking Risk.
The Funds return may not match the return of the Index for a number of reasons. For example, the Fund incurs a number of operating expenses not applicable to the 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 Index and raising cash to meet redemptions or deploying cash in connection with newly created Creation Units. The Funds return may also deviate significantly from the return of the 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 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 Index, or invest in them in the exact proportions they represent of the Index, due to legal restrictions
or limitations imposed by the governments of certain countries or a lack of liquidity on stock exchanges in which such securities trade. Moreover, the Fund may be delayed in purchasing or selling securities included in the Index. Any issues the Fund encounters with regard to currency convertibility (including the cost of borrowing funds, if any) and
repatriation may also increase the index tracking risk.
The Fund is expected to fair value most or all of 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 Index is based on securities closing prices on local foreign markets (
i.e
., the value of the Index is not based on fair value prices),
the Funds ability to track the Index may be adversely affected. The need to comply with the diversification and other requirements of the 1940 Act and the Internal Revenue Code may also impact the Funds ability to replicate the performance of the Index. In addition, if the Fund utilizes depositary receipts and other derivative instruments, its return
may not correlate as well with the Index as would be the case if the Fund purchased all the securities in the Index directly.
Replication Management Risk.
Unlike many investment companies, the Fund is not actively managed. Therefore, unless a specific security is removed from the Index, the Fund generally would not sell a security because the securitys issuer is in financial trouble. If a specific security is removed from the Funds 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 an exchange, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in
security prices. The Funds Index may not contain the appropriate or a diversified mix of securities for any particular economic cycle. The timing of changes in the Fund from one type of security to another in seeking to replicate the 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.
Risk of Cash Transactions.
Unlike most other ETFs, the Fund expects to effect a portion of its creations and redemptions 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. Other 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 a portion of its redemptions for cash, rather than in-kind distributions, it may be required to sell portfolio securities in order to obtain the cash needed to distribute redemption proceeds, which involves transaction costs. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it might not otherwise have recognized if it were to distribute portfolio securities in-kind, or to recognize such gain sooner than would otherwise be required. 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. See Creation and Redemption of
Creation Units in the Funds SAI. Certain countries 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.
Non-Diversified Risk.
The Fund is a separate investment portfolio of Market Vectors ETF Trust (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
9
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS (continued)
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 a larger proportion of its assets in a single issuer. As a result, the gains and losses on a single investment may have a greater impact on the Funds NAV and may
make the Fund more volatile than more diversified funds.
Concentration Risk.
The Funds assets may be concentrated in a particular sector or sectors or industry or group of industries to the extent that the 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. By concentrating its assets in a particular sector or sectors or industry or group of industries, the Fund is subject to the risk that economic, political or other conditions that have a negative effect on that sector or industry will negatively impact the Fund to a greater extent than if the Funds assets were
invested in a wider variety of sectors or industries. In addition, Funds assets will be concentrated in a particular country or geographic region. Consequently, events affecting that country or geographic region will have a greater impact on the Funds NAV and may make the Fund more volatile than if the Fund were invested in a more geographically
diverse portfolio of investments.
Risk of Investing in the Energy Sector.
To the extent the Index includes securities of issuers in the energy sector, such Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the energy sector. Companies operating in the energy
sector are subject to risks including, but not limited to, economic growth, worldwide demand, political instability in the regions that the companies operate, government regulation stipulating rates charged by utilities, interest rate sensitivity, oil price volatility and the cost of providing the specific utility services. In addition, these companies are at risk of
civil liability from accidents resulting in injury, loss of life or property, pollution or other environmental damage claims and risk of loss from terrorism and natural disasters.
Risk of Investing in the Industrials Sector.
To the extent the Index includes securities of issuers in the industrials sector, the Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the industrials sector. Companies in the industrials
sector may be adversely affected by changes in government regulation, world events and economic conditions. In addition, companies in the industrials sector may be adversely affected by environmental damages, product liability claims and exchange rates. The stock prices of companies in the industrials sector are affected by supply and demand both
for their specific product or service and for industrial sector products in general. The products of manufacturing companies may face product obsolescence due to rapid technological developments and frequent new product introduction. In addition, the industrials sector may also be adversely affected by changes or trends in commodity prices, which
may be influenced or characterized by unpredictable factors.
Risk of Investing in the Telecommunications Sector.
To the extent the Index includes securities of issuers in the telecommunications sector, the Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the telecommunications sector. The
telecommunications sector is characterized by increasing competition and regulation. Companies in the telecommunications sector may encounter distressed cash flows due to the need to commit substantial capital to meet increasing competition, particularly in formulating new products and services using new technology. Technological innovations may
make the products and services of telecommunications companies obsolete.
Risk of Investing in the Utilities Sector.
To the extent the Funds Index includes securities of issuers in the utilities sector, such Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the utilities sector. Issuers in the utilities sector are
subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs; difficulty in raising capital in adequate amounts on reasonable terms in periods of high inflation and unsettled capital markets; governmental regulation of rates charged to
customers; costs associated with compliance with and changes in environmental and other regulations; effects of economic slowdowns and surplus capacity; increased competition from other providers of utility services; inexperience with and potential losses resulting from a developing deregulatory environment; costs associated with the reduced
availability of certain types of fuel, occasionally reduced availability and high costs of natural gas for resale, and the effects of energy conservation policies; effects of a national energy policy and lengthy delays and greatly increased costs and other problems associated with the design, construction, licensing, regulation and operation of nuclear facilities
for electric generation, including, among other considerations, the problems associated with the use of radioactive materials and the disposal of radioactive wastes; technological innovations that may render existing plants, equipment or products obsolete; difficulty in obtaining regulatory approval of new technologies; lack of compatibility of
telecommunications equipment; and potential impact of terrorist activities on the utilities industry and its customers and the impact of natural or man-made disasters. Issuers in the utilities sector also may be subject to regulation by various governmental authorities and may be affected by the imposition of special tariffs and changes in tax laws,
regulatory policies and accounting standards.
10
Risk of Investing in the Basic Materials Sector.
To the extent the Index includes securities of issuers in the basic materials sector, the Fund will invest in companies in such sector. As such, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of 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.
Risks of Investing in Derivatives.
Derivatives are financial instruments, such as swaps, options, warrants, futures contracts, currency forwards and participation notes, 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. The use of derivatives may increase the amount and affect the timing and character of taxes payable by shareholders of the Fund.
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). A liquid secondary market may not always exist for the Funds derivative positions at any time.
Swaps.
The use of swap agreements entails certain risks, which may be different from, and possibly greater than, the risks associated with investing directly in the underlying asset for the swap agreement. For example, swap agreements may be subject to the risk of default by a counterparty as a result of bankruptcy or otherwise, which may cause
the Fund to lose payments due by such counterparty altogether, or collect only a portion thereof, which collection could involve additional costs or delays. Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. If a swap transaction is particularly large or if the relevant market is illiquid,
it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses to the Fund. In addition, a swap transaction may be subject to the Funds limitation on investments in illiquid securities. Swap agreements may be subject to pricing risk, which exists when a particular swap
agreement becomes extraordinarily expensive (or inexpensive) relative to historical prices or the prices of corresponding cash market instruments. The swaps market is a relatively new market and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Funds
ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Options.
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. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well-conceived option transaction may be unsuccessful because of market behavior or
unexpected events. The prices of options can be highly volatile and the use of options can lower total returns.
Warrants.
Warrants are equity securities in the form of options issued by a corporation which give the holder the right to purchase stock, usually at a price that is higher than the market price at the time the warrant is issued. A purchaser takes the risk that the warrant may expire worthless because the market price of the common stock fails to
rise above the price set by the warrant.
Futures.
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. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. The prices of futures can
be highly volatile, using futures can lower total return, and the potential loss from futures can exceed the Funds initial investment in such contracts. Utilization of futures transactions by the Fund involves the risk of imperfect or even negative correlation to the
11
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS (continued)
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.
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. The use of currency forward transactions involves certain risks. For example, if the counterparty under the contract 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 delays.
Participation Notes.
P-Notes are issued by banks or broker-dealers and are designed to offer a return linked to the performance of a particular underlying equity security or market. P-Notes can have the characteristics or take the form of various instruments, including, but not limited to, certificates or warrants. The holder of a P-Note that is linked
to a particular underlying security is entitled to receive any dividends paid in connection with the underlying security. However, the holder of a P-Note generally does not receive voting rights as it would if it directly owned the underlying security.
P-Notes constitute direct, general and unsecured contractual obligations of the banks or broker-dealers that issue them, which therefore subject the Fund to counterparty risk, as discussed below.
Investments in P-Notes involve certain risks in addition to those associated with a direct investment in the underlying foreign companies or foreign securities markets whose return they seek to replicate. For instance, there can be no assurance that the trading price of a P-Note will equal the underlying value of the foreign company or foreign
securities market that it seeks to replicate. As the purchaser of a P-Note, the Fund is relying on the creditworthiness of the counterparty issuing the P-Note and has no rights under a P-Note against the issuer of the underlying security. Therefore, if such counterparty were to become insolvent, the Fund would lose its investment. The risk that the
Fund may lose its investments due to the insolvency of a single counterparty may be amplified to the extent the Fund purchases P-Notes issued by one issuer or a small number of issuers. P-Notes also include transaction costs in addition to those applicable to a direct investment in securities. In addition, the Funds use of P-Notes may cause the
Funds performance to deviate from the performance of the portion of the Index to which the Fund is gaining exposure through the use of P-Notes.
Due to liquidity and transfer restrictions, the secondary markets on which P-Notes are traded may be less liquid than the markets for other securities, which may lead to the absence of readily available market quotations for securities in the Funds portfolio. The ability of the Fund to value its securities becomes more difficult and the judgment in
the application of fair value procedures may play a greater role in the valuation of the Funds securities due to reduced availability of reliable objective pricing data. Consequently, while such determinations will be made in good faith, it may nevertheless be more difficult for the Fund to accurately assign a daily value to such securities.
Leverage Risk.
To the extent that the Fund borrows money or utilizes certain derivatives, it will be leveraged. Leveraging generally exaggerates the effect on NAV of any increase or decrease in the market value of the Funds portfolio securities.
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 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 Funds Index trading individually or in the aggregate at any point in time. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that differ significantly from NAV. If a shareholder purchases Shares at a time when the market price is at a premium to the NAV or sells Shares at a time when the market price is at a discount to the NAV, the shareholder may sustain losses.
12
A description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio securities is available in the Funds SAI.
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 Adviser.
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 December 31, 2010, the Adviser managed approximately $31.3 billion in assets. The Adviser has been an investment adviser since 1955 and also acts as adviser or sub-adviser to other mutual funds, exchange-traded funds, other pooled investment vehicles and separate accounts. 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, 2011.
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, 2012, the Adviser has 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 0.67% of its 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 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. The Shares are expected to be 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 Controller of Operations Administrations Division and Corporate Safety (September 2006December 2007) and a Senior Finance Associate (August 2004August 2006) for United Airlines. 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 of the Fund.
DETERMINATION 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. 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 the close of trading (ordinarily 4:00 p.m. Eastern 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.
13
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS (continued)
The values of the Funds portfolio securities are based on the securities closing prices on their local principal markets, where available. In the absence of a last reported sales price, or if no sales were reported, and for other assets for which market quotes are not readily available, values may be based on quotes obtained from a quotation reporting
system, established market makers or by an outside independent pricing service. Prices obtained by an outside independent pricing service use information provided by market makers or estimates of market values obtained from yield data related to investments or securities with similar characteristics and may use a computerized grid matrix of securities
and its evaluations in determining what it believes is the fair value of the portfolio securities. If a market quotation for a security is not readily available or it does not otherwise accurately reflect the market value of the security at the time the Fund calculates its NAV, the security will be fair valued by the Adviser in accordance with the Trusts valuation
policies and procedures approved by the Board of Trustees. The Fund may also 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 most or all of the 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 Funds Index. This may adversely affect the Funds ability to track the Index. With respect to securities traded in foreign markets, 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. In times of severe market disruption or low trading volume in the Funds Shares, this spread can increase significantly. It is anticipated that the Shares will trade in the secondary market at prices that may differ to varying degrees from the NAV of the Shares. During periods of disruptions to creations and redemptions or
the existence of extreme market volatility, the market prices of Shares are more likely to differ significantly from the Shares NAV.
The Depository Trust Company (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.
The NYSE Arca is open for trading Monday through Friday and is closed on weekends and the following holidays: New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because non-U.S. exchanges may be open on days when the Fund does not price
its Shares, the value of the securities in the Funds portfolio may change on days when shareholders will not be able to purchase or sell the Funds Shares.
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 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 impose restrictions on the frequency of purchases and redemptions for
the Fund at the present time.
14
DISTRIBUTIONS
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, if any, and net capital gains, if any, 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.
TAX INFORMATION
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, if any, at least annually, and any net realized long-term or short-term capital gains, if any, 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 longterm 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 reported as capital gain dividends are generally taxable as
long-term capital gains. Long-term capital gains of non-corporate shareholders are generally taxable at a maximum rate of 15%. Absent further legislation, the maximum tax rate on long-term capital gains of non-corporate shareholders will generally return to 20% for taxable years beginning after December 31, 2012.
For taxable years beginning before January 1, 2013, the Fund may receive dividends, the distribution of which the Fund may report as qualified dividends. In the event that the Fund receives such a dividend and reports 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.
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 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), subject to certain limitations, the investors pro rata share of the Funds foreign income taxes. It is expected that more than 50% of the Funds assets will consist of foreign securities.
15
ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENT STRATEGIES AND RISKS (continued)
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, 2012 (or a later date if extended by the U.S. Congress), 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. The Fund may also determine to not make reports of any interest related dividends or short-term capital gain dividends, which would result in withholding on such distributions. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the U.S. withholding tax and the possible applicability of the U.S. estate 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%, and is scheduled to increase to 31% after 2012.
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 or 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 Creations and Redemptions of Creation Units.
A person who exchanges securities for Creation Units 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 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. 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 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.
The Index is published by 4-asset management GmbH (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.
16
MARKET VECTORS RUSSIA SMALL-CAP INDEX
The 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 small-capitalization companies that are domiciled and primarily listed on an exchange in Russia or that generate at least 50% of their revenues in Russia. In exceptional cases,
companies with less than 50% of their revenues derived from Russia may be eligible for inclusion in the Index.
The universe of small-capitalization companies that may be included
in the Index is determined on the basis of such companies relative market capitalization as compared to the free-float
full market capitalization of all publicly traded Russian companies.
Constituent stocks of the Index must have a market capitalization of greater than $150 million on a rebalancing date to be eligible for the Index. Stocks whose market capitalizations fall below $75 million as of any rebalancing date will no longer be eligible for the Index. Stocks must have a three-month average daily trading volume value of at least $1
million to be eligible for the 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 Rule 11Aa3-1 of the Securities Exchange Act
of 1934, as amended. Similar criteria and standards apply to stocks with foreign listings).
As
of the date of this Prospectus, the Index included 24 securities of companies
with a market capitalization range of between approximately $330 million
and $3.1 billion with an average market capitalization of $1.6 billion. These
amounts are subject to change.
The Index is calculated and maintained by Structured Solutions AG on behalf of the Index Provider. The Index Provider is not affiliated with the Fund. Index values are calculated daily and are disseminated every 15 seconds between the hours of approximately 3:00 a.m. and 5:30 p.m. (Eastern time). The 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 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 Index eligibility criteria. Companies with recent stock exchange listings,
i.e
., recent initial public offerings, may be added to the Index on a quarterly basis, provided the companies meet all eligibility criteria and have been trading for more than 30 trading days. The share weights of the 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 Index Providers web site prior to the start of trading on the first business day following the third Friday of the calendar quarter. A press announcement identifying additions and deletions to the Index is issued on the second Friday in a quarter-end month. 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.
17
LICENSE AGREEMENT AND DISCLAIMERS
The Adviser has entered into a licensing agreement with the Index Provider to use the Index. The Adviser has also granted the Index Provider a license to use the phrase Market Vectors in connection with the Index and the Index Provider will pay the Adviser a share of the revenues received by the Index Provider from the licensing of the Index to a third
party. The Fund is entitled to use the Index pursuant to a sub-licensing arrangement with the Adviser.
Shares of the Fund are not sponsored, endorsed, sold or promoted by the Index Provider. The Index Provider makes no representation or warranty, express or implied, to the owners of the Shares of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Shares of the Fund particularly or the ability of
the Index to track the performance of the securities markets. The Index Providers only relationship to the Adviser is the licensing of certain service marks and trade names and the Index which is determined, composed and calculated by the Index Provider without regard to the Adviser or the Shares of the Fund. The Index Provider has no obligation to
take the needs of the Adviser or the owners of the Shares of the Fund into consideration in determining, composing or calculating the Index. The Index Provider is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Shares of the Fund to be issued or in the determination or calculation of the
equation by which the Shares of the Fund are to be converted into cash. The Index Provider has no obligation or liability in connection with the administration, marketing or trading of the Shares of the Fund.
THE INDEX PROVIDER DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND THE INDEX PROVIDER SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. THE INDEX PROVIDER MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY THE ADVISER, OWNERS OF THE SHARES OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX PROVIDER 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 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX PROVIDER HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
The Fund is not sponsored, promoted, sold or supported in any other manner by Structured Solutions AG nor does Structured Solutions AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or its trade mark or its price at any time or in any other respect. The Index is calculated and maintained
by Structured Solutions AG. Structured Solutions AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Index Provider, Structured Solutions AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the Fund.
Neither publication of Index by Structured Solutions AG nor the licensing of the Index or its trade mark for the purpose of use in connection with the Fund constitutes a recommendation by Structured Solutions AG to invest capital in the Fund nor does it in any way represent an assurance or opinion of Structured Solutions AG with regard to any
investment in the Fund. Structured Solutions AG is not responsible for fulfilling the legal requirements concerning the accuracy and completeness of the Funds Prospectus.
18
The Fund has not yet commenced operations as of the date of this Prospectus and therefore does not have a financial history.
19
The Fund has not yet commenced operations and, therefore, does not have information about the differences between the Funds daily market price on NYSE Arca and its NAV. Information regarding how often the Shares of the Fund traded on NYSE Arca at a price above (
i.e.,
at a premium) or below (
i.e.,
at a discount) the NAV of the Fund during the
past four calendar quarters, as applicable, can be found at vaneck.com/etf.
20
CONTINUOUS OFFERING
The method by which Creation Units are created and traded may raise certain issues under applicable securities laws. Because new Creation Units are issued and sold by the Trust on an ongoing basis, a distribution, as such term is used in the Securities Act of 1933, as amended (the Securities Act), may occur at any point. 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 NYSE Arca is satisfied by the fact that the prospectus is available at NYSE Arca upon request. The prospectus delivery mechanism provided in Rule 153 is
only available with respect to transactions on an exchange.
OTHER INFORMATION
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.
Dechert LLP serves as counsel to the Trust, including the Fund. Ernst & Young LLP serves as the Trusts independent registered public accounting firm and will audit the Funds financial statements annually.
21
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
1.202.551.8090. 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 20549-1520. 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. Additional information about the Funds investments will be available in the Funds annual and semi-annual reports to shareholders. In the Funds 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. The SAI and the Funds annual and semi-annual reports 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 at vaneck.com/etf.
(Investment Company Act file no. 811-10325)
22
For more detailed information about the Fund, see the SAI dated
, 2011, which is incorporated by reference into this Prospectus. Additional information about the Funds investments will be available in the Funds annual and semi-annual reports to shareholders. In the Funds annual report, 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 888.MKT.VCTR to request, free of charge, the annual or semi-annual reports, when available, 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 SEC Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling 202.551.8090.
Reports and other information about the Fund are available on the EDGAR Database on the SECs internet site at http://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
RSXJPRO
STATEMENT OF ADDITIONAL INFORMATION
Dated __________, 2011
This
Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the Prospectus dated __________, 2011 (the
Prospectus) for the Market Vectors ETF Trust (the Trust), relating to the series of the Trust listed below,
as it may be revised from time to time.
Fund
Principal U.S. Listing Exchange
Ticker
Market
Vectors Russia Small-Cap ETF
NYSE Arca,
Inc.
A
copy of the Prospectus 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
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Placement of Creation Orders Outside Clearing ProcessDomestic Funds
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Placement of Creation Orders Outside Clearing ProcessForeign Funds
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Placement of Redemption Orders Outside Clearing ProcessDomestic
Funds
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Placement of Redemption Orders Outside Clearing ProcessForeign Funds
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GENERAL DESCRIPTION OF THE TRUST
The Fund will offer and issue Shares at its net asset value (NAV) only in aggregations of a specified number of Shares (a Creation
Unit). Similarly, Shares are redeemable by the Fund only in Creation Units. Creation Units of the Fund are issued and redeemed
partially for cash and partially in-kind for securities generally included in the Funds Index (defined herein). 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 that may differ from the Shares NAV. A Creation Unit consists of 50,000 Shares
of the Fund.
In each instance of such cash creations or redemptions, the Trust may impose transaction fees based on transaction expenses related
to the particular exchange that will be higher than the transaction fees associated with in-kind purchases or redemptions.
INVESTMENT POLICIES AND RESTRICTIONS
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) 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 not within the control of the Fund and, therefore, the
Fund may incur delays in disposing of the security and/or 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.
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 Van Eck Associates Corporation (the Adviser)
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.
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
2
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 Funds
Index. Under such circumstances, the Adviser may seek to utilize other
instruments that it believes to be correlated to the Funds Index components or
a subset of the components. Liquid futures contracts are not currently
available for the Index of the Fund.
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 they 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.
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
3
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).
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.
Warrants and
Subscription Rights
Warrants
are equity securities in the form of options issued by a corporation which give
the holder the right to purchase stock, usually at a price that is higher than
the market price at the time the warrant is issued. A purchaser takes the risk
that the warrant may expire worthless because the market price of the common
stock fails to rise above the price set by the warrant.
4
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.
The
use of currency forward transactions involves certain risks. For example, if
the counterparty under the contract 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.
A
convertible security is a bond, debenture, note, preferred stock, right,
warrant or other security that may be converted into or exchanged for a
prescribed amount of common stock or other security of the same or a different
issuer or into cash within a particular period of time at a specified price or
formula. A convertible security generally entitles the holder to receive
interest paid or accrued on debt securities or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities generally have
characteristics similar to both debt and equity securities. The value of
convertible securities tends to decline as interest rates rise and, because of
the conversion feature, tends to vary with fluctuations in the market value of
the underlying securities. Convertible securities ordinarily provide a stream
of income with generally higher yields than those of common stock of the same
or similar issuers. Convertible securities generally rank senior to common
stock in a corporations capital structure but are usually subordinated to
comparable nonconvertible securities. Convertible securities generally do not
participate directly in any dividend increases or decreases of the underlying
securities although the market prices of convertible securities may be affected
by any dividend changes or other changes in the underlying securities.
A
structured note is a derivative security for which the amount of principal
repayment and/or interest payments is based on the movement of one or more
factors. These factors include, but are not limited to, currency exchange
rates, interest rates (such as the prime lending rate or LIBOR), referenced
bonds and stock indices. Some of these factors may or may not correlate to the
total rate of return on one or more underlying instruments referenced in such
notes. Investments in structured notes involve risks including interest rate
risk, credit risk and market risk. Depending on the factor(s) used and the use
of multipliers or deflators, changes in interest rates and movement of such
factor(s) may cause significant price fluctuations. Structured notes may be
less liquid than other types of securities and more volatile than the reference
factor underlying the note.
Participation
notes (P-Notes) are issued by banks or broker-dealers and are designed to
offer a return linked to the performance of a particular underlying equity
security or market. P-Notes can have the characteristics or take the form of
various instruments, including, but not limited to, certificates or warrants.
The holder of a P-Note that is linked to a particular underlying security is
entitled to receive any dividends paid in connection with the underlying
security. However, the holder of a P-Note generally does not receive voting
rights as it would if it directly owned the underlying security. P-Notes
constitute direct, general and unsecured contractual obligations of the banks
or broker-dealers that issue them, which therefore subject the Fund to
counterparty risk, as discussed below. Investments in P-Notes involve
5
certain risks in addition to
those associated with a direct investment in the underlying foreign companies
or foreign securities markets whose return they seek to replicate. For
instance, there can be no assurance that the trading price of a P-Note will
equal the value of the underlying foreign company or foreign securities market
that it seeks to replicate. As the purchaser of a P-Note, the Fund is relying on
the creditworthiness of the counterparty issuing the P-Note and has no rights
under a P-Note against the issuer of the underlying security. Therefore, if
such counterparty were to become insolvent, the Fund would lose its investment.
The risk that the Fund may lose its investments due to the insolvency of a
single counterparty may be amplified to the extent the Fund purchases P-Notes
issued by one issuer or a small number of issuers. P-Notes also include
transaction costs in addition to those applicable to a direct investment in
securities. In addition, the Funds use of P-Notes may cause the Funds
performance to deviate from the performance of the portion of the Index to
which the Fund is gaining exposure through the use of P-Notes.
Due
to liquidity and transfer restrictions, the secondary markets on which P-Notes
are traded may be less liquid than the markets for other securities, which may
lead to the absence of readily available market quotations for securities in
the Funds portfolio. The ability of the Fund to value its securities becomes
more difficult and the Advisers judgment in the application of fair value
procedures may play a
greater role in the valuation of the Funds securities due to reduced
availability of reliable objective pricing data. Consequently, while such
determinations will be made in good faith, it may nevertheless be more
difficult for the Fund to accurately assign a daily value to such securities.
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.
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;
6
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 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;
5.
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;
6.
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; and
7.
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.
Make short sales of securities.
3.
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.
4.
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.
5.
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.
7
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 securities not included in the Index, 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.
8
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 Summary InformationPrincipal Risks
of Investing in the Fund and Additional Information About the Funds
Investment Strategies and RisksRisks of Investing in the Fund. The discussion
below supplements, and should be read in conjunction with, such sections of the
Funds Prospectus.
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 securities
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.
In the
event that the securities in the Funds 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 periods of time, the
Fund may not fully replicate the performance of the
9
Index due to the temporary unavailability of certain Index securities
in the secondary market or due 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 risks of an investment in a portfolio of equity securities in an
economic sector or industry in which the Funds Index is highly concentrated.
In addition, because it is the policy of the Fund to generally invest in the
securities that comprise the Index, the portfolio of securities held by the
Fund (Fund Securities) also will be concentrated in that economic sector or
industry.
10
A
discussion of exchange listing and trading matters associated with an
investment in the Fund is contained in the Funds Prospectus under the headings
Summary
InformationPrincipal Risks of Investing in the Fund, Additional
Information About the Funds Investment Strategies and RisksRisks 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
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. 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 Funds 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. 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.
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 is 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 make 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. Eastern time) on
each Business Day.
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
11
of estimates of all other assets and
liabilities of the Fund including, among others, current day estimates of
dividend income and expense accruals.
12
T
rustees and
Officers of the Trust
The Board
of the Trust consists of four Trustees, three of whom are not interested
persons (as defined in the 1940 Act), of the Trust (the Independent
Trustees). Mr. David H. Chow, an Independent Trustee, serves as Chairman of
the Board. The Board is responsible for overseeing the management and
operations of the Trust, including general supervision of the duties performed
by the Adviser and other service providers to the Trust. The Adviser is
responsible for the day-to-day administration and business affairs of the
Trust.
The Board
believes that each Trustees experience, qualifications, attributes or skills
on an individual basis and in combination with those of the other Trustees lead
to the conclusion that the Board possesses the requisite skills and attributes
to carry out its oversight responsibilities with respect to the Trust. The
Board believes that the Trustees ability to review, critically evaluate,
question and discuss information provided to them, to interact effectively with
the Adviser, other service providers, counsel and independent auditors, and to
exercise effective business judgment in the performance of their duties,
support this conclusion. The Board also has considered the following
experience, qualifications, attributes and/or skills, among others, of its
members in reaching its conclusion: such persons character and integrity;
length of service as a board member of the Trust; such persons willingness to
serve and willingness and ability to commit the time necessary to perform the
duties of a Trustee; and as to each Trustee other than Mr. van Eck, his status
as not being an interested person (as defined in the 1940 Act) of the Trust.
In addition, the following specific experience, qualifications, attributes
and/or skills apply as to each Trustee: Mr. Chow, significant business and
financial experience, particularly in the investment management industry,
experience with trading and markets through his involvement with the Pacific
Stock Exchange, and service as a chief executive officer, board member, partner
or executive officer of various businesses and non-profit organizations; Mr.
Short, business and financial experience, particularly in the investment
management industry, and service as a president, board member or executive
officer of various businesses; Mr. Stamberger, business and financial
experience and service as the president, chief executive officer and board
member of SmartBrief Inc., a media company; and Mr. van Eck, business and
financial experience, particularly in the investment management industry, and
service as a president, executive officer and/or board member of various
businesses, including the Adviser, Van Eck Securities Corporation, and Van Eck
Absolute Return Advisers Corporation. References to the experience,
qualifications, attributes and skills of Trustees are pursuant to requirements
of the Securities and Exchange Commission (the SEC), do not constitute
holding out of the Board or any Trustee as having any special expertise or
experience, and shall not impose any greater responsibility or liability on any
such person or on the Board by reason thereof.
13
The
Trustees of the Trust, their addresses, positions with the Trust, ages, term of
office and length of time served, principal occupations during the past five
years, the number of portfolios in the Fund Complex overseen by each Trustee
and other directorships, if any, held by the Trustees, are set forth below.
Name, Address
1
and Age
Position(s)
Term of
Principal Occupation(s)
Number of
Other
David H. Chow, 53*
Chairman
Since
2008
Founder and CEO, DanCourt
Management LLC (strategy consulting firm), March 1999 to present.
41
Director, Audit Committee
Chairman and Compensation Committee member, Forward Management, LLC, 2008 to
present; Trustee, Berea College of Kentucky and Vice-Chairman of the
Investment Committee.
R. Alastair Short, 57*
Trustee
Since
2006
President, Apex Capital
Corporation (personal investment vehicle), January 1988 to present; Vice
Chairman, W.P. Stewart & Co., Inc. (asset management firm), September
2007 to September 2008; and Managing Director, The GlenRock Group, LLC
(private equity investment firm), May 2004 to September 2007.
48
Chairman and Independent
Director, EULAV Asset Management, January 2011 to present; Independent
Director, Tremont offshore funds, June 2009 to present; Director, Kenyon
Review; Director, The Medici Archive Project.
Richard D. Stamberger, 51*
Trustee
Since
2006
Director, President and
CEO, SmartBrief, Inc. (media company).
48
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 VIP Trust and the Trust.
*
Member of the Audit
Committee.
Member of the Nominating and
Corporate Governance Committee.
14
Name, Address
1
and Age
Position(s)
Term of
Principal Occupation(s) During
Number of
Other
Jan F. van Eck, 47
4
Trustee, President and
Chief Executive Officer
Trustee (Since 2006);
President and Chief Executive Officer (Since 2009)
Director, President and
Owner of the Adviser, Van Eck Associates Corporation; Director and President,
Van Eck Securities Corporation (VESC); Director and President, Van Eck
Absolute Return Advisers Corp. (VEARA).
41
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 VIP 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.
The
Officers of the Trust, their addresses, positions with the Trust, 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, 46
Assistant Vice
Since 2008
Assistant Vice President
of the Adviser (Since 2008); Manager (Portfolio Administration) of the
Adviser (September 2005-October 2008); Vice President, Robeco Investment
Management (July1990-September 2005); Officer of other investment companies
advised by the Adviser.
Charles T. Cameron, 50
Vice President
Since 2006
Director of Trading (Since
1995) and Portfolio Manager (Since 1997) for the Adviser; Officer of other
investment companies advised by the Adviser.
John J. Crimmins, 53
Treasurer
Since 2009
Vice President of
Portfolio Administration of the Adviser (Since 2009); Vice President of VESC
and VEARA (Since 2009); Chief Financial, Operating and Compliance Officer,
Kern Capital Management LLC (September 1997-February 2009); Officer of other
investment companies advised by the Adviser.
Susan C. Lashley, 56
Vice President
Since 2006
Vice President of the
Adviser and VESC; Officer of other investment companies advised by the
Adviser.
Thomas K. Lynch, 54
Chief
Since 2007
Chief Compliance Officer
of the Adviser and VEARA (Since December 2006) and of VESC (Since August
2008); Vice President of the Adviser, VEARA and VESC; Treasurer (April 2005
December 2006); Second Vice President
15
Officers Name,
Position(s) Held
Term of
Principal Occupation(s) During The Past Five Years
of Investment Reporting,
TIAA-CREF (January 1996-April 2005); Officer of other investment companies
advised by the Adviser.
Laura I. Martínez, 30
Assistant Vice
Since 2008
Assistant Vice President,
Associate General Counsel and Assistant Secretary of the Adviser, VESC and
VEARA (Since 2008); Associate, Davis Polk & Wardwell (October 2005-June
2008); Stanford Law School (September 2002-June 2005); Officer of other
investment companies advised by the Adviser.
Joseph J. McBrien, 62
Senior Vice
Since 2006
Senior Vice President,
General Counsel and Secretary of the Adviser, VESC and VEARA (Since December
2005); Director of VESC and VEARA (Since October 2010); Managing Director,
Chatsworth Securities LLC (March 2001-November 2005); Officer of other
investment companies advised by the Adviser.
Jonathan R. Simon, 36
Vice President
Since 2006
Vice President, Associate
General Counsel and Assistant Secretary of the Adviser, VESC and VEARA (Since
2006); Associate, Schulte Roth & Zabel (July 2004-July 2006); Associate,
Carter Ledyard & Milburn LLP (September 2001-July 2004); Officer of other
investment companies advised by the Adviser.
Bruce J. Smith, 55
Senior Vice
Since 2006
Senior Vice President,
Chief Financial Officer, Treasurer and Controller of the Adviser, VESC and
VEARA (Since 1997); Director of the Adviser, VESC and VEARA (Since October
2010); 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.
The Board
of the Trust met five times during the fiscal year ended December 31,
2010.
The Board
has an Audit Committee consisting of three Trustees who are Independent
Trustees. 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; (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
16
firm and the full Board. The Audit Committee met four times during
the fiscal year ended December 31, 2010.
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. Mr. Stamberger
is the Chairman 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) 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 (v) review and assess, from time to time, the
performance of the committees and subcommittees of the Board and report the
results to the Board. The Nominating and Corporate Governance Committee met
one time during the fiscal year ended December 31, 2010.
The Board
has determined that its leadership structure is appropriate given the business
and nature of the Trust. In connection with its determination, the Board
considered that the Chairman of the Board is an Independent Trustee. The
Chairman of the Board can play an important role in setting the agenda of the
Board and also serves as a key point person for dealings between management and
the other Independent Trustees. The Independent Trustees believe that the
Chairmans independence facilitates meaningful dialogue between the Adviser and
the Independent Trustees. The Board also considered that the Chairman of each
Board committee is an Independent Trustee, which yields similar benefits with
respect to the functions and activities of the various Board committees. The
Independent Trustees also regularly meet outside the presence of management and
are advised by independent legal counsel. The Board has determined that its
committees help ensure that the Trust has effective and independent governance and
oversight. The Board also believes that its leadership structure facilitates
the orderly and efficient flow of information to the Independent Trustees from
management of the Trust, including the Adviser. The Board reviews its structure
on an annual basis.
As an
integral part of its responsibility for oversight of the Trust in the interests
of shareholders, the Board, as a general matter, oversees risk management of
the Trusts investment programs and business affairs. The function of the Board
with respect to risk management is one of oversight and not active involvement
in, or coordination of, day-to-day risk management activities for the Trust.
The Board recognizes that not all risks that may affect the Trust can be
identified, that it may not be practical or cost-effective to eliminate or
mitigate certain risks, that it may be necessary to bear certain risks (such as
investment-related risks) to achieve the Trusts goals, and that the processes,
procedures and controls employed to address certain risks may be limited in
their effectiveness. Moreover, reports received by the Trustees that may relate
to risk management matters are typically summaries of the relevant information.
The Board
exercises oversight of the risk management process primarily through the Audit
Committee, and through oversight by the Board itself. The Trust faces a number
of risks, such as investment-related and compliance risks. The Advisers
personnel seek to identify and address risks, i.e., events or circumstances
that could have material adverse effects on the business, operations,
shareholder services, investment performance or reputation of the Trust. Under
the overall supervision of the Board or the applicable Committee of the Board,
the Trust, the Adviser, and the affiliates of the Adviser employ a variety of
processes, procedures and controls to identify such possible events or
circumstances, to lessen the probability of their occurrence and/or to mitigate
the effects of such events or circumstances if they do occur. Different
processes, procedures and controls are employed with respect to different types
of risks. Various personnel, including the Trusts Chief Compliance Officer, as
well as various personnel of the
17
Adviser and other service providers such as
the Trusts independent accountants, may report to the Audit Committee and/or
to the Board with respect to various aspects of risk management, as well as
events and circumstances that have arisen and responses thereto.
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
Aggregate Dollar Range of Equity
David H. Chow
None
Over
$100,000
R. Alastair Short
None
$50,001
- $100,000
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.
The
Trust pays each Independent Trustee an annual retainer of $40,000, a per meeting
fee of $15,000 for scheduled quarterly meetings of the Board and each special
meeting of the Board and a per meeting fee of $7,500 for telephonic meetings.
The Trust pays the Chairman of the Board an annual retainer of $42,875, the
Chairman of the Audit Committee an annual retainer of $18,375 and the Chairman
of the Governance Committee an annual retainer of $12,250. 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 compensation paid to the Trustees by the Trust for the
fiscal year ended December 31, 2010. Annual Trustee fees may be reviewed
periodically and changed by the Trusts Board.
Name of Trustee
Aggregate
Deferred
Pension or
Estimated
Total
David H. Chow
$
180,375
$
180,375
N/A
N/A
$
95,000
R. Alastair Short
$
155,875
$
0
N/A
N/A
$
234,625
Richard D. Stamberger
$
149,750
$
74,875
N/A
N/A
$
238,500
Jan F. van Eck
(3)
$
0
$
0
N/A
N/A
$
0
(1)
The Fund Complex consists
of Van Eck Funds, Van Eck VIP 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.
18
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
Creation Units, 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 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 202.551.8090. 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 (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
19
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
.
20
The
following information supplements and should be read in conjunction with the
section in the Prospectus entitled Management of the Fund.
Van
Eck Associates Corporation acts as investment adviser to the Trust and, subject
to the general 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 adviser to the Fund pursuant to an investment
management agreement between the Trust and the Adviser (the Investment
Management Agreement). 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.
Term
.
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).
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
21
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.
The
Bank of New York Mellon (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.
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).
22
O
ther Accounts
Managed by the Portfolio Managers
Other
Accounts Managed
Accounts
with respect to which the
Name of
Category
of
Number
of
Total
Assets in
Number
of
Total
Assets in
Hao-Hung (Peter) Liao
Registered investment
companies
23
$20.42 billion
0
0
Other pooled investment
vehicles
0
0
0
0
Other accounts
0
0
0
0
George Cao
Registered investment
companies
23
$20.42 billion
0
0
Other pooled investment
vehicles
0
0
0
0
Other accounts
0
0
0
0
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.
P
ortfolio 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.
P
ortfolio Manager
Share Ownership
As
of the date of this SAI, Messrs. Liao and Cao do not beneficially own any
Shares of the Fund.
23
B
ROKERAGE
TRANSACTIONS
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 an 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 and
taxable distributions. 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.
24
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.
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
25
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.
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.
26
C
REATION AND REDEMPTION OF CREATION UNITS
The Fund will
issue and sell Shares only in Creation Units on a continuous basis through the
Distributor, without an initial sales load, at its 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.
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. Eastern 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 a 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 Funds Index. In addition, the Trust reserves the
right to accept a basket of securities or cash that 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
27
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.
P
rocedures 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). A Participating
Party and DTC Participant are collectively referred to as an Authorized
Participant. 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.
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
28
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.
P
lacement 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
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.
29
P
lacement 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. Eastern 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. Eastern 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.)
P
lacement of
Creation Orders Outside Clearing ProcessForeign Funds
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. 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.
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.
30
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, 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) the 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, without limitation, acts of God or public service or
utility problems such as earthquakes, fires, floods, extreme weather conditions
and power outages resulting in telephone, telecopy and computer failures; wars;
civil or military disturbances, including acts of civil or military authority
or governmental actions; terrorism; sabotage; epidemics; riots; labor disputes;
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.
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
31
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 the section entitled
Summary InformationPrincipal Risks of Investing in the Fund and Additional
Information About the Funds Investment Strategies and RisksRisks of Investing
in the Fund in the Funds Prospectus.
32
P
lacement 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. Eastern 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. Eastern 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) and
the applicable cash payment will be transferred by the third (3rd) Business Day
following the date on which such request for redemption is deemed received.
P
lacement 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. Eastern 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. Eastern 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.
P
lacement of
Redemption Orders Outside Clearing ProcessForeign Funds
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
they otherwise permit or require 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.
In
connection with taking delivery of Shares for Fund Securities upon redemption
of Creation Units, a redeeming shareholder or entity acting on behalf of a
redeeming shareholder must maintain
33
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
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.
SETTLEMENT PERIODS GREATER THAN
Beginning
of Settlement
End of
Settlement
Number of
Days in
Russia
12/28/11
01/10/12
13
12/29/11
01/11/12
13
12/30/11
01/12/12
13
*
These
worst-case redemption cycles are based on information regarding regular
holidays, which may be out of date. Based on changes in holidays, longer
(worse) redemption cycles are possible.
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
34
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.
35
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. 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 the close of trading
(ordinarily 4:00 p.m., Eastern time) on the New York Stock Exchange. 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 values
of the Funds portfolio securities are based on the securities closing prices
on their local principal markets, where available. In the absence of a last
reported sales price, or if no sales were reported, and for other assets for
which market quotes are not readily available, values may be based on quotes
obtained from a quotation reporting system, established market makers or by an
outside independent pricing service. Prices obtained by an outside independent
pricing service use information provided by market makers or estimates of
market values obtained from yield data related to investments or securities
with similar characteristics and may use a computerized grid matrix of
securities and its evaluations in determining what it believes is the fair
value of the portfolio securities. If a market quotation for a security is not
readily available or it does not otherwise accurately reflect the market value
of the security at the time the Fund calculates its NAV, the security will be
fair valued by the Adviser 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 most or all of the 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 Funds Index. This may adversely affect
the Funds ability to track the Index. With respect to securities traded in
foreign markets, the value of the Funds portfolio securities may change on
days when you will not be able to purchase or sell your Shares.
36
The
following information supplements and should be read in conjunction with the
section in the Funds Prospectus entitled Shareholder
InformationDistributions.
Dividends
from net investment income, if any, 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 the 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.
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.
C
ONTROL PERSONS
AND PRINCIPAL SHAREHOLDERS
As of the
date of this SAI, no entity beneficially owned any voting securities of the
Fund.
37
The
following information also supplements and should be read in conjunction with
the section in the Funds Prospectus entitled Shareholder InformationTax
Information.
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 98.2% 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. 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), subject to certain limitations, the investors pro rata share of the
Funds foreign income taxes. It is expected that more than 50% of the Funds
assets will consist of foreign securities.
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
38
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, 2013.
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.
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, 2012 (or a later date
if extended by the U.S. Congress), 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. The Fund may also determine to not make designations of any
interest related dividends or short-term capital
39
gain dividends, which would result in withholding on such
distributions. 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% and is currently scheduled to increase to 31% in 2013. 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.
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, 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.
C
APITAL STOCK AND
SHAREHOLDER REPORTS
Each Share
issued by the Trust has a pro rata interest in the assets of the corresponding
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.
40
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 limitations on
liability 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
Dechert
LLP, 1095 Avenue of the Americas, New York, New York 10036, is counsel to the
Trust and has passed upon the validity of the Funds Shares.
41
L
ICENSE AGREEMENT
AND DISCLAIMERS
The Shares
of the Fund are not sponsored, endorsed, sold or promoted by the Licensor. The
Licensor makes no representation or warranty, express or implied, to the owners
of the Shares of the Fund or any member of the public regarding the
advisability of investing in securities generally or in the Shares of the Fund
particularly or the ability of the Index to track the performance of the
securities market. The Licensors only relationship to the Adviser is the
licensing of certain service marks and trade names and of the Index which is
determined, composed and calculated by the Licensor without regard to the
Adviser or the Shares of the Fund. The Licensor has no obligation to take the
needs of the Adviser or the owners of the Shares of the Fund into consideration
in determining, composing or calculating the Index. The Licensor is not
responsible for and has not participated in the determination of the timing of,
prices at, or quantities of the Shares of the Fund to be issued or in the
determination or calculation of the equation by which the Shares of the Fund
are to be converted into cash. The Licensor has no obligation or liability in
connection with the administration, marketing or trading of the Shares of the
Fund.
THE
LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX
OR ANY DATA INCLUDED THEREIN AND THE LICENSOR SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. THE LICENSOR MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF THE
SHARES OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR
ANY DATA INCLUDED THEREIN. THE 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 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE LICENSOR
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
42
VAN ECK GLOBAL PROXY VOTING POLICIES
Rule 206(4)-6 also requires the Adviser to
disclose information about the proxy voting procedures to its clients and to
inform clients how to obtain information about how their proxies were voted.
Additionally, Rule 204-2 under the Advisers Act requires the Adviser to
maintain certain proxy voting records.
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.
The Adviser intends to vote all proxies in accordance with applicable
rules and regulations, and in the best interests of clients without influence
by real or apparent conflicts of interest. To assist in its responsibility for
voting proxies and the overall voting process, the Adviser has engaged an
independent third party proxy voting specialist, Glass Lewis & Co., LLC.
The services provided by Glass Lewis include in-depth research, global issuer
analysis, and voting recommendations as well as vote execution, reporting and
recordkeeping.
Resolving
Material Conflicts of Interest
When a material conflict of interest exists, proxies will be voted in
the following manner:
1.
Strict adherence to the Glass Lewis guidelines, or
2.
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
Van Eck 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 Chief Compliance Officer with a written explanation of the reason for the
deviation.
43
Client Inquiries
1.
Notification of Availability of Information
a.
Client Brochure - The Client Brochure or Part II of Form ADV will
inform clients that they can obtain information from the Adviser 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.
2.
Availability of Proxy Voting Information
a.
At the clients request or if the information is not available on the
Advisers website, a hard copy of the accounts proxy votes will be mailed to
each client.
Recordkeeping
Requirements
1.
Van Eck 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:
a.
proxy statements received;
b.
identifying number for the portfolio security;
c.
shareholder meeting date;
d.
brief identification of the matter voted on;
e.
whether the vote was cast on the matter;
f.
how the vote was cast (e.g., for or against proposal, or abstain; for
or withhold regarding election of directors);
g.
records of written client requests for information on how the Adviser
voted proxies on behalf of the client;
h.
a copy of written responses from the Adviser to any written or oral
client request for information on how the Adviser voted proxies on behalf of
the client; and any documents prepared by the Adviser that were material to
the decision on how to vote or that memorialized the basis for the decision,
if such documents were prepared.
2.
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.
3.
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.
4.
Proxy voting records will be maintained in
an easily accessible place for five years, the first two at the office of the Adviser. Proxy statements on file with EDGAR or maintained by a third
44
party and proxy votes maintained by a third
party are not subject to these particular retention requirements.
At times the Adviser may determine that, in the best interests of its
clients, a particular proxy should not be voted. This may occur, for example,
when the cost of voting a foreign proxy (translation, transportation, etc.)
would exceed the benefit of voting the proxy or voting the foreign proxy may
cause an unacceptable limitation on the sale of the security. Any such
instances will be documented by the Portfolio Manager and reviewed by the Chief
Compliance Officer.
Securities
Lending
Certain portfolios managed by the Adviser participate in securities
lending programs to generate additional revenue. Proxy voting rights generally
pass to the borrower when a security is on loan. The Adviser will use its best
efforts to recall a security on loan and vote such securities if the Portfolio
Manager determines that the proxy involves a material event.
Proxy
Voting Policy
The Adviser has reviewed the Glass Lewis Proxy Guidelines
(Guidelines) and has determined that the Guidelines are consistent with the
Advisers proxy voting responsibilities and its fiduciary duty with respect to
its clients. The Adviser will review any material amendments to the Guidelines.
While it is the Advisers policy to generally follow the Guidelines,
the Adviser retains the right, on any specific proxy, to vote differently from
the Guidelines, if the Adviser believes it is in the best interests of its
clients. Any such exceptions will be documented by the Adviser and reviewed by
the Chief Compliance Officer.
45
PART C: OTHER INFORMATION
Item 28.
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).***
(d)(3)
Form of
Investment Management Agreement between the Trust and Van Eck Associates
Corporation (with respect to certain municipal portfolios). ###
(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)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Indonesia
Index ETF).
(i)(11)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Vietnam
ETF).
(i)(12)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors
Pre-Refunded Municipal Index ETF).
(i)(13)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Egypt Index ETF).^^^^
(i)(14)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Kuwait Index ETF).^^^^
(i)(15)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Latin America
Small-Cap Index ETF). ^^^^^
(i)(16)
Opinion and
consent of Dechert LLP (with respect to Market Vectors China ETF).^
(i)(17)
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors Brazil
Small-Cap ETF).
(i)(18)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Junior Gold Miners
ETF).^^
(i)(19)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Poland ETF).^^^
(i)(20)
Opinion and
consent of Dechert LLP (with respect to Market Vectors India Small-Cap Index
ETF).#
(i)(21)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Emerging Markets Local
Currency Bond ETF).##
(i)(22)
Opinion and
consent of Dechert LLP (with respect to Market Vectors GDP International
Equity ETF and Market Vectors GDP Emerging Markets Equity ETF).§
(i)(23)
Opinion and
consent of Dechert LLP (with respect to Market Vectors Investment Grade
Floating Rate Bond ETF). ##
(i)(24)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors MLP ETF). §
(i)(25)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Rare Earth/Strategic
Metals ETF). ####
(i)(26)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors LatAm Aggregate Bond
ETF and Market Vectors Asia ex-Japan Aggregate Bond ETF). §
(i)(27)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors All China All-Cap ETF,
Market Vectors All China Consumer Discretionary Sector ETF, Market Vectors
All China Consumer Staples Sector ETF, Market Vectors All China Energy Sector
ETF, Market Vectors All China Financial Services Sector ETF, Market Vectors
All China Healthcare Sector ETF, Market Vectors All China Industrials Sector
ETF, Market Vectors All China Information Technology Sector ETF, Market
Vectors All China Materials Sector ETF, Market Vectors All China Utilities
Sector ETF and Market Vectors All China Small Cap ETF). §
(i)(28)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors High Yield Floating
Rate ETF). §
(i)(29)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Fixed Income II ETF). §
(i)(30)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Colombia ETF). #####
(i)(31)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors CM Commodity Index
ETF). §
(i)(32)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Russia Small-Cap ETF).
§§
(i)(33)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Germany Small-Cap
ETF). ######
(i)(34)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Germany Mid-Cap ETF).
§
(i)(35)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Fixed Income
Closed-End Fund ETF). §
(i)(36)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors GDP Emerging Markets
Small-Cap Equity ETF). §
(j)
Not
applicable.
(k)
Not
applicable.
(l)
Not
applicable.
(m)
Not
applicable.
(n)
Not
applicable.
(o)
Not
applicable.
(p)(1)
Code of
Ethics.
Item 29.
Persons Controlled by or Under Common
Control with Registrant
None.
Item 30.
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 31.
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 32.
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 Offices
Positions and Offices with
Thomas K.
Lynch
Chief
Compliance Officer
Chief
Compliance Officer
Joseph
McBrien
Senior Vice
President, General
Senior Vice
President, Secretary and Chief Legal Officer
Bruce J.
Smith
Senior Vice
President, Chief
Senior Vice
President and Chief Financial Officer
Jan F. van
Eck
Director and
Executive Vice
President,
Chief Executive Officer and Trustee
Item 33.
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 34.
Management Services
Not
applicable.
Item 35.
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 under Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement 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 1
st
day of April 2011.
MARKET VECTORS ETF TRUST
By:
/s/ Jan F. van Eck
*
Name: Jan F. van Eck
Title: 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
April 1, 2011
David H.
Chow
/s/ R.
Alastair Short
*
Trustee
April 1, 2011
R. Alastair
Short
/s/ Richard
D. Stamberger
*
Trustee
April 1, 2011
Richard D.
Stamberger
/s/ Jan F.
van Eck
*
President,
Chief
April 1, 2011
Executive
Officer and
Trustee
Jan F. van
Eck
/s/ Bruce J.
Smith
*
Chief
Financial Officer
April 1, 2011
Bruce J.
Smith
*
By:
/s/ Jonathan
R. Simon
Jonathan R.
Simon
Attorney-in-Fact
EXHIBIT INDEX
(i)(32)
Opinion and
Consent of Dechert LLP (with respect to Market Vectors Russia Small-Cap ETF).
SEC Registration Number: 333-123257
1940 Act Registration Number: 811-10325
(continued)
The Trust is an open-end management investment company. The Trust currently consists of 41 investment portfolios. This SAI relates to
one investment portfolio, Market Vectors Russia 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.
Held with
the Trust
Office
2
and
Length of
Time Served
During Past Five Years
Portfolios
in Fund
Complex
3
Overseen
Directorships
Held By
Trustee During
Past Five Years
Trustee
Since 2006
Held with
the Trust
Office
2
and
Length of
Time Served
Past Five Years
Portfolios
in Fund
Complex
3
Overseen
Directorships
Held By
Trustee During
Past Five Years
Address
1
and Age
with the Trust
Office
2
and
Length of
Time Served
President and
Assistant
Treasurer
Compliance
Officer
Address
1
and Age
with the Trust
Office
2
and
Length of
Time Served
President and
Assistant
Secretary
President,
Secretary and
Chief Legal
Officer
and Assistant
Secretary
President and
Chief Financial
Officer
Market Vectors Russia
Small-Cap
ETF (As of December 31, 2010)
Securities in all Registered Investment
Companies Overseen By Trustee In
Family of Investment Companies
(As of December 31, 2010)
Compensation
From the Trust
Compensation
From the Trust
Retirement
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)
Compensation
.
As compensation for its services under the Investment Management Agreement, the
Adviser will be 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, 2012, the Adviser
has 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 0.67% of its 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.
As
of the date of this SAI, in addition to the Fund, Messrs. Liao and Cao managed
the following:
(As of February 28, 2011)
advisory fee is based on the
performance of the account
Portfolio
Manager
Account
Accounts in
Category
Accounts in
Category
Accounts in
Category
Accounts in
Category
Due to
various legal and operational constraints in certain countries in which the Fund
invests, Creation Units are issued partially for cash and partially in-kind for
securities generally included in the Funds Index. To the extent in-kind
creations are effected for the Fund, Creation Units of the Fund generally
consists of the in-kind deposit of a designated portfolio of equity securities
(the Deposit Securities) that comprise the Funds Index and an amount of cash
computed as described below (the Cash Component) or, as permitted or required
by the Fund, of cash. 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.
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 NYSE Arca (Closing Time) (ordinarily
4:00 p.m. Eastern 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 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.
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 may be assessed an additional
variable charge 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 or otherwise gain exposure to, 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 and/or financial
instruments 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 certain taxes. 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 shareholders.
Creators of Creation Units are responsible for the costs of transferring the
securities constituting the Deposit Securities to the account of the Trust.
The
Administrator, through NSCC, makes available immediately prior to the opening of
business on the Exchange (currently 9:30 a.m. Eastern 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. Unless cash redemptions are
permitted or required for the Fund, the redemption proceeds for a Creation Unit
generally 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. 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.
The basic
redemption transaction fee of $1,000 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
(when cash redemptions are permitted or required for the Fund) may also be
imposed to compensate the Fund for the costs associated with selling the
applicable securities. 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 or settle any financial instruments 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 and/or
financial instruments were sold or settled by the Trust and the cash in lieu
amount (which amount, at the Advisers discretion, may be capped), applicable
registration fees, brokerage commissions and certain taxes (Transaction
Costs). 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. In no event will fees charged by
the Fund in connection with a redemption exceed 2% of the value of each Creation
Unit. Investors who use the services of a broker or other such intermediary may
be charged a fee for such services. To the extent the Fund cannot recoup the
amount of Transaction Costs incurred in connection with a redemption from the
redeeming shareholder because of the 2% cap or otherwise, those Transaction
Costs will be borne by the Funds remaining shareholders and negatively affect
the Funds performance.
SEVEN DAYS FOR YEAR 2011
Period
Period
Settlement Period
All inquiries by clients as to how the
Adviser has voted proxies must immediately be forwarded to Portfolio
Administration.
Voting
Foreign Proxies
Business Address
with Underwriter
Trust
335 Madison Avenue
New York, NY 10017
335 Madison Avenue
New York, NY 10017
Counsel and Secretary
335 Madison Avenue
New York, NY 10017
Financial Officer, Treasurer and
Controller
335 Madison Avenue
New York, NY 10017
President
Exhibit (i)(32)
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1095 Avenue of the Americas |
New York, NY 10036-6797 |
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+1 212 698 3500 Main |
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+1 212 698 3599 Fax |
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www.dechert.com |
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April 1, 2011
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. 312 to the Registration Statement filed on Form N-1A under the Securities Act of 1933 (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 Russia 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. 312 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. 316 pursuant to the Investment Company Act of 1940, as amended, in connection with the effectiveness of the Market Vectors Russia 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).
US Austin Boston Charlotte Hartford New York Orange County Philadelphia Princeton San Francisco Silicon Valley Washington DC EUROPE Brussels London Luxembourg Moscow Munich Paris ASIA Beijing Hong Kong
Market Vectors
ETF Trust
April 1, 2011
Page 2
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, |
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/s/ Dechert LLP |