ck0001137360-20211231
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PROSPECTUS
February 2,
2022 |
VANECK®
Digital
India ETF DGIN
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Principal
U.S. Listing Exchange for the Fund: NYSE Arca, Inc. |
The
U.S. Securities and Exchange Commission ("SEC") has not approved or
disapproved these securities or passed upon the accuracy or adequacy
of this Prospectus. Any representation to the contrary is a criminal
offense. |
800.826.2333 vaneck.com
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VANECK®
DIGITAL INDIA ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck® Digital India ETF (the
“Fund”) seeks to track as closely as possible, before fees and expenses, the
price and yield performance of the MVIS®
Digital India Index (the “Index”).
FUND FEES AND EXPENSES
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund (“Shares”).
You may pay other fees, such as brokerage commissions and other fees to
financial intermediaries, which are not reflected in the tables and examples
below.
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Shareholder
Fees (fees
paid directly from your investment)
None
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Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Management
Fee |
0.75 |
% |
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Other
Expenses(a)
(b) |
0.00 |
% |
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Total
Annual Fund Operating Expenses(b) |
0.75 |
% |
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(a) “Other Expenses” are based
on estimated amounts for the current fiscal
year.
(b) Van Eck Associates
Corporation (the “Adviser”) will pay all expenses of the Fund, except for the
fee payment under the investment management agreement, acquired fund fees and
expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay the offering costs until at least May 1,
2023.
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 example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell or hold all of
your Shares at the end of those periods. The example also assumes that your
investment has a 5% annual return and that the Fund’s operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
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YEAR
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EXPENSES |
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1 |
$77 |
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3 |
$240 |
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PORTFOLIO
TURNOVER
The Fund will pay transaction
costs, such as commissions, when it purchases and sells securities (or “turns
over” its portfolio). A higher portfolio turnover will cause the Fund to incur
additional transaction costs and may result in higher taxes when Fund Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, may affect the Fund’s performance. Because
the Fund is newly organized, no portfolio turnover figures are
available.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund normally invests at least 80% of its total assets in securities that
comprise the Fund’s benchmark index. The Index consists of equity securities of
companies involved in supporting the digitalization of the Indian economy. To be
initially eligible for the Index, companies must (i) be domiciled,
headquartered, or incorporated in India (“Indian companies”) and (ii) generate
at least 50% of their revenues from one or more of the following categories:
software, hardware, information technology services and consulting,
communications equipment and infrastructure, telecommunication services,
internet applications, e-commerce sites including financial services and
electronic payment processing. In addition, Indian companies that are ranked
within the top 10 telecommunication services companies by annual revenue are
also eligible for inclusion in the Index because such companies are involved
with and/or support the digitization of the Indian economy.
Such
companies may include small-, medium-, and large- capitalization companies and
foreign market issuers, including emerging market issuers. As of December 8,
2021, the Index included 35 securities of companies with a market capitalization
range of between approximately $1 billion and $200 billion and a weighted
average market capitalization of $50 billion. These amounts are
subject
to change. The Index is published by MV Index Solutions GmbH (the “Index
Provider” or “MVIS”), which is a wholly owned subsidiary of the Adviser. The
Index is reconstituted and rebalanced quarterly. The Fund’s 80% investment
policy is non-fundamental and may be changed without shareholder approval upon
60 days’ prior written notice to shareholders.
The
Fund, using a “passive” or indexing investment approach, attempts to approximate
the investment performance of the Index by investing in a portfolio of
securities that generally replicates the Index. Unlike many investment companies
that try to “beat” the performance of a benchmark index, the Fund does not try
to “beat” the Index and does not seek temporary defensive positions that are
inconsistent with its investment objective of seeking to track the
Index.
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “1940 Act”), and, therefore, may invest a greater
percentage of its assets in a particular issuer. The Fund may concentrate its
investments in a particular industry or group of industries to the extent that
the Index concentrates in an industry or group of industries. As of December 8,
2021, each of the information technology and communication services sectors
represented a significant portion of the
Index.
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. An investment in the Fund is not a
deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore,
you should consider carefully the following risks before investing in the Fund,
each of which could significantly and adversely affect the value of an
investment in the Fund.
Special
Risk Considerations of Investing in Indian Issuers. Investments
in securities of Indian issuers involve risks and special considerations not
typically associated with investments in the U.S. securities markets. Such
heightened risks include, among others, greater government control over the
economy, including the risk that the Indian government may decide not to
continue to support economic reform programs, political and legal uncertainty,
competition from low-cost issuers of other emerging economies in Asia, currency
fluctuations or blockage of foreign currency exchanges and the risk of
nationalization or expropriation of assets. Issuers in India are subject to less
stringent requirements regarding accounting, auditing, financial reporting and
record keeping than are issuers in more developed markets, and therefore, all
material information may not be available or reliable. India is also located in
a part of the world that has historically been prone to natural disasters, such
as earthquakes and tsunamis. Any such natural disaster could cause a significant
impact on the Indian economy, causing an adverse impact on the Fund. In
addition, religious and border disputes persist in India. Moreover, India has
experienced civil unrest and hostilities with neighboring countries, including
Pakistan, and the Indian government has confronted separatist movements in
several Indian states. India has experienced acts of terrorism that targeted
foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indian economy.
The
securities market of India is considered an emerging market characterized by a
small number of listed companies with significantly smaller market
capitalizations, greater price volatility and substantially less liquidity than
developed markets, such as the United States. These factors, coupled with
restrictions on foreign investment and other factors, limit the supply of
securities available for investment by the Fund. This will affect the rate at
which the Fund is able to invest in India, the purchase and sale prices for such
securities and the timing of purchases and sales. Emerging markets can
experience high rates of inflation, deflation and currency devaluation. Certain
restrictions on foreign investment may decrease the liquidity of the Fund’s
portfolio or inhibit the Fund’s ability to track the Index. In addition, the
Reserve Bank of India (“RBI”), the Indian counterpart of the Federal Reserve
Bank in the United States, imposes certain limits on the foreign ownership of
Indian securities. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
India and may inhibit the Fund’s ability to track the Index.
Equity
Securities Risk.
The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority in right to a share of corporate income, and therefore will be subject
to greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns,
although under certain market conditions fixed income securities may have
comparable or greater price volatility.
Risk
of Investing in Small- and Medium-Capitalization Companies.
Small- and medium-capitalization companies may be more volatile and more likely
than large-capitalization companies to have narrower product lines, fewer
financial resources, less management depth and experience and less competitive
strength. In addition, these companies often have greater price volatility,
lower trading volume and less liquidity than larger more established companies.
Returns on investments in securities of small- and medium-capitalization
companies could trail the returns on investments in securities of
large-capitalization companies.
Risk
of Investing in the Communication Services Sector.
The Fund will be sensitive to, and its performance may depend to a greater
extent on, the overall condition of the communication services sector. Companies
in the communication services
sector
may be affected by industry competition, substantial capital requirements,
government regulations and obsolescence of communications products and services
due to technological advancement.
Risk
of Investing in the Information Technology Sector.
The Fund will be sensitive to, and its performance may depend to a greater
extent on, the overall condition of the information technology sector.
Information technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Risk
of Investing in Emerging Market Issuers. Investments
in securities of emerging market issuers are exposed to a number of risks that
may make these investments volatile in price or difficult to trade. Emerging
markets are more likely than developed markets to experience problems with the
clearing and settling of trades, as well as the holding of securities by local
banks, agents and depositories. Political risks may include unstable
governments, nationalization, restrictions on foreign ownership, laws that
prevent investors from getting their money out of a country and legal systems
that do not protect property rights as well as the laws of the United States.
Market risks may also include economies that concentrate in only a few
industries, securities issues that are held by only a few investors, liquidity
issues and limited trading capacity in local exchanges and the possibility that
markets or issues may be manipulated by foreign nationals who have inside
information. The frequency, availability and quality of financial information
about investments in emerging markets varies. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited, and the Fund's
passive investment approach does not take account of these risks. All of these
factors can make emerging market securities more volatile and potentially less
liquid than securities issued in more developed markets.
Risk
of Investing in Foreign Securities.
Investments in the securities of foreign 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. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. The Fund invests in securities of issuers located in countries
whose economies are heavily dependent upon trading with key partners. Any
reduction in this trading may have an adverse impact on the Fund’s
investments.
Foreign
Currency Risk.
Because the Fund’s assets may be invested in securities denominated in foreign
currencies, the proceeds received by the Fund from its investments and/or the
revenues received by the underlying issuer will generally be denominated in
foreign currencies. The Fund’s exposure to foreign currencies and changes in the
value of foreign currencies versus the U.S. dollar may result in reduced returns
for the Fund, and the value of certain foreign currencies may be subject to a
high degree of fluctuation. Moreover, the Fund may incur costs in connection
with conversions between U.S. dollars and foreign currencies.
Risk
of Cash Transactions.
Unlike other exchange-traded funds (“ETFs”), the Fund expects to effect its
creations and redemptions at least partially for cash, rather than wholly for
in-kind securities. Therefore, it may be required to sell portfolio securities
and subsequently incur brokerage costs and/or recognize gains or losses on such
sales that the Fund might not have recognized if it were to distribute portfolio
securities in kind. As such, investments in Shares may be less tax-efficient
than an investment in a conventional ETF.
Market
Risk.
The
prices of the securities in the Fund are subject to the risks associated with
investing in the securities market, including general economic conditions,
sudden and unpredictable drops in value, exchange trading suspensions and
closures and public health risks. These risks may be magnified if certain
social, political, economic and other conditions and events (such as natural
disasters, epidemics and pandemics, terrorism, conflicts and social unrest)
adversely interrupt the global economy; in these and other circumstances, such
events or developments might affect companies world-wide. An investment in the Fund may lose
money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or system failures.
Index
Tracking Risk.
The Fund’s return may not match the return of the Index for a number of reasons.
For example, the Fund incurs a number of operating expenses, including taxes,
not applicable to the 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 Index, or (to the extent the Fund
effects creations and redemptions for cash) raising cash to meet redemptions or
deploying cash in connection with newly created Creation Units, which are not
factored into the return of the Index. Transaction costs, including brokerage
costs, will decrease the Fund’s net asset value (“NAV”) to the extent not offset
by the transaction fee payable by an Authorized Participant (“AP”). Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to
adjust
its exposure to the required levels in order to track the Index. Errors in the
Index data, the Index computations and/or the construction of the Index in
accordance with its methodology may occur from time to time and may not be
identified and corrected by the Index provider for a period of time or at all,
which may have an adverse impact on the Fund and its shareholders. Shareholders
should understand that any gains from the Index provider’s errors will be kept
by the Fund and its shareholders and any losses or costs resulting from the
Index provider’s errors will be borne by the Fund and its shareholders. When the
Index is rebalanced and the Fund in turn rebalances its portfolio to attempt to
increase the correlation between the Fund’s portfolio and the Index, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne directly by the Fund and its shareholders. Apart from scheduled
rebalances, the Index provider or its agents may carry out additional ad hoc
rebalances to the Index. Therefore, errors and additional ad hoc rebalances
carried out by the Index provider or its agents to the Index may increase the
costs to and the tracking error risk of the Fund. The Fund may not be fully
invested at times, either as a result of cash flows into the Fund (if the Fund
effects creations and redemptions for cash) or reserves of cash held by the Fund
to pay expenses or meet redemptions. In addition, the Fund may not invest in
certain securities included in the Index, or invest in them in the exact
proportions in which they are represented in the Index. The Fund’s performance
may also deviate from the return of the Index due to legal restrictions or
limitations imposed by the governments of certain countries, certain listing
standards of the Fund’s listing exchange (the “Exchange”), a lack of liquidity
on stock exchanges in which such securities trade, potential adverse tax
consequences or other regulatory reasons (such as diversification requirements).
The Fund may value certain of its investments, underlying currencies and/or
other assets based on fair value prices. To the extent the Fund calculates its
NAV based on fair value prices and the value of the Index is based on
securities’ closing prices on foreign markets (i.e.,
the value of the Index is not based on fair value prices), the Fund’s ability to
track the Index may be adversely affected. In addition, any issues the Fund
encounters with regard to currency convertibility (including the cost of
borrowing funds, if any) and repatriation may also increase the index tracking
risk. The Fund may also need to rely on borrowings to meet redemptions, which
may lead to increased expenses. When markets are volatile, the ability to sell
securities at fair value prices may be adversely impacted and may result in
additional trading costs and/or increase the index tracking risk. For tax
efficiency purposes, the Fund may sell certain securities, and such sale may
cause the Fund to realize a loss and deviate from the performance of the Index.
In light of the factors discussed above, the Fund’s return may deviate
significantly from the return of the Index. Changes to the composition of the
Index in connection with a rebalancing or reconstitution of the Index may cause
the Fund to experience increased volatility, during which time the Fund’s index
tracking risk may be heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of financial institutions that act as APs,
none of which are obligated to engage in creation and/or redemption
transactions. To the extent that those APs exit the business, or are unable to
or choose not to process creation and/or redemption orders, and no other AP is
able to step forward to create and redeem, there may be a significantly
diminished trading market for Shares or Shares may trade like closed-end funds
at a greater discount (or premium) to NAV and possibly face trading halts and/or
de-listing. The AP concentration risk may be heightened in scenarios where APs
have limited or diminished access to the capital required to post
collateral.
New
Fund Risk.
The Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund's small asset base, certain of the Fund's expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
Absence
of Prior Active Market. The
Fund is a newly organized series of an investment company and thus has no
operating history. While the Fund’s Shares are expected to be listed on the
Exchange, there can be no assurance that active trading markets for the Shares
will develop or be maintained. Further, secondary markets may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods in times of market stress because market makers and APs may step away
from making a market in the Shares and in executing creation and redemption
orders, which could cause a material deviation in the Fund’s market price from
its NAV.
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.
Passive
Management Risk.
An investment in the Fund involves risks similar to those of investing in any
fund invested in equity securities traded on an exchange, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in security prices. However,
because the Fund is not “actively” managed, unless a specific security is
removed from the Index, the Fund generally would not sell a security because the
security’s issuer was in financial trouble. Additionally, unusual market
conditions may cause the Index provider to postpone a scheduled rebalance or
reconstitution, which could cause the Index to vary from its normal or expected
composition. Therefore, the Fund’s performance could be lower than funds that
may actively shift their portfolio assets to take advantage of market
opportunities or to lessen the impact of a market decline or a decline in the
value of one or more issuers.
Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund Shares.
The market price of the Shares may fluctuate in response to the Fund’s NAV, the
intraday value of the Fund’s holdings and supply and demand for Shares. The
Adviser cannot predict whether Shares will trade above, below, or at their most
recent NAV. Disruptions to creations and redemptions, the existence of market
volatility or potential lack of an active trading market for Shares (including
through a trading halt), as well as other factors, may result in Shares trading
at a significant premium or discount to NAV or to the intraday value of the
Fund’s holdings. If a shareholder purchases Shares at a time when the market
price is at a premium to the NAV or sells Shares at a time when the market price
is at a discount to the NAV, the shareholder may pay significantly more or
receive significantly less than the underlying value of the Shares that were
bought or sold or the shareholder may be unable to sell his or her Shares. The
securities held by the Fund may be traded in markets that close at a different
time than the Exchange. Liquidity in those securities may be reduced after the
applicable closing times. Accordingly, during the time when the Exchange is open
but after the applicable market closing, fixing or settlement times, bid-ask
spreads on the Exchange and the resulting premium or discount to the Shares’ NAV
may widen. Additionally, in stressed market conditions, the market for the
Fund’s Shares may become less liquid in response to deteriorating liquidity in
the markets for the Fund’s underlying portfolio holdings. There are various
methods by which investors can purchase and sell Shares. Investors should
consult their financial intermediaries before purchasing or selling Shares of
the Fund.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified”
fund under the 1940 Act. Therefore, the Fund may invest a relatively high
percentage of its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. Moreover, the gains and losses on a
single investment may have a greater impact on the Fund’s NAV and may make the
Fund more volatile than more diversified funds.
Concentration
Risk.
The Fund’s assets may be concentrated in a particular sector or sectors or
industry or group of industries to the extent the Index concentrates in a
particular sector or sectors or industry or group of industries. To the extent
that the Fund is concentrated in a particular sector or sectors or industry or
group of industries, the Fund will be subject to the risk that economic,
political or other conditions that have a negative effect on those sectors
and/or industries may negatively impact the Fund to a greater extent than if the
Fund’s assets were invested in a wider variety of sectors or
industries.
PERFORMANCE
The Fund has not yet commenced operations and
therefore does not have a performance history. Once available,
the Fund’s performance information will be accessible on the Fund’s website at
www.vaneck.com.
PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Associates Corporation.
Portfolio
Managers.
The following individuals are primarily and jointly responsible for the
day-to-day management of the Fund’s portfolio:
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Name |
Title
with Adviser |
Date
Began Managing the Fund |
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Peter
H. Liao |
Portfolio
Manager |
February
2022 |
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Guo
Hua (Jason) Jin |
Portfolio
Manager |
February
2022 |
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PURCHASE
AND SALE OF FUND SHARES
For
important information about the purchase and sale of Fund Shares, tax
information and payments to broker-dealers and other financial intermediaries,
please turn to the “Summary Information About Purchases and Sales of Fund
Shares, Taxes and Payments to Broker-Dealers and Other Financial Intermediaries”
section of this Prospectus.
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SUMMARY
INFORMATION ABOUT PURCHASES AND SALES OF FUND SHARES, TAXES AND
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES |
PURCHASE
AND SALE OF FUND SHARES
Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through a broker or dealer at a market price. Shares of the Fund
are listed on the Exchange, and because Shares trade at market prices rather
than NAV, Shares of the Fund may trade at a price greater than NAV (i.e.,
a “premium”) or less than NAV (i.e.,
a “discount”).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares of the Fund (bid) and the
lowest price a seller is willing to accept for Shares (ask) when buying or
selling Shares in the secondary market (the “bid-ask spread”).
Recent
information, including information about the Fund’s NAV, market price, premiums
and discounts, and bid-ask spreads, is included on the Fund’s website at
www.vaneck.com.
TAX
INFORMATION
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of the Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer or other intermediary or its employees or associated persons to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
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ADDITIONAL
INFORMATION ABOUT THE FUND’S INVESTMENT STRATEGIES AND
RISKS |
PRINCIPAL
INVESTMENT STRATEGIES
The
Adviser anticipates that, generally, the Fund will hold or gain exposure to all
of the securities that comprise the Index in proportion to their weightings in
the Index. However, under various circumstances, it may not be possible or
practicable to purchase all of those securities in those weightings. In these
circumstances, the Fund may purchase a sample of securities in the Index. There
also may be instances in which the Adviser may choose to underweight or
overweight a security in the Index, purchase securities not in the Index that
the Adviser believes are appropriate to substitute for certain securities in the
Index or utilize various combinations of other available investment techniques
in seeking to track as closely as possible, before fees and expenses, the price
and yield performance of the Index. The Fund may sell securities that are
represented in the Index in anticipation of their removal from the Index or
purchase securities not represented in the Index in anticipation of their
addition to the Index. The Fund may also, in order to comply with the tax
diversification requirements of the Internal Revenue Code of 1986, as amended
(the “Code”), temporarily invest in securities not included in the Index and are
expected to be highly correlated with the securities included in the
Index.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
The
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees of the
Trust (the “Board of Trustees”) without shareholder approval, except as noted in
this Prospectus or the Statement of Additional Information (“SAI”) under the
section entitled “Investment Policies and Restrictions— Investment
Restrictions.”
RISKS
OF INVESTING IN THE FUND
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund’s
“Summary Information” section followed by additional risk information.
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. An investment in the Fund is not
a deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore, you should
consider carefully the following risks before investing in the Fund, each of
which could significantly and adversely affect the value of an investment in the
Fund.
Special
Risk Considerations of Investing in Indian Issuers.
Investments in securities of Indian issuers involve risks and special
considerations not typically associated with investments in the U.S. securities
markets. Such heightened risks include, among others, greater government control
over the economy, political and legal uncertainty, competition from low-cost
issuers of other emerging economies in Asia, currency fluctuations or blockage
of foreign currency exchanges and the risk of nationalization or expropriation
of assets. Large portions of many Indian companies remain in the hands of
individuals and corporate governance standards of Indian companies may be weaker
and less transparent, which may increase the risk of loss and unequal treatment
of investors. In addition, religious and border disputes persist in India. India
has experienced civil unrest and hostilities with neighboring countries,
including Pakistan, and the Indian government has confronted separatist
movements in several Indian states. India has also experienced acts of terrorism
that have targeted foreigners, which have had a negative impact on tourism, an
important sector of the Indian economy. India has tested nuclear arms, and the
threat of deployment of such weapons could hinder development of the Indian
economy and escalating tensions could impact the broader region.
The
Indian securities markets are smaller and less liquid than securities markets in
more developed economies and are subject to greater price volatility. Issuers in
India are subject to less stringent requirements regarding accounting, auditing
and financial reporting than are issuers in more developed markets, and
therefore, all material information may not be available or reliable. India also
has less developed clearance and settlement procedures, and there have been
times when settlements have been unable to keep pace with the volume of
securities and have been significantly delayed. Indian stock exchanges have
experienced problems such as temporary exchange closures, broker defaults,
settlement delays and strikes by brokers that have affected the market price and
liquidity of the securities of Indian companies. In addition, the governing
bodies of the Indian stock exchanges have from time to time restricted
securities from trading, limited price movements and restricted margin
requirements. Further, from time to time, disputes have occurred between listed
companies and the Indian stock exchanges and other regulatory bodies that, in
some cases, have had a negative effect on market sentiment. In addition,
inflation in India may be at very high levels. High inflation may lead to the
adoption of corrective measures designed to moderate growth, regulate prices of
staples and other commodities and otherwise contain inflation. Such measures
could inhibit economic activity in India. Additionally, each of the factors
described below could have a negative impact on the Fund’s performance and
increase the volatility of the Fund.
Economic
Risk.
The Indian government has exercised and continues to exercise significant
influence over many aspects of the economy, and the number of public sector
enterprises in India is substantial. Accordingly, Indian government actions in
the future could have a significant effect on the Indian economy. The Indian
government has experienced chronic structural public sector deficits. High
amounts of debt and public spending could have an adverse impact on India’s
economy. Services are the major source of economic growth, accounting for half
of India’s output with less than one quarter of its labor force. Additionally,
the Indian economy may be dependent upon agriculture. About two-thirds of the
workforce is in agriculture. The Fund’s investments may be susceptible to
adverse weather changes including the threat of monsoons and other natural
disasters.
Despite strong growth, the World Bank and others express concern about the
combined state and federal budget deficit.
Regulatory
Risk.
Under the Foreign Portfolio Investors Regulations, 2019 (“FPI Regulations”) of
the Securities and Exchange Board of India (“SEBI”), a foreign portfolio
investor (“FPI”), is subject to certain restrictions on buying, selling or
otherwise dealing in securities.
The
Fund will be registered as a Category I FPI registered with SEBI and hence will
make investments in Indian securities in accordance with the SEBI (Foreign
Portfolio Investors) Regulations, 2019, as amended from time to time (“FPI
Regulations”), the Operational Guidelines for FPIs, Designated Depository
Participants (“DDPs”) and Eligible Foreign Investors (the “Operational
Guidelines”), circulars and notifications issued by SEBI from time to time. It
is noted that there can be no assurance that the entity holding the FPI license
shall continue to qualify for the license. Loss of the FPI registration could
adversely impact the ability of the Fund to make investments in
India.
SEBI
imposes certain limitations on participation in an FPI by Non-Resident Indians
(“NRI”), Overseas Citizens of India (“OCI”) or Resident Indians (“RI”).
The
investments of the Fund will be made in accordance with investment restrictions
prescribed under the FPI Regulations. If new policy announcements or regulations
in India are made, including potential policies with retroactive effect which
require changes in the structure or operations of the Fund, these may adversely
impact the performance of the Fund may get adversely impacted.
In
addition, FPIs that are domiciled in countries which are classified as
“high-risk” jurisdictions or that are monitored by the Financial Action Task
Force may be subject to additional compliance requirements and/or increased
monitoring by the designated depository participant and/or the SEBI. These
policies are constantly evolving and could have an adverse impact on the
Fund.
Investment
and Repatriation Restrictions. The
aggregate holding of a single FPI, including its investor group, whether
directly or through offshore derivative instruments (“ODIs”) or a combination
thereof, in an Indian issuer must be less than 10% of the total paid-up equity
capital on a fully diluted basis of such Indian issuer. SEBI, the Indian
counterpart of the SEC in the United States, monitors foreign holdings and
periodically announces current foreign ownership limitations and changes to such
limits. These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in India and may
inhibit the Fund’s ability to track the Index.
Multiple
entities registered as FPIs and directly or indirectly, having common ownership
of more than 50% or common control, shall be treated as part of the same
investor group.
Equity
Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. For example, an adverse event, such as an
unfavorable earnings report, may result in a decline in the value of equity
securities of an issuer held by the Fund; the price of the equity securities of
an issuer may be particularly sensitive to general movements in the securities
markets; or a drop in the securities markets may depress the price of most or
all of the equities securities held by the Fund. In addition, the equity
securities of an issuer in the Fund’s portfolio may decline in price if the
issuer fails to make anticipated dividend payments. Equity securities are
subordinated to preferred securities and debt in a company’s capital structure
with respect to priority in right to a share of corporate income, and therefore
will be subject to greater dividend risk than preferred securities or debt
instruments. In addition, while broad market measures of equity securities have
historically generated higher average returns than fixed income securities,
equity securities have generally also experienced significantly more volatility
in those returns, although under certain market conditions fixed income
securities may have comparable or greater price volatility. A change in the
financial condition, market perception or the credit rating of an issuer of
securities included in the Index may cause the value of its securities to
decline.
Risk
of Investing in Small- and Medium-Capitalization Companies. The
Fund may invest in small- and medium-capitalization companies and, therefore
will be subject to certain risks associated with small- and 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, with little or no record of profitability. In addition, these
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than large-capitalization companies. Returns on
investments in securities of small- and medium-capitalization companies could
trail the returns on investments in securities of larger companies.
Risk
of Investing in the Communication Services Sector.
The Fund will be sensitive to, and its performance may depend to a greater
extent on, the overall condition of the communication services sector. Companies
in the communication services sector may be affected by industry competition,
substantial capital requirements, government regulations and obsolescence of
communications products and services due to technological
advancement.
Risk
of Investing in the Information Technology Sector. The
Fund will be sensitive to, and its performance may depend to a greater extent
on, the overall condition of the information technology sector. Information
technology companies face intense competition, both domestically and
internationally, which may have an adverse effect on profit margins. Information
technology companies may have limited product lines, markets, financial
resources or personnel. The products of information technology companies may
face product obsolescence due to rapid technological developments and frequent
new product introduction, unpredictable changes in growth rates and competition
for the services of qualified personnel. Companies in the information technology
sector are heavily dependent on patent protection and the expiration of patents
may adversely affect the profitability of these companies.
Risk
of Investing in Emerging Market Issuers. Investments
in securities of emerging market issuers are exposed to a number of risks that
may make these investments volatile in price or difficult to trade. Emerging
markets are more likely than developed markets to experience problems with the
clearing and settling of trades, as well as the holding of securities by local
banks, agents and depositories. Political risks may include unstable
governments, nationalization, restrictions on foreign ownership, laws that
prevent investors from getting their money out of a country and legal systems
that do not protect property rights as well as the laws of the United States.
Market risks may also include economies that concentrate in only a few
industries, securities issues that are held by only a few investors, liquidity
issues and limited trading capacity in local exchanges and the possibility that
markets or issues may be manipulated by foreign nationals who have inside
information. The frequency, availability and quality of financial information
about investments in emerging markets varies. The Fund has limited rights and
few practical remedies in emerging markets and the ability of U.S. authorities
to bring enforcement actions in emerging markets may be limited, and the Fund's
passive investment approach does not take account of these risks. All of these
factors can make emerging market securities more volatile and potentially less
liquid than securities issued in more developed markets.
Risk
of Investing in Foreign Securities.
Investments in the securities of foreign 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. Because
certain foreign securities markets may be limited in size, the activity of large
traders may have an undue influence on the prices of securities that trade in
such markets. Certain foreign markets that have historically been considered
relatively stable may become volatile in response to changed conditions or new
developments. Increased interconnectivity of world economies and financial
markets increases the possibility that adverse developments and conditions in
one country or region will affect the stability of economies and financial
markets in other countries or regions. The Fund invests in securities of issuers
located in countries whose economies are heavily dependent upon trading with key
partners. Any reduction in this trading may have an adverse impact on the Fund’s
investments. Because the Fund may invest in securities denominated in foreign
currencies and some of the income received by the Fund may be in foreign
currency, changes in currency exchange rates may negatively impact the Fund’s
return. The risks of investing in emerging market countries are greater than
risks associated with investments in foreign developed countries.
Foreign
issuers are often subject to less stringent requirements regarding accounting,
auditing, financial reporting and record keeping than are U.S. issuers, and,
therefore, not all material information may be available or reliable. Securities
exchanges or foreign governments may adopt rules or regulations that may
negatively impact the Fund’s ability to invest in foreign securities or may
prevent the Fund from repatriating its investments. The Fund may also invest in
depositary receipts which involve similar risks to those associated with
investments in foreign securities. In addition, the Fund may not receive
shareholder communications or be permitted to vote the securities that it holds,
as the issuers may be under no legal obligation to distribute shareholder
communications.
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, organizations, entities
and/or individuals, changes in international trade patterns, trade barriers and
other protectionist or retaliatory measures. The United States and other nations
or international organizations may impose economic sanctions or take other
actions that may adversely affect issuers of specific countries. Economic
sanctions could, among other things, effectively restrict or eliminate the
Fund’s ability to purchase or sell securities or groups of securities for a
substantial period of time, and may make the Fund’s investments in such
securities harder to value. These sanctions, any future sanctions or other
actions, or even the threat of future sanctions or other actions, may negatively
affect the value and liquidity of the Fund. Also, certain issuers located in
foreign countries in which the Fund invests may operate in, or have dealings
with, countries subject to sanctions and/or embargoes imposed by the U.S.
Government and the United Nations and/or countries identified by the U.S.
Government as state sponsors of terrorism. As a result, an issuer may sustain
damage to its reputation if it is identified as an issuer which operates in, or
has dealings with, such countries. The Fund, as an investor in such issuers, may
be indirectly subject to those risks.
Foreign
Currency Risk. Because
the Fund’s assets that are invested in equity securities of issuers in foreign
countries may be denominated in foreign currencies, the proceeds received by the
Fund from these investments will generally be in foreign currencies. The Fund’s
exposure to foreign currencies and changes in the value of foreign currencies
versus the U.S. dollar may result in reduced returns for the Fund, and the value
of certain foreign currencies may be subject to a high degree of fluctuation.
Moreover, the Fund may incur costs in connection with conversions between U.S.
dollars and foreign currencies. The value of certain emerging market countries’
currencies may be subject to a high degree of fluctuation. This fluctuation may
be due to
changes
in interest rates, investors’ expectations concerning inflation and interest
rates, the emerging market country’s debt levels and trade deficit, 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. For example, certain
emerging market countries have experienced economic challenges and liquidity
issues with respect to their currency. The economies of certain emerging market
countries can be significantly affected by currency devaluations. Certain
emerging market countries may also have managed currencies which are maintained
at artificial levels relative to the U.S. dollar rather than at levels
determined by the market. This type of system could lead to sudden and large
adjustments in the currency, which in turn, may have a negative effect on the
Fund and its investments.
Risk
of Cash Transactions. Unlike
other ETFs, the Fund expects to effect its creations and redemptions at least
partially for cash, rather than wholly for in-kind securities. Because the Fund
currently intends to effect a portion of redemptions for cash, rather than
in-kind distributions, it may be required to sell portfolio securities in order
to obtain the cash needed to distribute redemption proceeds, which involves
transaction costs that the Fund may not have incurred had it effected
redemptions entirely in kind. These costs may include brokerage costs and/or
taxable gains or losses, which may be imposed on the Fund and decrease the
Fund’s NAV to the extent such costs are not offset by a transaction fee payable
by an AP. If the Fund recognizes gain on these sales, this generally will cause
the Fund to recognize gain it might not otherwise have recognized if it were to
distribute portfolio securities in-kind, or to recognize such gain sooner than
would otherwise be required. As a result, an investment in the Fund may be less
tax-efficient than an investment in a more conventional ETF. Other ETFs
generally are able to make in-kind redemptions and avoid realizing gains in
connection with transactions designed to raise cash to meet redemption requests.
The Fund generally intends to distribute these gains to shareholders to avoid
being taxed on this gain at the Fund level and otherwise comply with the special
tax rules that apply to it. This strategy may cause shareholders to be subject
to tax on gains they would not otherwise be subject to, or at an earlier date
than, if they had made an investment in a different ETF. Additionally,
transactions may have to be carried out over several days if the securities
market is relatively illiquid and may involve considerable transaction fees and
taxes.
Market
Risk.
The prices of the securities in the Fund are subject to the risks associated
with investing in the securities market, including general economic conditions,
sudden and unpredictable drops in value, exchange trading suspensions and
closures and public health risks. These risks may be magnified if certain
social, political, economic and other conditions and events (such as natural
disasters, epidemics and pandemics, terrorism, conflicts and social unrest)
adversely interrupt the global economy; in these and other circumstances, such
events or developments might affect companies world-wide. Overall securities
values could decline generally or could underperform other investments. An
investment in the Fund may lose money.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third parties,
failed or inadequate processes and technology or system failures.
Index
Tracking Risk.
The Fund’s return may not match the return of the Index for a number of reasons.
For example, the Fund incurs a number of operating expenses, including taxes,
not applicable to the 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 Index or (to the extent the Fund
effects creations and redemptions for cash) raising cash to meet redemptions or
deploying cash in connection with newly created Creation Units, which are not
factored into the return of the Index. Transaction costs, including brokerage
costs, will decrease the Fund’s NAV to the extent not offset by the transaction
fee payable by an AP. Market disruptions and regulatory restrictions could have
an adverse effect on the Fund’s ability to adjust its exposure to the required
levels in order to track the Index. Unusual market conditions may cause the
Index Provider to postpone a scheduled rebalance, which could cause the Index to
vary from its normal or expected composition. There is no assurance that the
Fund’s Index Provider (defined herein) or any agents that may act on its behalf
will compile the Index accurately, or that the Index will be determined,
composed or calculated accurately. Errors in respect of the quality, accuracy
and completeness of the data used to compile the Index may occur from time to
time and may not be identified and corrected by the Index Provider for a period
of time or at all, particularly where the Index is less commonly used as
benchmarks by funds or managers. Therefore, gains, losses or costs associated
with errors of the Index Provider or its agents will generally be borne by the
Fund and its shareholders. For example, during a period where the Index contains
incorrect constituents, the Fund would have market exposure to such constituents
and would be underexposed to the Index’s other constituents. Such errors may
negatively or positively impact the Fund and its shareholders. Any gains due to
the Index Provider’s or others’ errors will be kept by the Fund and its
shareholders and any losses resulting from the Index Provider’s or others’
errors will be borne by the Fund and its shareholders. When the Index is
rebalanced and the Fund in turn rebalances its portfolio to attempt to increase
the correlation between the Fund’s portfolio and Index, any transaction costs
and market exposure arising from such portfolio rebalancing will be borne
directly by the Fund and its shareholders. The Fund may not be fully invested at
times, either as a result of cash flows into the Fund (if the Fund effects
creations and redemptions for cash) or reserves of cash held by the Fund to pay
expenses or meet redemptions. In addition, the Fund may not be able to invest in
certain securities and/or other assets included in the Index, or invest in them
in the exact proportions in which they are represented in the Index, due to
legal restrictions or limitations imposed by the governments of certain
countries, certain Exchange listing standards, a lack of liquidity on stock
exchanges in which such securities trade, potential adverse tax consequences or
other regulatory reasons (such as diversification requirements). A lack of
liquidity may be
due
to various events, including market events, economic conditions or investor
perceptions. Illiquid securities may be difficult to value and their value may
be lower than market price of comparable liquid securities, which would
negatively affect the Fund's performance. Moreover, the Fund may be delayed in
purchasing or selling securities included in the Index. When markets are
volatile, the ability to sell securities at fair value prices may be adversely
impacted and may result in additional trading costs and/or increase the index
tracking risk. Any issues the Fund encounters with regard to currency
convertibility (including the cost of borrowing funds, if any) and repatriation
may also increase the index tracking risk. The Fund may also need to rely on
borrowings to meet redemptions, which may lead to increased expenses. For tax
efficiency purposes, the Fund may sell certain securities, and such sale may
cause the Fund to realize a loss and deviate from the performance of its
Index.
The
Fund may accept cash in connection with a purchase of Creation Units (defined
herein) or effect its redemptions in cash rather than in-kind and, as a result,
the Fund’s ability to match the return of the Index will be
affected.
The
Fund may fair value certain of the securities, underlying currencies and/or
other assets it holds, except those securities primarily traded on exchanges
that close at the same time the Fund calculates its NAV. To the extent the Fund
calculates its NAV based on fair value prices and the value of the Index is
based on securities’ closing prices on local foreign markets (i.e., the value of
the Index is not based on fair value prices) or if the Fund otherwise calculates
its NAV based on prices that differ from those used in calculating the Index,
the Fund’s ability to track the Index may be adversely affected. The need to
comply with the tax diversification and other requirements of the Code may also
impact the Fund’s ability to track the performance of the Index. In addition, if
the Fund utilizes depositary receipts or other derivative instruments that are
not included in the Index, its return may not correlate as well with the returns
of the Index as would be the case if the Fund purchased all the securities in
the Index directly. Actions taken in response to proposed corporate actions
could result in increased tracking error. In light of the factors discussed
above, the Fund’s return may deviate significantly from the return of the
Index.
Apart
from scheduled rebalances, the Index Provider or its agents may carry out
additional ad hoc rebalances to the Index in order, for example, to correct an
error in the selection of index constituents. When the Index is rebalanced and
the Fund in turn rebalances its portfolio to attempt to increase the correlation
between the Fund’s portfolio and the Index, any transaction costs and market
exposure arising from such portfolio rebalancing will be borne directly by the
Fund and its shareholders. Therefore, errors and additional ad hoc rebalances
carried out by the Index Provider to the Index may increase the costs to and the
tracking error risk of the Fund.
Index
tracking risk may be heightened during times of increased market volatility or
other unusual market conditions. Changes to the composition of the Index in
connection with a rebalancing or reconstitution of the Index may cause the Fund
to experience increased volatility, during which time the Fund’s index tracking
risk may be heightened.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of financial institutions that act as APs,
none of which are obligated to engage in creation and/or redemption
transactions. To the extent that those APs exit the business, or are unable to
or choose not to process creation and/or redemption orders, and no other AP is
able to step forward to create and redeem, there may be a significantly
diminished trading market for Shares or Shares may trade like closed-end funds
at a greater discount (or premium) to NAV and possibly face trading halts and/or
de-listing. The AP concentration risk may be heightened in scenarios where APs
have limited or diminished access to the capital required to post
collateral.
New
Fund Risk. The
Fund is a new fund, with a limited or no operating history and a small asset
base. There can be no assurance that the Fund will grow to or maintain a viable
size. Due to the Fund's small asset base, certain of the Fund's expenses and its
portfolio transaction costs may be higher than those of a fund with a larger
asset base. To the extent that the Fund does not grow to or maintain a viable
size, it may be liquidated, and the expenses, timing and tax consequences of
such liquidation may not be favorable to some shareholders.
Absence
of Prior Active Market. The
Fund is a newly organized series of an investment company and thus has no
operating history. While Shares are expected to be listed on the Exchange, there
can be no assurance that an active trading market for the Shares will develop or
be maintained. Further, secondary markets may be subject to irregular trading
activity, wide bid/ask spreads and extended trade settlement periods in times of
market stress because market makers and APs may step away from making a market
in the Shares and in executing creation and redemption orders, which could cause
a material deviation in the Fund’s market price from its NAV. Van Eck Securities
Corporation, the distributor of the Shares (the “Distributor”), does not
maintain a secondary market in the Shares. Investors purchasing and selling
Shares in the secondary market may not experience investment results consistent
with those experienced by those APs creating and redeeming directly with the
Fund.
Decisions
by market makers or APs to reduce their role or “step away” from these
activities in times of market stress could inhibit the effectiveness of the
arbitrage process in maintaining the relationship between the underlying value
of the Fund’s portfolio securities and the Fund’s market price. This reduced
effectiveness could result in Fund Shares trading at a price which differs
materially from NAV and also in greater than normal intraday bid/ask spreads for
Fund 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. If a trading halt or unanticipated early close of the
Exchange
occurs, a shareholder may be unable to purchase or sell Shares of the Fund.
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.
Passive
Management Risk.
Unlike many investment companies, the Fund is not “actively” managed. Therefore,
unless a specific security is removed from the Index, the Fund generally would
not sell a security because the security’s issuer is in financial trouble. If a
specific security is removed from the Index, the Fund may be forced to sell such
security at an inopportune time or for prices other than at current market
values. An investment in the Fund involves risks similar to those of investing
in any fund that invests in equity securities traded on an exchange, such as
market fluctuations caused by such factors as economic and political
developments, changes in interest rates and perceived trends in security prices.
The Index may not contain the appropriate or a diversified mix of securities for
any particular economic cycle. The timing of changes in the securities of the
Fund’s portfolio in seeking to track the Index could have a negative effect on
the Fund. Unlike with an actively managed fund, the Adviser does not use
techniques or defensive strategies designed to lessen the effects of market
volatility or to reduce the impact of periods of market decline. Additionally,
unusual market conditions may cause the Fund’s Index Provider to postpone a
scheduled rebalance or reconstitution, which could cause the Index to vary from
its normal or expected composition. This means that, based on market and
economic conditions, the Fund’s performance could be lower than funds that may
actively shift their portfolio assets to take advantage of market opportunities
or to lessen the impact of a market decline or a decline in the value of one or
more issuers.
Fund
Shares Trading, Premium/Discount Risk and Liquidity of Fund Shares. Disruptions
to creations and redemptions, the existence of market volatility or potential
lack of an active trading market for Shares (including through a trading halt),
as well as other factors, may result in Shares trading at a significant premium
or discount to NAV or to the intraday value of the Fund’s holdings. The NAV of
the Shares may fluctuate with changes in the market value of the Fund’s
securities holdings. The market price of Shares may fluctuate, in some cases
materially, in accordance with changes in NAV and the intraday value of the
Fund’s holdings as well as supply and demand on the Exchange. The Adviser cannot
predict whether Shares will trade below, at or above their NAV. Given the fact
that Shares can be created and redeemed by APs in Creation Units, the Adviser
believes that large discounts or premiums to the NAV of Shares should not be
sustained in the long-term. While the creation/redemption feature is designed to
make it likely that Shares normally will trade close to the value of the Fund’s
holdings, market prices are not expected to correlate exactly to the Fund’s NAV
due to timing reasons, supply and demand imbalances and other factors. The 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 may be closely related to,
but not necessarily identical to, the same forces influencing the prices of the
securities of the Fund’s portfolio of investments trading individually or in the
aggregate at any point in time. If a shareholder purchases Shares at a time when
the market price is at a premium to the NAV or sells Shares at a time when the
market price is at a discount to the NAV, the shareholder may pay significantly
more or receive significantly less than the underlying value of the Shares that
were bought or sold or the shareholder may be unable to sell his or her Shares.
Any of these factors, discussed above and further below, may lead to the Shares
trading at a premium or discount to the Fund’s NAV. In addition, because certain
of the Fund’s underlying securities trade on exchanges that are closed when the
Exchange (i.e.,
the exchange that Shares of the Fund trade on) is open, there are likely to be
deviations between the expected value of an underlying security and the closing
security’s price (i.e.,
the last quote from its closed foreign market) resulting in premiums or
discounts to NAV that may be greater than those experienced by other ETFs. In
addition, the securities held by the Fund may be traded in markets that close at
a different time than the Exchange. Liquidity in those securities may be reduced
after the applicable closing times. Accordingly, during the time when the
Exchange is open but after the applicable market closing, fixing or settlement
times, bid/ask spreads and the resulting premium or discount to the Shares’ NAV
may widen. Additionally, in stressed market conditions, the market for the
Fund’s Shares may become less liquid in response to deteriorating liquidity in
the markets for the Fund’s underlying portfolio holdings. There are various
methods by which investors can purchase and sell Shares. Investors should
consult their financial intermediaries before purchasing or selling Shares of
the Fund.
When
you buy or sell Shares of the Fund through a broker, you will likely incur a
brokerage commission or other charges imposed by brokers. In addition, the
market price of Shares, like the price of any exchange-traded security, includes
a bid/ask spread charged by the market makers or other participants that trade
the particular security. The spread of the Fund’s Shares varies over time based
on the Fund’s trading volume and market liquidity and may increase if the Fund’s
trading volume, the spread of the Fund’s underlying securities, or market
liquidity decrease. In times of severe market disruption, including when trading
of the Fund’s holdings may be halted, the bid/ask spread may increase
significantly. This means that Shares may trade at a discount to the Fund’s NAV,
and the discount is likely to be greatest during significant market
volatility.
Non-Diversified
Risk.
The Fund is a separate investment portfolio of VanEck ETF Trust (the “Trust”),
which is an open-end investment company registered under the 1940 Act. The Fund
is classified as a “non-diversified” fund under the 1940 Act. Moreover, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest a relatively high percentage of its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. Moreover, the gains and losses on a single investment may have a
greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Concentration
Risk.
The Fund’s assets may be concentrated in a particular sector or sectors or
industry or group of industries to the extent that the Index concentrates in a
particular sector or sectors or industry or group of industries. The securities
of many or all of the companies in the same sector or industry may decline in
value due to developments adversely affecting such sector or
industry.
By concentrating its assets in a particular sector or sectors or industry or
group of industries, the Fund is subject to the risk that economic, political or
other conditions that have a negative effect on those sectors and/or industries
may negatively impact the Fund to a greater extent than if the Fund’s assets
were invested in a wider variety of sectors or industries.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
The
Fund may invest in securities not included in the Index, money market
instruments, including repurchase agreements or other funds which invest
exclusively in money market instruments, convertible securities, structured
notes (notes on which the amount of principal repayment and interest payments
are based on the movement of one or more specified factors, such as the movement
of a particular stock or stock index) and/or certain derivatives, which the
Adviser believes will help the Fund track the Index. Depositary receipts not
included in the Fund’s Index may be used by the Fund in seeking performance that
corresponds to the Index and in managing cash flows, and may count towards
compliance with the Fund’s 80% policy. The Fund may also invest, to the extent
permitted by the 1940 Act, in other affiliated and unaffiliated funds, such as
open-end or closed-end management investment companies, including other ETFs.
The Fund does not have a temporary defensive strategy to protect against
potential stock market declines.
BORROWING
MONEY
The
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. The Fund is expected to enter into a credit facility to borrow
money for temporary, emergency or other purposes, including the funding of
shareholder redemption requests, trade settlements and as necessary to
distribute to shareholders any income required to maintain the Fund’s status as
a regulated investment company. To the extent that the Fund borrows money, it
may be leveraged; at such times, the Fund will appreciate or depreciate in value
more rapidly than the Index. Leverage generally has the effect of increasing the
amount of loss or gain the Fund might realize, and may increase volatility in
the value of the Fund’s investments.
LENDING
PORTFOLIO SECURITIES
The
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, the Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Fund’s
bank lending agent equal to at least 102% of the value of the portfolio
securities being loaned. This collateral is marked-to-market on a daily basis.
Although the Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower fail to return the borrowed securities (e.g.,
the Fund would have to buy replacement securities and the loaned securities may
have appreciated beyond the value of the collateral held by the Fund) or become
insolvent. The Fund may pay fees to the party arranging the loan of securities.
In addition, the Fund will bear the risk that it may lose money because the
borrower of the loaned securities fails to return the securities in a timely
manner or at all. The Fund could also lose money in the event of a decline in
the value of any cash collateral or in the value of investments made with the
cash collateral. These events could trigger adverse tax consequences for the
Fund. Substitute payments for dividends received by the Fund for securities
loaned out by the Fund will not be considered qualified dividend
income.
ADDITIONAL
NON-PRINCIPAL RISKS
Risk
of Investing in Depositary Receipts.
The Fund may invest in depositary receipts (including American Depositary
Receipts ("ADRs"), which involve similar risks to those associated with
investments in foreign securities. Depositary receipts are receipts listed on
U.S. or foreign exchanges issued by banks or trust companies that entitle the
holder to all dividends and capital gains that are paid out on the underlying
foreign shares. The issuers of certain depositary receipts are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities. Investments in depositary receipts may be less liquid than
the underlying shares in their primary trading market and, if not included in
the Fund’s Index, may negatively affect the Fund’s ability to replicate the
performance of its Index. In addition, investments in depositary receipts that
are not included in the Fund’s Index may increase tracking error.
Risk
of Investing in Derivatives. Derivatives
are financial instruments whose values are based on the value of one or more
reference assets or indicators, such as a security, currency, interest rate, or
index. The Fund’s use of derivatives involves risks different from, and possibly
greater than, the risks associated with investing directly in securities and
other more traditional investments. Moreover, although the value of a derivative
is based on an underlying asset or indicator, a derivative typically does not
carry the same rights as would be the case if the Fund invested directly in the
underlying securities, currencies or other assets.
Derivatives
are subject to a number of risks, such as potential changes in value in response
to market developments or, in the case of “over-the-counter” derivatives, as a
result of a counterparty’s credit quality and the risk that a derivative
transaction may not have the effect the Adviser anticipated. Derivatives also
involve the risk of mispricing or improper valuation and the risk that changes
in the value of a derivative may not achieve the desired correlation with the
underlying asset or indicator. Derivative transactions can create investment
leverage, and may be highly volatile, and the Fund could lose more than the
amount it invests. The use of derivatives may increase the amount and affect the
timing and character of taxes payable by shareholders of the Fund.
Many
derivative transactions are entered into “over-the-counter” without a central
clearinghouse; as a result, the value of such a derivative transaction will
depend on, among other factors, the ability and the willingness of the Fund’s
counterparty to perform its obligations under the transaction. If a counterparty
were to default on its obligations, the Fund’s contractual remedies against such
counterparty may be subject to bankruptcy and insolvency laws, which could
affect the Fund’s rights as a creditor (e.g.,
the Fund
may
not receive the net amount of payments that it is contractually entitled to
receive). A liquid secondary market may not always exist for the Fund’s
derivative positions at any time, and the Fund may not be able to initiate or
liquidate a swap position at an advantageous time or price, which may result in
significant losses.
In
October 2020, the Securities and Exchange Commission (the "SEC") adopted a final
rule related to the use of derivatives, short sales, reverse repurchase
agreements and certain other transactions by registered investment companies
that will rescind and withdraw the guidance of the SEC and its staff regarding
asset segregation and cover transactions. The final rule requires funds to trade
derivatives and other transactions that create future payment or delivery
obligations (except reverse repurchase agreements and similar financing
transactions) subject to a value-at-risk (“VaR”) leverage limit, certain
derivatives risk management program and reporting requirements. Generally, these
requirements apply unless a fund qualifies as a “limited derivatives user,” as
defined in the final rule. Under the final rule, when a fund trades reverse
repurchase agreements or similar financing transactions, including certain
tender option bonds, it needs to aggregate the amount of indebtedness associated
with the reverse repurchase agreements or similar financing transactions with
the aggregate amount of any other senior securities representing indebtedness
when calculating the fund’s asset coverage ratio or treat all such transactions
as derivatives transactions. Reverse repurchase agreements or similar financing
transactions aggregated with other indebtedness do not need to be included in
the calculation of whether a fund is a limited derivatives user, but for funds
subject to the VaR testing, reverse repurchase agreements and similar financing
transactions must be included for purposes of such testing whether treated as
derivatives transactions or not. The SEC also provided guidance in connection
with the new rule regarding use of securities lending collateral that may limit
a fund's securities lending activities. Compliance with these new requirements
will be required after an eighteen-month transition period.
Participation
Notes. Participation
Notes (“P-Notes”) are issued by banks or broker-dealers and are designed to
offer a return linked to the performance of a particular underlying equity
security or market. P-Notes can have the characteristics or take the form of
various instruments, including, but not limited to, certificates or warrants.
The holder of a P-Note that is linked to a particular underlying security is
entitled to receive any dividends paid in connection with the underlying
security. However, the holder of a P-Note generally does not receive voting
rights as it would if it directly owned the underlying security. P-Notes
constitute direct, general and unsecured contractual obligations of the banks or
broker-dealers that issue them, which therefore subject a Fund to counterparty
risk, as discussed below. Investments in P-Notes involve certain risks in
addition to those associated with a direct investment in the underlying foreign
securities or foreign securities markets whose return they seek to replicate.
For instance, there can be no assurance that the trading price of a P-Note will
equal the value of the underlying foreign security or foreign securities market
that it seeks to replicate. As the purchaser of a P-Note, a Fund is relying on
the creditworthiness of the counterparty issuing the P-Note and has no rights
under a P-Note against the issuer of the underlying security. Therefore, if such
counterparty were to become insolvent or default on its obligations, a Fund
would lose its investment. The risk that a Fund may lose its investments due to
the insolvency of a single counterparty may be amplified to the extent the Fund
purchases P-Notes issued by one issuer or a small number of issuers. P-Notes
also include transaction costs in addition to those applicable to a direct
investment in securities. In addition, a Fund’s use of P-Notes may cause the
Fund’s performance to deviate from the performance of the portion of its Index
to which the Fund is gaining exposure through the use of P-Notes.
Due
to liquidity and transfer restrictions, the secondary markets on which P-Notes
are traded may be less liquid than the markets for other securities, which may
lead to the absence of readily available market quotations for securities in a
Fund’s portfolio and may cause the value of the P-Notes to decline. The ability
of a Fund to value its securities may become more difficult and the judgment in
the application of fair value procedures may play a greater role in the
valuation of a Fund’s securities due to reduced availability of reliable
objective pricing data. Consequently, while such determinations will be made in
good faith, it may nevertheless be more difficult for a Fund to accurately
assign a daily value to such securities.
Additionally
any subscription to P-notes with underlying Indian securities may be subject to
certain regulatory requirements imposed by SEBI and non-compliance may lead to
the winding down of such positions, which may adversely affect a
Fund.
Shareholder
Risk.
Certain shareholders, including other funds advised by the Adviser, may from
time to time own a substantial amount of the Fund’s Shares. In addition, a third
party investor, the Adviser or an affiliate of the Adviser, an AP, a market
maker, or another entity may invest in the Fund and hold its investment for a
limited period of time. There can be no assurance that any large shareholder
would not redeem its investment. Redemptions by shareholders could have a
negative impact on the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on the Exchange and may,
therefore, have a material effect on the market price of the
Shares.
Leverage
Risk.
To the extent that the Fund borrows money or utilizes certain derivatives, it
may be leveraged. Leveraging generally exaggerates the effect on NAV of any
increase or decrease in the market value of the Fund’s portfolio securities. To
manage the risk associated with leveraging, the Fund may segregate liquid
assets, or otherwise “cover” its derivatives position in a manner consistent
with the 1940 Act and the rules and SEC interpretations thereunder. The Fund may
modify its asset segregation policies at any time to comply with any changes in
the SEC’s positions regarding asset segregation.
A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities is available in the Fund’s SAI.
Board
of Trustees.
The Board of Trustees of the Trust has responsibility for the general oversight
of the management of the Fund, including general supervision of the Adviser and
other service providers, but is not involved in the day-to-day management of the
Trust. A list of the Trustees and the Trust officers, and their present
positions and principal occupations, is provided in the Fund’s SAI.
Investment
Adviser.
Under the terms of an investment management agreement between the Trust and Van
Eck Associates Corporation with respect to the Fund (the “Investment Management
Agreement”), Van Eck Associates Corporation serves as the adviser to the Fund
and, subject to the supervision of the Board of Trustees, is responsible for the
day-to-day investment management of the Fund. As of December 31, 2021, the
Adviser managed approximately $81.73 billion in assets. The Adviser has been an
investment adviser since 1955 and also acts as adviser or sub-adviser to mutual
funds, other ETFs, other pooled investment vehicles and separate accounts. The
Adviser’s principal business address is 666 Third Avenue, 9th Floor, New York,
New York 10017. A discussion regarding the Board of Trustees’ approval of the
Investment Management Agreement will be available in the Trust’s annual report
for the period ended December 31, 2021.
Pursuant
to the Investment Management Agreement, the Adviser is responsible for all
expenses of the Fund, including the costs of
transfer
agency, custody, fund administration, legal, audit and other services, except
for the fee payment under the Investment Management Agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. For its services to the Fund, the Fund has agreed to pay
the Adviser an annual unitary management fee equal to 0.75% of its average daily
net assets. Offering costs excluded from the annual unitary management fee are:
(a) legal fees pertaining to the Fund’s Shares offered for sale, (b) SEC and
state registration fees; and (c) initial fees paid for Shares of the Fund to be
listed on an exchange. Notwithstanding the foregoing, the Adviser has agreed to
pay all such offering costs until at least May 1, 2023.
Manager
of Managers Structure.
The Adviser and the Trust may rely on an exemptive order (the “Order”) from the
SEC that permits the Adviser to enter into investment sub-advisory agreements
with unaffiliated sub-advisers without obtaining shareholder approval. The
Adviser, subject to the review and approval of the Board of Trustees, may select
one or more sub- advisers for the Fund and supervise, monitor and evaluate the
performance of each sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Fund and
its shareholders. The Adviser thus would have the responsibility (subject to the
oversight of the Board of Trustees) to recommend the hiring and replacement of
sub-advisers as well as the discretion to terminate any sub-adviser and
reallocate the Fund’s assets for management among any other sub-adviser(s) and
itself. This means that the Adviser would be able to reduce the sub-advisory
fees and retain a larger portion of the management fee, or increase the
sub-advisory fees and retain a smaller portion of the management fee. The
Adviser would compensate each sub-adviser out of its management
fee.
Administrator,
Custodian and Transfer Agent.
Van Eck Associates Corporation is the administrator for the Fund (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
the Fund’s assets and provides transfer agency and fund accounting services to
the Fund. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
Distributor.
Van Eck Securities Corporation is the distributor of the Shares (the
“Distributor”). The Distributor will not distribute Shares in less than a
specified number of Shares, each called a “Creation Unit,” and does not maintain
a secondary market in the Shares. The Shares are traded in the secondary
market.
The
portfolio managers who currently share joint responsibility for the day-to-day
management of the Fund’s portfolio are Peter H. Liao, CFA, and Guo Hua (Jason)
Jin. Mr. Liao has been employed by the Adviser as an analyst since the summer of
2004 and has been a portfolio manager since 2006. Mr. Liao graduated from New
York University in 2004 with a Bachelor of Arts in Economics and Mathematics.
Mr. Jin has been employed by the Adviser as an analyst since January 2007 and
has been a portfolio manager since 2018. Mr. Jin graduated from the State
University of New York at Buffalo in 2004 with a Bachelor of Science degree in
Business Administration with a concentration in Financial Analysis. Messrs. Liao
and Jin also serve as portfolio managers for certain other investment companies
and pooled investment vehicles advised by the Adviser. See the Fund’s SAI for
additional information about the portfolio managers’ compensation, other
accounts managed by the portfolio managers and their respective ownership of
Shares.
DETERMINATION
OF NAV
The
NAV per Share for the Fund is computed by dividing the value of the net assets
of the Fund (i.e.,
the value of its total assets less total liabilities) by the total number of
Shares outstanding. Expenses and fees, including the management fee, are accrued
daily and taken into account for purposes of determining NAV. The NAV of the
Fund is determined each business day as of the close of trading (ordinarily 4:00
p.m., Eastern time) on the New York Stock Exchange.
The
values of the Fund’s portfolio securities are based on the securities’ closing
prices on the markets on which the securities trade, when available. Due to the
time differences between the United States and certain countries in which the
Fund invests, securities on these exchanges may not trade at times when Shares
of the Fund will trade. In the absence of a last reported sales price, or if no
sales were reported, and for other assets for which market quotes are not
readily available, values may be based on quotes obtained from a quotation
reporting system, established market makers or by an outside independent pricing
service. Debt instruments with remaining maturities of more than 60 days are
valued at the evaluated mean price provided by an outside independent pricing
service. If an outside independent pricing service is unable to provide a
valuation, the instrument is valued at the mean of the highest bid and the
lowest asked quotes obtained from one or more brokers or dealers selected by the
Adviser. Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values obtained
from yield data related to investments or securities with similar
characteristics and may use a computerized grid matrix of securities and its
evaluations in determining what it believes is the fair value of the portfolio
securities. Short-term debt instruments having a maturity of 60 days or less are
valued at amortized cost. 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. If a market
quotation for a security or other asset is not readily available or the Adviser
believes it does not otherwise accurately reflect the market value of the
security or asset at the time the Fund calculates its NAV, the security or asset
will be fair valued by the Adviser in accordance with the Trust’s valuation
policies and procedures approved by the Board of Trustees. The Fund may also use
fair value pricing in a variety of circumstances, including but not limited to,
situations 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 certain of the foreign equity securities held by the Fund, if any,
each day the Fund calculates its NAV, except those securities principally traded
on exchanges that close at the same time the Fund calculates its
NAV.
Accordingly,
the Fund’s NAV may reflect certain portfolio securities’ fair values rather than
their market prices at the time the exchanges on which they principally trade
close. Fair value pricing involves subjective judgments and it is possible that
a fair value determination for a security or other asset is materially different
than the value that could be realized upon the sale of such security or asset.
In addition, fair value pricing could result in a difference between the prices
used to calculate the Fund’s NAV and the prices used by the Fund’s Index. This
may adversely affect the Fund’s ability to track its Index. With respect to
securities that are principally traded 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.
INTRADAY
VALUE
The
trading prices of the Fund’s Shares in the secondary market generally differ
from the Fund’s daily NAV and are affected by market forces such as the supply
of and demand for Fund Shares and underlying securities held by the Fund,
economic conditions and other factors. Information regarding the intraday value
of the Fund’s Shares (“IIV”) may be disseminated throughout each trading day by
the Exchange or by market data vendors or other information providers. The IIV
is based on the current market value of the securities and/or cash required to
be deposited in exchange for a Creation Unit. The IIV does not necessarily
reflect the precise composition of the current portfolio of securities held by
the Fund at a particular point in time or the best possible valuation of the
current portfolio. Therefore, the IIV should not be viewed as a “real-time”
update of the Fund’s NAV, which is computed only once a day. The IIV is
generally determined by using current market quotations and/or price quotations
obtained from broker-dealers and other market intermediaries that may trade in
the portfolio securities held by the Fund and valuations based on current market
rates. The quotations and/or valuations of certain Fund holdings may not
be
updated
during U.S. trading hours if such holdings do not trade in the United States.
The Fund is not involved in, or responsible for, the calculation or
dissemination of the IIV and makes no warranty as to its accuracy.
RULE
144A AND OTHER UNREGISTERED SECURITIES
An
AP (i.e.,
a person eligible to place orders with the Distributor to create or redeem
Creation Units of the Fund) that is not a “qualified institutional buyer,” as
such term is defined under Rule 144A of the Securities Act of 1933, as amended
(the “Securities Act”), will not be able to receive, as part of a redemption,
restricted securities eligible for resale under Rule 144A or other unregistered
securities.
BUYING
AND SELLING EXCHANGE-TRADED SHARES
The
Shares of the Fund are expected to be listed on the Exchange. 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,” which is any difference
between the bid price and the ask price. The spread varies over time for the
Fund’s Shares based on the Fund’s trading volume and market liquidity, and is
generally lower if the Fund has high trading volume and market liquidity, and
generally higher if the Fund has little trading volume and market liquidity
(which is often the case for funds that are newly launched or small in size). In
times of severe market disruption or low trading volume in the Fund’s Shares,
this spread can increase significantly. It is anticipated that the Shares will
trade in the secondary market at prices that may differ to varying degrees from
the NAV of the Shares. During periods of disruptions to creations and
redemptions or the existence of extreme market volatility, the market prices of
Shares are more likely to differ significantly from the Shares’
NAV.
The
Depository Trust Company (“DTC”) serves as securities depository for the Shares.
(The Shares may be held only in book- entry form; stock certificates will not be
issued.) DTC, or its nominee, is the record or registered owner of all
outstanding Shares. Beneficial ownership of Shares will be shown on the records
of DTC or its participants (described below). Beneficial owners of Shares are
not entitled to have Shares registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and are
not considered the registered holder thereof. Accordingly, to exercise any
rights of a holder of Shares, each beneficial owner must rely on the procedures
of: (i) DTC; (ii) “DTC Participants,” i.e.,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives) own
DTC; and (iii) “Indirect Participants,” i.e.,
brokers, dealers, banks and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly,
through which such beneficial owner holds its interests. The Trust understands
that under existing industry practice, in the event the Trust requests any
action of holders of Shares, or a beneficial owner desires to take any action
that DTC, as the record owner of all outstanding Shares, is entitled to take,
DTC would authorize the DTC Participants to take such action and that the DTC
Participants would authorize the Indirect Participants and beneficial owners
acting through such DTC Participants to take such action and would otherwise act
upon the instructions of beneficial owners owning through them. As described
above, the Trust recognizes DTC or its nominee as the owner of all Shares for
all purposes. For more information, see the section entitled “Book Entry Only
System” in the Fund’s SAI.
The
Exchange is open for trading Monday through Friday and is closed on weekends and
the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth National Independence Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Because
non-U.S. exchanges may be open on days when the Fund does not price its Shares,
the value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell the Fund’s
Shares.
The
right of redemption by an AP 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 the Fund or
determination of its NAV is not reasonably practicable; or (4) in such other
circumstance as is permitted by the SEC.
Market
Timing and Related Matters.
The Fund imposes no restrictions on the frequency of purchases and redemptions.
Frequent purchases and redemptions of Fund Shares may attempt to take advantage
of a potential arbitrage opportunity presented by a lag between a change in the
value of the Fund’s portfolio securities after the close of the primary markets
for the Fund’s portfolio securities and the reflection of that change in the
Fund’s NAV (“market timing”). The Board of Trustees considered the nature of the
Fund (i.e.,
a fund whose Shares are expected to trade intraday), that the Adviser monitors
the trading activity of APs for patterns of abusive trading, that the Fund
reserves the right to reject orders that may be disruptive to the management of
or otherwise not in the Fund’s best interests, and that the Fund may fair value
certain of its securities. Given this structure, the Board of Trustees
determined that it is not necessary to impose restrictions on the frequency of
purchases and redemptions for the Fund at the present time.
DISTRIBUTIONS
Net
Investment Income and Capital Gains.
As a shareholder of the Fund, you are entitled to your share of the Fund’s
distributions of net investment income and net realized capital gains on its
investments. The Fund pays out substantially all of its net earnings to its
shareholders as “distributions.”
The
Fund typically earns income dividends from stocks and interest from debt
securities. These amounts, net of expenses, are typically passed along to Fund
shareholders as dividends from net investment income. The Fund realizes capital
gains or losses
whenever
it sells securities. Net capital gains are distributed to shareholders as
“capital gain distributions.” Distributions from the Fund’s net investment
income, including net short-term capital gains, if any, are taxable to you as
ordinary income. Any long-term capital gains distributions you receive from the
Fund are taxable as long-term capital gains.
Net
investment income and net realized capital gains, if any, is typically
distributed to shareholders annually. Dividends may be declared and paid more
frequently to improve index tracking or to comply with the distribution
requirements of the Code. In addition, in situations where the Fund acquires
investment securities after the beginning of a dividend period, the Fund may
elect to distribute at least annually amounts representing the full dividend
yield net of expenses on the underlying investment securities, as if the Fund
owned the underlying investment securities for the entire dividend period. If
the Fund so elects, some portion of each distribution may result in a return of
capital, which, for tax purposes, is treated as a return of your investment in
Shares. You will be notified regarding the portion of the distribution which
represents a return of capital.
Distributions
in cash may be reinvested automatically in additional Shares of the Fund only if
the broker through which you purchased Shares makes such option
available.
TAX
INFORMATION
As
with any investment, you should consider how your Fund investment will be taxed.
The tax information in this Prospectus is provided as general information. You
should consult your own tax professional about the tax consequences of an
investment in the Fund, including the possible application of foreign, state and
local taxes. Unless your investment in the Fund is through a tax-exempt entity
or tax-deferred retirement account, such as a 401(k) plan, you need to be aware
of the possible tax consequences when: (i) the Fund makes distributions, (ii)
you sell Shares in the secondary market or (iii) you create or redeem Creation
Units.
Taxes
on Distributions. As
noted above, the Fund expects to distribute net investment income, if any, at
least annually, and any net realized long-term or short-term capital gains, if
any, annually. The Fund may also pay a special distribution at any time to
comply with U.S. federal tax requirements.
In
general, your distributions are subject to U.S. federal income tax when they are
paid, whether you take them in cash or reinvest them in the Fund. Distributions
of net investment income, including net short-term gains, if any, are generally
taxable as ordinary income. Whether distributions of capital gains represent
long-term or short-term capital gains is determined by how long the Fund owned
the investments that generated them, rather than how long you have owned your
Shares. Distributions of net short-term capital gains in excess of net long-term
capital losses, if any, are generally taxable as ordinary income. Distributions
of net long- term capital gains in excess of net short-term capital losses, if
any, that are properly reported as capital gain dividends are generally taxable
as long-term capital gains. Long-term capital gains of a non-corporate
shareholder are generally taxable at a maximum rate of 15% or 20%, depending on
whether the shareholder’s income exceeds certain threshold amounts.
The
Fund may receive dividends, the distribution of which the Fund may report as
qualified dividends. In the event that the Fund receives such a dividend and
reports the distribution of such dividend as a qualified dividend, the dividend
may be taxed at the maximum capital gains rates of 15% or 20%, provided holding
period and other requirements are met at both the shareholder and the Fund
level. There can be no assurance that any significant portion of the Fund’s
distributions will be eligible for qualified dividend treatment.
Distributions
in excess of the 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 thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce the 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.
Dividends,
interest and gains from non-U.S. investments of the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may, in some cases, reduce or
eliminate such taxes.
If
more than 50% of the Fund’s total assets at the end of its taxable year consist
of foreign securities, the Fund may elect to “pass through” to its investors
certain foreign income taxes paid by the Fund, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor’s pro rata share of the Fund’s foreign income taxes, and (ii)
either deduct (in calculating U.S. taxable income) or credit (in calculating
U.S. federal income), subject to certain holding period and other limitations,
the investor’s pro rata share of the Fund’s foreign income taxes.
Backup
Withholding. The
Fund may be required to withhold a percentage of your distributions and proceeds
if you have not provided a taxpayer identification number or social security
number or otherwise established a basis for exemption from backup withholding.
The backup withholding rate for individuals is currently 24%. 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 (“IRS”).
Taxes
on the Sale or Cash Redemption of Exchange Listed Shares.
Currently, any capital gain or loss realized upon a sale of Shares is generally
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as a short-term capital gain or loss if held for one year or
less. However, any capital loss on a sale of Shares held for six months or less
is treated as long-term capital loss to the extent that capital gain dividends
were paid with respect to such Shares. The ability to deduct capital losses may
be limited. To the extent that the Fund shareholder’s Shares are redeemed for
cash, this is normally treated as a sale for tax purposes.
Taxes
on Creations and Redemptions of Creation Units.
A person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The IRS, however, may assert that a
loss realized upon an exchange of primarily securities for Creation Units cannot
be deducted currently under the rules governing “wash sales,” or on the basis
that there has been no significant change in economic position. Persons
exchanging securities for Creation Units or redeeming Creation Units should
consult their own tax adviser with respect to whether wash sale rules apply and
when a loss might be deductible and the tax treatment of any creation or
redemption transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units held as capital assets is generally
treated as long-term capital gain or loss if the Shares (or securities
surrendered) have been held for more than one year and as a short-term capital
gain or loss if the Shares (or securities surrendered) have been held for one
year or less.
If
you create or redeem Creation Units, you will be sent a confirmation statement
showing how many Shares you created or sold and at what price.
Medicare
Tax.
An additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Non-U.S.
Shareholders.
Dividends paid by the Fund to Non-U.S. shareholders are generally subject to
withholding tax at a 30% rate or a reduced rate specified by an applicable
income tax treaty to the extent derived from investment income and short-term
capital gains. Dividends paid by the Fund from net tax-exempt income or
long-term capital gains are generally not subject to such withholding tax.
Properly-reported dividends are generally exempt from U.S. federal withholding
tax where they (i) are paid in respect of the Fund’s “qualified net interest
income” (generally, the Fund’s U.S. source interest income, other than certain
contingent interest and interest from obligations of a corporation or
partnership in which the Fund is at least a 10% shareholder, reduced by expenses
that are allocable to such income); or (ii) are paid in respect of the Fund’s
“qualified short-term capital gains” (generally, the excess of the Fund’s net
short-term capital gain over the Fund’s long-term capital loss for such taxable
year). However, depending on its circumstances, the Fund may report all, some or
none of its potentially eligible dividends as such qualified net interest income
or as qualified short-term capital gains and/or treat such dividends, in whole
or in part, as ineligible for this exemption from withholding.
Any
capital gain realized by a Non-U.S. shareholder upon a sale of Shares of the
Fund will generally not be subject to U.S. federal income or withholding tax
unless (i) the gain is effectively connected with the shareholder’s trade or
business in the United States, or in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met or (ii) the Fund is or has been a U.S. real property holding corporation, as
defined below, at any time within the five-year period preceding the date of
disposition of the Fund’s Shares or, if shorter, within the period during which
the Non-U.S. shareholder has held the Shares. Generally, a corporation is a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests, as defined in the Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. The
Fund may be, or may prior to a Non-U.S. shareholder’s disposition of Shares
become, a U.S. real property holding corporation. If the Fund is or becomes a
U.S. real property holding corporation, so long as the Fund’s Shares are
regularly traded on an established securities market, only a Non-U.S.
shareholder who holds or held (at any time during the shorter of the five year
period preceding the date of disposition or the holder’s holding period) more
than 5% (directly or indirectly as determined under applicable attribution rules
of the Code) of the Fund’s Shares will be subject to United States federal
income tax on the disposition of Shares.
As
part of the Foreign Account Tax Compliance Act, (“FATCA”), the Fund may be
required to withhold 30% tax on certain types of U.S. sourced income
(e.g.,
dividends, interest, and other types of passive income) paid to (i) foreign
financial institutions (“FFIs”), including non-U.S. investment funds, unless
they agree to collect and disclose to the IRS information regarding their direct
and indirect U.S. account holders and (ii) certain nonfinancial foreign entities
(“NFFEs”), unless they certify certain information regarding their direct and
indirect U.S. owners. To avoid possible withholding, FFIs will need to enter
into agreements with the IRS which state that they will provide the IRS
information, including the names, account numbers and balances, addresses and
taxpayer
identification
numbers of U.S. account holders and comply with due diligence procedures with
respect to the identification of U.S. accounts as well as agree to withhold tax
on certain types of withholdable payments made to non-compliant foreign
financial institutions or to applicable foreign account holders who fail to
provide the required information to the IRS, or similar account information and
required documentation to a local revenue authority, should an applicable
intergovernmental agreement be implemented. NFFEs will need to provide certain
information regarding each substantial U.S. owner or certifications of no
substantial U.S. ownership, unless certain exceptions apply, or agree to provide
certain information to the IRS.
The
Fund may be subject to the FATCA withholding obligation, and also will be
required to perform due diligence reviews to classify foreign entity investors
for FATCA purposes. Investors are required to agree to provide information
necessary to allow the Fund to comply with the FATCA rules. If the Fund is
required to withhold amounts from payments pursuant to FATCA, investors will
receive distributions that are reduced by such withholding amounts.
Non-U.S.
shareholders are advised to consult their tax advisors with respect to the
particular tax consequences to them of an investment in the Fund, including the
possible applicability of the U.S. estate tax.
The
foregoing discussion summarizes some of the consequences under current U.S.
federal income tax law of an investment in the Fund. It is not a substitute for
personal tax advice. Consult your own tax advisor about the potential tax
consequences of an investment in the Fund under all applicable tax laws. Changes
in applicable tax authority could materially affect the conclusions discussed
above and could adversely affect the Fund, and such changes often
occur.
India
Tax Status
Taxation
of Dividends.
Dividends paid by Indian companies on or after April 1, 2020 are no longer
subject to dividend distribution tax in the hands of the Indian company, but
instead be subject to tax in the hands of the shareholder. The dividend income
paid to non-Indian shareholders is taxable under Indian law at 20% (plus the
applicable surcharge and health and education cess).
Taxation
of capital gains
Capital
gains on the sale of shares of Indian securities are subject to tax in India as
follows:
(a)
Capital gains from the sale of listed equity shares or units of equity oriented
funds made off the floor of the stock exchange or zero coupon bonds, held for 12
months or less are taxable as short-term capital gains at the rate of 30% (plus
the applicable surcharge and health and education cess). For those securities
held for more than 12 months, capital gains shall be taxed at the rate of 10%
(plus the applicable surcharge and health and education cess);
(b)
Capital gains from the sale of unlisted securities held for 36 months (for
securities other than shares) and 24 months (for shares) or less are taxable at
the rate of 30% (plus the applicable surcharge and health and education cess),
and those held for more than 36 months (for securities other than shares) and 24
months (for shares) shall be taxed at the rate of 10% (plus the applicable
surcharge and health and education cess);
(c)
Capital gains from the sale of listed Indian equity shares or units of equity
oriented funds made on the floor of the stock exchange and subject to Securities
Transaction Tax (“STT”) and held for 12 months or less are taxable at the rate
of 15% (plus the applicable surcharge and health and education cess) and those
held for more than 12 months shall be taxed at the rate of 10% (plus the
applicable surcharge and health and education cess) for gains exceeding 100,000
Indian rupees; and
(d)
Capital gains arising from the transfer of foreign currency convertible bonds
and depositary receipts outside India between non-resident investors should not
be subject to tax in India.
Securities
Transaction Tax
All
transactions entered on a recognized stock exchange in India are subject to the
STT in accordance with the Income-tax Act, 1961 (“ITA”). The Fund will be liable
to pay STT in respect of dealings in Indian securities purchased or sold on the
Indian stock exchanges. The applicable rates of STT are set out
below:
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Transactions/
Particulars |
Payable
by Purchaser |
Payable
by Seller |
Purchase/sale
of an equity share in a company or unit of an equity oriented fund -
delivery based transaction in recognized stock exchange |
0.1% |
0.1% |
Sale
of equity share in a company or unit of an equity oriented fund -
transaction in a recognized stock exchange, settled otherwise than by
actual delivery |
N.A. |
0.025% |
Sale
of unlisted shares under an offer for sale to the public |
N.A |
0.2% |
Sale
of an option in securities |
N.A |
0.017% |
Sale
of an option in securities, where option is exercised |
0.125% |
N.A. |
Sale
of futures in securities |
N.A. |
0.01% |
Sale
of unit of an equity-oriented fund to a fund |
N.A. |
0.001% |
GAAR.
The
General Anti-Avoidance Rules (“GAAR”), as contained in the ITA came into effect
on April 1, 2017.
As
per the provisions of ITA, the Indian tax authorities have been granted wide
powers to tax “impermissible avoidance arrangements” including the power to
disregard entities in a structure, reallocate income and expenditure between
parties to the arrangement, alter the tax residence of such entities and the
legal situs of assets involved, treat debt as equity and vice versa. The GAAR
provisions are potentially applicable to any transaction or any part
thereof.
The
term “impermissible avoidance arrangement” has been defined to mean an
arrangement where the main purpose is to obtain a tax benefit, and
which:
(i)creates
rights, or obligations, which are not ordinarily created between persons dealing
at arm’s length;
(ii)results,
directly or indirectly, in the misuse, or abuse, of the provisions of ITA;
(iii)lacks
commercial substance or is deemed to lack commercial substance, in whole or in
part; or
(iv)is
entered into, or carried out, by means, or in a manner, which are not ordinarily
employed for bona fide
purposes.
Further,
an arrangement shall be presumed, unless it is proved to the contrary by the
taxpayer, to have been entered into, or carried out, for the main purpose of
obtaining a tax benefit, if the main purpose of a step in, or a part of, the
arrangement is to obtain a tax benefit, notwithstanding the fact that the main
purpose of the whole arrangement is not to obtain a tax benefit.
The
Central Board of Direct Taxes (“CBDT”) on January 27, 2017 has issued
clarifications on implementation of GAAR provisions in response to various
queries received from the stakeholders and industry associations, including that
where tax avoidance is sufficiently addressed by the Limitation of Benefit
Clause (”LOB”) in a treaty, GAAR shall not be invoked.
The
CBDT has further clarified that if the jurisdiction of an FPI is finalized based
on non-tax commercial considerations and the main purpose is not to obtain tax
benefit, GAAR would not apply.
Taxation
of Indirect Transfer of Indian Assets
Under
ITA, Indian capital gains tax can be imposed on income arising from the transfer
of shares in a company registered outside India which derives, directly or
indirectly, its value substantially from the assets located in India. Being a
Category I FPI, the Fund is currently exempt from the application of these
rules. In case of a loss of the Fund's registration as a Category I FPI or
changes in Indian rules, the Fund and the investors could be subject to the
indirect transfer tax provisions in the future.
Taxation
under indirect transfer provisions (if and as applicable) should also be subject
to relief under an applicable tax treaty, subject to compliance with the
applicable requirements under the treaty and the furnishing of requisite
documents to the Indian income tax authorities, including a tax residence
certificate.
The
levels and bases of taxation and any relevant reliefs from taxation referred to
in this document may change, any reliefs referred to are the ones which
currently apply and their value may differ from investor to
investor.
Taxation
of the Investors
For
investors in the Fund who are tax residents outside India and who do not carry
on any business activities in India, there should be no Indian income tax
implications on distributions received from the Fund.
The
above section India Tax Status is based on current provisions of Indian law, and
any change or modification made by subsequent legislation, regulation, or
administrative or judicial decision could increase the Indian tax liability of
the Fund and reduce the return to Fund shareholders.
The
Index is published by MVIS, which is an indirectly wholly owned subsidiary of
the Adviser.
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MVIS®
DIGITAL INDIA INDEX |
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The
Index is a rules based, modified market capitalization weighted, float adjusted
index intended to give investors a means of tracking the overall performance of
the companies involved in and supporting the digitalization of India. Companies
involved in and supporting digitalization of India include, but are not limited
to, the following categories, as defined by the Index Provider: software,
hardware, information technology services and consulting, communications
equipment and infrastructure, telecommunication services, internet applications,
e-commerce sites including online financial services and electronic payment
processing. The Index Provider may add additional categories to this list as the
field of digitalization evolves.
To
be initially eligible for the Index, companies must: (i) be an Indian company
and be listed on an eligible stock exchange (as determined by the Index
Provider) and (ii) generate at least 50% of their revenues from one or more of
the digitalization categories listed above. In addition, Indian companies that
are ranked within the top 10 telecommunication services companies by annual
revenue are eligible for inclusion in the Index because such companies are
involved with and/or support the digitization of the Indian economy. To be
eligible for inclusion in the Index, all stocks must have a market
capitalization of greater than $150 million as of the end of the month prior to
the month in which a rebalancing date occurs. Indian companies that are current
components of the Index must (i) generate at least 25% of their revenues from
one or more of the digitalization categories listed above or (ii) continue to
rank within the top 10 telecommunication services companies by annual revenue in
order to remain in the Index.
The
Index is the exclusive property of MVIS (a wholly owned subsidiary of the
Adviser), which has contracted with Solactive AG to maintain and calculate the
Index. Solactive AG uses its best efforts to ensure that the Index is calculated
correctly. Irrespective of its obligations towards MVIS, Solactive AG has no
obligation to point out errors in the Index to third parties. The Fund is not
sponsored, endorsed, sold or promoted by MVIS and MVIS makes no representation
regarding the advisability of investing in the Fund.
The
Index is reconstituted and rebalanced quarterly. MVIS may delay or change a
scheduled rebalancing or reconstitution of the Index or the implementation of
certain rules at its sole discretion.
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LICENSE
AGREEMENT AND DISCLAIMERS |
The
Adviser has entered into a licensing agreement with MVIS to use the Index. The
Index Provider is a wholly owned subsidiary of the Adviser. The Fund is entitled
to use the Index pursuant to a sub-licensing arrangement with the
Adviser.
Shares
of the Fund are not sponsored, endorsed, sold or promoted by MVIS. MVIS makes no
representation or warranty, express or implied, to the owners of Shares of the
Fund or any member of the public regarding the advisability of investing in
securities generally or in the Shares of the Fund particularly or the ability of
the Index to track the performance of its respective securities market. The
Index is determined and composed by MVIS without regard to the Adviser or the
Shares of the Fund. MVIS has no obligation to take the needs of the Adviser or
the owners of Shares of the Fund into consideration in determining and composing
the Index.
MVIS
is not responsible for and has not participated in the determination of the
timing of prices at, or quantities of the Shares of the Fund to be issued or in
the determination or calculation of the equation by which the Shares of the Fund
are to be converted into cash. MVIS has no obligation or liability in connection
with the administration, marketing or trading of the Shares of the Fund.
The
Index is the exclusive property of MVIS, which has contracted with Solactive AG
to maintain and calculate the Index. Solactive AG uses its best efforts to
ensure that the Index is calculated correctly. Irrespective of its obligations
towards the MVIS, Solactive AG has no obligation to point out errors in the
Index to third parties including but not limited to investors and/or financial
intermediaries of the financial instrument.
The
Fund is not sponsored, promoted, sold or supported in any other manner by
Solactive AG nor does Solactive AG offer any express or implicit guarantee or
assurance either with regard to the results of using the Index and/or its
trademark or its price at any time or in any other respect. Neither publication
of the Index by Solactive AG nor the licensing of the Index or its trademark for
the purpose of use in connection with the Fund constitutes a recommendation by
Solactive AG to invest capital in the Fund nor does it in any way represent an
assurance or opinion of Solactive AG with regard to any investment in the Fund.
Solactive AG is not responsible for fulfilling the legal requirements concerning
the accuracy and completeness of the prospectus of the Fund.
MVIS
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA
INCLUDED THEREIN AND MVIS SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. MVIS MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY THE ADVISER, OWNERS OF SHARES OF THE FUND OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDEX, OR THE FUND OR ANY DATA INCLUDED THEREIN.
MVIS MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MVIS HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
The
Fund has not yet commenced operations as of the date of this Prospectus and
therefore does not have a financial history.
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PREMIUM/DISCOUNT
INFORMATION |
The
Fund has not yet commenced operations and, therefore, does not have information
about the differences between the Fund’s daily market price on the Exchange and
its NAV. Information regarding how often the closing trading price of the
Shares of the Fund was above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the Fund for the most recently completed calendar year
and the most recently completed calendar quarter(s) since that year (or the life
of the Fund, if shorter) can be found at www.vaneck.com.
CONTINUOUS
OFFERING
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act may occur at any point. Broker dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(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(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on the Exchange is satisfied by the fact that
the prospectus is available at the Exchange upon request. The prospectus
delivery mechanism provided in Rule 153 is only available with respect to
transactions on an exchange.
In
addition, certain affiliates of the Fund and the Adviser may purchase and resell
Fund Shares pursuant to this Prospectus.
OTHER
INFORMATION
The
Trust was organized as a Delaware statutory trust on March 15, 2001. Its
Declaration of Trust currently permits the Trust to issue an unlimited number of
Shares of beneficial interest. If shareholders are required to vote on any
matters, each Share outstanding would be entitled to one vote. Annual meetings
of shareholders will not be held except as required by the 1940 Act and other
applicable law. See the Fund’s 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 Fund beyond the limits set forth in Section 12(d)(1) subject to certain
terms and conditions set forth in SEC regulations, including that such
investment companies enter into an agreement with the Fund.
The
Prospectus, SAI and any other Fund communication do not create any contractual
obligations between the Fund’s shareholders and the Trust, the Fund, the Adviser
and/or the Trustees. Further, shareholders are not intended third party
beneficiaries of any contracts entered into by (or on behalf of) the Fund,
including contracts with the Adviser or other parties who provide services to
the Fund.
Dechert
LLP serves as counsel to the Trust, including the Fund. Ernst & Young LLP
serves as the Trust’s independent registered public accounting firm and will
audit the 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 Fund’s Shares. The Fund’s
Registration Statement, including this Prospectus, the Fund’s SAI and the
exhibits are available 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:
[email protected].
The
SAI for the Fund, which has been filed with the SEC, provides more information
about the Fund. The SAI for the Fund is incorporated herein by reference and is
legally part of this Prospectus. Additional information about the Fund’s
investments is available in the Fund’s annual and semi-annual reports to
shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year. The SAI and the Fund’s annual
and semi-annual reports may be obtained without charge by writing to the Fund at
Van Eck Securities Corporation, the Fund’s Distributor, at 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling the Distributor at the following
number: Investor Information: 800.826.2333.
Shareholder
inquiries may be directed to the Fund in writing to 666 Third Avenue, 9th Floor,
New York, New York 10017 or by calling 800.826.2333.
The
Fund’s SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
[THIS
PAGE INTENTIONALLY LEFT BLANK]
For
more detailed information about the Fund, see the SAI dated February 2, 2022, as
may be supplemented from time to time. Additional information about the Fund’s
investments is or will be available in the Fund’s annual and semi-annual reports
to shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year.
Call
VanEck at 800.826.2333 to request, free of charge, the annual or semi-annual
reports, the SAI, or other information about the Fund or to make shareholder
inquiries. You may also obtain the SAI or the Fund’s annual or semi-annual
reports, by visiting the VanEck website at www.vaneck.com.
Reports
and other information about the Fund are available on the EDGAR Database on the
SEC’s internet site at http://www.sec.gov. In addition, copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following email address: [email protected].