M
ARKET VECTORS—GLOBAL
FRONTIER ETF
P
rincipal Investment
Objective and Strategies
Investment
Objective
. The Fund’s investment objective is to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the Global Frontier Index
SM
(the “Global Frontier
Index”). For a further description of the Global Frontier Index, see “Global
Frontier Index
SM
.”
Principal
Investment Policy
. The Fund will normally invest at
least 80% of its total assets in equity securities, which may include
depositary receipts, of companies either (i) domiciled in frontier emerging
market countries, (ii) primarily listed on an exchange in frontier emerging
market countries or (iii) which generate at least 50% of their revenues in
frontier emerging market countries. Such companies may include small- and
medium-capitalization companies. Frontier emerging market countries are
countries that have smaller economies or less developed capital markets than
traditional emerging market countries. Frontier emerging market countries may
include: Bahrain, Bangladesh, Bulgaria, Croatia, Czech Republic, Ecuador,
Egypt, Estonia, Georgia, Ghana, Jamaica, Jordan, Kazakhstan, Kenya, Kuwait,
Latvia, Lebanon, Lithuania, Malawi, Mauritius, Morocco, New Guinea, Nigeria,
Oman, Pakistan, Panama, Papua, Poland, Qatar, Romania, Slovak Republic,
Slovenia, Sri Lanka, Trinidad and Tobago, Tunisia, Ukraine, United Arab
Emirates, Vietnam and Zimbabwe. The countries that comprise frontier emerging
market countries may change from time to time. This 80% investment policy is non-fundamental
and requires 60 days’ prior written notice to shareholders before it can be
changed.
Indexing
Investment Approach
. The Fund is not managed according
to traditional methods of “active” investment management, which involve the
buying and selling of securities based upon economic, financial and market
analysis and investment judgment. Instead, the Fund, utilizing a “passive” or
indexing investment approach, attempts to approximate the investment
performance of the Global Frontier Index by investing in a portfolio of
securities that generally replicates the Global Frontier Index.
The
Adviser anticipates that, generally, the Fund will hold all of the securities
which comprise the Global Frontier Index in proportion to their weightings in
the Global Frontier Index. However, under various circumstances, it may not be
possible or practicable to purchase all of those securities in these
weightings. In these circumstances, the Fund may purchase a sample of
securities in the Global Frontier Index. There also may be instances in which
the Adviser may choose to overweight another security in the Global Frontier
Index, purchase securities not in the Global Frontier Index which the Adviser
believes are appropriate to substitute for certain securities in the Global
Frontier 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 Global Frontier Index. The Fund
may sell securities that are represented in the Global Frontier Index in
anticipation of their removal from the Global Frontier Index or purchase
securities not represented in the Global Frontier Index in anticipation of
their addition to the Global Frontier Index. The Adviser expects that, over
time, the correlation between the Fund’s performance and that of the Global
Frontier Index before fees and expenses will be [80]% or better. A figure of
100% would indicate perfect correlation.
The
Fund will normally invest at least [80]% of its total assets in securities that
comprise the Global Frontier Index. For these purposes, depositary receipts
will count towards the 80% policy discussed above. A lesser percentage may be
so invested to the extent that the Adviser needs additional flexibility to
comply with the requirements of the Internal Revenue Code and other regulatory
requirements.
- 14 -
Because
of the passive investment management approach of the Fund, the portfolio
turnover rate is expected to be under 30%, generally a lower turnover rate than
for many other investment companies. Sales as a result of Global Frontier Index
changes could result in the realization of short or long-term capital gains in
the Fund resulting in tax liability for shareholders subject to U.S. federal
income tax. See “Shareholder Information—Tax Matters.”
Market
Capitalization
. The Global Frontier Index is comprised
of companies with market capitalizations greater than $100 million. Stocks
whose market capitalization falls below $75 million as of any rebalancing date
shall be deleted from the Global Frontier Index. Stocks must have a three-month
average daily turnover greater than U.S. $1 million per day. The total market
capitalization of the Global Frontier Index as of June 30, 2008 was in excess
of $[ ] billion.
Borrowing
Money
. The Fund may borrow money from a bank up to a
limit of one-third of the market value of its assets, but only for temporary or
emergency purposes. To the extent that the Fund borrows money, it may be
leveraged; at such times, the Fund may appreciate or depreciate in value more
rapidly than its benchmark, the Global Frontier Index.
Fundamental
and Non-Fundamental Policies
. The Fund’s investment
objective and each of the other investment policies are non-fundamental
policies that may be changed by the Board of Trustees without shareholder
approval, except as noted in the SAI under the heading “Investment Policies and
Restrictions—Investment Restrictions.”
P
rincipal 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 Fund’s 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.
Risk
of Investing in Foreign Securities
. Investments in the
securities of non-U.S. issuers involve risks beyond those associated with investments
in U.S. securities. These additional risks include greater market volatility,
the availability of less reliable financial information, higher transactional
and custody costs, taxation by foreign governments, decreased market liquidity
and political instability. Foreign issuers are often subject to less stringent
requirements regarding accounting, auditing, financial reporting and record
keeping than are U.S. issuers, and therefore, not all material information will
be available. Securities exchanges or foreign governments may adopt rules or
regulations that may negatively impact the Fund’s 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 depository receipts that it holds, as the issuers may be under no
legal obligation to distribute them.
Because
the Fund may invest in securities denominated in foreign currencies, changes in
currency exchange rates may negatively impact the Fund’s 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 Fund’s
exposure to foreign currencies may result in reduced returns to the Fund. The
Fund does not expect to hedge its currency risk.
Special
Risk Considerations of Investing in Frontier Emerging Market Country Issuers.
Investment in securities of issuers either domiciled in frontier emerging
market countries, primarily listed on an exchange in frontier emerging market
countries or which generate at least 50% of their revenues in frontier emerging
market countries involves risks not typically associated with investments in
securities
- 15 -
of issuers in
developed countries. Such heightened risks include, among others, expropriation
and/or nationalization of assets, 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 and,
in certain countries, genocidal warfare.
Frontier
emerging market countries generally have less developed capital markets than
traditional emerging market countries, and, consequently, the risks of
investing in emerging market countries are magnified in frontier emerging
market countries. Because securities markets in frontier emerging market
countries are underdeveloped and are less correlated to global economic cycles
than those markets located in more developed countries, frontier emerging
markets are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations and uncertainty regarding the existence of trading markets.
In addition, certain governments of frontier emerging market countries restrict
or control to varying degrees the ability of foreign investors to invest in
securities of issuers operating in those countries. These restrictions and/or
controls may at times limit or prevent foreign investment in securities of
issuers located in frontier emerging market countries. Moreover, certain
frontier emerging market countries require governmental approval 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 the countries and/or impose additional taxes on foreign
investors. These factors make investing in frontier emerging market countries
significantly riskier than investing in other more developed countries and any
one of them could a cause a decline in the value of the Fund’s Shares.
Issuers
located in frontier emerging market countries are not subject to the same rules
and regulations as issuers operating in more developed economies. Therefore,
there may be less financial and other information publicly available with
regard to issuers located in frontier emerging market countries and such
issuers are not subject to the uniform accounting, auditing and financial
reporting standards applicable to issuers located in more developed countries.
In addition, governments of certain frontier emerging market in which the Fund
may invest may levy withholding or other taxes on dividend and interest income.
Although in certain frontier emerging market countries a portion of these taxes
are recoverable, the non-recovered portion of foreign withholding taxes will
reduce the income received from investments in such countries.
Investment
in frontier emerging market countries may be subject to a greater degree of
risk associated with governmental approval in connection with the repatriation
of capital by foreign investors. In addition, there is the risk that a frontier
emerging market country’s balance of payments declines, the frontier emerging
market country may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for repatriation of capital,
as well as by the application to the Fund of any restrictions on investments.
Additionally, investments in frontier emerging markets 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.
Securities
laws in many frontier emerging market countries is 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, there may be no single
centralized securities exchange on which securities are traded in certain
frontier emerging market countries and the systems of corporate governance to
which issuers located in frontier emerging market counties are subject may be
less advanced than that to which issuers located in more developed countries
- 16 -
are subject,
and therefore, shareholders in such companies may not receive many of the
protections available to shareholders in 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 frontier emerging market countries may be inconsistent and subject to
sudden change.
Frontier
emerging market countries may be heavily dependent upon international trade
and, consequently, have been and 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 they trade. These economies 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 frontier emerging market
countries in which the Fund invests may operate in, or have dealings with,
countries subject to sanctions and/or embargos 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.
Market
Risk
. The prices of the securities in the Fund are
subject to the risk associated with investing in the stock market, including
sudden and unpredictable drops in value. An investment in the Fund may lose
money.
Index
Tracking Risk
. The Fund’s return may not match the
return of the Global Frontier Index for a number of reasons. For example, the
Fund incurs a number of operating expenses not applicable to the Global
Frontier Index and incurs costs associated with buying and selling securities,
especially when rebalancing the Fund’s securities holdings to reflect changes
in the composition of the Global Frontier 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. The Fund is
expected to fair value the foreign securities it holds. See “Shareholder
Information—Determination of NAV.” To the extent the Fund calculates its NAV
based on fair value prices and the value of the Global Frontier Index is based
on the securities’ closing price on local foreign markets (
i.e.
, the value of the Global Frontier
Index is not based on fair value prices), the Fund’s ability to track the
Global Frontier Index may be adversely affected. The need to comply with the
diversification and other requirements of the Internal Revenue Code may also
impact the Fund’s ability to replicate the performance of the Global Frontier
Index.
Replication
Management Risk
. Unlike many investment companies, the
Fund is not actively “managed.” Therefore, unless a specific security is
removed from the Global Frontier Index, the Fund generally would not sell a
security because the security’s issuer was in financial trouble. An investment
in the Fund involves risks similar to those of investing in any fund of equity
securities traded on exchanges, such as market fluctuations caused by such
factors as economic and political developments, changes in interest rates and
perceived trends in security prices. You should anticipate that the value of
the Shares will decline, more or less, in correspondence with any decline in
value of the Global Frontier Index.
Non-Diversified
Risk
. The Fund is a separate investment portfolio of
the Trust, which is an open-end investment company registered under the 1940
Act. The Fund is classified as a “non-diversified” investment company under the
1940 Act. As a result, the Fund is subject to the risk that it will be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest larger proportions of the assets of the
Fund in a single company within the industry that comprise the Global Frontier
Index. As of June 30, 2008, the Global Frontier Index included [ ]
- 17 -
securities. As
a result, the gains and losses on a single security may have a greater impact
on the Fund’s NAV and may make the Fund more volatile than diversified funds.
Investing
in Small- or Medium-Capitalization Companies
. The Fund
may invest in small- or medium-capitalization companies. If it does so, it may
be subject to certain risks associated with small- or medium-capitalization
companies. These companies are often subject to less analyst coverage and may
be in early and less predictable periods of their corporate existences. In
addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. These
companies tend to have smaller revenues, narrower product lines, less
management depth and experience, smaller shares of their product or service
markets, fewer financial resources and less competitive strength than larger
companies.
P
erformance
The
Fund has not yet commenced operations and therefore does not have a performance
history.
F
ees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
(a)(b)
|
|
|
|
|
|
|
Shareholder Expenses
(fees paid directly from your investment,
but see “Shareholder Information—Creation and Redemption of Creation Units”
for a discussion of Creation and Redemption Transaction Fees)
|
|
None
|
|
|
Standard Creation/Redemption Transaction
Fee
|
|
$
|
[ ]
|
|
|
Maximum Creation/Redemption Transaction Fee
(b)
|
|
$
|
[ ]
|
|
|
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets)
|
|
|
[ ]
|
%
|
|
Management Fee
|
|
|
[ ]
|
%
|
|
Other Operating Expenses
(c)
|
|
|
[ ]
|
%
|
|
Total Gross Annual Fund Operating Expenses
(d)
|
|
|
[ ]
|
%
|
|
Fee Waivers and Expenses Assumption
(e)
|
|
|
[ ]
|
%
|
|
Total Net Annual Fund Operating Expenses
(e)
|
|
|
[ ]
|
%
|
|
|
|
|
(a)
|
When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges.
|
|
|
|
|
(b)
|
If a Creation Unit is
purchased or redeemed outside the usual process through the NSCC, if
available, or for cash, a variable fee of up to four times the standard
creation or redemption transaction fee will be charged.
|
|
|
|
|
(c)
|
Other operating expenses
are based on estimated amounts for the current fiscal year and calculated as
a percentage of the Fund’s net assets.
|
|
|
|
|
(d)
|
The Adviser has
contractually agreed to waive fees and/or pay Fund expenses to the extent
necessary to prevent the operating expenses of the Fund (excluding interest
expense, offering costs and other trading expenses, taxes and extraordinary
expenses) from exceeding [ ]% of average net assets per year at least until [May 1, 2009].
|
|
|
|
|
(e)
|
The other expenses
excluded from the [ ]%
expense cap are: (a) legal fees pertaining to the Fund’s Shares offered for
sale; (b) SEC and state registration fees; and (c) initial fees paid to be
listed on an exchange.
|
- 18 -
E
xpense Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Fund.
The
Fund sells and redeems Shares in Creation Units principally on an in-kind basis
for portfolio securities of the Global Frontier Index. Shares in less than
Creation Units are not redeemable. An investor purchasing a Creation Unit on an
in-kind basis would pay the following expenses on a $10,000 investment (payment
with a deposit of securities included in the Global Frontier Index), assuming
all Shares are redeemed at the end of the periods shown, a 5% annual return and
that the Fund’s operating expenses remain the same.
Investors should note that the presentation below of a $10,000
investment is for illustration purposes only as Shares will be issued by the
Fund only in Creation Units. Further, the return of 5% and estimated expenses
are for illustration purposes only, and should not be considered indicators of
expected Fund expenses or performance, which may be greater or less than the
estimates. Based on these assumptions, your costs would be
:
|
|
|
|
|
Year
|
|
Expenses
|
|
|
|
|
1
|
|
$[ ]
|
|
3
|
|
$[ ]
|
C
reation Transaction Fees
and Redemption Transaction Fees
The Trust
issues and redeems Shares at NAV only in blocks of 50,000 Shares or multiples
thereof. As a practical matter, only authorized participants may purchase or
redeem these Creation Units. A standard creation transaction fee of $[ ] is
charged to each purchaser of Creation Units. The fee is the same regardless of
the number of Creation Units purchased by an authorized participant on the same
day. An authorized participant who holds Creation Units and wishes to redeem at
NAV would also pay a standard redemption transaction fee of $[ ] on the date of
such redemption(s), regardless of the number of Creation Units redeemed that
day. Authorized participants who hold Creation Units will also pay the annual
Fund operation expenses described in the table above. Assuming an investment in
a Creation Unit of $[ ] and a 5% return each year, and assuming that the Fund’s
operating expenses remain the same, the total costs would be $[ ] if the
Creation Unit is redeemed after one year and $[ ] if the Creation Unit is
redeemed after three years. Investors should note that this presentation is for
illustration purposes only and actual costs may be higher. See “Shareholder
Information—Creation and Redemption of Creation Units.”
- 19 -
MARKET
VECTORS—GULF STATES ETF
Principal Investment Objective and Strategies
Investment
Objective
. The Fund’s investment objective is to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the Gulf Corporation Council Index
SM
(the “GCC Index”). For a further description of the GCC Index, see “Gulf
Corporation Council Index
SM
.”
Principal
Investment Policy
. The Fund will normally invest at least
80% of its total assets in equity securities, which may include depositary
receipts, of companies either (i) domiciled in a country belonging to the Gulf
Corporation Counsel (the “GCC”),
(ii) primarily listed on an exchange in countries belonging to the GCC or (iii)
which generate at least 50% of their revenues in countries belonging to the GCC.
Such companies may include small- and medium-capitalization companies. Countries
belonging to the GCC may include Bahrain, Kuwait, Oman, Qatar, the United Arab
Emirates (“UAE”)
and Saudi Arabia. This 80% investment policy is non-fundamental and requires
60 days’
prior written notice to shareholders before it can be changed.
Indexing
Investment Approach
. The Fund is not managed according
to traditional methods of “active” investment management, which involve the
buying and selling of securities based upon economic, financial and market
analysis and investment judgment. Instead, the Fund, utilizing a “passive” or
indexing investment approach, attempts to approximate the investment
performance of the GCC Index by investing in a portfolio of securities that
generally replicates the GCC Index.
The
Adviser anticipates that, generally, the Fund will hold all of the securities
which comprise the GCC Index in proportion to their weightings in the GCC
Index. However, under various circumstances, it may not be possible or
practicable to purchase all of those securities in these weightings. In these
circumstances, the Fund may purchase a sample of securities in the GCC Index.
There also may be instances in which the Adviser may choose to overweight
another security in the GCC Index, purchase securities not in the GCC Index
which the Adviser believes are appropriate to substitute for certain securities
in the GCC 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 GCC Index. The Fund may sell
securities that are represented in the GCC Index in anticipation of their
removal from the GCC Index or purchase securities not represented in the GCC
Index in anticipation of their addition to the GCC Index. The Adviser expects
that, over time, the correlation between the Fund’s performance and that
of the GCC Index before fees and expenses will be [80]% or better. A figure
of 100% would indicate perfect correlation.
The
Fund will normally invest at least [80]% of its total assets in securities that
comprise the GCC Index. For these purposes, depositary receipts will count
towards the 80% policy discussed above. A lesser percentage may be so invested
to the extent that the Adviser needs additional flexibility to comply with the
requirements of the Internal Revenue Code and other regulatory requirements.
Because
of the passive investment management approach of the Fund, the portfolio
turnover rate is expected to be under 30%, generally a lower turnover rate than
for many other investment companies. Sales as a result of GCC Index changes
could result in the realization of short or long-term capital gains in the Fund
resulting in tax liability for shareholders subject to U.S. federal income tax.
See “Shareholder Information—Tax Matters.”
Market
Capitalization
. The GCC Index is comprised of
companies with market capitalizations greater than $100 million. Stocks whose
market capitalization falls below $75 million as of any rebalancing date shall
be deleted from the GCC Index. Stocks must have a three-month average daily
- 20 -
turnover
greater than U.S. $1 million per day. The total market capitalization of the
GCC Index as of June 30, 2008 was in excess of $[ ] billion.
Borrowing
Money
. The Fund may borrow money from a bank up to a
limit of one-third of the market value of its assets, but only for temporary or
emergency purposes. To the extent that the Fund borrows money, it may be
leveraged; at such times, the Fund may appreciate or depreciate in value more
rapidly than its benchmark, the GCC Index.
Fundamental
and Non-Fundamental Policies
. The Fund’s investment
objective and each of the other investment policies are non-fundamental
policies that may be changed by the Board of Trustees without shareholder
approval, except as noted in the SAI under the heading “Investment Policies and
Restrictions—Investment Restrictions.”
Principal Risks of Investing in
the Fund
Investors
in the Fund should be willing to accept a high degree of volatility in the
price of the Fund’s 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.
Risk
of Investing in Foreign Securities
. Investments in the
securities of non-U.S. issuers involve risks beyond those associated with
investments in U.S. securities. These additional risks include greater market
volatility, the availability of less reliable financial information, higher
transactional and custody costs, taxation by foreign governments, decreased
market liquidity and political instability. Foreign issuers are often subject
to less stringent requirements regarding accounting, auditing, financial
reporting and record keeping than are U.S. issuers, and therefore, not all
material information will be available. Securities exchanges or foreign
governments may adopt rules or regulations that may negatively impact the
Fund’s 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 depository receipts that it holds,
as the issuers may be under no legal obligation to distribute them.
Because
the Fund may invest in securities denominated in foreign currencies, changes in
currency exchange rates may negatively impact the Fund’s 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 Fund’s
exposure to foreign currencies may result in reduced returns to the Fund. The
Fund does not expect to hedge its currency risk.
Special
Risk Considerations of Investing in GCC Issuers.
Investment in securities of companies either domiciled in countries belonging
to the GCC, primarily listed on an exchange in countries belonging to the GCC
or which generate at least 50% of their revenues in countries belonging to the
GCC involves risks not typically associated with investments in securities of
issuers in developed countries. Such heightened risks include, among others,
expropriation and/or nationalization of assets, 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 and, in certain
countries, genocidal warfare.
Certain
countries belonging to the GCC generally have less developed capital markets
than traditional emerging market countries, and, consequently, the risks of
investing in foreign securities are magnified in countries belonging to the GCC.
Because securities markets in certain countries belonging to the GCC are
underdeveloped and are less correlated to global economic cycles than those
markets located in
- 21 -
more developed
countries, securities markets in countries belonging to the GCC are subject to greater risks
associated with market volatility, lower market capitalization, lower trading
volume, illiquidity, inflation, greater price fluctuations and uncertainty
regarding the existence of trading markets. In addition, certain governments in countries belonging to the GCC restrict or control to varying degrees the ability of foreign
investors to invest in securities of issuers operating in those countries.
These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located in countries belonging to the GCC.
Moreover, certain countries belonging to the GCC require governmental approval
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 the countries and/or impose additional taxes on foreign
investors. These factors make investing in issuers located in countries belonging to the GCC significantly riskier than investing in issuers located in more
developed countries, and any one of them could a cause a decline in the value
of the Fund’s Shares.
Issuers
located in countries belonging to the GCC are not subject to the same rules and
regulations as issuers operating in more developed economies. Therefore, there
may be less financial and other information publicly available with regard to
issuers located in countries belonging to the GCC and such issuers are not
subject to the uniform accounting, auditing and financial reporting standards
applicable to issuers located in more developed countries. In addition,
governments of certain countries belonging to the GCC in which the Fund may
invest may levy withholding or other taxes on dividend and interest income.
Although in certain countries belonging to the GCC a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries.
Investment
in countries belonging to the GCC may be subject to a greater degree of risk
associated with governmental approval in connection with the repatriation of
capital by foreign investors. In addition, there is the risk that if a country
belonging to the GCC’s
balance of payments declines, the country may
impose temporary restrictions on foreign capital remittances. Consequently, the
Fund could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments. Additionally, investments in
countries belonging to the GCC 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.
Securities
laws in many countries belonging to the GCC 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, there may be no single
centralized securities exchange on which securities are traded in certain
countries belonging to the GCC and the systems of corporate governance to which
issuers located in countries belonging to the GCC are subject may be less
advanced than that to which issuers located in more developed countries are
subject, and therefore, shareholders in such companies may not receive many of
the protections available to shareholders in 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 countries belonging to the GCC may be inconsistent and
subject to sudden change.
Certain
countries belonging to the GCC may be heavily dependent upon international trade
and, consequently, have been and 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 they trade. These economies also have been and may continue to be
adversely
- 22 -
affected by
economic conditions in the countries with which they trade. In addition,
certain issuers located in countries belonging to the GCC in which the Fund
invests may operate in, or have dealings with, countries subject to sanctions
and/or embargos 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.
Market
Risk
. The prices of the securities in the Fund are
subject to the risk associated with investing in the stock market, including
sudden and unpredictable drops in value. An investment in the Fund may lose
money.
Index
Tracking Risk
. The Fund’s return may not match the
return of the GCC Index for a number of reasons. For example, the Fund incurs a
number of operating expenses not applicable to the GCC Index and incurs costs
associated with buying and selling securities, especially when rebalancing the
Fund’s securities holdings to reflect changes in the composition of the GCC 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. The Fund is expected to fair value the foreign securities it holds.
See “Shareholder Information—Determination of NAV.” To the extent the Fund
calculates its NAV based on fair value prices and the value of the GCC Index is
based on the securities’ closing price on local foreign markets (
i.e.
,
the value of the GCC Index is not based on fair value prices), the Fund’s
ability to track the GCC Index may be adversely affected. The need to comply
with the diversification and other requirements of the Internal Revenue Code
may also impact the Fund’s ability to replicate the performance of the GCC Index.
Replication
Management Risk
. Unlike many investment companies, the
Fund is not actively “managed.” Therefore, unless a specific security is
removed from the GCC Index, the Fund generally would not sell a security
because the security’s issuer was in financial trouble. An investment in the
Fund involves risks similar to those of investing in any fund of equity
securities traded on exchanges, such as market fluctuations caused by such
factors as economic and political developments, changes in interest rates and
perceived trends in security prices. You should anticipate that the value of
the Shares will decline, more or less, in correspondence with any decline in
value of the GCC Index.
Non-Diversified
Risk
. The Fund is a separate investment portfolio of
the Trust, which is an open-end investment company registered under the 1940
Act. The Fund is classified as a “non-diversified” investment company under the
1940 Act. As a result, the Fund is subject to the risk that it will be more volatile
than a diversified fund because the Fund may invest its assets in a smaller
number of issuers or may invest larger proportions of the assets of the Fund in
a single company within the industry that comprise the GCC Index. As of June
30, 2008, the GCC Index included [ ] securities. As a result, the gains and
losses on a single security may have a greater impact on the Fund’s NAV and may
make the Fund more volatile than diversified funds.
Investing
in Small- or Medium-Capitalization Companies
. The Fund
may invest in small- or medium-capitalization companies. If it does so, it may
be subject to certain risks associated with small- or medium-capitalization
companies. These companies are often subject to less analyst coverage and may
be in early and less predictable periods of their corporate existences. In
addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. These
companies tend to have smaller revenues, narrower product lines, less
management depth and experience, smaller shares of their product or service
markets, fewer financial resources and less competitive strength than larger
companies.
- 23 -
Performance
The
Fund has not yet commenced operations and therefore does not have a performance
history.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
(a)(b)
|
|
|
|
|
|
Shareholder Expenses
(fees paid directly from your investment, but see “Shareholder
Information—Creation and Redemption of Creation Units” for a discussion of
Creation and Redemption Transaction Fees)
|
|
None
|
|
|
Standard
Creation/Redemption Transaction Fee
|
|
$[ ]
|
|
|
Maximum
Creation/Redemption Transaction Fee
(b)
|
|
$[ ]
|
|
|
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
|
|
|
|
|
Management
Fee
|
|
[ ]%
|
|
|
Other
Operating Expenses
(c)
|
|
[ ]%
|
|
|
Total Gross
Annual Fund Operating Expenses
(d)
|
|
[ ]%
|
|
|
Fee Waivers
and Expenses Assumption
(e)
|
|
[ ]%
|
|
|
Total Net
Annual Fund Operating Expenses
(e)
|
|
[ ]%
|
|
|
|
|
|
|
|
(a)
|
When buying
or selling Shares through a broker, you will incur customary brokerage
commissions and charges.
|
|
|
|
|
(b)
|
If a
Creation Unit is purchased or redeemed outside the usual process through the
NSCC, if available, or for cash, a variable fee of up to four times the
standard creation or redemption transaction fee will be charged.
|
|
|
|
|
(c)
|
Other
operating expenses are based on estimated amounts for the current fiscal year
and calculated as a percentage of the Fund’s net assets.
|
|
|
|
|
(d)
|
The Adviser
has contractually agreed to waive fees and/or pay Fund expenses to the extent
necessary to prevent the operating expenses of the Fund (excluding interest
expense, offering costs and other trading expenses, taxes and extraordinary
expenses) from exceeding [ ]% of
average net assets per year at least until [May 1, 2009].
|
|
|
|
|
(e)
|
The other
expenses excluded from the [ ]%
expense cap are: (a) legal fees pertaining to the Fund’s Shares offered
for sale; (b) SEC and state registration fees; and (c) initial fees
paid to be listed on an exchange.
|
Expense Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Fund.
The
Fund sells and redeems Shares in Creation Units principally on an in-kind basis
for portfolio securities of the GCC Index. Shares in less than Creation Units
are not redeemable. An investor purchasing a Creation Unit on an in-kind basis
would pay the following expenses on a $10,000 investment (payment with a
deposit of securities included in the GCC Index), assuming all Shares are redeemed
at the end of the periods shown, a 5% annual return and that the Fund’s
operating expenses remain the same.
Investors should note that the presentation below of
a $10,000 investment is for illustration purposes only as Shares will be issued
by the Fund only in Creation Units. Further, the return of 5% and estimated
expenses are for illustration purposes only, and should not be considered
- 24 -
indicators of expected Fund expenses or
performance, which may be greater or less than the estimates. Based on these
assumptions, your costs would be
:
|
|
|
|
|
|
Year
|
|
Expenses
|
|
|
|
|
|
|
1
|
|
$[ ]
|
|
|
3
|
|
$[ ]
|
|
Creation Transaction Fees and Redemption
Transaction Fees
The Trust
issues and redeems Shares at NAV only in blocks of 50,000 Shares or
multiples thereof. As a practical matter, only authorized participants may
purchase or redeem these Creation Units. A standard creation transaction fee of
$[ ] is charged to each purchaser of
Creation Units. The fee is the same regardless of the number of Creation Units
purchased by an authorized participant on the same day. An authorized
participant who holds Creation Units and wishes to redeem at NAV would also pay
a standard redemption transaction fee of $[ ] on the date of such redemption(s), regardless of the number of Creation
Units redeemed that day. Authorized participants who hold Creation Units will
also pay the annual Fund operation expenses described in the table above.
Assuming an investment in a Creation Unit of $[ ] and a 5% return each year, and assuming that the Fund’s
operating expenses remain the same, the total costs would be $[ ] if the Creation Unit is redeemed after
one year and $[ ] if the Creation
Unit is redeemed after three years. Investors should note that this
presentation is for illustration purposes only and actual costs may be higher.
See “Shareholder Information—Creation and Redemption of Creation Units.”
- 25 -
MARKET VECTORS—VIETNAM ETF
Principal Investment Objective and Strategies
Investment
Objective
. The Fund’s investment objective is to
replicate as closely as possible, before fees and expenses, the price and yield
performance of the Vietnam Index
SM
(the “Vietnam Index”). For a
further description of the Vietnam Index, see “Vietnam Index
SM
.”
Principal
Investment Policy
. The Fund will normally invest at
least 80% of its total assets in equity securities, which may include
depositary receipts, of companies either (i) domiciled in Vietnam, (ii)
primarily listed on an exchange in Vietnam or (iii) which generate at least 50%
of their revenues in Vietnam. Such companies may include small- and
medium-capitalization companies. This 80% investment policy is non-fundamental
and requires 60 days’ prior written notice to shareholders before it can be
changed.
Indexing
Investment Approach
. The Fund is not managed according
to traditional methods of “active” investment management, which involve the
buying and selling of securities based upon economic, financial and market
analysis and investment judgment. Instead, the Fund, utilizing a “passive” or
indexing investment approach, attempts to approximate the investment
performance of the Vietnam Index by investing in a portfolio of securities that
generally replicates the Vietnam Index.
The
Adviser anticipates that, generally, the Fund will hold all of the securities
which comprise the Vietnam Index in proportion to their weightings in the
Vietnam Index. However, under various circumstances, it may not be possible or
practicable to purchase all of those securities in these weightings. In these
circumstances, the Fund may purchase a sample of securities in the Vietnam
Index. There also may be instances in which the Adviser may choose to
overweight another security in the Vietnam Index, purchase securities not in the
Vietnam Index which the Adviser believes are appropriate to substitute for
certain securities in the Vietnam 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
Vietnam Index. The Fund may sell securities that are represented in the Vietnam
Index in anticipation of their removal from the Vietnam Index or purchase
securities not represented in the Vietnam Index in anticipation of their
addition to the Vietnam Index. The Adviser expects that, over time, the
correlation between the Fund’s performance and that of the Vietnam Index
before fees and expenses will be [80]% or better. A figure of 100% would indicate
perfect correlation.
The
Fund will normally invest at least [80]% of its total assets in securities that
comprise the Vietnam Index. For these purposes, depositary receipts will count
towards the 80% policy discussed above. A lesser percentage may be so invested
to the extent that the Adviser needs additional flexibility to comply with the
requirements of the Internal Revenue Code and other regulatory requirements.
Because
of the passive investment management approach of the Fund, the portfolio turnover
rate is expected to be under 30%, generally a lower turnover rate than for many
other investment companies. Sales as a result of Vietnam Index changes could
result in the realization of short or long-term capital gains in the Fund
resulting in tax liability for shareholders subject to U.S. federal income tax.
See “Shareholder Information—Tax Matters.”
Market
Capitalization
. The Vietnam Index is comprised of
companies with market capitalizations greater than $200 million. Stocks whose
market capitalization falls below $100 million as of any rebalancing date shall
be deleted from the Vietnam Index. Stocks must have a three-month average daily
turnover greater than U.S. $1 million per day. The total market capitalization
of the Vietnam Index as of June 30, 2008 was in excess of $[ ]
billion.
- 26 -
Borrowing
Money
. The Fund may borrow money from a bank up to a
limit of one-third of the market value of its assets, but only for temporary or
emergency purposes. To the extent that the Fund borrows money, it may be
leveraged; at such times, the Fund may appreciate or depreciate in value more
rapidly than its benchmark, the Vietnam Index.
Fundamental
and Non-Fundamental Policies
. The Fund’s investment
objective and each of the other investment policies are non-fundamental
policies that may be changed by the Board of Trustees without shareholder
approval, except as noted in the SAI under the heading “Investment Policies and
Restrictions—Investment Restrictions.”
Principal Risks of Investing in the Fund
Investors
in the Fund should be willing to accept a high degree of volatility in the
price of the Fund’s 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.
Risk
of Investing in Foreign Securities
. Investments in the
securities of non-U.S. issuers involve risks beyond those associated with
investments in U.S. securities. These additional risks include greater market
volatility, the availability of less reliable financial information, higher
transactional and custody costs, taxation by foreign governments, decreased
market liquidity and political instability. Foreign issuers are often subject
to less stringent requirements regarding accounting, auditing, financial
reporting and record keeping than are U.S. issuers, and therefore, not all
material information will be available. Securities exchanges or foreign
governments may adopt rules or regulations that may negatively impact the
Fund’s 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 depository receipts that it holds,
as the issuers may be under no legal obligation to distribute them.
Because
the Fund may invest in securities denominated in foreign currencies, changes in
currency exchange rates may negatively impact the Fund’s 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 Fund’s
exposure to foreign currencies may result in reduced returns to the Fund. The
Fund does not expect to hedge its currency risk.
Special
Risk Considerations of Investing in Vietnamese Issuers.
Investment in securities of companies either domiciled in Vietnam, primarily
listed on an exchange in Vietnam or which generate at least 50% of their
revenues in Vietnam involves risks not typically associated with investments
in securities of issuers in developed countries. Such heightened risks include,
among others, expropriation and/or nationalization of assets, 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 and, in certain countries, genocidal warfare.
Vietnam
generally have less developed capital markets than traditional emerging market
countries, and, consequently, the risks of investing in foreign securities are
magnified with respect to investments in Vietnam. Because securities markets in
Vietnam are underdeveloped and are less correlated to global economic cycles
than those markets located in more developed countries, securities markets in
Vietnam are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations and uncertainty regarding the existence of trading markets.
In addition, the government in Vietnam may restrict or
- 27 -
control to
varying degrees the ability of foreign investors to invest in securities of
issuers operating in Vietnam. These restrictions and/or controls may at times
limit or prevent foreign investment in securities of issuers located in
Vietnam. Moreover, governmental approval prior to investments by foreign
investors may be requires in Vietnam 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 Vietnam and/or impose additional taxes on foreign investors.
These factors make investing in issuers located in Vietnam significantly
riskier than investing in issuers located in more developed countries, and any
one of them could a cause a decline in the value of the Fund’s Shares.
Issuers
located in Vietnam are not subject to the same rules and regulations as issuers
operating in more developed economies. Therefore, there may be less financial
and other information publicly available with regard to issuers located in
Vietnam and such issuers are not subject to the uniform accounting, auditing
and financial reporting standards applicable to issuers located in more developed
countries. In addition, the government of Vietnam may levy withholding or other
taxes on dividend and interest income. Although a portion of these taxes may be
recoverable, any non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries.
Investment
in Vietnam may be subject to a greater degree of risk associated with
governmental approval in connection with the repatriation of capital by foreign
investors. In addition, there is the risk that if Vietnam’s balance of payments
declines, Vietnam may impose temporary restrictions on foreign capital
remittances. Consequently, the Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Fund of any restrictions on
investments. Additionally, investments in Vietnam 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.
Securities
laws in Vietnam 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, there may be no single centralized securities
exchange on which securities are traded in Vietnam and the systems of corporate
governance to which issuers located in Vietnam are subject may be less advanced
than that to which issuers located in more developed countries are subject, and
therefore, shareholders in such companies may not receive many of the
protections available to shareholders in 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 Vietnam may be inconsistent and subject to sudden change.
Vietnam
may be heavily dependent upon international trade and, consequently, may have
been and 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. The economy of Vietnam also has been and may continue to be adversely
affected by economic conditions in the countries with which it trades. In
addition, certain issuers located in Vietnam in which the Fund invests may
operate in, or have dealings with, countries subject to sanctions and/or
embargos 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.
- 28 -
Market
Risk
. The prices of the securities in the Fund are
subject to the risk associated with investing in the stock market, including
sudden and unpredictable drops in value. An investment in the Fund may lose
money.
Index
Tracking Risk
. The Fund’s return may not match the
return of the Vietnam Index for a number of reasons. For example, the Fund
incurs a number of operating expenses not applicable to the Vietnam Index and
incurs costs associated with buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the
composition of the Vietnam 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. The Fund is expected to fair value
the foreign securities it holds. See “Shareholder Information—Determination of
NAV.” To the extent the Fund calculates its NAV based on fair value prices and
the value of the Vietnam Index is based on the securities’ closing price on
local foreign markets (
i.e.
, the value of the Vietnam Index is
not based on fair value prices), the Fund’s ability to track the Vietnam Index
may be adversely affected. The need to comply with the diversification and
other requirements of the Internal Revenue Code may also impact the Fund’s
ability to replicate the performance of the Vietnam Index.
Replication
Management Risk
. Unlike many investment companies, the
Fund is not actively “managed.” Therefore, unless a specific security is
removed from the Vietnam Index, the Fund generally would not sell a security
because the security’s issuer was in financial trouble. An investment in the
Fund involves risks similar to those of investing in any fund of equity
securities traded on exchanges, such as market fluctuations caused by such
factors as economic and political developments, changes in interest rates and
perceived trends in security prices. You should anticipate that the value of
the Shares will decline, more or less, in correspondence with any decline in
value of the Vietnam Index.
Non-Diversified
Risk
. The Fund is a separate investment portfolio of
the Trust, which is an open-end investment company registered under the 1940
Act. The Fund is classified as a “non-diversified” investment company under the
1940 Act. As a result, the Fund is subject to the risk that it will be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest larger proportions of the assets of the
Fund in a single company within the industry that comprise the Vietnam Index.
As of June 30, 2008, the Vietnam Index included [ ] securities. As a result,
the gains and losses on a single security may have a greater impact on the
Fund’s NAV and may make the Fund more volatile than diversified funds.
Investing
in Small- or Medium-Capitalization Companies
. The Fund
may invest in small- or medium-capitalization companies. If it does so, it may
be subject to certain risks associated with small- or medium-capitalization
companies. These companies are often subject to less analyst coverage and may
be in early and less predictable periods of their corporate existences. In
addition, these companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. These
companies tend to have smaller revenues, narrower product lines, less
management depth and experience, smaller shares of their product or service
markets, fewer financial resources and less competitive strength than larger
companies.
Performance
The
Fund has not yet commenced operations and therefore does not have a performance
history.
Fees and Expenses
This table
describes the fees and expenses that you may pay if you buy and hold Shares of
the Fund.
(a)(b)
- 29 -
|
|
|
|
|
|
Shareholder Expenses
(fees paid directly from your investment, but see “Shareholder Information—Creation
and Redemption of Creation Units” for a discussion of Creation and Redemption
Transaction Fees)
|
|
None
|
|
|
Standard
Creation/Redemption Transaction Fee
|
|
$[ ]
|
|
|
Maximum
Creation/Redemption Transaction Fee
(b)
|
|
$[ ]
|
|
|
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
|
|
|
|
|
Management
Fee
|
|
[ ]
|
%
|
|
Other
Operating Expenses
(c)
|
|
[ ]
|
%
|
|
Total Gross
Annual Fund Operating Expenses
(d)
|
|
[ ]
|
%
|
|
Fee Waivers
and Expenses Assumption
(e)
|
|
[ ]
|
%
|
|
Total Net
Annual Fund Operating Expenses
(e)
|
|
[ ]
|
%
|
|
|
|
|
|
|
(a)
|
When buying
or selling Shares through a broker, you will incur customary brokerage
commissions and charges.
|
|
|
|
|
(b)
|
If a
Creation Unit is purchased or redeemed outside the usual process through the
NSCC, if available, or for cash, a variable fee of up to four times the
standard creation or redemption transaction fee will be charged.
|
|
|
|
|
(c)
|
Other
operating expenses are based on estimated amounts for the current fiscal year
and calculated as a percentage of the Fund’s net assets.
|
|
|
|
|
(d)
|
The Adviser
has contractually agreed to waive fees and/or pay Fund expenses to the extent
necessary to prevent the operating expenses of the Fund (excluding interest
expense, offering costs and other trading expenses, taxes and extraordinary
expenses) from exceeding [ ]% of
average net assets per year at least until [May 1, 2009].
|
|
|
|
|
(e)
|
The other
expenses excluded from the [ ]%
expense cap are: (a) legal fees pertaining to the Fund’s Shares offered
for sale; (b) SEC and state registration fees; and (c) initial fees paid
to be listed on an exchange.
|
Expense Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Fund.
The
Fund sells and redeems Shares in Creation Units principally on an in-kind basis
for portfolio securities of the Vietnam Index. Shares in less than Creation
Units are not redeemable. An investor purchasing a Creation Unit on an in-kind
basis would pay the following expenses on a $10,000 investment (payment with a
deposit of securities included in the Vietnam Index), assuming all Shares are
redeemed at the end of the periods shown, a 5% annual return and that the
Fund’s operating expenses remain the same.
Investors should note that the presentation below of
a $10,000 investment is for illustration purposes only as Shares will be issued
by the Fund only in Creation Units. Further, the return of 5% and estimated
expenses are for illustration purposes only, and should not be considered
indicators of expected Fund expenses or performance, which may be greater or
less than the estimates. Based on these assumptions, your costs would be
:
|
|
|
|
|
|
Year
|
|
Expenses
|
|
|
|
|
|
|
1
|
|
$[ ]
|
|
|
3
|
|
$[ ]
|
|
- 30 -
Creation
Transaction Fees and Redemption Transaction Fees
The Trust issues and redeems
Shares at NAV only in blocks of 50,000 Shares or multiples thereof. As a
practical matter, only authorized participants may purchase or redeem these
Creation Units. A standard creation transaction fee of $[ ] is charged to each purchaser of Creation
Units. The fee is the same regardless of the number of Creation Units purchased
by an authorized participant on the same day. An authorized participant who
holds Creation Units and wishes to redeem at NAV would also pay a standard
redemption transaction fee of $[ ] on
the date of such redemption(s), regardless of the number of Creation Units
redeemed that day. Authorized participants who hold Creation Units will also
pay the annual Fund operation expenses described in the table above. Assuming
an investment in a Creation Unit of $[ ] and a 5% return each year, and assuming that the Fund’s operating
expenses remain the same, the total costs would be $[ ] if the Creation Unit is redeemed after one year and $[ ] if the Creation
Unit is redeemed after
three years. Investors should note that this presentation is for illustration
purposes only and actual costs may be higher. See “Shareholder
Information—Creation and Redemption of Creation Units.”
- 31 -
AFRICA
INDEX
SM
The
Africa Index (the “Africa Index”) is a rules based index intended
to give investors a means of tracking the overall performance of companies that
are headquartered in Africa or that generate the majority of their revenues
in Africa. The Africa Index is a modified capitalization weighted, float adjusted
index comprised of publicly traded companies headquartered in Africa and companies
generating the majority of their revenues in Africa.
Constituent
stocks for the Africa Index must have a market capitalization of greater than
$200 million on a rebalancing date to be added to the Africa Index. Stocks
whose market capitalization falls below $100 million as of any rebalancing date
will be deleted from the Africa Index. Stocks must have a three-month average
daily turnover greater than U.S. $1 million to be included in the Africa Index.
Only shares that trade on a recognized domestic or international stock exchange
may qualify (e.g., National Stock Market stocks must be “reported securities”
under 11Aa3-1 of the Exchange Act. Similar criteria and standards apply to
stocks with foreign listings).
The
Africa Index is calculated and maintained by
[ ]. Index values
are calculated daily, except Saturdays and Sundays, and are distributed over
the Consolidated Tape Association’s Network B between the hours of
approximately 7:00 p.m. and 6:15 p.m. Index values are disseminated every 15
seconds.
The
Africa 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
Africa Index is reconstituted quarterly, at the close of business on the third
Friday of each calendar quarter, and companies are added and/or deleted based
upon the Africa Index eligibility criteria. Companies with recent stock
exchange listings, i.e., recent initial public offerings, may be added to the
Africa Index on any rebalancing date, provided the companies meet all
eligibility criteria and have been trading for more than 10 trading days. The
share weights of the Africa Index components are adjusted on each rebalancing date.
Rebalancing
data, including constituent weights and related information, is posted on the
Index’s 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 Africa Index is issued on the Wednesday prior to
a rebalancing date. Share weights of the constituents remain constant between
quarters except in the event of certain types of corporate actions, including
stock splits and reverse stock splits. Share weights of the Africa Index are
not adjusted between rebalancing dates for shares issued or shares repurchased.
- 32 -
EMERGING
EUROPE & COMMONWEALTH OF INDEPENDENT STATES (EX RUSSIA) INDEX
SM
The
Emerging Europe & Commonwealth of Independent States (ex Russia) Index (“EE & CIS
(ex Russia) Index”) is a rules based index intended to give investors
a means of tracking the overall performance of companies either headquartered
in Eastern Europe (excluding Russia) or South-East Europe or in the
Commonwealth of Independent States (ex Russia) (the “CIS”) or generating
a majority of their revenues in Eastern Europe (excluding Russia) or South-East
Europe or in the CIS (ex Russia). The EE & CIS
Index is a modified capitalization weighted, float adjusted index comprised of
publicly traded companies domiciled in Armenia, Azerbaijan, Belarus, Georgia,
Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Ukraine and Uzbekistan; Bulgaria,
Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia
and Slovenia; Albania, Croatia, Macedonia, Serbia, Bosnia and Herzegovina, and
Montenegro, companies primarily listed on an exchange in Eastern Europe
(excluding Russia) or South-East Europe or in the CIS, or companies generating
the majority of their revenues in Eastern Europe (excluding Russia) or
South-East Europe or in the CIS (ex Russia).
Constituent
stocks for the EE & CIS (ex Russia) Index must have a market capitalization
of greater than $100 million on a rebalancing date to be added to the EE & CIS
(ex Russia) Index. Stocks whose market capitalization falls below $75 million
as of any rebalancing date will be deleted from the EE
& CIS (ex Russia) Index. Stocks must have a three-month average daily turnover
greater than U.S. $1 million to be included in the EE & CIS (ex Russia) Index.
Only shares that trade on a recognized domestic or international stock exchange
may qualify (e.g., National Stock Market stocks must be “reported securities” under
11Aa3-1 of the Exchange Act. Similar criteria and standards apply to stocks
with foreign listings).
The
EE & CIS (ex Russia) Index is calculated and maintained by [ ].
Index values are calculated daily, except Saturdays, and are distributed over
the Consolidated Tape Association’s Network B between the hours of
approximately 7:00 p.m. and 6:15 p.m.. Index values are disseminated every 15
seconds.
The
EE & CIS (ex Russia) 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 EE & CIS (ex Russia) Index is reconstituted quarterly, at the
close of business on the third Friday of each calendar quarter, and companies
are added and/or deleted based upon the EE & CIS (ex Russia) Index
eligibility criteria. Companies with recent stock exchange listings, i.e.,
recent initial public offerings, may be added to the EE & CIS
(ex Russia) Index on any rebalancing date, provided the companies meet all eligibility
criteria and have been trading for more than 10 trading days. The share weights
of the EE & CIS (ex Russia) Index components are adjusted on each
rebalancing date.
Rebalancing
data, including constituent weights and related information, is posted on the
Index’s 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 EE & CIS (ex Russia) Index is
issued on the Wednesday prior to a rebalancing date. Share weights of the
constituents remain constant between quarters except in the event of certain
types of corporate actions, including stock splits and reverse stock splits.
Share weights of the EE & CIS (ex Russia) Index are not adjusted between
rebalancing dates for shares issued or shares repurchased.
- 33 -
GLOBAL
FRONTIER INDEX
SM
The
Global Frontier Index is a rules based index intended to give investors a means
of tracking the overall performance of companies either headquartered in
frontier markets (i.e., countries with smaller economies or less developed capital
markets than traditional emerging markets) or generating the majority of
their revenues in frontier markets. The Global Frontier
Index is a modified capitalization weighted, float adjusted index.
Constituent
stocks for the Global Frontier Index must have a market capitalization of
greater than $100 million on a rebalancing date to be added to the Global
Frontier Index. Stocks whose market capitalization falls below $75 million as
of any rebalancing date will be deleted from the Global Frontier Index. Stocks
must have a three-month average daily turnover greater than U.S. $1 million to
be included in the Global Frontier Index. Only shares that trade on a
recognized domestic or international stock exchange may qualify (e.g., National
Stock Market stocks must be “reported securities” under 11Aa3-1 of the Exchange
Act. Similar criteria and standards apply to stocks with foreign listings).
The
Global Frontier Index is calculated and maintained by
[ ]. Index values
are calculated daily, except Saturdays, and are distributed over the
Consolidated Tape Association’s Network B between the hours of approximately
7:00 p.m. and 6:15 p.m.. Index values are disseminated every 15 seconds.
The
Global Frontier 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 Global Frontier Index is reconstituted quarterly, at the close of
business on the third Friday of each calendar quarter, and companies are added
and/or deleted based upon the Global Frontier Index eligibility criteria.
Companies with recent stock exchange listings, i.e., recent initial public
offerings, may be added to the Global Frontier Index on any rebalancing date,
provided the companies meet all eligibility criteria and have been trading for
more than 10 trading days. The share weights of the Global Frontier Index
components are adjusted on each rebalancing date.
Rebalancing
data, including constituent weights and related information, is posted on the
Index’s 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 Global Frontier Index is issued on
the Wednesday prior to a rebalancing date. Share weights of the constituents
remain constant between quarters except in the event of certain types of
corporate actions, including stock splits and reverse stock splits. Share
weights of the Global Frontier Index are not adjusted between rebalancing dates
for shares issued or shares repurchased.
- 34 -
GULF CORPORATION COUNCIL INDEX
SM
The
Gulf Corporation Council Index (“GCC Index”) is a
rules based index intended to give investors a means of tracking the overall
performance of companies either headquartered in countries belonging to the GCC
or generating the majority of their revenues in countries belonging to the GCC.
The GCC Index is a modified capitalization weighted, float adjusted index comprised
of publicly traded companies headquartered in the GCC, i.e., Bahrain, Kuwait,
Oman, Qatar, UAE and Saudia Arabia (if new countries are approved to the GCC,
they will also be added to the GCC Index) and companies generating the majority
of their revenues in Bahrain, Kuwait, Oman, Qatar, UAE and Saudi Arabia (these
markets have to be open for foreign investment in order to be eligible).
Constituent
stocks for the GCC Index must have a market capitalization of greater than $100
million on a rebalancing date to be added to the GCC Index. Stocks whose market
capitalization falls below $75 million as of any rebalancing date will be
deleted from the GCC Index. Stocks must have a three-month average daily
turnover greater than U.S. $1 million to be included in the GCC Index. Only
shares that trade on a recognized domestic or international stock exchange may
qualify (e.g., National Stock Market stocks must be “reported securities” under
11Aa3-1 of the Exchange Act. Similar criteria and standards apply to stocks
with foreign listings).
The
GCC Index is calculated and maintained by
[ ].
Index values are calculated daily, except Saturdays, and are distributed over
the Consolidated Tape Association’s Network B between the hours of approximately
7:00 p.m. and 6:15 p.m.. Index values are disseminated every 15 seconds.
The
GCC 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
GCC Index is reconstituted quarterly, at the close of business on the third
Thursday of each calendar quarter, and companies are added and/or deleted based
upon the GCC Index eligibility criteria. Companies with recent stock exchange
listings, i.e., recent initial public offerings, may be added to the GCC Index
on any rebalancing date, provided the companies meet all eligibility criteria
and have been trading for more than 10 trading days. The share weights of the
GCC Index components are adjusted on each rebalancing date.
Rebalancing
data, including constituent weights and related information, is posted on the
Index’s web site prior to the start of trading on the first business day
following the third Wednesday of the calendar quarter. A press announcement
identifying additions and deletions to the GCC Index is issued on the Tuesday
prior to a rebalancing date. Share weights of the constituents remain constant
between quarters except in the event of certain types of corporate actions,
including stock splits and reverse stock splits. Share weights of the GCC Index
are not adjusted between rebalancing dates for shares issued or shares
repurchased.
- 35 -
VIETNAM INDEX
SM
The
Vietnam Index (“Vietnam Index”) is a rules based index intended to
give investors a means of tracking the overall performance of companies either
headquartered in Vietnam or generating a majority of their revenues in Vietnam.
The Vietnam Index is a modified capitalization weighted, float adjusted index
comprised of publicly traded companies headquartered in Vietnam and companies
generating the majority of their revenues in Vietnam.
Constituent
stocks for the Vietnam Index must have a market capitalization of greater than
$200 million on a rebalancing date to be added to the Vietnam Index. Stocks
whose market capitalization falls below $100 million as of any rebalancing date
will be deleted from the Vietnam Index. Stocks must have a three-month average
daily turnover greater than U.S. $1 million to be included in the Vietnam
Index. Only shares that trade on a recognized domestic or international stock
exchange may qualify (e.g., National Stock Market stocks must be “reported
securities” under 11Aa3-1 of the Exchange Act. Similar criteria and standards
apply to stocks with foreign listings).
The
Vietnam Index is calculated and maintained by
[ ]. Index values
are calculated daily, except Saturdays and Sundays, and are distributed over
the Consolidated Tape Association’s Network B between the hours of
approximately 7:00 p.m. and 6:15 p.m.. Index values are disseminated every 15
seconds.
The
Vietnam 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
Vietnam Index is reconstituted quarterly, at the close of business on the third
Friday of each calendar quarter, and companies are added and/or deleted based
upon the Vietnam Index eligibility criteria. Companies with recent stock
exchange listings, i.e., recent initial public offerings, may be added to the
Vietnam Index on any rebalancing date, provided the companies meet all
eligibility criteria and have been trading for more than 10 trading days. The
share weights of the Vietnam Index components are adjusted on each rebalancing
date.
Rebalancing
data, including constituent weights and related information, is posted on the
Index’s 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 Vietnam Index is issued on the
Wednesday prior to a rebalancing date. Share weights of the constituents remain
constant between quarters except in the event of certain types of corporate
actions, including stock splits and reverse stock splits. Share weights of the
Vietnam Index are not adjusted between rebalancing dates for shares issued or
shares repurchased.
- 36 -
PORTFOLIO
HOLDINGS
A
description of each Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Funds’ SAI.
ADDITIONAL
INVESTMENT STRATEGIES
Each
Fund will normally invest at least [80]% of its total assets in component
securities that comprise its Index. Each Fund may invest its remaining assets
in money market instruments, including repurchase agreements or other funds
which invest exclusively in money market instruments, convertible securities,
structured notes (notes on which the amount of principal repayment and interest
payments are based on the movement of one or more specified factors, such as
the movement of a particular stock or stock index) and in swaps, options,
futures contracts and currency forwards. Swaps, options, futures contracts and
currency forwards (and convertible securities and structured notes) may be used
by each Fund in seeking performance that corresponds to its benchmark Index,
and in managing cash flows. The Funds will not invest in money market
instruments as part of a temporary defensive strategy to protect against
potential stock market declines.
The
Funds may lend their 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 Funds receive 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 a 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, each Fund will bear the
risk of loss of any cash collateral that it invests.
ADDITIONAL
RISKS OF INVESTING IN THE FUNDS
Absence
of Prior Active Market
. The Funds are newly organized
series of an investment company and thus have no operating history. While each
Fund’s Shares will be listed on the Exchange, 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 the Exchange may be
halted due to market conditions or for reasons that, in the view of the Exchange,
make trading in Shares inadvisable. In addition, trading in Shares on the
Exchange is subject to trading halts caused by extraordinary market volatility
pursuant to the Exchange’s “circuit breaker” rules. There can be no assurance
that the requirements of the Exchange 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 each Fund’s securities holdings. The market
prices of Shares will fluctuate in accordance with changes in NAV and supply
and demand on each Fund’s respective Exchange. 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 each
Fund’s respective Index trading individually or in the aggregate at any point
in time. However, given that Shares can be created and redeemed daily in
Creation Units (unlike shares of closed-end funds, which frequently trade at
appreciable discounts from, and sometimes at premiums to, their NAV), the Adviser
believes that large discounts or premiums to the NAV of the Shares should not
be sustained.
- 37 -
MANAGEMENT
Board
of Trustees
. The Board of Trustees of the Trust has
responsibility for the general oversight of the management of the Funds,
including general supervision of the Adviser and other service providers, but
is not involved in the day-to-day management of the Trust. A list of the
Trustees and the Trust officers, and their present positions and principal
occupations, is provided in the Funds’ SAI.
Investment
Manager
. Under the terms of an Investment Management
Agreement between the Trust and Van Eck Associates Corporation with respect to
the Funds (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 Funds. As of June 30, 2008, the Adviser managed approximately
$[ ] billion in assets. The Adviser’s principal
business address is 99 Park Avenue, 8th Floor, New York, New York 10016.
A
discussion regarding the Board of Trustees’ approval of the Investment
Management Agreement will be available in the Trust’s [semi-annual] report for
the period ending [June 30, 2008].
For
the services provided to each Fund under the Investment Management Agreement,
each Fund will pay the Adviser monthly fees based on a percentage of each
Fund’s average daily net assets at the annual rate of [ ]%.
From time to time, the Adviser may waive all or a portion of its fee. Until at
least [May 1, 2009], the Adviser has contractually agreed to waive fees and/or
pay Fund expenses to the extent necessary to prevent the operating expenses of
each Fund (excluding interest expense, offering costs, taxes and extraordinary
expenses) from exceeding [ ]% of average daily net
assets per year. The other expenses 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 to be listed on an exchange.
Each
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 Funds (the “Administrator”), and The
Bank of New York is the custodian of each Fund’s assets and provides transfer
agency and fund accounting services to the Funds. 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 Fund’s Shares. The
Distributor will not distribute Shares in less than Creation Units, and it does
not maintain a secondary market in the Shares. As noted in the section entitled
“Shareholder Information—Buying and Selling Exchange-Traded Shares,” the Shares
are traded in the secondary market.
PORTFOLIO
MANAGERS
The
portfolio manager who is currently responsible for the day-to-day management of
each Fund’s portfolio is Hao-Hung (Peter) Liao Mr. Liao has been employed by
the Adviser since the summer of 2004. Mr. Liao attended New York University
from 2000 to 2004 where he received a Bachelor of Arts majoring in mathematics
and economics. Mr. Liao also serves as investment analyst for the Worldwide
Absolute Return Fund (“WARF”) where his role includes manager review,
performance attribution, changes in manager mandates and risk management, and
as a portfolio manager of WARF. Mr. Liao also serves as portfolio manager of
eleven other funds of the Trust. Except as disclosed above, Mr. Liao does not
manage any other accounts of any type for the Adviser. Because each Fund is
new, Mr. Liao will be
- 38 -
serving as the
portfolio manager of each Fund since its inception. See the Funds’ SAI for
additional information about the portfolio manager’s compensation, other
accounts managed by the portfolio manager and his ownership of Shares in each
Fund.
- 39 -
SHAREHOLDER
INFORMATION
Determination of NAV
The
NAV per Share for each 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 each Fund is
determined each business day after the close of trading (ordinarily 4:00 p.m.,
New York time) on the New York Stock Exchange (“NYSE”). Any assets or
liabilities denominated in currencies other than the U.S. dollar are converted
into U.S. dollars at the current market rates on the date of valuation as
quoted by one or more sources.
The
value of each Fund’s portfolio securities is based on the securities’ closing
price on local markets when available. If a security’s market price is not
readily available or does not otherwise accurately reflect the fair value of
the security, the security will be valued by another method that the Adviser
believes will better reflect fair value in accordance with the Trust’s
valuation policies and procedures approved by the Board of Trustees. Each Fund
may use fair value pricing in a variety of circumstances, including but not
limited to, situations when the value of a security in a Fund’s 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, each Fund currently expects
that it will fair value foreign equity securities held by the Fund each day the
Fund calculates its NAV. Accordingly, a Fund’s 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 a
Fund’s NAV and the prices used by the Fund’s respective Index. This may
adversely affect a Fund’s ability to track its respective Index. With respect
to securities that are primarily listed on foreign exchanges, the value of the
Fund’s 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 Market Vectors—Africa ETF, Market Vectors—Emerging Europe ETF, Market
Vectors—Global Frontier ETF, Market Vectors—Gulf States ETF and Market
Vectors—Vietnam ETF are expected to be approved for listing on
the , subject to
notice of issuance. If you buy or sell Shares in the secondary market, you will
incur customary brokerage commissions and charges and may pay some or all of
the spread between the bid and the offered price in the secondary market on
each leg of a round trip (purchase and sale) transaction. It is anticipated
that the Shares of the Funds will trade in the secondary market at prices that
may differ to varying degrees from the closing NAVs of the Shares. Given,
however, that Shares can be created and redeemed daily in Creation Units, the
Adviser believes that large discounts and premiums to NAV should not be
sustained for very long.
DTC
serves as securities depository for the Shares. (The Shares may be held only in
book-entry form; stock certificates will not be issued.) DTC, or its nominee,
is the record or registered owner of all outstanding Shares. Beneficial
ownership of Shares will be shown on the records of DTC or its participants
(described below). Beneficial owners of Shares are not entitled to have Shares
registered in their names, will not receive or be entitled to receive physical
delivery of certificates in definitive form and are not considered the
registered holder thereof. Accordingly, to exercise any rights of a holder of
Shares, each beneficial owner must rely on the procedures of: (i) DTC; (ii)
“DTC Participants,”
i.e.
,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other
- 40 -
organizations,
some of whom (and/or their representatives) own DTC; and (iii) “Indirect
Participants,”
i.e.
, brokers,
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly, through
which such beneficial owner holds its interests. The Trust understands that
under existing industry practice, in the event the Trust requests any action of
holders of Shares, or a beneficial owner desires to take any action that DTC,
as the record owner of all outstanding Shares, is entitled to take, DTC would
authorize the DTC Participants to take such action and that the DTC
Participants would authorize the Indirect Participants and beneficial owners
acting through such DTC Participants to take such action and would otherwise
act upon the instructions of beneficial owners owning through them. As
described above, the Trust recognizes DTC or its nominee as the owner of all
Shares for all purposes. For more information, see the section entitled “Book
Entry Only System” in the Funds’ SAI.
Market
Timing and Related Matters
. The Funds impose no
restrictions on the frequency of purchases and redemptions. In determining not
to approve a written, established policy limiting purchases and redemptions,
the Board of Trustees evaluated the nature of the Funds (
i.e.
, a fund whose shares are expected to
trade intra-day). In particular, the Board of Trustees considered that, unlike
traditional mutual funds, the Funds generally issue and redeem their Shares at
the NAV per Share for a basket of securities intended to mirror each Fund’s
portfolio, plus a small amount of cash, and Shares may be purchased and sold in
the secondary market at prevailing market prices.
Given
this structure, the Board of Trustees determined that it is unlikely that (a)
market timing would be attempted by a Fund’s shareholders or (b) any attempts
to market time the Funds by shareholders would result in negative impact to the
Fund or its shareholders. However, creations and redemptions of Creation Units
consisting of a significant amount of cash, although expected to be rare, could
create the potential for market timing with its negative impact to the Funds
and their shareholders.
Creation and Redemption of Creation Units
The
Trust issues and redeems Shares at NAV only in a large specified number of
Shares called a “Creation Unit.” A Creation Unit consists of 50,000 Shares. The
Funds generally issue and redeem Creation Units only in-kind in exchange for a
designated portfolio of equity securities included in each respective benchmark
Index and a relatively small cash payment. Except when aggregated in Creation
Units, the Shares are not redeemable securities of the Fund. See “Shareholder
Information—Buying and Selling Exchange-Traded Shares” and “—Procedures for Creation
of Creation Units.”
Fund
Deposits
. The consideration for creation of Creation
Units of the Funds generally consists of the in-kind deposit of a designated
portfolio of equity securities (the “Deposit Securities”) constituting a
replication of each Fund’s respective benchmark Index and an amount of cash
computed as described below (the “Cash Component”) and together with the
Deposit Securities, the “Fund Deposit.” The list of the names and numbers of
shares of the Deposit Securities is made available by the Administrator through
the facilities of the NSCC immediately prior to the opening of business each
day of the Exchange on which each Fund trades. The Cash Component represents
the difference between the NAV of a Creation Unit and the market value of the
Deposit Securities and may include a “Dividend Equivalent Payment” as described
in the Funds’ SAI.
Procedures
for Creation of Creation Units
. To be eligible to
place orders with the Distributor to create Creation Units of the Funds, an
entity or person either must be (1) a “Participating Party,”
i.e.
, a broker-dealer or other participant
in the Clearing Process through the Continuous Net Settlement System of the
NSCC; or (2) a DTC Participant; and, in either case, must have executed an
agreement with the Trust and with the Distributor with respect to creations and
redemptions of Creation Units outside the
- 41 -
Clearing
Process (“Participant Agreement”). All Creation Units of the Funds, however
created, will be entered on the records of DTC in the name of Cede & Co.
for the account of a DTC Participant.
At
any given time, there may be only a limited number of broker-dealers that have
executed a Participant Agreement. Those placing orders to create Creation Units
of the Funds 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 date on which a creation (or redemption order, as discussed below)
is placed (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. Investors should refer to “Creation and
Redemption of Creation Units” in the Funds’ SAI for details regarding the
logistics of placement of orders using and outside the Clearing Process.
Acceptance
of Creation Order
. The Trust reserves the absolute
right to reject a creation order transmitted to it by the Distributor if, for
any reason: (a) the order is not in proper form; (b) the creator or creators,
upon obtaining the Shares ordered, would own 80% or more of the currently
outstanding Shares of a Fund; (c) the Deposit Securities delivered are not as
specified by the Administrator, as described above; (d) acceptance of the
Deposit Securities would have certain adverse tax consequences to a Fund; (e)
the acceptance of the Fund Deposit would, in the opinion of counsel, be
unlawful; (f) the acceptance of the Fund Deposit would otherwise, in the
discretion of the Trust or the Adviser, have an adverse effect on the Trust or
the rights of beneficial owners; or (g) in the event that circumstances outside
the control of the Trust, the Distributor and the Adviser make it for all
practical purposes impossible to process creation orders. Examples of such
circumstances include acts of God or public service or utility problems such as
fires, floods, extreme weather conditions and power outages resulting in
telephone, telecopy and computer failures; market conditions or activities
causing trading halts; systems failures involving computer or other information
systems affecting the Trust, the Adviser, the Distributor, DTC, the NSCC or any
other participant in the creation process, and similar extraordinary events.
The Trust shall notify a prospective creator of its rejection of the order of
such person. The Trust and the Distributor are under no duty, however, to give
notification of any defects or irregularities in the delivery of Fund Deposits
nor shall either of them incur any liability for the failure to give any such
notification. The Trust shall notify a prospective creator of its rejection of
the order of such person.
All
questions as to the number of Shares of each security in the Deposit Securities
and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Trust, and the Trust’s
determination shall be final and binding.
Creation
Transaction Fee
. A fixed creation transaction fee of
$[ ], which is paid to the Fund (the “Creation
Transaction Fee”), is applicable to each transaction regardless of the number
of Creation Units purchased in the transaction. In addition, a variable charge
of up to four times the Creation Transaction Fee may be imposed with respect to
transactions effected outside of the Clearing Process (through a DTC
Participant) or to the extent that cash is used in lieu of securities to
purchase Creation Units. Where the Trust permits a creator to substitute “cash
in lieu” of depositing a portion of the Deposit Securities, the creator will be
assessed an additional variable charge for cash creations on the “cash in lieu”
portion of its investment. See “Creation and Redemption of Creation Units” in
the Funds’ SAI. The price for each Creation Unit will equal the daily NAV per
Share times the number of Shares in a Creation Unit plus the fees described
above and, if applicable, any transfer taxes. Shares of the Funds may be issued
in advance of receipt of all Deposit Securities subject to various conditions,
including a
- 42 -
requirement to
maintain on deposit with the Funds cash at least equal to 115% of the market
value of the missing Deposit Securities. See “Creation and Redemption of
Creation Units” in the Funds’ SAI.
Redemption
of Creation Units
. Shares may be redeemed only in
Creation Units at their NAV next determined after receipt of a redemption
request in proper form by the Distributor, only on a day on which each Fund’s
respective Exchange is open for trading and only through a Participating Party
or DTC Participant, who has executed a Participant Agreement.
The Trust will not redeem Shares in amounts less than
Creation Units
. Beneficial owners also may sell Shares in the
secondary market, but must accumulate enough Shares to constitute a Creation
Unit in order to have such Shares redeemed by the Trust. There can be no
assurance, however, that there will be sufficient liquidity in the public
trading market at any time to permit assembly of a Creation Unit. Investors
should expect to incur brokerage and other costs in connection with assembling
a sufficient number of Shares to constitute a redeemable Creation Unit.
The
Administrator, through NSCC, makes available immediately prior to the opening
of business on each Fund’s respective Exchange (currently 9:30 a.m., New York
time) on each day that the Exchange is open for business, the securities held
by a Fund (“Fund Securities”) that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form (as
defined below) on that day. Fund Securities received on redemption may not be
identical to Deposit Securities which are applicable to purchasers of Creation
Units. Unless cash redemptions are available or specified for the Fund, the
redemption proceeds for a Creation Unit generally consist of Fund Securities,
plus cash in an amount equal to the difference between the NAV of the Shares
being redeemed, as next determined after a receipt of a request in proper form,
and the value of the Fund Securities, less the redemption transaction fee
described below.
The
redemption transaction fee of $[ ] is deducted
from such redemption proceeds. Should the Fund Securities have a value greater
than the NAV of Shares being redeemed, a compensating cash payment to the Trust
equal to the differential, plus the applicable redemption fee and, if applicable,
any transfer taxes will be required to be arranged for by or on behalf of the
redeeming shareholder. The basic redemption transaction fees are the same no
matter how many Creation Units are being redeemed pursuant to any one
redemption request. The Funds may adjust these fees from time to time based
upon actual experience. An additional charge up to four times the redemption
transaction fee may be charged with respect to redemptions outside of the
Clearing Process. An additional variable charge for cash redemptions or partial
cash redemptions (when cash redemptions are available) may also be imposed.
Investors who use the services of a broker or other such intermediary may be
charged a fee for such services. Investors should refer to “Creation and
Redemption of Creation Units” in the Funds’ SAI for details regarding the
logistics of redemption orders using and outside the Clearing Process.
Redemptions
of Shares for Fund Securities will be subject to compliance with applicable
U.S. federal and state securities laws, and the Funds (whether or not they
otherwise permit cash redemptions) reserve the right to redeem Creation Units
for cash to the extent that the Funds could not lawfully deliver specific
Deposit Securities upon redemptions or could not do so without first
registering the Fund Securities under such laws. Deliveries of Fund Securities
to redeeming investors generally will be made within three business days. Due
to the schedule of holidays in certain countries, however, the delivery of
in-kind redemption proceeds may take longer than three business days after the
day on which the redemption request is received in proper form. In such cases,
the local market settlement procedures will not commence until the end of the
local holiday periods. See the Funds’ SAI for a list of the local holidays in
the foreign countries relevant to the Fund.
The
right of redemption may be suspended or the date of payment postponed (1) for
any period during which the NYSE is closed (other than customary weekend and
holiday closings); (2) for any
- 43 -
period during
which trading on the NYSE is suspended or restricted; (3) for any period during
which an emergency exists as a result of which disposal of the Shares of the
Funds or determination of their NAV is not reasonably practicable; or (4) in
such other circumstance as is permitted by the SEC.
Investors
interested in creating and/or redeeming Creation Units should refer to the more
detailed information “Creation and Redemption of Creation Units” in the Funds’
SAI.
Distributions
Net
Investment Income and Capital Gains
. As a Fund
shareholder, you are entitled to your share of the Fund’s distributions of net
investment income and net realized capital gains on its investments. The Funds
pay out substantially all of their net earnings to their 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 Funds realize capital
gains or losses whenever they sells securities. Net capital gains are
distributed to shareholders as “capital gain distributions.”
Net
investment income and net capital gains are typically distributed to
shareholders at least annually. Dividends may be declared and paid more
frequently to improve index tracking or to comply with the distribution
requirements of the Internal Revenue Code. In addition, the Funds may determine
to distribute at least annually amounts representing the full dividend yield
net of expenses on the underlying investment securities, as if the Funds 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. 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 your Fund only
if the broker through which you purchased Shares makes such option available.
Tax Matters
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. 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) a
Fund makes distributions, (ii) you sell Shares in the secondary market or (iii)
you create or redeem Creation Units.
Taxes
on Distributions
. The Funds expect to distribute net
investment income at least annually, and any net realized long-term or
short-term capital gains annually. The Funds may also pay a special
distribution at the end of the calendar year 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. Dividends paid out of a Fund’s income and net short-term gains, if any,
are taxable as ordinary income. The Funds may receive dividends, the
distribution of which the Funds may designate as qualified dividends. In the
event that a Fund receives such a dividend and designates the distribution of
such dividend as a qualified dividend, the dividend may be taxed at the maximum
capital gains rate. Distributions of net long-term capital gains, if any, in
excess of net short-term capital losses are taxable as long-term capital gains,
regardless of how long you have held the Shares.
Distributions
in excess of a Fund’s 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
- 44 -
thereafter. A
distribution will reduce a Fund’s 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.
If
you are not a citizen or resident alien of the United States, each Fund’s
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.
Dividends
and interest from non-U.S. investments received by the Funds may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
The
Funds 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 establish a basis for exemption from backup
withholding. The backup withholding rate for individuals is currently 28%. This
is not an additional tax and may be refunded, or credited against your U.S.
federal income tax liability, provided certain required information is
furnished to the Internal Revenue Service.
Taxes
on the Sale 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.
Taxes
on Creations and Redemptions of Creation Units
. A
person who exchanges equity 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
exchanger’s aggregate basis in the securities surrendered, taking into
consideration the Cash Component paid. A person who exchanges Creation Units
for equity securities will generally recognize a gain or loss equal to the difference
between the exchangor’s basis in the Creation Units and the aggregate market
value of the securities received. The Internal Revenue Service, however, may
assert that a loss realized upon an exchange of 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 should consult their own tax adviser with respect to
whether wash sale rules apply and when a loss might be deductible.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption of Creation Units 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 the Shares 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.
- 45 -
The
foregoing discussion summarizes some of the consequences under current U.S.
federal income tax law of an investment in the Funds. 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.
- 46 -
LICENSE
AGREEMENT
The
Adviser has entered into a licensing agreement with to use the Africa Index,
to use the EE (ex Russia) & CIS Index,
to use the Global Frontier Index, to
use the GCC Index and to use the Vietnam Index. Each Fund is entitled to use
its respective benchmark Index pursuant to a sub-licensing arrangement with the
Adviser.
[DISCLAIMERS
TO COME.]
- 47 -
FINANCIAL
HIGHLIGHTS
The
Funds have not yet commenced operations as of the date of this Prospectus and
therefore do not have a financial history.
- 48 -
GENERAL
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 Trust’s
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 Funds 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 a Fund.
Clifford
Chance US LLP serves as counsel to the Trust, including the Funds.
[ ] serves as each Fund’s independent registered
public accounting firm and will audit each Fund’s financial statements
annually.
Additional Information
This
Prospectus does not contain all the information included in the Registration
Statement filed with the SEC with respect to the Funds’ Shares. Information
about the Fund can be reviewed and copied at the SEC’s 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 Fund’s 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 SEC’s 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 SEC’s Public Reference Section,
Washington, DC 20549-0102. These documents and other information concerning the
Trust also may be inspected at the offices of the
[ ] ([ ]).
The
SAI for these Funds, which has been filed with the SEC, provides more
information about the Funds. The SAI for these Funds is incorporated herein by
reference and is legally part of this Prospectus. It may be obtained without
charge by writing to the Funds at Van Eck Securities Corporation, the Funds’
distributor, at 99 Park Avenue, New York, New York 10016 or by calling the
distributor at the following number: Investor Information: 1.888.MKT.VCTR
(658-8287).
Shareholder
inquiries may be directed to a Fund in writing to 99 Park Avenue, 8th Floor,
New York, NY 10016.
The
Funds’ SAI will be available through their website at
www.vaneck.com/etf
.
- 49 -
The information in this Statement of
Additional Information is not complete and may be changed. The Trust may not
sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Statement of Additional
Information is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is
not permitted.
Subject to Completion
Preliminary Statement of Additional Information dated May 9, 2008
MARKET VECTORS ETF TRUST
STATEMENT OF ADDITIONAL INFORMATION
Dated , 2008
This
Statement of Additional Information (“SAI”) is not a Prospectus. It should be
read in conjunction with the Prospectus dated
, 2008 (the “Prospectus”)
for the Market Vectors ETF Trust (the “Trust”), relating to Market
Vectors—Africa ETF, Market Vectors—Emerging Europe ETF, Market Vectors—Global
Frontier ETF, Market Vectors—Gulf States ETF and Market Vectors—Vietnam ETF
(each, a “Fund” and, together, the “Funds”), as it may be revised from time to
time. A copy of the Prospectus for the Trust, relating to the Funds, may be
obtained without charge by writing to the Trust or the Distributor. The Trust’s
address is 99 Park Avenue, 8th Floor, New York, New York 10016. Capitalized
terms used herein that are not defined have the same meaning as in the
Prospectus, unless otherwise noted.
TABLE OF CONTENTS
i
The
information contained herein regarding the Africa Index
SM
, Emerging
Europe & Commonwealth of Independent States (ex Russia) Index
SM
,
Global Frontier Index
SM
, Gulf Corporation Council Index
SM
and Vietnam Index
SM
(each, an
“Index”) was provided by ,
, ,
, and ,
respectively, while the information contained herein regarding the securities
markets and The Depository Trust Company (“DTC”) was obtained from
publicly available sources.
[DISCLAIMERS
TO COME.]
GENERAL
DESCRIPTION OF THE TRUST
The
Trust is an open-end management investment company. The Trust currently
consists of twenty-six investment portfolios. This SAI relates to five
investment portfolios, Market Vectors—Africa ETF, Market Vectors—Emerging
Europe ETF, Market Vectors—Global Frontier ETF, Market Vectors—Gulf States ETF
and Market Vectors—Vietnam ETF (each, a “Fund” and, together, the “Funds”). The
Funds invest in common stocks and depositary receipts consisting of some or all
of the component securities of each Fund’s respective benchmark Index. The
Trust was organized as a Delaware statutory trust on March 15, 2001. The
shares of the Fund are referred to herein as “Shares.”
The
Funds will offer and issue Shares at their net asset value (“NAV”) only in
aggregations of a specified number of Shares (each, a “Creation Unit”), usually
in exchange for a basket of Deposit Securities (together with the deposit of a
specified cash payment). The Shares of Market Vectors—Africa ETF, Market
Vectors—Emerging Europe ETF, Market Vectors—Global Frontier ETF, Market
Vectors—Gulf States ETF and Market Vectors—Vietnam ETF are expected to be
approved for listing, subject to notice of issuance, on the (the “ ” or the
“Exchange”), and will trade in the secondary market at market prices. Those
prices may differ from the Shares’ NAV. Similarly, Shares are also redeemable
by the Funds only in Creation Units, and generally in exchange for specified
securities held by each Fund and a specified cash payment. A Creation Unit
consists of 50,000 Shares of each Fund.
The
Trust reserves the right to offer a “cash” option for creations and redemptions
of Shares (subject to applicable legal requirements). In each instance of such
cash creations or redemptions, the Trust may impose transaction fees based on
transaction expenses in the particular exchange that will be higher than the
transaction fees associated with in-kind purchases or redemptions. In all
cases, such fees will be limited in accordance with the requirements of the
Securities and Exchange Commission (the ”SEC”) applicable to management
investment companies offering redeemable securities.
2
INVESTMENT
POLICIES AND RESTRICTIONS
Repurchase Agreements
The
Funds 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 a Fund acquires a money market instrument (generally a security
issued by the U.S. Government or an agency thereof, a banker’s 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 a 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 Trust’s
custodian bank until repurchased. In addition, the Trust’s Board of Trustees
(“Board” or “Trustees”) monitors each Fund’s repurchase agreement transactions
generally and has established guidelines and standards for review of the
creditworthiness of any bank, broker or dealer counterparty to a repurchase
agreement with the Fund. No more than an aggregate of 15% of each Fund’s 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 Funds may
incur a loss upon disposition of the security. If the other party to the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a court may determine that the underlying
security is collateral for a loan by a Fund not within the control of the Fund
and, therefore, the Fund may not be able to substantiate its interest in the
underlying security and may be deemed an unsecured creditor of the other party
to the agreement. While the Trust’s management acknowledges these risks, it is
expected that they can be controlled through careful monitoring procedures.
Futures Contracts, Options, Swap Agreements
and Currency Forwards
The
Funds may utilize futures contracts, options, swap agreements and currency
forwards. 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 Funds may use futures contracts and options on futures contracts based on
other indexes or combinations of indexes that the Adviser (defined herein)
believes to be representative of each Fund’s respective benchmark Index.
Although
futures contracts (other than cash settled futures contracts including most
stock index futures contracts) by their terms call for actual delivery or
acceptance of the underlying instrument or commodity, in most cases the
contracts are closed out before the maturity date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position (“buying” a contract which has previously been “sold” or “selling” a
contract previously “purchased”) in an
3
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 Funds expect to earn interest income on their margin deposits.
The
Funds may use futures contracts and options thereon, together with positions in
cash and money market instruments, to simulate full investment in each Fund’s
respective Index. Liquid futures contracts are not currently available for the
benchmark Index of each Fund. Under such circumstances, the Adviser may seek to
utilize other instruments that it believes to be correlated to each Fund’s
respective Index components or a subset of the components.
Restrictions on the Use of Futures and
Options
Except
as otherwise specified in the Funds’ Prospectus or this SAI, there are no
limitations on the extent to which the Funds may engage in transactions
involving futures and options thereon. The Fund will take steps to prevent
their futures positions from “leveraging” its securities holdings. When a 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 a Fund has a
short futures position as part of a complex stock replication strategy, the
Fund will maintain with their 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
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, each 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 a Fund’s 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 Trust’s custodian bank.
4
Future Developments
The
Funds may take advantage of opportunities in the area of options, futures
contracts, options on futures contracts, options on the Funds, 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 a Fund by the Adviser.
Investment Restrictions
The
Trust has adopted the following investment restrictions as fundamental policies
with respect to each Fund. These restrictions cannot be changed without the
approval of the holders of a majority of each Fund’s 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 a 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.
|
Each 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.
|
Each Fund
may not borrow money, except as permitted under the 1940 Act, and as
interpreted or modified by regulation from time to time;
|
|
|
|
|
|
|
3.
|
Each 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.
|
Each Fund
may not purchase a security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if, as a result, 25% or more of its total
assets would be invested in a single issuer;
|
|
|
|
|
|
|
5.
|
Each Fund
may not purchase or sell real estate, except that the Fund may (i) invest in
securities of issuers that invest in real estate or interests therein; (ii)
invest in mortgage-related securities and other securities that are secured
by real estate or interests therein; and (iii) hold and sell real estate
acquired by the Fund as a result of the ownership of securities;
|
|
|
|
|
|
|
6.
|
Each Fund
may not engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be considered an underwriter within
the meaning of the Securities Act of 1933, as amended (the “Securities Act”),
in the disposition of restricted securities or in connection with its
investments in other investment companies;
|
|
|
|
|
|
|
7.
|
Each Fund
may not purchase or sell commodities, unless acquired as a result of owning
securities or other instruments, but it may purchase, sell or enter into
financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments and may
invest in securities or other instruments backed by commodities; or
|
5
|
|
|
|
|
|
8.
|
Each 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 a 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, each Fund observes the following restrictions, which may be
changed by the Board without a shareholder vote. Each 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 a Fund’s net assets would be invested in such
securities.
|
|
|
|
|
|
|
2.
|
Mortgage,
pledge or otherwise encumber its assets, except to secure borrowing effected
in accordance with the fundamental restriction on borrowing set forth below.
|
|
|
|
|
|
|
3.
|
Make short
sales of securities.
|
|
|
|
|
|
|
4.
|
Purchase any
security on margin, except for such short-term loans as are necessary for
clearance of securities transactions. The deposit or payment by a Fund or
initial or variation margin in connection with futures contracts or related
options thereon is not considered the purchase of a security on margin.
|
|
|
|
|
|
|
5.
|
Participate
in a joint or joint-and-several basis in any trading account in securities,
although transactions for the Funds and any other account under common or
affiliated management may be combined or allocated between the Fund and such
account.
|
|
|
|
|
|
|
6.
|
Purchase
securities of open-end or closed-end investment companies except in
compliance with the 1940 Act, although the Fund may not acquire any
securities of registered open-end investment companies or registered unit
investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the
1940 Act.
|
If
a percentage limitation is adhered to at the time of investment or contract, a
later increase or decrease in percentage resulting from any change in value or
total or net assets will not result in a violation of such restriction, except
that the percentage limitations with respect to the borrowing of money and
illiquid securities will be continuously complied with.
As
long as the aforementioned investment restrictions are complied with, each Fund
may invest its remaining assets in money market instruments or funds which
reinvest exclusively in money market instruments, in stocks that are in the
relevant market but not the index, and/or in combinations of certain stock
index futures contracts, options on such futures contracts, stock options,
stock index options, options on the Shares, and stock index swaps and
swaptions, each with a view towards providing each Fund with exposure to the
securities in its benchmark Index. These investments may be made to invest
uncommitted cash balances or, in limited circumstances, to assist in meeting
shareholder redemptions of Creation Units. Each Fund also will not invest in
money market instruments as part of a temporary defensive strategy to protect against
potential stock market declines.
6
SPECIAL
CONSIDERATIONS AND RISKS
A
discussion of the risks associated with an investment in the Fund is contained
in the Funds’ Prospectus under the headings “Market Vectors—Africa
ETF—Principal Risks of Investing in the Fund,” “Market Vectors—Emerging Europe
ETF—Principal Risks of Investing in the Fund,” “Market Vectors—Global Frontier
ETF—Principal Risks of Investing in the Fund,” “Market Vectors—Persian Gulf
ETF—Principal Risks of Investing in the Fund,” “Market Vectors—Vietnam
ETF—Principal Risks of Investing in the Fund” and “Additional Risks of
Investing in the Funds.” The discussion below supplements, and should be read
in conjunction with, such sections of the Prospectus.
General
Investment
in each Fund should be made with an understanding that the value of the Fund’s
portfolio securities may fluctuate in accordance with changes in the financial
condition of the issuers of the portfolio securities, the value of common
stocks generally and other factors.
An
investment in each Fund should also be made with an understanding of the risks
inherent in an investment in equity securities, including the risk that the
financial condition of issuers may become impaired or that the general
condition of the stock market may deteriorate (either of which may cause a
decrease in the value of the portfolio securities and thus in the value of
Shares). Common stocks are susceptible to general stock market fluctuations and
to volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic and
banking crises.
Holders
of common stocks incur more risk than holders of preferred stocks and debt
obligations because common stockholders, as owners of the issuer, have
generally inferior rights to receive payments from the issuer in comparison
with the rights of creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Further, unlike debt securities which typically
have a stated principal amount payable at maturity (whose value, however, will
be subject to market fluctuations prior thereto), or preferred stocks which
typically have a liquidation preference and which may have stated optional or
mandatory redemption provisions, common stocks have neither a fixed principal
amount nor a maturity. Common stock values are subject to market fluctuations
as long as the common stock remains outstanding.
Although
most of the securities in a Fund’s 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 a Fund’s Shares will be adversely affected if trading markets for the
Fund’s portfolio securities are limited or absent or if bid/ask spreads are
wide.
The
Funds are 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 its Index.
An
investment in each Fund should also be made with an understanding that the Fund
will not be able to replicate exactly the performance of its respective 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
7
other Fund
expenses, whereas such transaction costs and expenses are not included in the
calculation of its respective Index. It is also possible that for short periods
of time, a Fund may not fully replicate the performance of its respective 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 a Fund is required
to correct such imbalances by means of adjusting the composition of the
securities. It is also possible that the composition of a Fund may not exactly
replicate the composition of its respective Index if the Fund has to adjust its
portfolio holdings in order to continue to qualify as a “regulated investment
company” under the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”).
Shares
are subject to the risk of an investment in a portfolio of equity securities in
an economic sector in which the Index is highly concentrated. In addition,
because it is the policy of each Fund to generally invest in the securities
that comprise its respective Index, the portfolio of securities held by such
Fund (“Fund Securities”) also will be concentrated in that industry.
Futures and Options Transactions
Positions
in futures contracts and options may be closed out only on an exchange which
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 Funds would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if a 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
Funds 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 Funds, however,
intend to utilize futures and options contracts in a manner designed to limit
their risk exposure to that which is comparable to what it would have incurred
through direct investment in stocks.
Utilization
of futures transactions by the Funds involves the risk of imperfect or even
negative correlation to each Fund’s benchmark respective Index if the index
underlying the futures contracts differs from the benchmark Index. There is
also the risk of loss by the Funds of margin deposits in the event of
bankruptcy of a broker with whom a 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 day’s 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
8
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.
Swaps
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 Funds may
lose such payments altogether or collect only a portion thereof, which
collection could involve costs or delay.
U.S. Federal Tax Treatment of Futures
Contracts
The
Funds may be required for federal income tax purposes to mark-to-market and
recognize as income for each taxable year their net unrealized gains and losses
on certain futures contracts as of the end of the year as well as those
actually realized during the year. The Funds may be required to defer the
recognition of losses on futures contracts to the extent of any unrecognized
gains on related positions held by the Funds.
In
order for each Fund to continue to qualify for U.S. federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income,
i.e.
, dividends, interest, income derived
from loans of securities, gains from the sale of securities or of foreign
currencies or other income derived with respect to a Fund’s business of
investing in securities. It is anticipated that any net gain realized from the
closing out of futures contracts will be considered gain from the sale of
securities and therefore will be qualifying income for purposes of the 90%
requirement.
The
Funds distribute to shareholders annually any net capital gains which have been
recognized for U.S. federal income tax purposes (including unrealized gains at
the end of a Fund’s fiscal year) on futures transactions. Such distributions
are combined with distributions of capital gains realized on each Fund’s other
investments and shareholders are advised on the nature of the distributions.
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, at any point a “distribution,” as such
term is used in the Securities Act, may occur. Broker-dealers and other persons
are cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client
in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that could lead to a
categorization as an underwriter.
Broker-dealers
who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold
9
allotment”
within the meaning of Section 4(3)(C) of the Securities Act, would be unable to
take advantage of the prospectus delivery exemption provided by Section
4(3) of the Securities Act. This is because the prospectus delivery
exemption in Section 4(3) of the Securities Act is not available in
respect of such transactions as a result of Section 24(d) of the 1940 Act. As a
result, broker-dealer firms should note that dealers who are not underwriters
but are participating in a distribution (as contrasted with ordinary secondary
market transactions) and thus dealing with the Shares that are part of an
overallotment within the meaning of Section 4(3)(A) of the Securities Act would
be unable to take advantage of the prospectus delivery exemption provided by
Section 4(3) of the Securities Act. Firms that incur a prospectus delivery
obligation with respect to Shares are reminded that, under Rule 153 of the
Securities Act, a prospectus delivery obligation under Section 5(b)(2) of
the Securities Act owed to an exchange member in connection with a sale on the
Exchange is satisfied by the fact that the prospectus is available at the
relevant Exchange upon request. The prospectus delivery mechanism provided in
Rule 153 is only available with respect to transactions on an exchange.
10
EXCHANGE
LISTING AND TRADING
A
discussion of exchange listing and trading matters associated with an
investment in the Funds is contained in the Funds’ Prospectus under the
headings “Market Vectors—Africa ETF—Principal Risks of Investing in the Fund,”
“Market Vectors—Emerging Europe ETF—Principal Risks of Investing in the Fund,”
“Market Vectors—Global Frontier ETF—Principal Risks of Investing in the Fund,”
“Market Vectors—Gulf States ETF—Principal Risks of Investing in the Fund,”
“Market Vectors—Vietnam ETF—Principal Risks of Investing in the Fund,”
“Shareholder Information—Determination of NAV” and “Shareholder
Information—Buying and Selling Exchange-Traded Shares.” The discussion below
supplements, and should be read in conjunction with, such sections of the
Funds’ Prospectus.
The
Shares of each Fund will be traded on the [ ], subject to notice of issuance,
in the secondary market at prices that may differ to some degree from their
NAV. There can be no assurance that the requirements of the Exchange necessary
to maintain the listing of Shares of the Funds will continue to be met.
The
Exchange may but is not required to remove the Shares of the Funds 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 a
Fund’s respective underlying Index or portfolio of securities on which the
Funds is based is no longer calculated or available or (3) such other
event shall occur or condition exists that, in the opinion of the Exchange,
makes further dealings on the Exchange inadvisable. In addition, the Exchange
will remove the Shares from listing and trading upon termination of the Trust.
As
in the case of other securities traded on the Exchanges, brokers’ commissions
on transactions will be based on negotiated commission rates at customary
levels.
In
order to provide investors with a basis to gauge whether the market price of
the Shares on the Exchange are approximately consistent with the current value
of the assets of the Funds on a per Share basis, an updated Indicative Per
Share Portfolio Value is disseminated intra-day through the facilities of the
Consolidated Tape Association’s 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
Funds are 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 each 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 a Fund on a
given day. While the equity securities value component estimates the current
market value of a Fund’s 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 a Fund’s NAV per share, which is
calculated at the close of the regular trading session on the New York Stock
Exchange (“NYSE”) (ordinarily 4:00 p.m., New York time) on each day Business Day.
11
In
addition to the equity securities value component described in the preceding
paragraph, the Indicative Per Share Portfolio Value for each Fund includes a
net other assets value component consisting of estimates of all other assets
and liabilities of the Fund including, among others, current day estimates of
dividend income and expense accruals.
12
BOARD OF
TRUSTEES OF THE TRUST
Trustees and Officers of the Trust
The
Board has responsibility for the overall management and operations of the
Trust, including general supervision of the duties performed by the Adviser and
other service providers. The Board currently consists of four Trustees.
Independent Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
Name, Address
1
and Age
|
|
Position(s)
Held with
Fund
|
|
Term of
Office
2
and
Length of
Time
Served
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
Portfolios in
Fund
Complex
3
Overseen
|
|
Other
Directorships
Held By
Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
David H.
Chow, 50*
|
|
Trustee
|
|
Since 2006
|
|
Vice-Chairman
and Chief Investment Officer, Torch Hill Investment Partners LLC (private
equity firm), July 2007 to present; Managing Partner, Lithos Capital Partners
LLC (private equity firm), January 2006 to June 2007; Managing Director,
DanCourt Management LLC (strategy consulting firm), March 1999 to present.
|
|
26
|
|
None.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Alastair
Short, 54*
|
|
Trustee
|
|
Since 2006
|
|
Vice Chairman,
W.P. Stewart & Co., Ltd. (asset management firm), September 2007 to
present; Managing Director, The GlenRock Group, LLC (private equity
investment firm), May 2004 to September 2007; President, Apex Capital
Corporation (personal investment vehicle), January 1988 to present;
President, Matrix Global Investments, Inc. and predecessor company (private
investment company), September 1995 to January 1999.
|
|
36
|
|
Director, Kenyon review;
Director, The Medici Archive Project.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard D.
Stamberger, 48*
|
|
Trustee
|
|
Since 2006
|
|
Director,
President and CEO, SmartBrief, Inc.
|
|
36
|
|
None.
|
|
|
|
|
1
|
The address for each
Trustee and officer is 99 Park Avenue, 8th Floor, New York, New York 10016.
|
|
|
|
|
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 Funds, Inc., Van Eck Worldwide Insurance Trust
and the Trust.
|
|
|
|
13
|
|
|
|
*
|
Member of the Audit
Committee.
|
Interested Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
Name, Address
1
and Age
|
|
Position(s) Held with Fund
|
|
Term of
Office
2
and
Length of
Time Served
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
Portfolios in
Fund
Complex
3
Overseen
|
|
Other
Directorships
Held Outside
the Fund
Complex:
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan F. van
Eck,
4
44
|
|
Trustee
|
|
Since 2006
|
|
Director and
Executive Vice President, Van Eck Associates Corporation; Director, Executive
Vice President and Chief Compliance Officer, Van Eck Securities Corporation;
Director and President, Van Eck Absolute Return Advisers Corp.
|
|
26
|
|
Director,
Greylock Capital Associates LLC.
|
|
|
|
|
1
|
The address for each
Trustee and officer is 99 Park Avenue, 8th Floor, New York, New York 10016.
|
|
|
|
|
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 Funds, Inc., Van Eck Worldwide Insurance Trust
and the Trust.
|
|
|
|
|
4
|
“Interested person” of the
Fund within the meaning of the 1940 Act. Mr. van Eck is an officer of the
Adviser.
|
Officer Information
The
Officers of the Trust, their addresses, positions with the Fund, ages and
principal occupations during the past five years are set forth below.
|
|
|
|
|
|
|
|
|
Officer’s Name, Address
1
and Age
|
|
Position(s) Held
with Fund
|
|
Term of
Office
2
and
Length of
Time Served
|
|
Principal Occupation(s) During The Past Five Years
|
|
|
|
|
|
|
|
|
Charles T.
Cameron, 48
|
|
Vice
President
|
|
Since 1996
|
|
Director of
Trading and Portfolio Manager for the Adviser; Officer of three other
investment companies advised by the Adviser.
|
|
|
|
|
|
|
|
|
|
Keith J
Carlson, 51
|
|
Chief
Executive Officer and President
|
|
Since 2004
|
|
President of
the Adviser and Van Eck Securities Corporation (“VESC”); Private Investor
(June 2003-January 2004); Independent Consultant, Waddell & Reed, Inc.
(December 2002-May 2003); Officer of three other investment companies advised
by the Adviser.
|
|
|
|
|
|
|
|
|
|
Susan C.
Lashley, 53
|
|
Vice
President
|
|
Since 1998
|
|
Vice
President of the Adviser and VESC; Officer of three other investment
companies advised by the Adviser.
|
14
|
|
|
|
|
|
|
|
|
Officer’s Name, Address
1
and Age
|
|
Position(s) Held
with Fund
|
|
Term of
Office
2
and
Length of
Time Served
|
|
Principal Occupation(s) During The Past Five Years
|
|
|
|
|
|
|
|
|
Thomas K.
Lynch, 51
|
|
Chief Compliance
Officer
|
|
Since 2007
|
|
Chief
Compliance Officer of the Adviser and Van Eck Absolute Return Advisers
Corporation (“VEARA”) (Since January 2007); Vice President of the Adviser and
VEARA; Treasurer and Officer of three other investment companies advised by
the Adviser (April 2005-December 2006); Second Vice President of Investment
Reporting, TIAA-CREF (January 1996-April 2005).
|
|
|
|
|
|
|
|
|
|
Joseph J.
McBrien, 59
|
|
Senior Vice
President, Secretary and Chief Legal Officer
|
|
Since 2005
|
|
Senior Vice
President, General Counsel and Secretary of the Adviser, VESC and VEARA
(Since December 2005); Managing Director, Chatsworth Securities LLC (March
2001-November 2005); Officer of three other investment companies advised by
the Adviser.
|
|
|
|
|
|
|
|
|
|
Alfred J.
Ratcliffe, 60
|
|
Vice
President and Treasurer
|
|
Since 2006
|
|
Vice
President of the Adviser (Since 2006); Vice President and Director of Mutual
Fund Accounting and Administration, PFPC (March 2000-November 2006); Officer
of three other investment companies advised by the Adviser.
|
|
|
|
|
|
|
|
|
|
Jonathan R.
Simon, 33
|
|
Vice
President and Assistant Secretary
|
|
Since 2006
|
|
Vice
President and Associate General Counsel of the Adviser (Since 2006); Vice
President and Assistant Secretary of VEARA and VESC (Since 2006); Associate,
Schulte Roth & Zabel (July 2004-July 2006); Associate, Carter Ledyard
& Milburn LLP (September 2001-July 2004); Officer of three other
investment companies advised by the Adviser.
|
|
|
|
|
|
|
|
|
|
Bruce J.
Smith, 53
|
|
Senior Vice
President and Chief Financial Officer
|
|
Since 1985
|
|
Senior Vice
President and Chief Financial Officer of the Adviser; Senior Vice President,
Chief Financial Officer, Treasurer and Controller of VESC and VEARA; Officer
of three other investment companies advised by the Adviser.
|
|
|
|
|
|
|
|
|
|
Derek S. van
Eck
(3)
, 43
|
|
Executive
Vice President
|
|
Since 2004
|
|
Director and
Executive Vice President of the Adviser, VESC and VEARA; Director of Greylock
Capital Associates LLC; Officer of three other investment companies advised
by the Adviser.
|
15
|
|
|
|
|
|
|
|
|
Officer’s Name, Address
1
and Age
|
|
Position(s) Held
with Fund
|
|
Term of
Office
2
and
Length of
Time Served
|
|
Principal Occupation(s) During The Past Five Years
|
|
|
|
|
|
|
|
|
Jan F. van
Eck
(3)
, 44
|
|
Executive
Vice President
|
|
Since 2005
|
|
Director and
Executive Vice President of the Adviser; Director, Executive Vice President
and Chief Compliance Officer of VESC; Director and President of VEARA;
Director of Greylock Capital Associates LLC; Trustee of Market Vectors ETF
Trust; Officer of three other investment companies advised by the Adviser.
|
|
|
|
|
1
|
The address for each
Officer is 99 Park Avenue, 8th Floor, New York, New York 10016.
|
|
|
|
|
2
|
Officers are elected yearly
by the Trustees.
|
|
|
|
|
3
|
Messrs. Jan F. van Eck and
Derek S. van Eck are brothers.
|
The
Board of the Trust met six times during the fiscal year ended December 31,
2007.
The
Board has an Audit Committee, consisting of three Trustees who are not
“interested persons” (as defined in the 1940 Act) of the Trust (an “Independent
Trustee”). Messrs. Chow, Short and Stamberger currently serve as members of the
Audit Committee and each has been designated as an “audit committee financial
expert” as defined under Item 407 of Regulation S-K of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Mr. Short is the Chairman of
the Audit Committee. The Audit Committee has the responsibility, among other
things, to: (i) oversee the accounting and financial reporting processes
of the Trust and its internal control over financial reporting and, as the
Audit Committee deems appropriate, to inquire into the internal control over
financial reporting of certain third-party service providers; (ii) oversee
the quality and integrity of the Trust’s financial statements and the
independent audit thereof; (iii) oversee or, as appropriate, assist the
Board’s oversight of the Trust’s compliance with legal and regulatory
requirements that relate to the Trust’s accounting and financial reporting,
internal control over financial reporting and independent audit;
(iv) approve prior to appointment the engagement of the Trust’s
independent registered public accounting firm and, in connection therewith, to
review and evaluate the qualifications, independence and performance of the
Trust’s independent registered public accounting firm; and (v) act as a
liaison between the Trust’s independent registered public accounting firm and
the full Board. The Audit Committee met two times during the fiscal year ended
December 31, 2007.
The
Board also has a Nominating and Corporate Governance Committee consisting of
three Independent Trustees. Messrs. Chow, Short and Stamberger currently serve
as members of the Nominating and Corporate Governance Committee. The Nominating
and Corporate Governance Committee has the responsibility, among other things,
to: (i) evaluate, as necessary, the composition of the Board, its
committees and sub-committees and make such recommendations to the Board as
deemed appropriate by the Committee; (ii) review and define Independent
Trustee qualifications; (iii) review the qualifications of individuals
serving as Trustees on the Board and its committees; (iv) develop
corporate governance guidelines for the Trust and the Board; (v) evaluate,
recommend and nominate qualified individuals for election or appointment as members
of the Board and recommend the appointment of members and chairs of each Board
committee and subcommittee and (vi) review and assess, from time to time,
the performance of the committees and subcommittees of the Board and report
results to the Board. The Nominating and Corporate Governance Committee met two
times during the fiscal year ended December 31, 2007.
16
The
officers and Trustees of the Trust, in the aggregate, own less than 1% of the
Shares of each Fund.
For
each Trustee, the dollar range of equity securities beneficially owned by the
Trustee in the Trust and in all registered investment companies overseen by the
Trustee is shown below.
|
|
|
|
|
|
|
Name Of Trustee
|
|
Dollar Range of Equity
Securities in Market
Vectors ETF Trust
(As of December 31, 2007)
|
|
Aggregate Dollar Range Of Equity
Securities in all Registered Investment
Companies Overseen By Trustee In
Family of Investment Companies
(As of December 31, 2007)
|
|
|
|
|
|
|
|
David H.
Chow
|
|
$50,001 –
$100,000
|
|
$50,001 –
$100,000
|
|
R. Alastair
Short
|
|
None
|
|
$10,001 –
$50,000
|
|
Richard D.
Stamberger
|
|
$10,001 –
$50,000
|
|
Over
$100,000
|
|
Jan F. van
Eck
|
|
$10,001 –
$50,000
|
|
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 Funds.
Remuneration of Trustees
The
Trust pays each Independent Trustee an annual retainer of $10,000, a per
meeting fee of $5,000 for scheduled quarterly meetings of the Board and each
special meeting of the Board and a per meeting fee of $2,500 for telephonic
meetings. The Trust pays the Chairman of the Board an annual retainer of
$10,000 and each Trustee who acts as chairman of a committee an annual retainer
of $5,000. The Trust also reimburses each Trustee for travel and other
out-of-pocket expenses incurred in attending such meetings. No pension or
retirement benefits are accrued as part of Trustee compensation.
The
table below shows the estimated compensation that is contemplated to be paid to
the Trustees by the Trust for the fiscal year ended December 31, 2008. Annual
Trustee fees may be reviewed periodically and changed by the Trust’s Board.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustee
|
|
Aggregate
Compensation
From the Trust
|
|
Deferred
Compensation
From the Trust
|
|
Pension or Retirement
Benefits Accrued as
Part of the Trust’s
Expenses
(2)
|
|
Estimated
Annual
Benefits
Upon
Retirement
|
|
Total
Compensation
From the Trust
and the Fund
Complex
(1)
Paid
to Trustee
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David H.
Chow
|
|
$
|
0
|
|
$
|
47,121
|
|
N/A
|
|
N/A
|
|
$
|
47,121
|
|
|
R. Alastair
Short
|
|
$
|
40,000
|
|
$
|
0
|
|
N/A
|
|
N/A
|
|
$
|
90,500
|
|
|
Richard D.
Stamberger
|
|
$
|
26,250
|
|
$
|
10,024
|
|
N/A
|
|
N/A
|
|
$
|
101,994
|
|
|
Jan F. van
Eck
(3)
|
|
$
|
0
|
|
$
|
0
|
|
N/A
|
|
N/A
|
|
$
|
0
|
|
|
|
|
|
(1)
|
The “Fund Complex
“ consists of Van Eck
Funds, Van Eck Funds, Inc., Van Eck Worldwide Insurance Trust and the Trust.
|
|
|
|
|
(2)
|
Because the funds of the
Trust have different fiscal year ends, the amounts shown are presented on a
calendar year basis.
|
|
|
|
|
(3)
|
“Interested person” under
the 1940 Act.
|
17
PORTFOLIO
HOLDINGS DISCLOSURE
Each
Fund’s portfolio holdings are publicly disseminated each day the Fund is open
for business through financial reporting and news services, including publicly
accessible Internet web sites. In addition, a basket composition file, which
includes the security names and share quantities to deliver in exchange for
Shares, together with estimates and actual cash components is publicly
disseminated daily prior to the opening of the Exchange via the National
Securities Clearing Corporation (the “NSCC”), a clearing agency that is
registered with the SEC. The basket represents one Creation Unit of each Fund.
The Trust, Adviser, Custodian and Distributor will not disseminate non-public
information concerning the Trust.
QUARTERLY
PORTFOLIO SCHEDULE
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 Funds will be available on the SEC’s website at
http://www.sec.gov
.
The Funds’ Form N-Q may also be reviewed and copied at the SEC’s 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 99 Park Avenue, 8th Floor, New York, New York 10016.
CODE OF ETHICS
The
Funds, 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
a Fund within seven days, 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.
PROXY VOTING
POLICIES AND PROCEDURES
The
Funds’ proxy voting record will be available upon request and on the SEC’s
website at
http://www.sec.gov
. Proxies for each Fund’s portfolio
securities are voted in accordance with the Adviser’s proxy voting policies and
procedures, which are set forth in Appendix A to this SAI.
The
Trust is required to disclose annually the Fund’s 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 Funds will be available through
each Fund’s website, at www.vaneck.com, or by writing to 99 Park Avenue, 8th
Floor, New York, New York 10016. The Funds’ Form N-PX will also be available on
the SEC’s website at
www.sec.gov
.
18
MANAGEMENT
The
following information supplements and should be read in conjunction with the
section in the Funds’ Prospectus entitled “Management.”
The Investment Manager
Van
Eck Associates Corporation (the “Adviser”) acts as investment manager to the
Trust and, subject to the supervision of the Board, is responsible for the
day-to-day investment management of the Fund. The Adviser is a private company
with headquarters in New York and manages other mutual funds and separate
accounts.
The
Adviser serves as investment manager to the Funds pursuant to the Investment
Management Agreement between the Trust and the Adviser. Under the Investment
Management Agreement, the Adviser, subject to the supervision of the Board and
in conformity with the stated investment policies of each Fund, manages the
investment of each Fund’s assets. The Adviser is responsible for placing
purchase and sale orders and providing continuous supervision of the investment
portfolio of the Funds.
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.
Compensation.
As
compensation for its services under the Investment Management Agreement, the
Adviser is paid a monthly fee based on a percentage of each Fund’s average
daily net assets at the annual rate of [ ]%. From time to time, the Adviser may waive all or a portion of its
fees. Until at least [May 1, 2009], the Adviser has contractually agreed to
waive fees and/or pay Fund expenses to the extent necessary to prevent the
operating expenses of each Fund (excluding interest expense, brokerage
commissions, offering costs and other trading expenses, fees, taxes and
extraordinary expenses) from exceeding [ ]% of average daily net assets per year. The other expenses excluded
from the expense cap are: (a) legal fees pertaining to a Fund’s Shares offered
for sale; (b) SEC and state registration fees; and (c) initial fees paid to be
listed on an exchange.
Term.
The
Investment Management Agreement continues in effect until the meeting of the
Board scheduled to be held on or before [ ]. Thereafter, the Investment Management Agreement is subject
to annual approval by (1) the Board or (2) a vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each 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 a Fund’s 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).
[
Legal
Investigations and Proceedings
.
In July 2004, Van Eck Associates Corporation (“VEAC”)
received a “Wells Notice” from the SEC in connection with the SEC’s
investigation of market-timing activities. This Wells Notice informed VEAC that
the SEC staff was considering recommending that the SEC bring a civil or
administrative action alleging violations of U.S. securities laws against VEAC
and two of its senior officers. Under SEC procedures, VEAC has an opportunity
to respond to the SEC staff before the staff makes a formal recommendation. The
time period for VEAC’s response has been extended until further notice from the
SEC and, to the best knowledge of VEAC, no
19
formal
recommendation has been made to the SEC to date. There cannot be any assurance
that, if the SEC were to assess sanctions against VEAC, such sanctions would
not materially and adversely affect VEAC. If it is determined that VEAC or its
affiliates engaged in improper or wrongful activity that caused a loss to the
Van Eck Funds or the Van Eck Worldwide Insurance Trust, the Board of Trustees
of the Van Eck Funds and the Van Eck Worldwide Insurance Trust will determine
the amount of restitution that should be made to such fund or its shareholders.
At the present time, the amount of such restitution, if any, has not been
determined. The Board and VEAC are currently working to resolve outstanding
issues relating to these matters.]
The Administrator
Van
Eck Associates Corporation also serves as administrator for the Trust pursuant
to the Investment Management Agreement. Under the Investment Management
Agreement, the Adviser is obligated on a continuous basis to provide such
administrative services as the Board of the Trust reasonably deems necessary
for the proper administration of the Trust and the Fund. The Adviser will
generally assist in all aspects of the Trust’s and the Funds’ operations;
supply and maintain office facilities, statistical and research data, data
processing services, clerical, bookkeeping and record keeping services
(including without limitation the maintenance of such books and records as are
required under the 1940 Act and the rules thereunder, except as maintained by
other agents), internal auditing, executive and administrative services, and
stationery and office supplies; prepare reports to shareholders or investors;
prepare and file tax returns; supply financial information and supporting data
for reports to and filings with the SEC and various state Blue Sky authorities;
supply supporting documentation for meetings of the Board; provide monitoring
reports and assistance regarding compliance with the Declaration of Trust,
by-laws, investment objectives and policies and with federal and state
securities laws; arrange for appropriate insurance coverage; calculate NAVs,
net income and realized capital gains or losses; and negotiate arrangements
with, and supervise and coordinate the activities of, agents and others to
supply services.
Custodian and Transfer Agent
The
Bank of New York serves as custodian for the Funds pursuant to a Custodian
Agreement. As Custodian, The Bank of New York holds the Funds’ assets. The Bank
of New York serves as each Fund’s transfer agent pursuant to a Transfer Agency
Agreement. The Bank of New York may be reimbursed by each Fund for its
out-of-pocket expenses. In addition, The Bank of New York provides various
accounting services to each of the Funds pursuant to a fund accounting
agreement.
The Distributor
Van
Eck Securities Corporation (the “Distributor”) is the principal underwriter and
distributor of Shares. Its principal address is 99 Park Avenue, New York, New
York 10016 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 each 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
Units—Procedures 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
20
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).
The Portfolio Managers
The
portfolio manager who is currently responsible for the day-to-day management of
each Fund’s portfolio is Hao-Hung (Peter) Liao. Mr. Liao has been employed by
the Adviser since the summer of 2004. Mr. Liao attended New York University
from 2000 to 2004 where he received a Bachelor of Arts majoring in mathematics
and economics. Mr. Liao also serves as investment analyst for the Worldwide
Absolute Return Fund (“WARF”), a series of the Van Eck Worldwide Insurance
Trust, a registered investment company, where his role includes manager review,
performance attribution, changes in manager mandates and risk management, and
as a portfolio manager of WARF which as of April 18, 2008, had $8,105,690 in
assets. Mr. Liao also serves as portfolio manager of eleven other funds of the
Trust, which as of April 18, 2008 had $5,719,470,670 in assets. Other than the
sixteen funds of the Trust and WARF, Mr. Liao does not manage any other
registered investment companies, pooled investment vehicles or other accounts.
Because each Fund is new, Mr. Liao will be serving as the portfolio manager of
each Fund since its inception.
Although
the funds in the Trust that are managed by Mr. Liao 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 sixteen funds of the Trust and WARF
presents a material conflict of interest for Mr. Liao or the Adviser.
Portfolio Manager Compensation
The
portfolio manager is paid a fixed base salary and a bonus. The bonus is based
upon the quality of investment analysis and the management of the Fund. The
quality of management of the Fund includes issues of replication, rebalancing,
portfolio monitoring, efficient operation, among other factors. Portfolio
managers who oversee accounts with significantly different fee structures is
generally compensated by discretionary bonus rather than a set formula to help
reduce potential conflicts of interest. At times, the Adviser and affiliates
manage accounts with incentive fees.
Portfolio Manager Share Ownership
As
of the date of this SAI, Mr. Liao did not beneficially own any Shares of the
Funds.
BROKERAGE
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
21
recognized
dealers in these securities, except when a better price and execution of the
order can be obtained elsewhere. The Funds 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 each 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. The
portfolio turnover rate for the Fund is expected to be under 30%. See “Market
Vectors—Africa ETF—Principal Investment Objective and Strategies,” “Market
Vectors—Emerging Europe ETF—Principal Investment Objective and Strategies,”
“Market Vectors—Global Frontier ETF—Principal Investment Objective and Strategies,”
“Market Vectors—Gulf States ETF—Principal Investment Objective and
Strategies,” and “Market Vectors—Vietnam ETF—Principal Investment Objective and
Strategies” in the Funds’ Prospectus. 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.
BOOK ENTRY
ONLY SYSTEM
The
following information supplements and should be read in conjunction with the
section in the Prospectus entitled “Shareholder Information—Buying and Selling
Exchange-Traded Shares.”
DTC
acts as securities depositary for the Shares. Shares of the Funds 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, [the Exchange] 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,
22
and the
transfer of ownership is effected only through, records maintained by DTC (with
respect to DTC Participants) and on the records of DTC Participants (with
respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of Shares.
Conveyance
of all notices, statements and other communications to Beneficial Owners is
effected as follows. Pursuant to the Depositary Agreement between the Trust and
DTC, DTC is required to make available to the Trust upon request and for a fee
to be charged to the Trust a listing of the Shares holdings of each DTC
Participant. The Trust shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding Shares, directly or indirectly, through
such DTC Participant. The Trust shall provide each such DTC Participant with
copies of such notice, statement or other communication, in such form, number
and at such place as such DTC Participant may reasonably request, in order that
such notice, statement or communication may be transmitted by such DTC Participant,
directly or indirectly, to such Beneficial Owners. In addition, the Trust shall
pay to each such DTC Participant a fair and reasonable amount as reimbursement
for the expenses attendant to such transmittal, all subject to applicable
statutory and regulatory requirements.
Share
distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all Shares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants’ accounts with
payments in amounts proportionate to their respective beneficial interests in
Shares as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of Shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in a “street name,” and will be the
responsibility of such DTC Participants.
The
Trust has no responsibility or liability for any aspects of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such Shares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests or for
any other aspect of the relationship between DTC and the DTC Participants or
the relationship between such DTC Participants and the Indirect Participants
and Beneficial Owners owning through such DTC Participants.
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.
CREATION AND
REDEMPTION OF CREATION UNITS
General
The
Trust issues and sells Shares only in Creation Units on a continuous basis
through the Distributor, without an initial sales load, at their NAV next
determined after receipt, on any Business Day (as defined herein), of an order
in proper form.
A
“Business Day” with respect to the Funds is any day on which the Exchange is
open for business. As of the date of the Prospectus, the Exchange observes the
following holidays: New Year’s
23
Day, Martin
Luther King, Jr. Day, President’s Day (Washington’s Birthday), Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Fund Deposit
The
consideration for a purchase of Creation Units generally consists of the
in-kind deposit of a designated portfolio of equity securities (the “Deposit
Securities”) constituting a replication of each Fund’s benchmark Index and an
amount of cash computed as described below (the “Cash Component”). Together,
the Deposit Securities and the Cash Component constitute 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 each
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 each Fund and ends on
the next ex-dividend date.
The
Administrator, through the NSCC (discussed below), makes available on each
Business Day, immediately prior to the opening of business on the Exchange
(currently 9:30 a.m., New York time), the list of the names and the required
number of shares of each Deposit Security to be included in the current Fund
Deposit (based on information at the end of the previous Business Day) as well
as the Cash Component for each Fund. Such Fund Deposit is applicable, subject
to any adjustments as described below, in order to effect creations of Creation
Units of each Fund until such time as the next-announced Fund Deposit
composition is made available.
The
identity and number of shares of the Deposit Securities required for the Fund
Deposit for each 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 each Fund’s respective benchmark Index. In addition,
the Trust reserves the right to permit or require the substitution of an amount
of cash (
i.e.
, a “cash in lieu”
amount) to be added to the Cash Component to replace any Deposit Security which
may, among other reasons, not be available in sufficient quantity for delivery,
not be permitted to be re-registered in the name of the Trust as a result of an
in-kind creation order pursuant to local law or market convention or which may
not be eligible for transfer through the Clearing Process (described below), or
which may not be eligible for trading by a Participating Party (defined below).
In light of the foregoing, in order to seek to replicate the in-kind creation
order process, the Trust expects to purchase the Deposit Securities represented
by the cash in lieu amount in the secondary market (“Market Purchases”). In
such cases where the Trust makes Market Purchases because a Deposit Security
may not be permitted to be re-registered in the name of the Trust as a result
of an in-kind creation order pursuant to local law or market convention, or for
other reasons, the Authorized Participant will reimburse the Trust for, among
other things, any difference between the market value at which the securities
were purchased by the Trust and the cash in lieu amount (which amount, at the
Adviser’s discretion, may be capped), applicable registration fees and taxes.
Brokerage commissions incurred in connection with the Trust’s acquisition of
Deposit Securities will be at the expense of each 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.
24
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 (discussed below), also makes available (i) on each Business Day, the
Dividend Equivalent Payment, if any, effective through and including the
previous Business Day, per outstanding Shares of the Fund, and (ii) on a
continuous basis throughout the day, the Indicative Per Share Portfolio Value.
Procedures for Creation of Creation Units
To
be eligible to place orders with the Distributor to create Creation Units of
the Funds, an entity or person either must be (1) a “Participating Party,”
i.e.
, a broker-dealer or other participant
in the Clearing Process through the Continuous Net Settlement System of the
NSCC; or (2) a DTC Participant (see “Book Entry Only System”); and, in either
case, must have executed an agreement with the Trust and with the Distributor with
respect to creations and redemptions of Creation Units outside the Clearing
Process (“Participant Agreement”) (discussed below). All Creation Units of the
Fund, however created, will be entered on the records of the Depository in the
name of Cede & Co. for the account of a DTC Participant.
All
orders to create Creation Units must be placed in multiples of 50,000 Shares (
i.e.
, a Creation Unit). All orders to
create Creation Units, whether through the Clearing Process or outside the
Clearing Process, must be received by the Distributor no later than the closing
time of the regular trading session on the relevant Exchange (“Closing Time”)
(ordinarily 4:00 p.m., New York time) (3:00 p.m., New York time, for “Custom
Orders” (as defined below)) in each case 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.
Creation
Units may be created in advance of the receipt by the Trust of all or a portion
of the Fund Deposit. In such cases, the Participating Party will remain liable
for the full deposit of the missing portion(s) of the Fund Deposit and will be
required to post collateral with the Trust consisting of cash at least equal to
a percentage of the marked-to-market value of such missing portion(s) that is
specified in the Participant Agreement. The Participant Agreement for any
Participating Party intending to follow such procedures will contain terms and
conditions permitting the Trust to 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 Funds 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 investor’s broker through a Participating Party or a DTC Participant who
has executed a Participant Agreement. At any
25
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 Process—Domestic Funds” and “—Placement of
Creation Orders Outside Clearing Process—Foreign Funds”). In the event that a
Fund includes both domestic and foreign securities, the time for submitting
orders is as stated in the “Placement of Creation Orders Outside Clearing
Process—Foreign Funds” and “Placement of Redemption Orders Outside Clearing
Process—Foreign Funds” sections below shall operate.
Placement of Creation Orders Using Clearing
Process
Fund
Deposits created through the Clearing Process 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 Party’s 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 Funds through the Clearing Process is deemed
received by the Distributor on the Transmittal Date if (i) such order is
received by the Distributor not later than the Closing Time on such Transmittal
Date and (ii) all other procedures set forth in the Participant Agreement are
properly followed.
Placement of Creation Orders Outside Clearing
Process—Domestic 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 Funds to be effected outside the Clearing Process need
not be a Participating Party, but such orders must state that the DTC
Participant is not using the Clearing Process and that the creation of Creation
Units will instead be effected through a transfer of securities and cash. The
Fund Deposit transfer must be ordered by the DTC Participant in a timely
fashion so as to ensure the delivery of the requisite number of Deposit
Securities through DTC to the account of the Trust by no later than 11:00 a.m.,
New York time, of the next Business Day immediately following the Transmittal
Date. All questions as to the number of Deposit Securities to be delivered, and
the validity, form and eligibility (including time of receipt) for the deposit
of any tendered securities, will be determined by the Trust, whose
determination shall be final and binding. The cash equal to the Cash
26
Component must
be transferred directly to the Distributor through the Federal Reserve wire
system in a timely manner so as to be received by the Distributor no later than
2:00 p.m., New York time, on the next Business Day immediately following the
Transmittal Date. An order to create Creation Units of the Funds 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 applicable 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.
Placement of Creation Orders Outside Clearing
Process—Foreign Funds
A
standard order must be placed by 4:00 p.m., New York time for purchases of
Shares. In the case of custom orders, the order must be received by the
Distributor no later than 10:00 a.m., New York time. The Distributor will
inform the Transfer Agent, the Adviser and the Custodian upon receipt of a
Creation Order. The Custodian will then provide such information to the
appropriate custodian. For each Fund, the Custodian will cause the subcustodian
of such Fund to maintain an account into which the Deposit Securities 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.
Acceptance of Creation Order
The
Trust reserves the absolute right to reject a creation order transmitted to it
by the Distributor if, for any reason, (a) the order is not in proper form; (b)
the creator or creators, upon obtaining the Shares ordered, would own 80% or
more of the currently outstanding Shares of the Funds; (c) the Deposit
Securities delivered are not as specified by the Administrator, as described
above; (d) acceptance of the Deposit Securities would have certain adverse tax
consequences to the Fund; (e) the acceptance of the Fund Deposit would, in the
opinion of counsel, be unlawful; (f) the acceptance of the Fund Deposit would
otherwise, in the discretion of the Trust or the Adviser, have an adverse
effect on the Trust or the rights of beneficial owners; or (g) in the event
that circumstances outside the control of the Trust, the Distributor and the
Adviser make it for all practical purposes impossible to process creation
orders. Examples of such circumstances include acts of God or public service or
utility problems such as fires, floods, extreme weather conditions and power
outages resulting in telephone, telecopy and computer failures; market
conditions or activities causing trading halts; systems failures involving computer
or other information systems affecting the Trust, the Adviser, the Distributor,
DTC, the NSCC or any other participant in the
27
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 Trust’s
determination shall be final and binding.
Creation Transaction Fee
A
fixed creation transaction fee of $[ ] payable to the Custodian is imposed on
each creation 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 fee will be imposed. Where the Trust permits a creator to
substitute cash in lieu of depositing a portion of the Deposit Securities, the
creator will be assessed an additional variable charge for cash creations on
the “cash in lieu” portion of its investment. Creators of Creation Units are
responsible for the costs of transferring the securities constituting the
Deposit Securities to the account of the Trust.
Redemption of Creation Units
Shares
may be redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in proper form by the Distributor, only on a
Business Day and only through a Participating Party or DTC Participant who has
executed a Participant Agreement.
The Trust
will not redeem Shares in amounts less than Creation Units
.
Beneficial Owners also may sell Shares in the secondary market, but must
accumulate enough Shares to constitute a Creation Unit in order to have such
Shares redeemed by the Trust. There can be no assurance, however, that there
will be sufficient liquidity in the public trading market at any time to permit
assembly of a Creation Unit. Investors should expect to incur brokerage and
other costs in connection with assembling a sufficient number of Shares to
constitute a redeemable Creation Unit. See “Market Vectors—Africa ETF—Principal
Risks of Investing in the Fund,” “Market Vectors—Emerging Europe ETF—Principal
Risks of Investing in the Fund,” “Market Vectors—Global Frontier ETF—Principal
Risks of Investing in the Fund,” “Market Vectors—Gulf States ETF—Principal
Risks of Investing in the Fund” and “Market Vectors—Vietnam ETF—Principal Risks
of Investing in the Fund” in the Prospectus.
The
Administrator, through NSCC, makes available immediately prior to the opening
of business on the Exchange (currently 9:30 a.m., New York time) on each day
that the Exchange is open for business, the Fund Securities that will be
applicable (subject to possible amendment or correction) to redemption requests
received in proper form (as defined below) on that day. Unless cash redemptions
are available or specified 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 described below. The redemption transaction
fee of $[•] is deducted from such redemption proceeds. Should the Fund
Securities have a value greater than the NAV of the Shares being redeemed, a
compensating cash payment to the Trust equal to the differential plus the
applicable redemption fee will be required to be arranged for by or on behalf
of the redeeming shareholder.
The
basic redemption transaction fees are the same no matter how many Creation
Units are being redeemed pursuant to any one redemption request. The Funds may
adjust these fees from time to time based upon actual experience. An additional
charge up to four times the redemption transaction fee may
28
be charged
with respect to redemptions outside of the Clearing Process. An additional
variable charge for cash redemptions or partial cash redemptions (when cash
redemptions are available) may also be imposed. Investors who use the services
of a broker or other such intermediary may be charged a fee for such services.
Placement of Redemption Orders Using Clearing
Process
Orders
to redeem Creation Units of the Fund through the Clearing Process 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 Funds using the Clearing Process is deemed received on the
Transmittal Date if (i) such order is received by the Distributor not later
than 4:00 p.m., New York time (3:00 p.m., New York time, for Custom Orders for
Domestic Funds and 10:00 a.m., New York time, for Foreign Funds) 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 applicable Fund as next determined. An order to redeem Creation Units of
the Funds using the Clearing Process made in proper form but received by the
Fund after 4:00 p.m., New York time, will be deemed received on the next
Business Day immediately following the Transmittal Date. The requisite Fund
Securities (or contracts to purchase such Fund Securities which are expected to
be delivered in a “regular way” manner) will be transferred by the third (3rd)
NSCC Business Day following the date on which such request for redemption is
deemed received, and the applicable cash payment.
Placement of Redemption Orders Outside
Clearing Process—Domestic Funds
Orders
to redeem Creation Units of the Funds 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 Funds outside the Clearing Process is deemed received by
the Administrator on the Transmittal Date if (i) such order is received by the
Administrator not later than 4:00 p.m., New York time (3:00 p.m., New York
time, for Custom Orders) on such Transmittal Date; (ii) such order is preceded
or accompanied by the requisite number of Shares of Creation Units specified in
such order, which delivery must be made through DTC to the Administrator no
later than 11:00 a.m., New York time, on such Transmittal Date (the “DTC
Cut-Off-Time”); and (iii) all other procedures set forth in the Participant
Agreement are properly followed.
After
the Administrator has deemed an order for redemption outside the Clearing
Process received, the Administrator will initiate procedures to transfer the
requisite Fund Securities (or contracts to purchase such Fund Securities) which
are expected to be delivered within three Business Days and the cash redemption
payment to the redeeming Beneficial Owner by the third Business Day following
the Transmittal Date on which such redemption order is deemed received by the
Administrator. An additional variable redemption transaction fee of up to four
times the basic transaction fee is applicable to redemptions outside the
Clearing Process.
Placement of Redemption Orders Outside
Clearing Process—Foreign Funds
A
standard order for redemption must be received by 4:00 p.m., New York time for
redemptions of Shares. In the case of custom redemptions, the order must be
received by the Distributor no later than 10:00 a.m., New York time.
Arrangements satisfactory to the Trust must be in place for the Participating
29
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 Funds (whether or not they otherwise permit cash redemptions) reserve
the right to redeem Creation Units for cash to the extent that the Funds 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 of Fund Securities upon redemption of
Creation Units, a redeeming shareholder or entity acting on behalf of a
redeeming shareholder must maintain appropriate custody arrangements with a
qualified broker-dealer, bank or other custody providers in each jurisdiction
in which any of the Fund Securities are customarily traded, to which account
such Fund Securities will be delivered. If neither the redeeming shareholder
nor the entity acting on behalf of a redeeming shareholder has appropriate
arrangements to take delivery of the Fund Securities in the applicable foreign
jurisdiction and it is not possible to make other such arrangements, or if it
is not possible to effect deliveries of the Fund Securities in such
jurisdictions, the Trust may, in its discretion, exercise its option to redeem
such Shares in cash, and the redeeming shareholder will be required to receive
its redemption proceeds in cash.
Deliveries
of redemption proceeds generally will be made within three business days. Due
to the schedule of holidays in certain countries, however, the delivery of
in-kind redemption proceeds may take longer than three business days after the
day on which the redemption request is received in proper form. In such cases,
the local market settlement procedures will not commence until the end of the
local holiday periods. The dates in calendar year 2008 in which the regular
holidays affecting the relevant securities markets of the below listed
countries are as follows:
SETTLEMENT PERIODS GREATER THAN SEVEN DAYS FOR YEAR
2008
|
|
|
|
|
|
|
|
|
|
|
Beginning of
Settlement Period
|
|
End of
Settlement Period
|
|
Number of
Days in
Settlement Period
|
|
|
|
|
|
|
|
|
|
Albania
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
Armenia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Azerbaijan
|
|
Azerbaijan
|
|
Azerbaijan
|
|
Azerbaijan
|
|
|
|
|
|
|
|
|
|
Bahrain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bangladesh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belarus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bosnia and Herzegovina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulgaria
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
02/04/08
|
|
02/14/08
|
|
10
|
|
|
|
02/05/08
|
|
02/15/08
|
|
10
|
|
|
|
02/06/08
|
|
02/18/08
|
|
12
|
|
|
|
04/28/08
|
|
05/08/08
|
|
10
|
|
|
|
04/29/08
|
|
05/09/08
|
|
10
|
30
|
|
|
|
|
|
|
|
|
|
|
Beginning of
Settlement Period
|
|
End of
Settlement Period
|
|
Number of
Days in
Settlement Period
|
|
|
|
|
|
|
|
|
|
|
|
04/30/08
|
|
05/12/08
|
|
12
|
|
|
|
09/26/08
|
|
10/08/08
|
|
12
|
|
|
|
09/29/08
|
|
10/09/08
|
|
10
|
|
|
|
09/30/08
|
|
10/10/08
|
|
10
|
|
|
|
|
|
|
|
|
|
Croatia
|
|
12/19/08
|
|
12/29/08
|
|
10
|
|
|
|
12/22/08
|
|
12/30/08
|
|
8
|
|
|
|
12/23/08
|
|
01/02/09
|
|
10
|
|
|
|
|
|
|
|
|
|
Czech Republic
|
|
12/19/08
|
|
12/29/08
|
|
10
|
|
|
|
12/22/08
|
|
12/30/08
|
|
8
|
|
|
|
12/23/08
|
|
12/31/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Denmark
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Ecuador
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estonia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finland
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ghana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indonesia
|
|
09/26/08
|
|
10/06/08
|
|
10
|
|
|
|
09/29/08
|
|
10/07/08
|
|
8
|
|
|
|
09/30/08
|
|
10/08/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Jamaica
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
12/26/08
|
|
01/05/09
|
|
10
|
|
|
|
12/29/08
|
|
01/06/09
|
|
8
|
|
|
|
12/30/08
|
|
01/07/09
|
|
8
|
|
|
|
|
|
|
|
|
|
Jordan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kazakhstan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenya
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kuwait
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kyrgyzstan
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Beginning of
Settlement Period
|
|
End of
Settlement Period
|
|
Number of
Days in
Settlement Period
|
|
|
|
|
|
|
|
|
|
Latvia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lebanon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lithuania
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macedonia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Malawi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mauritius
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
03/14/08
|
|
03/24/08
|
|
10
|
|
|
|
|
|
|
|
|
|
Moldova
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Montenegro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morocco
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Guinea
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nigeria
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norway
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Oman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pakistan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Panama
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Papua
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philippines
|
|
12/24/08
|
|
01/02/09
|
|
9
|
|
|
|
|
|
|
|
|
|
Poland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qatar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Romania
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russia*
|
|
12/26/07
|
|
01/08/08
|
|
13
|
|
|
|
12/27/07
|
|
01/09/08
|
|
13
|
|
|
|
12/28/07
|
|
01/10/08
|
|
13
|
|
|
|
|
|
|
|
|
|
Saudi Arabia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Serbia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Slovak Republic
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Beginning of
Settlement Period
|
|
End of
Settlement Period
|
|
Number of
Days in
Settlement Period
|
|
|
|
|
|
|
|
|
|
Slovenia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sri Lanka
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sweden
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Tajikistan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trinidad and Tobago
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tunisia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turkey
|
|
12/04/08
|
|
12/12/08
|
|
8
|
|
|
|
12/05/08
|
|
12/15/08
|
|
10
|
|
|
|
|
|
|
|
|
|
Ukraine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Arab Emirates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uzbekistan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Venezuela
|
|
03/14/08
|
|
03/24/08
|
|
10
|
|
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
|
|
|
|
|
|
Vietnam
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zimbabwe
|
|
|
|
|
|
|
* Settlement cycle in Russia is negotiated on a deal
by deal basis. Above data reflects a hypothetical T+3 Cycle Covers market
closings that have been confirmed as of 11/1/07. Holidays are subject to change
without notice.
The
right of redemption may be suspended or the date of payment postponed
(1) for any period during which the Exchange is closed (other than
customary weekend and holiday closings); (2) for any period during which
trading on the Exchange is suspended or restricted; (3) for any period
during which an emergency exists as a result of which disposal of the Shares of
a Fund or determination of its NAV is not reasonably practicable; or
(4) in such other circumstance as is permitted by the SEC.
DETERMINATION OF NET ASSET VALUE
The
following information supplements and should be read in conjunction with the
section in the Funds’ Prospectus entitled “Shareholder
Information—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, rounded to
33
the nearest cent. Expenses and fees, including the
management fee, are accrued daily and taken into account for purposes of
determining NAV. The NAV of the Fund is determined as of the close of the
regular trading session on the NYSE (ordinarily 4:00 p.m., New York time) on
each day that such exchange is open. Any assets or liabilities denominated in
currencies other than the U.S. dollar are converted into U.S. dollars at the
current market rates on the date of valuation as quoted by one or more sources.
The
value of each Fund’s portfolio securities is based on the securities’ closing
price on local markets when available. If a security’s market price is not
readily available or does not otherwise accurately reflect the fair value of
the security, the security will be valued by another method that the Adviser
believes will better reflect fair value in accordance with the Trust’s
valuation policies and procedures approved by the Board of Trustees. Each Fund
may use fair value pricing in a variety of circumstances, including but not
limited to, situations when the value of a security in the Fund’s portfolio has
been materially affected by events occurring after the close of the market on
which the security is principally traded (such as a corporate action or other
news that may materially affect the price of a security) or trading in a
security has been suspended or halted. In addition, the Fund currently expects
that it will fair value foreign equity securities held by the Fund each day the
Fund calculates its NAV. Accordingly, a Fund’s 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 a
Fund’s NAV and the prices used by the Fund’s benchmark Index. This may
adversely affect a Fund’s ability to track its benchmark Index. With respect to
securities that are primarily listed on foreign exchanges, the value of each Fund’s
portfolio securities may change on days when you will not be able to purchase
or sell your Shares.
In
computing each Fund’s NAV, the Fund’s securities holdings are valued based on
market quotations. When market quotations are not readily available for a
portfolio security a Fund must use the security’s fair value as determined in
good faith in accordance with the Fund’s Fair Value Pricing Procedures which
are approved by the Board of Trustees.
DIVIDENDS AND DISTRIBUTIONS
The
following information supplements and should be read in conjunction with the
section in the Prospectus entitled “Shareholder Information—Distributions.”
General
Policies
Dividends
from net investment income are declared and paid at least [annually] by each
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 each Fund to improve its Index tracking or to comply with
the distribution requirements of the Internal Revenue Code, in all events in a
manner consistent with the provisions of the 1940 Act. In addition, the Trust
may distribute at least annually amounts representing the full dividend yield
on the underlying portfolio securities of the Funds, net of expenses of the
Funds, as if each 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
34
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
each Fund as a regulated investment company (“RIC”) or to avoid imposition of
income or excise taxes on undistributed income.
DIVIDEND 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.
CONTROL PERSONS
[As
of the date of this SAI, the Adviser beneficially owned all of the voting
securities of each Fund.]
TAXES
The
following information also supplements and should be read in conjunction with
the section in the Prospectus entitled “Shareholder Information—Tax Matters.”
Each
Fund intends to qualify for and to elect treatment as a RIC under Subchapter M
of the Internal Revenue Code. 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.
Each
Fund will be subject to a 4% excise tax on certain undistributed income if it
does not distribute to its shareholders in each calendar year at least 98% of
its ordinary income for the calendar year plus 98% of its capital gain net
income for the twelve months ended October 31 of such years. Each 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 a Fund and if, pursuant to Section 351 of the
Internal Revenue Code, the Funds 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 Units—Procedures for Creation of Creation Units.”
Dividends
and interest received by a 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.
35
Each
Fund will report to shareholders annually the amounts of dividends received
from ordinary income, the amount of distributions received from capital gains
and the portion of dividends which may qualify for the dividends received
deduction. Certain ordinary dividends paid to non-corporate shareholders may
qualify for taxation at a lower tax rate applicable to long-term capital gains.
In
general, a sale of Shares results in capital gain or loss, and for individual
shareholders, is taxable at a federal rate dependent upon the length of time
the Shares were held. A redemption of a shareholder’s Fund Shares is normally
treated as a sale for tax purposes. Fund Shares held for a period of one year
or less at the time of such sale or redemption will, for tax purposes,
generally result in short-term capital gains or losses, and those held for more
than one year will generally result in long-term capital gains or losses. Under
current law, the maximum tax rate on long-term capital gains available to
non-corporate shareholders generally is 15%. Without future congressional
action, the maximum tax rate on long-term capital gains will return to 20% for
taxable years beginning on or after January 1, 2011.
Special
tax rules may change the normal treatment of gains and losses recognized by a
Fund if the Fund invests in forward foreign currency exchange contracts,
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 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 a Fund may be disallowed if
other Fund 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.
Each
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,
a 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 a Fund
makes such investments, it generally would be required to pay out such income
or gain as a distribution in each year to avoid taxation at the Fund level.
Distributions
reinvested in additional Fund Shares through the means of the service (see
“Dividend Reinvestment Service”) will nevertheless be taxable dividends to
Beneficial Owners acquiring such additional Shares to the same extent as if
such dividends had been received in cash. If more than 50% of a Fund’s assets
are invested in foreign securities at the end of any fiscal year, the Fund may
elect to permit shareholders to take a credit or deduction on their federal
income tax return for foreign taxes paid by the Fund.
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.
Nonresident shareholders are urged to
36
consult their
own tax advisors concerning the applicability of the U.S. withholding tax. A
RIC may, under certain circumstances, designate all or a portion of a dividend
as an “interest-related dividend” that if received by a nonresident
alien or foreign entity generally would be exempt from the 30% U.S. withholding
tax,
provided
that certain other requirements are met.
Some
shareholders may be subject to a withholding tax on distributions of ordinary
income, capital gains and any cash received on redemption of Creation Units
(“backup withholding”). The backup withholding rate for individuals is
currently 28%. Generally, shareholders subject to backup withholding will be
those for whom no certified taxpayer identification number is on file with a
Fund or who, to the Fund’s knowledge, have furnished an incorrect number. When
establishing an account, an investor must certify under penalty of perjury that
such number is correct and that such investor is not otherwise subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld will be allowed as a credit against shareholders’ U.S. federal income
tax liabilities, and may entitle them to a refund,
provided
that the required
information is timely furnished to the Internal Revenue Service.
The
foregoing discussion is a summary only and is not intended as a substitute for
careful tax planning. Purchasers of Shares of the Trust should consult their
own tax advisers as to the tax consequences of investing in such Shares,
including under state, local and other tax laws. Finally, the foregoing
discussion is based on applicable provisions of the Internal Revenue Code,
regulations, judicial authority and administrative interpretations in effect on
the date hereof. Changes in applicable authority could materially affect the
conclusions discussed above, and such changes often occur.
Reportable Transactions
Under
promulgated Treasury regulations, if a shareholder recognizes a loss on
disposition of a Fund’s Shares of $2 million or more for an individual
shareholder or $10 million or more for a corporate shareholder, the shareholder
must file with the IRS a disclosure statement on Form 8886. Direct shareholders
of portfolio securities are in many cases excepted from this reporting
requirement, but under current guidance, shareholders of a RIC that engaged in
a reportable transaction are not excepted. Future guidance may extend the
current exception from this reporting requirement to shareholders of most or
all RICs. In addition, pursuant to recently enacted legislation, significant
penalties may be imposed for the failure to comply with the reporting requirements.
The fact that a loss is reportable under these regulations does not affect the
legal determination of whether the taxpayer’s 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.
37
CAPITAL STOCK
AND SHAREHOLDER REPORTS
The
Trust currently is comprised of twenty-two investment funds. The Trust issues
Shares of beneficial interest with no par value. The Board may designate
additional funds of the Trust.
Each
Share issued by the Trust has a pro rata interest in the assets of the
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 relevant Fund, and in the net distributable assets of such 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. Shares of all funds vote together as a single class
except that if the matter being voted on affects only a particular fund it will
be voted on only by that fund, and if a matter affects a particular fund
differently from other funds, that fund will vote separately on such matter.
Under Delaware law, the Trust is not required to hold an annual meeting of
shareholders unless required to do so under the 1940 Act. The policy of the
Trust is not to hold an annual meeting of shareholders unless required to do so
under the 1940 Act. All Shares of the Trust have noncumulative voting rights
for the election of Trustees. Under Delaware law, Trustees of the Trust may be
removed by vote of the shareholders.
Under
Delaware law, shareholders of a statutory trust may have similar limitation
liabilities as shareholders of a corporation.
The
Trust will issue through DTC Participants to its shareholders semi-annual
reports containing unaudited financial statements and annual reports containing
financial statements audited by independent auditor approved by the Trust’s
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 Trust’s distributions.
Shareholder
inquiries may be made by writing to the Trust, c/o Van Eck Associates
Corporation, 99 Park Avenue, 8th Floor, New York, New York 10016.
COUNSEL AND
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Clifford
Chance US LLP is counsel to the Trust and have passed upon the validity of each
Fund’s Shares.
[ ]
serves as the Trust’s independent registered public accounting firm.
38
APPENDIX A
VAN ECK GLOBAL
PROXY VOTING POLICIES
INTRODUCTION
Effective
March 10, 2003, the Securities and Exchange Commission (the “Commission”)
adopted Rule 206(4)-6 under the Investment Advisers Act of 1940 (“Advisers
Act”), requiring each investment adviser registered with the Commission to
adopt and implement written policies and procedures for voting client proxies,
to disclose information about the procedures to its clients, and to inform
clients how to obtain information about how their proxies were voted. The
Commission also amended Rule 204-2 under the Advisers Act to require advisers
to maintain certain proxy voting records. Both rules apply to all investment
advisers registered with the Commission that have proxy voting authority over
their clients’ securities. An adviser that exercises voting authority without
complying with Rule 206(4)-6 will be deemed to have engaged in a “fraudulent,
deceptive, or manipulative” act, practice or course of business within the
meaning of Section 206(4) of the Advisers Act.
When an
adviser has been granted proxy voting authority by a client, the adviser owes
its clients the duties of care and loyalty in performing this service on their
behalf. The duty of care requires the adviser to monitor corporate actions and
vote client proxies. The duty of loyalty requires the adviser to cast the proxy
votes in a manner that is consistent with the best interests of the client.
PROXY VOTING POLICIES AND PROCEDURES
|
|
|
|
|
|
|
Resolving Material Conflicts Of Interest
|
|
|
|
|
|
|
•
|
A “material
conflict” means the existence of a business relationship between a portfolio
company or an affiliate and Van Eck Associates Corporation, any affiliate or
subsidiary (individually and together, as the context may require,
“Adviser”), or an “affiliated person” of a Van Eck mutual fund in excess of
$60,000. Examples of when a material conflict exists include the situation
where the adviser provides significant investment advisory, brokerage or
other services to a company whose management is soliciting proxies; an
officer of the Adviser serves on the board of a charitable organization that
receives charitable contributions from the portfolio company and the
charitable organization is a client of the Adviser; a portfolio company that
is a significant selling agent of Van Eck’s products and services solicits
proxies; a broker-dealer or insurance company that controls 5% or more of the
Adviser’s assets solicits proxies; the Adviser serves as an investment
adviser to the pension or other investment account of the portfolio company;
the Adviser and the portfolio company have a lending relationship. In each of
these situations voting against management may cause the Adviser a loss of
revenue or other benefit.
|
|
|
|
|
|
|
•
|
Conflict
Resolution. When a material conflict exists proxies will be voted in the
following manner:
|
|
|
|
|
|
|
|
Where the
written guidelines set out a pre-determined voting policy, proxies will be
voted in accordance with that policy, with no deviations (if a deviation is
advisable, one of the other methods may be used);
|
|
|
|
|
|
|
|
Where the
guidelines permit discretion and an independent third party has been retained
to vote proxies, proxies will be voted in accordance with the predetermined
policy based on the recommendations of that party; or
|
39
|
|
|
|
|
|
The potential
conflict will be disclosed to the client (a) with a request that the client
vote the proxy, (b) with a recommendation that the client engage another
party to determine how the proxy should be voted or (c) if the foregoing are
not acceptable to the client disclosure of how VEAC intends to vote and a
written consent to that vote by the client.
|
|
|
|
|
|
|
Any
deviations from the foregoing voting mechanisms must be approved by the
Compliance Officer with a written explanation of the reason for the
deviation.
|
|
|
|
|
|
|
Reasonable Research Efforts
|
|
|
|
|
|
|
When
determining whether a vote is in the best interest of the client, the Adviser
will use reasonable research efforts. Investment personnel may rely on public
documents about the company and other readily available information, which is
easily accessible to the investment personnel at the time the vote is cast.
Information on proxies by foreign companies may not be readily available.
|
|
|
|
|
|
|
Voting Client Proxies
|
|
|
|
|
|
|
•
|
The Adviser
generally will vote proxies on behalf of clients, unless clients instruct
otherwise. There may be times when refraining from voting a proxy is in a
client’s best interest, such as when the Adviser determines that the cost of
voting the proxy exceeds the expected benefit to the client. (For example,
casting a vote on a foreign security may involve additional costs such as
hiring a translator or traveling to a foreign country to vote the security in
person).
|
|
|
|
|
|
|
•
|
The
portfolio manager or analyst covering the security is responsible for making
voting decisions.
|
|
|
|
|
|
|
•
|
Portfolio
Administration, in conjunction with the portfolio manager and the custodian,
is responsible for monitoring corporate actions and ensuring that corporate
actions are timely voted.
|
|
|
|
|
|
|
Client Inquiries
|
All
inquiries by clients as to how Van Eck has voted proxies must immediately be
forwarded to Portfolio Administration.
|
|
|
|
|
|
DISCLOSURE TO CLIENTS
|
|
|
|
|
|
•
|
Notification
of Availability of Information Client Brochure.
|
The
Client Brochure or Part II of Form ADV will inform clients that they can obtain
information from VEAC on how their proxies were voted. The Client Brochure or
Part II of Form ADV will be mailed to each client annually.
The
Legal Department will be responsible for coordinating the mailing with
Sales/Marketing Departments.
|
|
|
|
|
|
•
|
Availability
of Proxy Voting Information at the client’s request or if the information is
not available on VEAC’s website, a hard copy of the account’s proxy votes
will be mailed to each client.
|
40
|
|
|
|
|
|
|
Recordkeeping Requirements
|
|
|
|
|
|
•
|
VEAC will
retain the following documentation and information for each matter relating
to a portfolio security with respect to which a client was entitled to vote:
|
|
|
|
|
|
|
—
|
proxy
statements received;
|
|
|
|
|
|
|
—
|
identifying
number for the portfolio security;
|
|
|
|
|
|
|
—
|
shareholder
meeting date;
|
|
|
|
|
|
|
—
|
brief
identification of the matter voted on;
|
|
|
|
|
|
|
—
|
whether the
vote was cast on the matter and how the vote was cast;
|
|
|
|
|
|
|
—
|
how the vote
was cast (
e.g.
,
for or against proposal, or abstain; for or withhold regarding election of
directors);
|
|
|
|
|
|
|
—
|
records of
written client requests for information on how VEAC voted proxies on behalf
of the client;
|
|
|
|
|
|
|
—
|
a copy of
written responses from VEAC to any written or oral client request for
information on how VEAC voted proxies on behalf of the client; and
|
|
|
|
|
|
|
—
|
any
documents prepared by VEAC that were material to the decision on how to vote
or that memorialized the basis for the decision, if such documents were
prepared.
|
|
|
|
|
|
|
•
|
Copies of
proxy statements filed on EDGAR, and proxy statements and records of proxy
votes maintained with a third party (i.e., proxy voting service) need not be
maintained. The third party must agree in writing to provide a copy of the
documents promptly upon request.
|
|
|
|
|
|
|
•
|
If
applicable, any document memorializing that the costs of voting a proxy
exceed the benefit to the client or any other decision to refrain from
voting, and that such abstention was in the client’s best interest.
|
|
|
|
|
|
|
•
|
Proxy voting
records will be maintained in an easily accessible place for five years, the
first two at the office of VEAC. Proxy statements on file with EDGAR or
maintained by a third party and proxy votes maintained by a third party are
not subject to these particular retention requirements.
|
|
|
|
|
|
|
Proxy Voting Guidelines
|
Generally, the
Adviser will vote in accordance with the following guidelines. Where the proxy
vote decision maker determines, however, that voting in such a manner would not
be in the best interest of the client, the investment personnel will vote
differently.
41
If there is a
conflict of interest on any management or shareholder proposals that are voted
on a case by case basis, we will follow the recommendations of an independent
proxy service provider.
|
|
|
|
|
II.
|
Officers and Directors
|
|
|
|
|
|
|
A. The Board of Directors
|
Director
Nominees in Uncontested Elections
Vote on a
case-by-case basis for director nominees, examining factors such as:
|
|
|
|
|
|
•
|
long-term
corporate performance record relative to a market index;
|
|
|
|
|
|
|
•
|
composition
of board and key board committees;
|
|
|
|
|
|
|
•
|
nominee’s
investment in the company;
|
|
|
|
|
|
|
•
|
whether a
retired CEO sits on the board; and
|
|
|
|
|
|
|
•
|
whether the
chairman is also serving as CEO.
|
In cases of
significant votes and when information is readily available, we also review:
|
|
|
|
|
|
•
|
corporate
governance provisions and takeover activity;
|
|
|
|
|
|
|
•
|
board
decisions regarding executive pay;
|
|
|
|
|
|
|
•
|
director
compensation;
|
|
|
|
|
|
|
•
|
number of
other board seats held by nominee; and
|
|
|
|
|
|
|
•
|
interlocking
directorships.
|
|
|
|
|
|
|
B. Chairman and CEO are the Same Person
|
Vote on a
case-by-case basis on shareholder proposals that would require the positions of
chairman and CEO to be held by different persons.
|
|
|
|
|
|
C. Majority of Independent Directors
|
Vote on a
case-by-case basis shareholder proposals that request that the board be
comprised of a majority of independent directors.
Vote for
shareholder proposals that request that the board audit, compensation and/or nominating
committees include independent directors exclusively.
|
|
|
|
|
D. Stock Ownership Requirements
|
Vote on a
case-by-case basis shareholder proposals requiring directors to own a minimum
amount of company stock in order to qualify as a director, or to remain on the
board.
42
E.
Term of Office
Vote on a
case-by-case basis shareholder proposals to limit the tenure of outside
directors.
F.
Director and Officer Indemnification and Liability Protection
Vote on a
case-by-case basis proposals concerning director and officer indemnification
and liability protection.
Generally,
vote against proposals to eliminate entirely director and officer liability for
monetary damages for violating the duty of care.
Vote for only
those proposals that provide such expanded coverage in cases when a director’s
or officer’s legal defense was unsuccessful if: (1) the director was found to
have acted in good faith and in a manner that he reasonably believed was in the
best interests of the company, AND (2) only if the director’s legal expenses
would be covered.
G.
Director Nominees in Contested Elections
Vote on a
case-by-case basis when the election of directors is contested, examining the
following factors:
|
|
|
|
|
|
•
|
long-term
financial performance of the target company relative to its industry;
|
|
|
|
|
|
|
•
|
management’s
track record;
|
|
|
|
|
|
|
•
|
background
to the proxy contest;
|
|
|
|
|
|
|
•
|
qualifications
of director nominees (both slates);
|
|
|
|
|
|
|
•
|
evaluation
of what each side is offering shareholders, as well as the likelihood that
the proposed objectives and goals can be met; and
|
|
|
|
|
|
|
•
|
stock
ownership positions.
|
H.
Board Structure: Staggered vs. Annual Elections
Generally,
vote against proposals to stagger board elections.
Generally,
vote for proposals to repeal classified boards and to elect all directors
annually.
I.
Shareholder Ability to Remove Directors
Vote against
proposals that provide that directors may be removed only for cause.
Vote for
proposals to restore shareholder ability to remove directors with or without
cause.
Vote against
proposals that provide that only continuing directors may elect replacements to
fill board vacancies.
Vote for
proposals that permit shareholders to elect directors to fill board vacancies.
43
J.
Shareholder Ability to Alter the Size of the Board
Vote for
proposals that seek to fix the size of the board.
Vote against
proposals that give management the ability to alter the size of the board
without shareholder approval.
III. Proxy Contests
A.
Reimburse Proxy Solicitation Expenses
Vote on a
case-by-case basis proposals to provide full reimbursement for dissidents
waging a proxy contest.
IV. Auditors
B.
Ratifying Auditors
Vote for
proposals to ratify auditors, unless information that is readily available to
the vote decision-maker demonstrates that an auditor has a financial interest
in or association with the company, and is therefore clearly not independent; or
such readily available information creates a reasonable basis to believe that
the independent auditor has rendered an opinion which is neither accurate nor
indicative of the company’s financial position.
Vote for
shareholder proposals asking for audit firm rotation unless the rotation period
is so short (less than five years) that it would be unduly burdensome to the
company.
V. Shareholder Voting and Control Issues
A.
Cumulative Voting
Generally,
vote against proposals to eliminate cumulative voting.
Generally,
vote for proposals to permit cumulative voting.
B.
Shareholder Ability to Call Special Meetings
Generally,
vote against proposals to restrict or prohibit shareholder ability to call
special meetings.
Generally,
vote for proposals that remove restrictions on the right of shareholders to act
independently of management.
C.
Shareholder Ability to Act by Written Consent
Generally,
vote against proposals to restrict or prohibit shareholder ability to take
action by written consent.
Generally,
vote for proposals to allow or make easier shareholder action by written
consent.
44
D.
Poison Pills
Vote for
shareholder proposals that ask a company to submit its poison pill for
shareholder ratification. Vote on a case-by-case basis shareholder proposals to
redeem a company’s poison pill.
Vote on a
case-by-case basis management proposals to ratify a poison pill.
E.
Fair Price Provision
Vote on a
case-by-case basis when examining fair price proposals, (where market
quotations are not readily available) taking into consideration whether the
shareholder vote requirement embedded in the provision is no more than a
majority of disinterested Shares.
Generally,
vote for shareholder proposals to lower the shareholder vote requirement in
existing fair price provisions.
F.
Greenmail
Generally,
vote for proposals to adopt anti-greenmail charter or bylaw amendments or
otherwise restrict a company’s ability to make greenmail payments.
Generally, vote
on a case-by-case basis anti-greenmail proposals when they are bundled with
other charter or bylaw amendments.
G.
Unequal Voting Rights
Vote against
dual class exchange offers.
Vote against
dual class recapitalizations.
H.
Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws
Vote against
management proposals to require a supermajority shareholder vote to approve
charter and bylaw amendments.
Vote for
shareholder proposals to lower supermajority shareholder vote requirements for
charter and bylaw amendments.
I.
Supermajority Shareholder Vote Requirement to Approve Mergers
Vote against
management proposals to require a supermajority shareholder vote to approve
mergers and other significant business combinations.
J.
White Knight Placements
Vote for
shareholder proposals to require approval of blank check preferred stock issues
for other than general corporate purposes or similar corporate actions.
K.
Confidential Voting
Generally,
vote for shareholder proposals that request corporations to adopt confidential
voting, use independent tabulators and use independent inspectors of election
as long as the proposals include clauses
45
for proxy
contests as follows: In the case of a contested election, management is
permitted to request that the dissident group honor its confidential voting
policy. If the dissidents agree, the policy remains in place. If the dissidents
do not agree, the confidential voting policy is waived.
Generally,
vote for management proposals to adopt confidential voting.
L.
Equal Access
Generally,
vote for shareholders proposals that would allow significant company
shareholders equal access to management’s proxy material in order to evaluate
and propose voting recommendations on proxy proposals and director nominees,
and in order to nominate their own candidates to the board.
M.
Bundled Proposals
Generally,
vote on a case-by-case basis bundled or “conditioned” proxy proposals. In the
case of items that are conditioned upon each other, we examine the benefits and
costs of the packaged items. In instances when the joint effect of the
conditioned items is not in shareholders’ best interests, we vote against the
proposals. If the combined effect is positive, we support such proposals.
N.
Shareholder Advisory Committees
Vote on a
case-by-case basis proposals to establish a shareholder advisory committee.
VI. Capital Structure
A.
Common Stock Authorization
Vote on a
case-by-case basis proposals to increase the number of Shares of common stock
authorized for issue.
Generally,
vote against proposed common stock authorizations that increase the existing
authorization by more than 100% unless a clear need for the excess Shares is
presented by the company.
B.
Stock Distributions: Splits and Dividends
Generally,
vote for management proposals to increase common share authorization for a
stock split, provided that the split does not result in an increase of
authorized but unissued Shares of more than 100% after giving effect to the
Shares needed for the split.
C.
Reverse Stock Splits
Generally,
vote for management proposals to implement a reverse stock split, provided that
the reverse split does not result in an increase of authorized but unissued
Shares of more than 100% after giving effect to the Shares needed for the
reverse split.
D.
Blank Check Preferred Authorization
Generally,
vote for proposals to create blank check preferred stock in cases when the
company expressly states that the stock will not be used as a takeover defense
or carry superior voting rights.
Vote on a
case-by-case basis proposals that would authorize the creation of new classes
of preferred stock with unspecified voting, conversion, dividend and
distribution, and other rights.
46
Vote on a
case-by-case basis proposals to increase the number of authorized blank check
preferred Shares.
E.
Shareholder Proposals Regarding Blank Check Preferred Stock
Generally, vote
for shareholder proposals to have blank check preferred stock placements, other
than those Shares issued for the purpose of raising capital or making
acquisitions in the normal course of business, submitted for shareholder
ratification.
F.
Adjust Par Value of Common Stock
Vote on a
case-by-case basis management proposals to reduce the par value of common
stock.
G.
Preemptive Rights
Vote on a
case-by-case basis proposals to create or abolish preemptive rights. In
evaluating proposals on preemptive rights, we look at the size of a company and
the characteristics of its shareholder base.
H.
Debt Restructurings
Vote on a
case-by-case basis proposals to increase common and/or preferred Shares and to
issue Shares as part of a debt restructuring plan. We consider the following
issues:
|
|
|
|
|
|
•
|
Dilution -
How much will ownership interest of existing shareholders be reduced, and how
extreme will dilution to any future earnings be?
|
|
|
|
|
|
|
•
|
Change In
Control - Will the transaction result in a change in control of the company?
|
|
|
|
|
|
|
•
|
Bankruptcy -
Is the threat of bankruptcy, which would result in severe losses in
shareholder value, the main factor driving the debt restructuring?
|
|
|
|
|
|
|
Generally,
we approve proposals that facilitate debt restructurings unless there are
clear signs of self-dealing or other abuses.
|
I.
Share Repurchase Programs
Vote for
management proposals to institute open-market share repurchase plans in which
all shareholders may participate on equal terms.
VII. Executive Compensation
In general, we
vote on a case-by-case basis on executive compensation plans, with the view
that viable compensation programs reward the creation of stockholder wealth by
having a high payout sensitivity to increases in shareholder value.
VIII. Compensation Proposals
A.
Amendments That Place a Cap on Annual Grants
Vote for plans
that place a cap on the annual grants any one participant may receive.
47
B.
Amend Administrative Features
Vote for plans
that simply amend shareholder-approved plans to include administrative
features.
C.
Amendments to Added Performance-Based Goals
Generally,
vote for amendments to add performance goals to existing compensation plans.
D.
Amendments to Increase Shares and Retain Tax Deductions
Vote on
amendments to existing plans to increase Shares reserved and to qualify the
plan for favorable tax treatment should be evaluated on a case-by-case basis.
E.
Approval of Cash or Cash-and-Stock Bonus Plans
Vote for cash
or cash-and-stock bonus plans to exempt the compensation from taxes.
F.
Shareholder Proposals to Limit Executive Pay
Vote on a
case-by-case basis all shareholder proposals that seek additional disclosure of
executive pay information.
Vote on a
case-by-case basis all other shareholder proposals that seek to limit executive
pay.
Vote for
shareholder proposals to expense options, unless the company has already
publicly committed to expensing options by a specific date.
G.
Golden and Tin Parachutes
Vote for
shareholder proposals to have golden and tin parachutes submitted for
shareholder ratification.
Vote on a
case-by-case basis all proposals to ratify or cancel golden or tin parachutes.
H.
Employee Stock Ownership Plans (ESOPS)
Vote on a
case-by-case basis proposals that request shareholder approval in order to
implement an ESOP or to increase authorized Shares for existing ESOPs, except
in cases when the number of Shares allocated to the ESOP is “excessive” (i.e.,
generally greater than 5% of outstanding Shares).
I.
401(k) Employee Benefit Plans
Generally,
vote for proposals to implement a 401(k) savings plan for employees.
IX. State Of Incorporation
A.
Voting on State Takeover Statutes
Vote on a
case-by-case basis proposals to opt in or out of state takeover statutes
(including control share acquisition statutes, control share cash-out statutes,
freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements,
severance pay and labor contract provisions, anti-greenmail provisions, and
disgorgement provisions).
48
B. Voting on Reincorporation Proposals
Vote on a
case-by-case basis proposals to change a company’s state of incorporation.
X. Mergers and Corporate Restructurings
A.
Mergers and Acquisitions
Vote on a
case-by-case basis proposals related to mergers and acquisitions, taking into
account at least the following:
|
|
|
|
|
|
•
|
anticipated
financial and operating benefits;
|
|
|
|
|
|
|
•
|
offer price
(cost vs. premium);
|
|
|
|
|
|
|
•
|
prospects of
the combined companies;
|
|
|
|
|
|
|
•
|
how the deal
was negotiated; and
|
|
|
|
|
|
|
•
|
changes in
corporate governance and their impact on shareholder rights.
|
|
|
|
|
B.
Corporate Restructuring
Vote on a
case-by-case basis proposals related to a corporate restructuring, including
minority squeezeouts, leveraged buyouts, spin-offs, liquidations and asset
sales.
C.
Spin-Offs
Vote on a
case-by-case basis proposals related to spin-offs depending on the tax and
regulatory advantages, planned use of sale proceeds, market focus and
managerial incentives.
D.
Asset Sales
Vote on a
case-by-case basis proposals related to asset sales after considering the
impact on the balance sheet/working capital, value received for the asset, and
potential elimination of diseconomies.
E.
Liquidations
Vote on a
case-by-case basis proposals related to liquidations after reviewing
management’s efforts to pursue other alternatives, appraisal value of assets,
and the compensation plan for executives managing the liquidation.
F.
Appraisal Rights
Vote for
proposals to restore, or provide shareholders with, rights of appraisal.
G.
Changing Corporate Name
Vote on a
case-by-case basis proposal to change the corporate name.
49
XI. Mutual Fund Proxies
A.
Election of Trustees
Vote on
trustee nominees on a case-by-case basis.
B.
Investment Advisory Agreement
Vote on investment
advisory agreements on a case-by-case basis.
C.
Fundamental Investment Restrictions
Vote on
amendments to a fund’s fundamental investment restrictions on a case-by-case
basis.
D.
Distribution Agreements
Vote on
distribution agreements on a case-by-case basis.
XII. Social and Environmental Issues
In general we
vote on a case-by-case basis on shareholder social and environmental proposals,
on the basis that their impact on share value can rarely be anticipated with
any high degree of confidence.
In most cases,
however, we vote for disclosure reports that seek additional information,
particularly when it appears companies have not adequately addressed
shareholders’ social and environmental concerns.
In determining
our vote on shareholder social and environmental proposals, we analyze factors
such as:
|
|
|
|
|
|
•
|
whether
adoption of the proposal would have either a positive or negative impact on
the company’s short-term or long-term share value;
|
|
|
|
|
|
|
•
|
the
percentage of sales, assets and earnings affected;
|
|
|
|
|
|
|
•
|
the degree
to which the company’s stated position on the issues could affect its
reputation or sales, or leave it vulnerable to boycott or selective
purchasing; whether the issues presented should be dealt with through
government or company—specific action;
|
|
|
|
|
|
|
•
|
whether the
company has already responded in some appropriate manner to the request
embodied in a proposal;
|
|
|
|
|
|
|
•
|
whether the
company’s analysis and voting recommendation to shareholders is persuasive;
|
|
|
|
|
|
|
•
|
what other
companies have done in response to the issue;
|
|
|
|
|
|
|
•
|
whether the proposal itself is well framed and reasonable;
whether implementation of the proposal would achieve the objectives sought in
the proposal; and
|
|
|
|
|
|
|
•
|
whether the subject of the proposal is best left to the
discretion of the board.
|
50
PART C: OTHER INFORMATION
Item 23. Exhibits:
|
|
|
|
(a)
|
Amended and
Restated Declaration of Trust.
*
|
|
|
|
|
(b)
|
Bylaws of
the Trust.
*
|
|
|
|
|
(c)
|
Not
applicable.
|
|
|
|
|
(d)(1)
|
Form of
Investment Management Agreement between the Trust and Van Eck Associates
Corporation (with respect to Market Vectors—Gold 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 Vectors—Gold
Miners ETF).
***
|
|
|
|
|
(e)(1)
|
Form of
Distribution Agreement between the Trust and Van Eck Securities Corporation.
**
|
|
|
|
|
(e)(2)
|
Form of
Participant Agreement.
*
|
|
|
|
|
(f)
|
Not
applicable.
|
|
|
|
|
(g)
|
Form of
Custodian Agreement between the Trust and The Bank of New York.
*
|
|
|
|
|
(h)(1)
|
Form of Fund
Accounting Agreement between the Trust and The Bank of New York.
*
|
|
|
|
|
(h)(2)
|
Form of
Transfer Agency Services Agreement between the Trust and The Bank of New
York.
*
|
|
|
|
|
(h)(3)
|
Form of
Sub-License Agreement between the Trust and the Van Eck Associates Corp.
*
|
|
|
|
|
(i)(1)
|
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors—
Environmental Services ETF, Market Vectors—Gold Miners ETF and Market
Vectors—Steel ETF).
***
|
|
|
|
|
(i)(2)
|
Opinion of
Clifford Chance US LLP (with respect to Market Vectors—Global Alternative
Energy ETF and Market Vectors—Russia ETF).
****
|
|
|
|
|
(i)(3)
|
Opinion of
Clifford Chance US LLP (with respect to Market Vectors—Global Agribusiness
ETF and Market Vectors—Global Nuclear Energy ETF).
*****
|
|
|
|
|
(i)(4)
|
Opinion of
Clifford Chance US LLP (with respect to Market Vectors—Lehman Brothers
Intermediate Municipal ETF, Market Vectors—Lehman Brothers Long Municipal
ETF, Market Vectors—Lehman Brothers 1-5 Year Municipal ETF, Market
Vectors—Lehman Brothers Non-Investment Grade Municipal ETF, Market
Vectors—Lehman Brothers California Municipal ETF and Market Vectors—Lehman
Brothers New York Municipal ETF).
*******
|
|
|
|
|
(i)(5)
|
Opinion of
Clifford Chance US LLP (with respect to Market Vectors—Coal ETF and Market
Vectors—Gaming ETF).†
|
|
|
|
|
(i)(6)
|
Opinion of
Clifford Chance US LLP (with respect to Market Vectors—Lehman Brothers
AMT-Free Massachusetts Municipal Index ETF, Market Vectors—Lehman Brothers
AMT-Free New Jersey Municipal Index ETF, Market Vectors—Lehman Brothers
AMT-Free Ohio Municipal Index ETF and Market Vectors—Lehman Brothers AMT-Free
Pennsylvania Municipal Index ETF).††
|
|
|
|
|
(i)(7)
|
Opinion of
Clifford Chance US LLP (with respect to Market Vectors—Hard Assets ETF and
Market Vectors—Solar Energy ETF). †††
|
|
|
|
|
(i)(8)
|
Opinion and
consent of Clifford Chance US LLP (with respect to Market Vectors—Africa ETF,
Market Vectors—Emerging Europe ETF, Market Vectors—Global Frontier ETF,
Market Vectors—Gulf States ETF and Market Vectors—Vietnam ETF). †††††
|
|
|
|
|
(j)(1)
|
Consent of
Ernst & Young, independent registered public accounting firm (with
respect to Market Vectors—Agribusiness ETF, Market Vectors—Coal ETF, Market
Vectors—Environmental Services ETF, Market Vectors—Gaming ETF, Market
Vectors—Global Alternative Energy ETF, Market Vectors—Gold Miners ETF, Market
Vectors—Nuclear Energy ETF, Market Vectors—Russia ETF and Market
Vectors—Steel ETF). ††††
|
|
|
|
|
(k)
|
Not
applicable.
|
|
|
|
|
(l)
|
Not
applicable.
|
|
|
|
|
(m)
|
Not
applicable.
|
C-1
|
|
|
|
(n)
|
Not
applicable.
|
|
|
|
|
(o)
|
Not
applicable.
|
|
|
|
|
(p)(1)
|
Code of
Ethics.
***
|
|
|
|
|
|
*
|
Incorporated
by the reference to the Registrant’s Registration Statement filed on April
28, 2006.
|
|
|
|
|
**
|
Incorporated
by reference to the Registrant’s Registration Statement filed on May 11,
2006.
|
|
|
|
|
***
|
Incorporated
by reference to the Registrant’s Registration Statement filed on October 6,
2006.
|
|
|
|
|
****
|
Incorporated
by reference to the Registrant’s Registration Statement filed on April 9,
2007.
|
|
|
|
|
*****
|
Incorporated
by reference to the Registrant’s Registration Statement filed on April 27,
2007.
|
|
|
|
|
******
|
Incorporated
by reference to the Registrant’s Registration Statement filed on July 30,
2007.
|
|
|
|
|
*******
|
Incorporated
by reference to the Registrant’s Registration Statement filed on November 2,
2007.
|
|
|
|
|
†
|
Incorporated
by reference to the Registrant’s Registration Statement filed on December 31,
2007.
|
|
|
|
|
††
|
Incorporated
by reference to the Registrant’s Registration Statement filed on February 15,
2008.
|
|
|
|
|
†††
|
Incorporated
by reference to the Registrant’s Registration Statement filed on April 21, 2008.
|
|
|
|
|
††††
|
Incorporated
by reference to the Registrant’s Registration Statement filed on April 25,
2008.
|
|
|
|
|
†††††
|
To be filed
by amendment.
|
Item 24. Persons Controlled by or Under
Common Control with Registrant
None.
Item 25. Indemnification
Pursuant to
Section 10.2 of the Amended and Restated Declaration of Trust, all persons that
are or have been a Trustee or officer of the Trust (collectively, the “Covered
Persons”) shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit, or proceeding in which he or
she becomes involved as a party or otherwise by virtue of his being or having
been a Trustee or officer and against amounts paid or incurred by him in the
settlement thereof. No indemnification will be provided to a Covered Person who
shall have been adjudicated by a court or body before which the proceeding was
brought to be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or not to have acted in good faith in the
reasonable belief that his action was in the best interest of the Trust; or in
the event of a settlement, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Article XII of the Trust’s
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.
C-2
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 Trustee’s service to the Trust, to the fullest
extent permitted by the Amended and Restated Agreement and Declaration of Trust
and Bylaws of the Fund and Title 12, Part V, Chapter 38 of the
Delaware Code, and applicable law.
Item 26. Business and Other Connections of Investment Manager
See
“Management” in the Statement of Additional Information. Information as to the
directors and officers of the Adviser is included in its Form ADV filed with
the SEC and is incorporated herein by reference thereto.
Item 27. Principal Underwriters
|
|
|
|
|
|
(a)
|
Van Eck
Securities Corporation is the Trust’s 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 three series: Emerging Markets Fund, Global Hard
Assets Fund and International Investors Gold Fund); Worldwide Insurance Trust
(which is comprised of five series: Worldwide Absolute Return Fund, Worldwide
Bond Fund, Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and
Worldwide Real Estate Fund); and Van Eck Funds, Inc. (which has one series,
Mid Cap Value Fund).
|
|
|
|
|
|
|
(b)
|
The
following is a list of the executive officers, directors and partners of Van
Eck Securities Corporation:
|
|
|
|
|
|
Name and Principal
Business Address
|
|
Positions and
Offices with Underwriter
|
|
|
|
|
Keith J.
Carlson
|
|
President
|
|
99 Park
Avenue
|
|
|
|
New York, NY
10016
|
|
|
|
|
|
|
|
Susan Lashey
|
|
Vice
President
|
|
99 Park
Avenue
|
|
|
|
New York, NY
10016
|
|
|
|
|
|
|
|
Joseph
McBrien
|
|
Senior Vice
President, General Counsel and Secretary
|
|
99 Park
Avenue
|
|
|
New York, NY
10016
|
|
|
|
|
|
|
|
Peter
Moeller
|
|
Senior Vice
President
|
|
99 Park
Avenue
|
|
|
|
New York, NY
10016
|
|
|
|
|
|
|
|
Jonathan R.
Simon
|
|
Vice
President and Associate General Counsel
|
|
99 Park
Avenue
|
|
|
|
New York, NY
10016
|
|
|
|
|
|
|
|
Bruce J.
Smith
|
|
Senior Vice
President, Chief Financial Officer, Treasurer and Controller
|
|
99 Park
Avenue
|
|
|
New York, NY
10016
|
|
|
C-3
|
|
|
|
|
Name and Principal
Business Address
|
|
Positions and
Offices with Underwriter
|
|
|
|
|
Jan F. van
Eck
|
|
Director,
Executive Vice President and Chief Compliance Officer
|
|
99 Park
Avenue
|
|
|
New York, NY
10016
|
|
|
|
|
|
|
|
Derek S. van
Eck
|
|
Director and
Executive Vice President
|
|
99 Park
Avenue
|
|
|
|
New York, NY
10016
|
|
|
Item 28. Location of Accounts and Records
All accounts,
books and other documents required to be maintained by Section 31(a) of
the 1940 Act and the Rules thereunder will be maintained at the offices of The
Bank of New York, 101 Barclay Street, New York, New York 10286.
Item 29. Management Services
Not
applicable.
Item 30. Undertakings
Not
applicable.
C-4
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it 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 9th day of May
2008.
|
|
|
|
|
|
MARKET
VECTORS ETF TRUST
|
|
|
|
|
|
|
By:
|
/s/ Keith J.
Carlson*
|
|
|
|
|
|
|
|
Keith J.
Carlson
|
|
|
|
President
and Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following person in the capacities and on the date
indicated.
|
|
|
|
|
|
/s/ David H.
Chow*
|
|
Trustee
|
May 9, 2008
|
|
|
|
|
|
David H. Chow
|
|
|
|
|
|
|
|
|
|
/s/ R.
Alastair Short*
|
|
Trustee
|
May 9, 2008
|
|
|
|
|
|
R. Alastair
Short
|
|
|
|
|
|
|
|
|
|
/s/ Richard
D. Stamberger*
|
|
Trustee
|
May 9, 2008
|
|
|
|
|
|
Richard D.
Stamberger
|
|
|
|
|
|
|
|
|
|
/s/ Jan F.
van Eck*
|
|
Trustee
|
May 9, 2008
|
|
|
|
|
|
Jan F. van
Eck
|
|
|
|
|
|
|
|
|
|
/s/ Keith J.
Carlson*
|
|
President
and
Chief Executive Officer
|
May 9, 2008
|
|
|
|
|
|
Keith J.
Carlson
|
|
|
|
|
|
|
|
|
|
/s/ Bruce J.
Smith*
|
|
Chief
Financial Officer
|
May 9, 2008
|
|
|
|
|
|
Bruce J.
Smith
|
|
|
|
|
|
|
|
*By:
|
/s/ Jonathan
R. Simon
|
|
|
|
|
Jonathan
R. Simon
|
|
Attorney-in-Fact
|
C-5
VanEck Vectors Gaming ETF (AMEX:BJK)
Historical Stock Chart
From Dec 2024 to Jan 2025
VanEck Vectors Gaming ETF (AMEX:BJK)
Historical Stock Chart
From Jan 2024 to Jan 2025
