ck0001137360-20211231
49712/31/2021VanEck ETF Trust0001137360falseN-1A00011373602022-12-202022-12-200001137360ck0001137360:S000075715Member2022-12-202022-12-200001137360ck0001137360:C000234997Memberck0001137360:S000075715Member2022-12-202022-12-20iso4217:USDxbrli:pure
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PROSPECTUS
December 20,
2022 |
VanEck® Commodity Strategy
ETF PIT
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Principal
U.S. Listing Exchange for the Fund: Cboe BZX Exchange,
Inc. |
The
U.S. Securities and Exchange Commission (“SEC”) and the Commodity Futures
Trading Commission (“CFTC”) have 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®
COMMODITY
STRATEGY ETF |
SUMMARY
INFORMATION
INVESTMENT OBJECTIVE
VanEck®
Commodity Strategy ETF (the “Fund”) seeks to provide long-term capital
appreciation.
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 |
0.55 |
% |
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Other
Expenses(a)(b) |
0.05 |
% |
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Total
Annual Fund Operating Expenses(b) |
0.60 |
% |
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Expense
Reimbursement(b) |
-0.05 |
% |
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Total
Annual Fund Operating Expenses After Expense Reimbursement(b) |
0.55 |
% |
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(a)
“Other Expenses” are based
on estimated amounts for the current fiscal year and reflect estimated expenses
at both the Fund and the Fund’s wholly-owned subsidiary (the “Subsidiary”)
levels.
(b)
Van Eck Absolute Return
Advisers Corporation (the “Adviser”) will pay all expenses of the Fund
(inclusive of any Subsidiary (as defined below)
expenses), 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 and/or reimburse
the Fund for the offering costs and trading expenses that are net account or
similar fees charged by futures commission merchants (“FCMs”) until at least
February 1,
2024.
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 (except that the example incorporates the fee waiver arrangement for
only the first year). 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 |
$56 |
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3 |
$187 |
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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 is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing, under normal circumstances, in
exchange-traded commodity futures contracts, exchange-traded and
over-the-counter (“OTC”) commodity-linked instruments, and pooled investment
vehicles, including exchange-traded products (“ETPs”) that provide exposure to
commodities (“Commodity Instruments”) and Cash and Fixed Income Investments (as
defined below). The
Fund does not invest in commodities directly.
Commodities
are assets that have tangible properties, such as oil, metals and agricultural
products. The value of Commodity Instruments may be affected by overall market
movements and other factors affecting the value of a particular industry or
commodity, such as weather, disease, embargoes or political and regulatory
developments. The Fund will seek to provide exposure to commodities from the
following five sectors: energy, precious metals, industrial metals, agriculture
and livestock.
The
Adviser considers various inputs to guide asset allocation decisions and select
Commodity Instruments that the Adviser believes will offer enhanced
risk-adjusted returns. The term “risk-adjusted returns” does not imply that the
Adviser employs low-risk strategies or that an investment in the Fund should be
considered a low-risk or no risk investment. The Adviser seeks to maximize
risk-adjusted returns through an optimization process that incorporates observed
risks of each Commodity Instrument. Additionally, the Adviser may consider other
factors, such as roll yield, price momentum and other discretionary factors of
each Commodity Instrument to allocate the Fund’s portfolio to Commodity
Instruments with the highest expected risk-adjusted returns. The term “roll
yield” refers to either the positive or negative returns generated from rolling
futures contracts. The term “price momentum” refers to the rate of acceleration
of a security’s price. The Adviser will then determine which Commodity
Instruments the Fund’s assets should be allocated to and the appropriate
portfolio weights. Therefore, the Fund’s portfolio allocation will vary over
time in the Adviser’s sole discretion and the Fund may not have economic
exposure to a particular commodity at any given time.
The
Fund will invest in certain Commodity Instruments through a subsidiary (the
“Subsidiary”), an exempted limited company organized under the laws of the
Cayman Islands. The Subsidiary is wholly owned and controlled by the Fund and is
advised by the Adviser. The Fund’s investment in the Subsidiary will generally
not exceed 25% of the value of the Fund’s total assets at each quarter-end of
the Fund's fiscal year. The Fund's investment in the Subsidiary generally
provides the Fund with exposure to Commodity Instruments within the limits of
the federal tax laws, which limit the ability of investment companies like the
Fund to invest directly in such instruments. The Subsidiary has the same
investment objective as the Fund and will follow the same general investment
policies and restrictions except that, unlike the Fund, it may invest without
limit in Commodity Instruments.
The
Fund expects to invest its assets in any one or more of the following to provide
liquidity, serve as margin or collateralize the Fund’s investments in certain
Commodity Instruments: U.S. Treasuries, other U.S. government obligations, money
market funds and funds that invest in short-term bonds, cash and cash-like
equivalents (e.g., high quality commercial paper and similar instruments that
are rated investment grade or, if unrated, of comparable quality, as the Adviser
determines), mortgage-backed securities issued or guaranteed by U.S. government
agencies, instrumentalities or sponsored enterprises of the U.S. government
(whether or not the securities are U.S. government securities) (together,
"Agency MBS"), municipal debt securities, Treasury inflation-protected
securities, sovereign debt obligations of non-U.S. countries, and repurchase
agreements (the “Cash and Fixed Income Investments”).
Except
as noted, for purposes of this Prospectus, references to the Fund’s investment
strategies and risks include those of its Subsidiary. The Fund complies with the
provisions of the Investment Company Act of 1940, as amended (the “1940 Act”),
governing investment policies (Section 8) and capital structure and leverage
(Section 18) on an aggregate basis with the Subsidiary. The Subsidiary will
comply with the 1940 Act provisions governing affiliated transactions and
custody of assets.
The
Fund is classified as a non-diversified fund under the 1940 Act and, therefore,
may invest a greater percentage of its assets in a particular
issuer.
The Fund may engage in active and frequent
trading of portfolio holdings.
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.
Commodities
and Commodity-Linked Instruments.
Commodities include, among other things, energy products, agricultural products,
industrial metals, precious metals and livestock. The commodities markets may
fluctuate widely based on a variety of factors, including overall market
movements, economic events and policies, changes in interest rates or inflation
rates, changes in monetary and exchange control programs, war, acts of
terrorism, natural disasters and technological developments. Variables such as
disease, drought, floods, weather, trade, embargoes, tariffs and other political
events, in particular, may have a larger impact on commodity prices than on
traditional securities. These additional variables may create additional
investment risks that subject the Fund’s investments to greater volatility than
investments in traditional securities. The prices of commodities can also
fluctuate widely due to supply and demand disruptions in major producing or
consuming regions. Because certain commodities may be produced in a limited
number of countries and may be controlled by a small number of producers,
political, economic and supply-related events in such countries could have a
disproportionate impact on the prices of such commodities. These factors may
affect the value of the Fund’s investments in varying ways, and different
factors may cause the values and the volatility of the Fund’s investments to
move in inconsistent directions at inconsistent rates. Because the value of a
commodity-linked derivative instrument and structured note typically are based
upon the price movements of physical commodities, the value of these securities
will rise or fall in response to changes in the underlying commodities or
related index of investment.
Commodities
and Commodity-Linked Instruments Tax Risk. The
tax treatment of commodity-linked derivative instruments may be adversely
affected by changes in legislation, regulations or other legally binding
authority. If, as a result of any such or other adverse regulatory action, the
income of the Fund from certain commodity-linked derivatives were treated as
non-qualifying income, the Fund might fail to qualify as a regulated investment
company (“RIC”) and/or be subject to federal income tax at the Fund level. The
uncertainty surrounding the treatment of certain commodity-related derivative
instruments under the qualification tests for a RIC may limit the Fund’s use of
such derivative instruments.
Futures
Contract Risk. The
use of futures contracts involves risks that are in addition to, and potentially
greater than, the risks of investing directly in securities and other more
traditional assets. Futures contracts are subject to collateral requirements and
daily limits that may limit the Fund’s ability to achieve its investment
objective. If the Fund is unable to meet its investment objective, the Fund’s
returns may be lower than expected. Additionally, these collateral requirements
may require the Fund to liquidate its position when it otherwise would not do
so. Futures contracts exhibit “futures basis,” which refers to the difference
between the current market value of the underlying commodity (the “spot” price)
and the price of the cash-settled futures contracts. A negative futures basis
exists when cash-settled futures contracts generally trade at a premium to the
current market value of the underlying commodity. If a negative futures basis
exists, the Fund’s investments in futures contracts will generally underperform
a direct investment in the underlying commodity.
This
risk may be adversely affected by “negative roll yields” in “contango” markets.
The
Fund will “roll” out of one futures contract as the expiration date approaches
and into another futures contract with a later expiration date. The "rolling"
feature creates the potential for a significant negative effect on the Fund's
performance that is independent of the performance of the spot prices of the
underlying commodity. The "spot price" of a commodity is the price of that
commodity for immediate delivery, as opposed to a futures price, which
represents the price for delivery on a specified date in the future. The Fund
would be expected to experience negative roll yield if the futures prices tend
to be greater than the spot price. A market where futures prices are generally
greater than spot prices is referred to as a “contango” market. Therefore, if
the futures market for a given commodity is in contango, then the value of a
futures contract on that commodity would tend to decline over time (assuming the
spot price remains unchanged), because the higher futures price would fall as it
converges to the lower spot price by expiration. Extended period of contango may
cause significant and sustained losses. Additionally, because of the frequency
with which the Fund may roll futures contracts, the impact of contango on Fund
performance may be greater than it would have been if the Fund rolled futures
contracts less frequently.
Risk
of U.S. Treasury Bills. Direct
obligations of the U.S. Treasury have historically involved little risk of loss
of principal if held to maturity. However, due to fluctuations in interest
rates, the market value of such securities may vary.
Subsidiary
Investment Risk.
Changes in the laws of the United States and/or the Cayman Islands, under which
the Fund and the Subsidiary are organized, respectively, could result in the
inability of the Fund to operate as intended and could negatively affect the
Fund and its shareholders. The Subsidiary is not registered under the 1940 Act
and is not subject to all the investor protections of the 1940 Act. Thus, the
Fund, as an investor in the Subsidiary, will not have the protections offered to
investors in registered investment companies.
Commodity
Regulatory Risk (with respect to investments in the Subsidiary).
Changes in the laws or regulations of the United States or the Cayman Islands,
including any changes to applicable tax laws and regulations, could impair the
ability of the Fund to achieve its investment objective and could increase the
operating expenses of the Fund or the Subsidiary. Based on the Fund’s and the
Subsidiary’s current investment strategies, the Fund and the Subsidiary are each
a “commodity pool” and the Adviser is considered a “commodity pool operator”
(“CPO”) with respect to the Fund and the Subsidiary under the Commodity Exchange
Act of 1936, as amended (“CEA”). Accordingly, the Fund and the Adviser are
subject to dual regulation by the CFTC and the Securities Exchange Commission
(“SEC”). Pursuant to certain CFTC regulations, the Fund and the Adviser have
elected to meet the requirements of certain CFTC regulations by complying with
specific SEC rules and regulations relating to disclosure and reporting
requirements. The CFTC could deem the Fund or the Adviser in violation of an
applicable CFTC regulation if the Fund or the Adviser failed to comply with a
related SEC regulatory requirement. In addition, the Fund and the Adviser will
remain subject to certain CFTC-mandated disclosure, reporting and recordkeeping
regulations with respect to the Fund and the Subsidiary. Compliance with the
CFTC regulations could increase the Fund’s expenses, adversely affecting the
Fund’s total return.
Tax
Risk (with respect to investments in the Subsidiary).
The Fund must derive at least 90% of its gross income from certain qualifying
sources of income in order to qualify as a RIC under the Internal Revenue Code
of 1986, as amended (the “Code”). The Internal Revenue Service (the “IRS”)
issued a revenue ruling in December 2005, which concluded that income and gains
from certain commodity-linked derivatives are not qualifying income under
Subchapter M of the Code. As a result, the Fund’s ability to invest directly in
commodity-linked futures contracts or swaps or in certain exchange-traded trusts
that hold commodities as part of its investment strategy is limited by the
requirement that it receive no more than ten percent (10%) of its gross income
from such investments. The Fund expects to invest its assets in the Subsidiary,
consistent with applicable law and the advice of counsel, in a manner that
should permit the Fund to treat income allocable from the Subsidiary as
qualifying income. The IRS has issued regulations that treat a fund’s income
inclusion with respect to an investment in a non-U.S. company generating
investment income as qualifying income only if there is a current-year
distribution out of the earnings and profits of the non-U.S. company that are
attributable to such income inclusion or if the income from the Subsidiary is
related to the Fund's business of investing in stocks and securities. The Fund
intends to treat its income from the Subsidiary as qualifying income. There
can
be no assurance that the IRS will not change its position with respect to some
or all of these issues or if the IRS did so, that a court would not sustain the
IRS’s position. Furthermore, the tax treatment of the Fund’s investments in the
Subsidiary may be adversely affected by future legislation, court decisions,
future IRS guidance or Treasury regulations.
Gap
Risk.
The Fund and the Subsidiary are subject to the risk that a commodity price will
fluctuate even during periods when there is no trading. Usually, such movements
occur when there are adverse news announcements, which can cause a commodity
price to drop substantially from the previous day’s closing price.
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. 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. 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 to an authorized participant (“AP”). As
such, investments in Shares may be less tax-efficient than an investment in a
conventional ETF.
Liquidity
Risk. The
Fund and/or Subsidiary will invest in Commodity Instruments, which may be less
liquid than other types of investments. The illiquidity of Commodity Instruments
could have a negative effect on the Fund’s ability to achieve its investment
objective and may result in losses to Fund shareholders. In stressed market
conditions, the liquidity of the Fund’s shares may begin to mirror those of the
underlying portfolio holdings, which can be significantly less liquid than the
Fund’s shares.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities.
High portfolio turnover may result in increased transaction costs to the Fund,
including brokerage commissions, dealer mark-ups and other transaction costs on
the sale of the securities and on reinvestment in other securities. High
portfolio turnover may also result in higher taxes when Fund Shares are held in
a taxable account.
Active
Management Risk.
The Fund is subject to management risk because it is an actively managed ETF. In
managing the Fund’s portfolio, the Adviser will apply investment techniques and
risk analyses in making investment decisions for the Fund, but there can be no
guarantee that these will produce the desired results.
Credit
Risk. Credit
risk refers to the possibility that the issuer or guarantor of a debt security
or a counterparty to exchange-traded futures, such as an FCM or an exchange’s
clearing corporation, will be unable and/or unwilling to make timely interest
payments and/or repay the principal on its debt or to otherwise honor its
obligations and/or default completely. The Fund invests in debt securities that
are subject to varying degrees of credit risk, depending on the issuer’s
financial condition and on the terms of the securities, which may be reflected
in credit ratings. There is a possibility that the credit rating of a bond may
be downgraded after purchase or the perception of an issuer’s credit worthiness
may decline, which may adversely affect the value of the security.
Interest
Rate Risk. Debt
securities, such as bonds, are also subject to interest rate risk. Interest rate
risk refers to fluctuations in the value of a bond resulting from changes in the
general level of interest rates. When the general level of interest rates goes
up, the prices of most debt securities go down. When the general level of
interest rates goes down, the prices of most debt securities go up. The
prevailing historically low interest rate environment increases the risks
associated with rising interest rates, including the potential for periods of
volatility and increased redemptions. In addition, debt securities, such as
bonds, with longer durations tend to be more sensitive to interest rate changes,
usually making them more volatile than debt securities with shorter durations.
In addition, in response to the COVID-19 pandemic, as with other serious
economic disruptions, governmental authorities and regulators are enacting
significant fiscal and monetary policy changes, including providing direct
capital infusions into companies, creating new monetary programs and lowering
interest rates. These actions present heightened risks to debt instruments, and
such risks could be even further heightened if these actions are unexpectedly or
suddenly reversed or are ineffective in achieving their desired
outcomes.
Derivatives
Risk.
The use of derivatives presents risks different from, and possibly greater than,
the risks associated with investing directly in traditional securities. The use
of derivatives by the Fund can lead to losses because of adverse movements in
the price or value of the underlying reference asset, which may be magnified by
certain features of the derivatives. Derivative strategies often involve
leverage, which may exaggerate a loss, potentially causing the Fund to lose more
money than it originally committed to initial margin, and more money than it
would have lost had it invested in the underlying reference asset. The values of
derivatives may move in unexpected ways, especially in unusual market
conditions, and may result in increased volatility, among other consequences.
There may be imperfect correlation between changes in the market value of a
derivative and the value of its underlying reference asset, and this may be
exaggerated in times of market stress or volatility. Derivatives require the
Fund to post margin or collateral or otherwise maintain liquid assets in a
manner that satisfies contractual undertakings and regulatory requirements. In
order to satisfy margin or other requirements, the Fund may need to sell
securities from its portfolio or exit positions at a time when it may be
disadvantageous to do so. All of this could, in turn, affect the Fund’s ability
to fully execute its investment strategies and/or achieve its investment
objective. The use of derivatives may also increase the amount of taxes payable
by shareholders because changes in government regulation of derivatives could
affect the character, timing and amount of the Fund’s taxable income or gains.
Other risks arise from the Fund’s potential inability to terminate or sell
derivative positions. A liquid secondary market may not always exist for the
Fund’s derivative positions at times when the Fund might wish to terminate or
sell such positions. The use of derivatives also involves the risk of mispricing
or improper valuation and that changes in the value of
the
derivative may not correlate perfectly with the underlying reference rate.
Derivatives may be subject to changing government regulation that could impact
the Fund’s ability to use certain derivatives and their cost.
Counterparty
Risk.
Investing in derivatives and repurchase agreements involves entering into
contracts with third parties (i.e., counterparties). The use of derivatives and
repurchase agreements involves risks that are different from those associated
with ordinary portfolio securities transactions. The Fund will be subject to
credit risk (i.e., the risk that a counterparty is or is perceived to be
unwilling or unable to make timely payments or otherwise meet its contractual
obligations) with respect to the amount it expects to receive from
counterparties to derivatives and repurchase agreements entered into by the
Fund. If a counterparty becomes bankrupt or fails to perform its obligations, or
if any collateral posted by the counterparty for the benefit of the Fund is
insufficient or there are delays in the Fund's ability to access such
collateral, the value of an investment in the Fund may decline. The counterparty
to a listed futures contract is the derivatives clearing organization for the
listed future. The listed future is held through a FCM acting on behalf of the
Fund. Consequently, the counterparty risk on a listed futures contract is the
creditworthiness of the FCM and the exchange's clearing corporation. From time
to time, the Fund may only have one FCM or a limited number of FCMs with which
it transacts futures, which may heighten such risk.
Pooled
Investment Vehicle Risk. The
Fund’s investments in pooled investment vehicles that invest in commodities are
subject to the commodity-related risks described herein. In addition, such
pooled investment vehicles are subject to risk with respect to the custody of
their holdings, and additional risks.
Repurchase
Agreements Risk.
A repurchase agreement exposes the Fund to the risk that the party that sells
the security may default on its obligation to repurchase it. The Fund may lose
money if it cannot sell the security at the agreed-upon time and price or the
security loses value before it can be sold.
Regulatory
Risk.
Changes in the laws or regulations of the United States, including any changes
to applicable tax laws and regulations, could impair the ability of the Fund to
achieve its investment objective and could increase the operating expenses of
the Fund. The Adviser is registered as a CPO under the CEA and the rules of the
CFTC and is subject to CFTC regulation with respect to the Fund. The CFTC has
adopted rules regarding the disclosure, reporting and recordkeeping requirements
that will apply with respect to the Fund as a result of the Adviser’s
registration as a CPO. Generally, these rules allow for substituted compliance
with CFTC disclosure and shareholder reporting requirements, based on the
Adviser’s compliance with comparable SEC requirements. This means that for most
of the CFTC’s disclosure and shareholder reporting applicable to the Adviser as
the Fund’s CPO, the Adviser’s compliance with SEC disclosure and shareholder
reporting will be deemed to fulfill the Adviser’s CFTC compliance obligations.
However, as a result of CFTC regulation with respect to the Fund, the Fund may
incur additional compliance and other expenses. The Adviser is also registered
as a “commodity trading advisor” (“CTA”) but relies on an exemption with respect
to the Fund from CTA regulations available for a CTA that also serves as the
Fund’s CPO. The CFTC has neither reviewed nor approved the Fund, their
investment strategies, or this Prospectus.
Affiliated
Fund Risk.
In managing the Fund, the Adviser will have the ability to select underlying
funds which it believes will achieve the Fund’s investment objective. The
Adviser may be subject to potential conflicts of interest in selecting
underlying funds because the Adviser may, due to its own financial interest or
other business considerations, have an incentive to invest in funds managed by
the Adviser or its affiliates in lieu of investing in funds managed or sponsored
by others.
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.
Authorized
Participant Concentration Risk.
The
Fund may have a limited number of financial institutions that act as Authorized
Participant (“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 net asset value (“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
Fund’s listing exchange (the “Exchange”), there can be no assurance that active
trading markets for the Shares will develop or be maintained, especially for
recently organized Funds. Further, secondary markets may be subject to irregular
trading activity, market dislocations, 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.
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 will be concentrated in investments that provide exposure to
commodities. To the extent that the Fund is concentrated in such investments,
the Fund will be subject to the risk that economic, political or other
conditions that have a negative effect on such investments may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of investments.
Municipal
Securities Risk.
Municipal securities are subject to the risk that litigation, legislation or
other political events, local business or economic conditions, credit rating
downgrades, or the bankruptcy of the issuer could have a significant effect on
an issuer’s ability to make payments of principal and/or interest or otherwise
affect the value of such securities. Certain municipalities may have difficulty
meeting their obligations due to, among other reasons, changes in underlying
demographics. Municipal securities can be significantly affected by political
changes as well as uncertainties in the municipal market related to government
regulation, taxation, legislative changes or the rights of municipal security
holders. Because many municipal securities are issued to finance similar
projects, especially those relating to education, health care, transportation,
utilities and water and sewer, conditions in those sectors can affect the
overall municipal market. Municipal securities include general obligation bonds,
which are backed by the “full faith and credit” of the issuer, which has the
power to tax residents to pay bondholders. Timely payments depend on the
issuer’s credit quality, ability to raise tax revenues and ability to maintain
an adequate tax base. General obligation bonds generally are not backed by
revenues from a specific project or source. Municipal securities also include
revenue bonds, which are generally backed by revenue from a specific project or
tax. The issuer of a revenue bond makes interest and principal payments from
revenues generated from a particular source or facility, such as a tax on
particular property or revenues generated from a municipal water or sewer
utility or an airport. Revenue bonds generally are not backed by the full faith
and credit and general taxing power of the issuer. The market for municipal
bonds may be less liquid than for taxable bonds. There may be less information
available on the financial condition of issuers of municipal securities than for
public corporations. Municipal instruments may be susceptible to periods of
economic stress, which could affect the market values and marketability of many
or all municipal obligations of issuers in a state, U.S. territory, or
possession. For example, the COVID-19 pandemic has significantly stressed the
financial resources of many municipal issuers, which may impair a municipal
issuer’s ability to meet its financial obligations when due and could adversely
impact the value of its bonds, which could negatively impact the performance of
the Fund.
Money
Market Funds Risk.
An investment in a money market fund is not a bank deposit and is not insured or
guaranteed by any bank, the Federal Deposit Insurance Corporation (“FDIC”) or
any other government agency. Although money market funds
seek
to preserve the value of investments at $1.00 per share, it is possible for the
Fund to lose money if shares of money market funds in which it invests fall
below $1.00 per share.
Securitized/Asset-Backed
Securities Risk. Investments
in asset-backed securities, including collateralized mortgage obligations, are
subject to the risk of significant credit downgrades, dramatic changes in
liquidity, and defaults to a greater extent than many other types of
fixed-income investments. During periods of falling interest rates, asset-backed
securities may be called or prepaid, which may result in the Fund having to
reinvest proceeds in other investments at a lower interest rate. During periods
of rising interest rates, the average life of asset-backed securities may
extend, which may lock in a below-market interest rate, increase the security’s
duration and interest rate sensitivity, and reduce the value of the security.
The Fund may invest in asset-backed securities issued or backed by federal
agencies or government sponsored enterprises or that are part of a
government-sponsored program, which may subject the Fund to the risks noted
above. The values of assets or collateral underlying asset-backed securities may
decline and, therefore, may not be adequate to cover underlying obligations.
Enforcing rights against the underlying assets or collateral may be difficult,
and the underlying assets or collateral may be insufficient if the issuer
defaults.
Sovereign
Bond Risk.
Investments in sovereign bonds involve special risks not present in corporate
bonds. The governmental authority that controls the repayment of the bonds may
be unable or unwilling to make interest payments and/or repay the principal on
its bonds or otherwise honor its obligations. If an issuer of sovereign bonds
defaults on payments of principal and/or interest, the Fund may have limited
recourse against the issuer. During periods of economic uncertainty, the market
prices of sovereign bonds, and the Fund’s NAV, may be more volatile than prices
of corporate bonds, which may result in losses. In the past, certain governments
of emerging market countries have declared themselves unable to meet their
financial obligations on a timely basis, which has resulted in losses for
holders of sovereign bonds.
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 Absolute Return Advisers Corporation.
Portfolio
Manager.
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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David
Schassler |
Portfolio
Manager |
Since
Inception |
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John
Lau |
Deputy
Portfolio Manager |
Since
Inception |
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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
Fund is an actively managed ETF that seeks to achieve its investment objective
by investing, under normal circumstances, in Commodity Instruments and Cash and
Fixed Income Investments.The
Fund does not invest in commodities directly.
Commodities
are assets that have tangible properties, such as oil, metals and agricultural
products. The value of Commodity Instruments may be affected by overall market
movements and other factors affecting the value of a particular industry or
commodity, such as weather, disease, embargoes or political and regulatory
developments. The Fund will seek to provide exposure to commodities from the
following five sectors: energy, precious metals, industrial metals, agriculture
and livestock.
The
Adviser considers various inputs to guide asset allocation decisions and select
Commodity Instruments that the Adviser believes will offer enhanced
risk-adjusted returns. The term “risk-adjusted returns” does not imply that the
Adviser employs low-risk strategies or that an investment in the Fund should be
considered a low-risk or no risk investment. The Adviser seeks to maximize
risk-adjusted returns through an optimization process that incorporates observed
risks of each Commodity Instrument. Additionally, the Adviser may consider other
factors, such as roll yield, price momentum and other discretionary factors of
each Commodity Instrument to allocate the Fund’s portfolio to Commodity
Instruments with the highest expected risk-adjusted returns. The term “roll
yield” refers to either the positive or negative returns generated from rolling
futures contracts. The term “price momentum” refers to the rate of acceleration
of a security’s price. The Adviser will then determine which Commodity
Instruments the Fund’s assets should be allocated to and the appropriate
portfolio weights. Therefore, the Fund’s portfolio allocation will vary over
time in the Adviser’s sole discretion and the Fund may not have economic
exposure to a particular commodity at any given time.
The
Fund will invest in certain Commodity Instruments through the Subsidiary, an
exempted limited company organized under the laws of the Cayman Islands. The
Subsidiary is wholly owned and controlled by the Fund and is advised by the
Adviser. The Fund’s investment in the Subsidiary will generally not exceed 25%
of the value of the Fund’s total assets at each quarter-end of the Fund's fiscal
year. The Fund's investment in the Subsidiary generally provides the Fund with
exposure to Commodity Instruments within the limits of the federal tax laws,
which limit the ability of investment companies like the Fund to invest directly
in such instruments. The Subsidiary has the same investment objective as the
Fund and will follow the same general investment policies and restrictions
except that, unlike the Fund, it may invest without limit in Commodity
Instruments.
The
Fund expects to invest its assets in any one or more of the Cash and Fixed
Income Investments to provide liquidity, serve as margin or collateralize the
Fund’s investments in certain Commodity Instruments.
Except
as noted, for purposes of this Prospectus, references to the Fund’s investment
strategies and risks include those of its Subsidiary. The Fund complies with the
provisions of the 1940 Act, governing investment policies (Section 8) and
capital structure and leverage (Section 18) on an aggregate basis with the
Subsidiary. The Subsidiary will comply with the 1940 Act provisions governing
affiliated transactions and custody of assets.
The
Fund is classified as a non-diversified fund under the 1940 Act and, therefore,
may invest a greater percentage of its assets in a particular
issuer.
The
Fund may engage in active and frequent trading of portfolio holdings.
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 (the
“Board of Trustees”) of VanEck ETF Trust (the “Trust”) 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.
Commodities
and Commodity-Linked Derivatives. Commodities
include, among other things, energy products, agricultural products, industrial
metals, precious metals and livestock. The commodities markets may fluctuate
widely based on a variety of factors, including overall market movements,
economic events and policies, changes in interest rates or inflation rates,
changes in monetary and exchange control programs, war, acts of terrorism,
natural disasters and technological developments. Variables such as disease,
drought, floods, weather, trade, embargoes, tariffs and other political events,
in particular, may have a larger impact on commodity prices than on traditional
securities. These additional variables may create additional investment risks
that subject the Fund’s investments to greater volatility than investments in
traditional securities. The prices of commodities can also
fluctuate
widely due to supply and demand disruptions in major producing or consuming
regions. Because certain commodities may be produced in a limited number of
countries and may be controlled by a small number of producers, political,
economic and supply-related events in such countries could have a
disproportionate impact on the prices of such commodities. These factors may
affect the value of the Fund’s investments in varying ways, and different
factors may cause the values and the volatility of the Fund’s investments to
move in inconsistent directions at inconsistent rates. Because the value of a
commodity-linked derivative instrument and structured note typically are based
upon the price movements of physical commodities, the value of these securities
will rise or fall in response to changes in the underlying commodities or
related index of investment.
Commodities
and Commodity-Linked Derivatives Tax Risk.
The tax treatment of commodity-linked derivative instruments may be adversely
affected by changes in legislation, regulations or other legally binding
authority. If, as a result of any such or other adverse regulatory action, the
income of the Fund from certain commodity-linked derivatives were treated as
non-qualifying income, the Fund might fail to qualify as a RIC and/or be subject
to federal income tax at the Fund level. The uncertainty surrounding the
treatment of certain commodity-related derivative instruments under the
qualification tests for a RIC may limit the Fund’s use of such derivative
instruments.
Futures
Contract Risk.
The use of futures contracts involves risks that are in addition to, and
potentially greater than, the risks of investing directly in securities and
other more traditional assets. Futures contracts are subject to collateral
requirements and daily limits that may limit the Fund’s ability to achieve its
investment objective. If the Fund is unable to meet its investment objective,
the Fund’s returns may be lower than expected. Additionally, these collateral
requirements may require the Fund to liquidate its position when it otherwise
would not do so. Futures contracts exhibit “futures basis,” which refers to the
difference between the current market value of the underlying commodity (the
“spot” price) and the price of the cash-settled futures contracts. A negative
futures basis exists when cash-settled futures contracts generally trade at a
premium to the current market value of the underlying commodity. If a negative
futures basis exists, the Fund’s investments in futures contracts will generally
underperform a direct investment in the underlying commodity.
This
risk may be adversely affected by “negative roll yields” in “contango”
markets.
The Fund will “roll” out of one futures contract as the expiration date
approaches and into another futures contract with a later expiration date. The
"rolling" feature creates the potential for a significant negative effect on the
Fund's performance that is independent of the performance of the spot prices of
the underlying commodity. The "spot price" of a commodity is the price of that
commodity for immediate delivery, as opposed to a futures price, which
represents the price for delivery on a specified date in the future. The Fund
would be expected to experience negative roll yield if the futures prices tend
to be greater than the spot price. A market where futures prices are generally
greater than spot prices is referred to as a “contango” market. Therefore, if
the futures market for a given commodity is in contango, then the value of a
futures contract on that commodity would tend to decline over time (assuming the
spot price remains unchanged), because the higher futures price would fall as it
converges to the lower spot price by expiration. Extended period of contango may
cause significant and sustained losses. Additionally, because of the frequency
with which the Fund may roll futures contracts, the impact of contango on Fund
performance may be greater than it would have been if the Fund rolled futures
contracts less frequently.
Risk
of U.S. Treasury Bills. Direct
obligations of the U.S. Treasury have historically involved little risk of loss
of principal if held to maturity. However, due to fluctuations in interest
rates, the market value of such securities may vary.
Subsidiary
Investment Risk. Changes
in the laws of the United States and/or the Cayman Islands, under which the Fund
and the Subsidiary are organized, respectively, could result in the inability of
the Fund to operate as intended and could negatively affect the Fund and its
shareholders. The Subsidiary is not registered under the 1940 Act and is not
subject to the investor protections of the 1940 Act. Thus, the Fund, as an
investor in the Subsidiary, will not have all the protections offered to
investors in registered investment companies.
Commodity
Regulatory Risk (with respect to investments in the Subsidiary).
Changes in the laws or regulations of the United States or the Cayman Islands,
including any changes to applicable tax laws and regulations, could impair the
ability of the Fund to achieve its investment objective and could increase the
operating expenses of the Fund or the Subsidiary. Based on the Fund’s and the
Subsidiary’s current investment strategies, the Fund and the Subsidiary are each
a “commodity pool” and the Adviser is considered a CPO with respect to the Fund
and the Subsidiary under the CEA. Accordingly, the Fund and the Adviser are
subject to dual regulation by the CFTC and the SEC. Pursuant to certain CFTC
regulations, the Fund and the Adviser have elected to meet the requirements of
certain CFTC regulations by complying with specific SEC rules and regulations
relating to disclosure and reporting requirements. The CFTC could deem the Fund
or the Adviser in violation of an applicable CFTC regulation if the Fund or the
Adviser failed to comply with a related SEC regulatory requirement. In addition,
the Fund and the Adviser will remain subject to certain CFTC-mandated
disclosure, reporting and recordkeeping regulations with respect to the Fund and
the Subsidiary. Compliance with the CFTC regulations could increase the Fund’s
expenses, adversely affecting the Fund’s total return.
Tax
Risk (with respect to investments in the Subsidiary).
The Fund must derive at least 90% of its gross income from certain qualifying
sources of income in order to qualify as a RIC under the Code. The IRS issued a
revenue ruling in December 2005, which concluded that income and gains from
certain commodity-linked derivatives are not qualifying income under Subchapter
M of the Code. As a result, the Fund’s ability to invest directly in
commodity-linked futures contracts or swaps or in certain exchange-traded trusts
that hold commodities as part of its investment strategy is limited by the
requirement that it receive no
more
than ten percent (10%) of its gross income from such investments. However, in
Revenue Ruling 2006-31, the IRS indicated that income from alternative
investment instruments that create commodity exposure may be considered
qualifying income under the Code. The IRS subsequently issued private letter
rulings to other taxpayers in which the IRS specifically concluded that that
income derived from a fund’s investment in a controlled foreign corporation
(“CFC”) also will constitute qualifying income to the fund, even if the CFC
itself owns commodity-linked futures contracts or swaps. A private letter ruling
cannot be used or cited as precedent and is binding on the IRS only for the
taxpayer that receives it. The Fund has not obtained a ruling from the IRS with
respect to its investments or its structure. In the absence of such a ruling,
the Fund expects to invest its assets in the Subsidiary, consistent with
applicable law and the advice of counsel, in a manner that should permit the
Fund to treat income allocable from the Subsidiary as qualifying income. The IRS
will no longer issue private letter rulings relating to the tax treatment of
income generated by investments in a subsidiary. The IRS has issued regulations
that treat a fund’s income inclusion with respect to an investment in a non-U.S.
company generating investment income as qualifying income if there is a
current-year distribution out of the earnings and profits of the non-U.S.
company that are attributable to such income inclusion or if the income from the
Subsidiary is related to the Fund's business of investing in stocks and
securities. The Fund intends to treat its income from the Subsidiary as
qualifying income. There can be no assurance that the IRS will not change its
position with respect to some or all of these issues or if the IRS did so, that
a court would not sustain the IRS’s position. Furthermore, the tax treatment of
the Fund’s investments in the Subsidiary may be adversely affected by future
legislation, court decisions, future IRS guidance or Treasury regulations. If
the IRS were to change its position or otherwise determine that income derived
from the Fund’s investment in the Subsidiary does not constitute qualifying
income and if such positions were upheld, or if future legislation, court
decisions, future IRS guidance or Treasury regulations were to adversely affect
the tax treatment of such investments, the Fund might cease to qualify as a RIC
and would be required to reduce its exposure to such investments which could
result in difficulty in implementing its investment strategy. If the Fund did
not qualify as a RIC for any taxable year, the Fund’s taxable income would be
subject to tax at the Fund level at regular corporate tax rates (without
reduction for distributions to shareholders) and to a further tax at the
shareholder level when such income is distributed. In such event, in order to
re-qualify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest and make certain
distributions.
Gap
Risk.
The Fund and the Subsidiary are subject to the risk that a commodity price will
fluctuate even during periods when there is no trading. Usually, such movements
occur when there are adverse news announcements, which can cause a commodity
price to drop substantially from the previous day’s closing price.
Risk
of Cash Transactions. Unlike
other ETFs, the Fund effects its creations and redemptions at least partially
for cash, rather than wholly for in-kind securities, due to various legal and
operational constraints in certain countries in which the Fund invests. 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
to 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.
Liquidity
Risk.
The Fund and/or Subsidiary will invest in Commodity Instruments, which may be
less liquid than other types of investments. The illiquidity of Commodity
Instruments could have a negative effect on the Fund’s ability to achieve its
investment objective and may result in losses to Fund shareholders. In stressed
market conditions, the liquidity of the Fund’s shares may begin to mirror those
of the underlying portfolio holdings, which can be significantly less liquid
than the Fund’s shares.
High
Portfolio Turnover Risk.
The Fund may engage in active and frequent trading of its portfolio securities.
High portfolio turnover may result in increased transaction costs to the Fund,
including brokerage commissions, dealer mark-ups and other transaction costs on
the sale of the securities and on reinvestment in other securities. High
portfolio turnover may also result in higher taxes when Fund Shares are held in
a taxable account.
Active
Management Risk.
The Fund is subject to management risk because it is an actively managed ETF. In
managing the Fund’s portfolio, the Adviser will apply investment techniques and
risk analyses in making investment decisions for the Fund, but there can be no
guarantee that these will produce the desired results.
Credit
Risk.
Credit risk is the risk that the issuer or guarantor of a debt security or a
counterparty to exchange-traded futures, such as an FCM or an exchange’s
clearing corporation, will be unable or unwilling to make timely principal,
interest or settlement payments or otherwise honor its obligations. The Fund
invests in debt securities that are subject to varying degrees of risk depending
on the issuer’s financial condition and on the terms of the securities, which
may be reflected in credit ratings. There is a
possibility
that the credit rating of a bond may be downgraded after purchase or the
perception of an issuer’s credit worthiness may decline, which may adversely
affect the value of the security.
Interest
Rate Risk.
Debt
securities are subject to interest rate risk. Interest rate risk refers to
fluctuations in the value of a security resulting from changes in the general
level of interest rates. When the general level of interest rates goes up, the
prices of most debt securities and certain Preferred Securities go down. When
the general level of interest rates goes down, the prices of most debt
securities go up. Many factors can cause interest rates to rise, including
central bank monetary policy, rising inflation rates and general economic
conditions. The prevailing historically low interest rate environment increases
the risk associated with rising interest rates, including the potential for
periods of volatility and increased redemptions.
In
addition, debt securities, such as bonds, with longer durations tend to be more
sensitive to interest rate changes, usually making them more volatile than debt
securities, such as bonds, with shorter durations. To the extent the Fund
invests a substantial portion of its assets in debt securities with longer-term
maturities, rising interest rates may cause the value of the Fund’s investments
to decline significantly.
In
addition, in response to the COVID-19 pandemic, as with other serious economic
disruptions, governmental authorities and regulators are enacting significant
fiscal and monetary policy changes, including providing direct capital infusions
into companies, creating new monetary programs and lowering interest rates.
These actions present heightened risks to debt instruments, and such risks could
be even further heightened if these actions are unexpectedly or suddenly
reversed or are ineffective in achieving their desired outcomes.
Derivatives
Risk. The
use of derivatives presents risks different from, and possibly greater than, the
risks associated with investing in traditional securities.
The
use of derivatives by the Fund can lead to losses because of adverse movements
in the price or value of the underlying reference asset, which may be magnified
by certain features of the derivatives. Derivative strategies often involve
leverage, which may exaggerate a loss, potentially causing the Fund to lose more
money than it originally committed to initial margin, and more money than it
would have lost had it invested in the underlying reference asset. The values of
derivatives may move in unexpected ways, especially in unusual market
conditions, and may result in increased volatility, among other consequences.
There may be imperfect correlation between changes in the market value of a
derivative and the value of its underlying reference asset, and this may be
exaggerated in times of market stress or volatility. Derivatives require the
Fund to post margin or collateral or otherwise maintain liquid assets in a
manner that satisfies contractual undertakings and regulatory requirements. In
order to satisfy margin or other requirements, the Fund may need to sell
securities from its portfolio or exit positions at a time when it may be
disadvantageous to do so. All of this could, in turn, affect the Fund’s ability
to fully execute its investment strategies and/or achieve its investment
objective. The use of derivatives may also increase the amount of taxes payable
by shareholders because changes in government regulation of derivatives could
affect the character, timing and amount of the Fund’s taxable income or gains.
Other risks arise from the Fund’s potential inability to terminate or sell
derivative positions. A liquid secondary market may not always exist for the
Fund’s derivative positions at times when the Fund might wish to terminate or
sell such positions. The use of derivatives also involves the risk of mispricing
or improper valuation and that changes in the value of the derivative may not
correlate perfectly with the underlying reference rate. Derivatives may be
subject to changing government regulation that could impact the Fund’s ability
to use certain derivatives and their cost.
In
October 2020, 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 (the “derivatives rule”). The derivatives rule
requires funds to trade derivatives and other transactions that create future
fund payment or delivery obligations subject to a VaR leverage limit, and
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 derivatives rule. Under the derivatives
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 rule regarding use of
securities lending collateral that may limit a fund’s securities lending
activities. In addition, under the derivatives rule, a Fund is permitted to
invest in a security on a when-issued or forward-settling basis, or with a
non-standard settlement cycle, and the transaction will be deemed not to involve
a senior security under the 1940 Act, provided that (i) the Fund intends to
physically settle the transaction and (ii) the transaction will settle within 35
days of its trade date (the “Delayed-Settlement Securities Provision”). A Fund
may otherwise engage in such transactions that do not meet the conditions of the
Delayed-Settlement Securities Provision so long as the Fund treats any such
transaction as a “derivatives transaction” for purposes of compliance with the
derivatives rule. Furthermore, under the derivatives rule, a Fund will be
permitted to enter into an unfunded commitment agreement, and such unfunded
commitment agreement will not be subject to the asset coverage requirements
under the 1940 Act, if the Fund reasonably believes, at the time it enters into
such agreement, that it will have sufficient cash and cash equivalents to meet
its obligations with respect to all such agreements as they come due.
Counterparty
Risk.
Investing in derivatives and repurchase agreements involves entering into
contracts with third parties (i.e., counterparties). The use of derivatives and
repurchase agreements involves risks that are different from those associated
with ordinary portfolio securities transactions. The Fund will be subject to
credit risk (i.e., the risk that a counterparty is or is perceived to be
unwilling or unable to make timely payments or otherwise meet its contractual
obligations) with respect to the amount it expects to receive from
counterparties to derivatives and repurchase agreements entered into by the
Fund. If a counterparty becomes bankrupt or fails to perform its obligations, or
if any collateral posted by the counterparty for the benefit of the Fund is
insufficient or there are delays in the Fund's ability to access such
collateral, the value of an investment in the Fund may decline. The counterparty
to a listed futures contract is the derivatives clearing organization for the
listed future. The listed future is held through an FCM acting on behalf of the
Fund. Consequently, the counterparty risk on a listed futures contract is the
creditworthiness of the FCM and the exchange's clearing corporation. From time
to time, the Fund may only have one FCM or a limited number of FCMs with which
it transacts futures, which may heighten such risk.
Pooled
Investment Vehicle Risk. The
Fund’s investments in pooled investment vehicles that invest in commodities are
subject to the commodity-related risks described herein. In addition, such
pooled investment vehicles are subject to risk with respect to the custody of
their holdings, and additional risks.
Affiliated
Fund Risk. In
managing the Fund, the Adviser will have the ability to select underlying funds
which it believes will achieve the Fund’s investment objective. The Adviser may
be subject to potential conflicts of interest in selecting underlying funds
because the Adviser may, due to its own financial interest or other business
considerations, have an incentive to invest in funds managed by the Adviser or
its affiliates in lieu of investing in funds managed or sponsored by others.
Repurchase
Agreements Risk.
A repurchase agreement exposes the Fund to the risk that the party that sells
the security may default on its obligation to repurchase it. The Fund may lose
money if it cannot sell the security at the agreed-upon time and price or the
security loses value before it can be sold.
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 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.
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.
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 will fluctuate with changes in the market value of the Fund’s
securities holdings. The market price of Shares will 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 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 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 will be concentrated in investments that provide exposure to
commodities. To the extent that the Fund is concentrated in such investments,
the Fund will be subject to the risk that economic, political or other
conditions that have a negative effect on such investments may negatively impact
the Fund to a greater extent than if the Fund’s assets were invested in a wider
variety of investments.
Municipal
Securities Risk. Municipal
securities are subject to the risk that litigation, legislation or other
political events, local business or economic conditions, credit rating
downgrades or the bankruptcy of an issuer could have a significant effect on the
issuer’s ability to make payments of principal and/or interest or otherwise
affect the value of such securities. In addition, there is a risk that, as a
result of the recent economic crisis, the ability of any issuer to pay, when
due, the principal or interest on its municipal bonds may be materially
affected. Certain municipalities may have difficulty meeting their obligations
due to, among other reasons, changes in underlying demographics. These actions
present heightened risks to debt instruments, and such risks could be even
further heightened if these actions are unexpectedly or suddenly reversed or are
ineffective in achieving their desired outcomes. Municipal instruments may be
susceptible to periods of economic stress, which could affect the market values
and marketability of many or all municipal obligations of issuers in a state,
U.S. territory, or possession. For example, the COVID-19 pandemic has
significantly stressed the financial resources of many municipal issuers, which
may impair a municipal issuer’s ability to meet its financial obligations when
due and could adversely impact the value of its bonds, which could negatively
impact the performance of the Fund.
Municipal
securities can be significantly affected by political changes as well as
uncertainties in the municipal market related to taxation, legislative changes
or the rights of municipal security holders. Because many municipal securities
are issued to finance similar projects, especially those relating to education,
health care, transportation, utilities and water and sewer, conditions in those
sectors can affect the overall municipal market. Municipal securities include
general obligation bonds, which are backed by the “full faith and credit” of the
issuer, which has the power to tax residents to pay bondholders. Timely payments
depend on the issuer’s credit quality, ability to raise tax revenues and ability
to maintain an adequate tax base. General obligation bonds generally are not
backed by revenues from a specific project or source. Municipal securities also
include revenue bonds, which are generally backed by revenue from a specific
project or tax. The issuer of a revenue bond makes interest and principal
payments from revenues generated from a particular source or facility, such as a
tax on particular property or revenues generated from a municipal water or sewer
utility or an airport. Revenue bonds generally are not backed by the full faith
and credit and general taxing power of the issuer. Municipal securities backed
by current or anticipated revenues from a specific project or specific assets
can be negatively affected by the discontinuance of the taxation supporting the
project or assets or the inability to collect revenues for the project or from
the assets.
If
the IRS determines that an issuer of a municipal security has not complied with
applicable tax requirements, interest from the security could become taxable and
the security could decline significantly in value.
The
market for municipal bonds may be less liquid than for taxable bonds. There may
also be less information available on the financial condition of issuers of
municipal securities than for public corporations. The reorganization of a
municipality’s debts may include extending debt maturities, reducing the amount
of principal or interest, refinancing the debt or taking other measures, which
may significantly affect the rights of creditors and the value of the securities
issued by the municipality and the value of the Fund’s investments. The taxing
power of any governmental entity may be limited and an entity’s credit may
depend on factors which are beyond the entity’s control.
Money
Market Funds Risk. An
investment in a money market fund is not a bank deposit and is not insured or
guaranteed by any bank, the FDIC or any other government agency. Although money
market funds seek to preserve the value of investments at $1.00 per share, it is
possible for the Fund to lose money if shares of money market funds in which
they invest fall below $1.00 per share.
Securitized/Asset-Backed
Securities Risk. Investments
in asset-backed securities, including collateralized mortgage obligations, are
subject to the risk of significant credit downgrades, dramatic changes in
liquidity, and defaults to a greater extent than many other types of
fixed-income investments. During periods of falling interest rates, asset-backed
securities may be called or prepaid, which may result in the Fund having to
reinvest proceeds in other investments at a lower interest rate. During periods
of rising interest rates, the average life of asset-backed securities may
extend, which may lock in a below-market interest rate, increase the security’s
duration and interest rate sensitivity, and reduce the value of the security.
The Fund may invest in asset-backed securities issued or backed by federal
agencies or government sponsored enterprises or that are part of a
government-sponsored program, which may subject the Fund to the risks noted
above. The values of assets or collateral underlying asset-backed securities may
decline and, therefore, may not be adequate to cover underlying obligations.
Enforcing rights against the underlying assets or collateral may be difficult,
and the underlying assets or collateral may be insufficient if the issuer
defaults.
Sovereign
Bond Risk.
Investment in sovereign bonds involves special risks not present in corporate
bonds. The governmental authority that controls the repayment of the bond may be
unable or unwilling to make interest payments and/or repay the principal on its
debt or otherwise honor its obligations. If an issuer of sovereign bonds
defaults on payments of principal and/or interest, the Fund may have limited
recourse against the issuer. During periods of economic uncertainty, the market
prices of sovereign bonds, and the Fund’s NAV, may be more volatile than prices
of corporate bonds, which may result in losses. In the past, certain governments
of emerging market countries have declared themselves unable to meet their
financial obligations on a timely basis, which has resulted in losses for
holders of sovereign bonds.
ADDITIONAL
NON-PRINCIPAL INVESTMENT STRATEGIES
The
Fund may invest in securities issued by other investment companies, equity
securities, fixed income securities and money market instruments, including
repurchase agreements or other funds which invest exclusively in money market
instruments. [The Fund may take temporary defensive positions that are
inconsistent with the Fund’s principal investment strategies in anticipation of
or in an attempt to respond to adverse market, economic, political or other
conditions. The Fund may not achieve its investment objective while it is
investing defensively.] For temporary defensive purposes, the Fund may invest
without limit in money market instruments, including repurchase agreements or
other funds which invest exclusively in money market instruments. The Fund may
also pursue temporary defensive positions in anticipation of or in an attempt to
respond to adverse market, economic, political or other conditions. Such a
position could have the effect of reducing any benefit the Fund may receive from
a market increase.
ADDITIONAL
REGULATORY CONSIDERATIONS
The
Adviser is registered as a CPO under the CEA and the rules of the CFTC and is
subject to CFTC regulation with respect to the Fund and the Subsidiary. The CFTC
has adopted rules regarding the disclosure, reporting and recordkeeping
requirements that will apply with respect to the Fund as a result of the
Adviser's registration as a CPO. Generally, these rules allow for substituted
compliance with CFTC disclosure and shareholder reporting requirements, based on
the Adviser's compliance with comparable SEC requirements. This means that for
most of the CFTC's disclosure and shareholder reporting applicable to the
Adviser as the
Fund's
CPO, the Adviser's compliance with SEC disclosure and shareholder reporting will
be deemed to fulfill the Adviser's CFTC compliance obligations. However, as a
result of CFTC regulation with respect to the Fund and the Subsidiary, the Fund
may incur additional compliance and other expenses. The Adviser is also
registered as a CTA, but relies on an exemption with respect to the Fund and the
Subsidiary from CTA regulations available for a CTA that also serves as the
Fund's and the Subsidiary's CPO. The CFTC has neither reviewed nor approved the
Fund or the Subsidiary, their investment strategies, or this
prospectus.
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 RIC. To the extent that the Fund borrows money, it may be leveraged. 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 non-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.
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.
Borrowing
and 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. The
Fund is required to comply with the derivatives rule when it engages in
transactions that create future Fund payment or delivery obligations.
Temporary
Defensive Strategy.
When the Fund utilizes a temporary defensive strategy, it may not achieve its
investment objective.
Investment
Restrictions. The
Fund may invest in securities of other investment companies subject to statutory
limitations prescribed by the 1940 Act or regulations thereunder. Pursuant to
such limitations, the Fund and its affiliates are limited in the amount that
they, in aggregate, can invest in the outstanding voting securities of any one
investment company. The Fund and its affiliates may not actively acquire
“control” of an investment company, which is presumed once ownership of an
investment company’s outstanding voting securities exceeds 25%. Also, to comply
with provisions of the 1940 Act and regulations thereunder, the Adviser may be
required to vote shares of an investment company in the same general proportion
as shares held by other shareholders of the investment company.
CYBER
SECURITY
The
Fund and its service providers are susceptible to cyber security risks that
include, among other things, theft, unauthorized monitoring, release, misuse,
loss, destruction or corruption of confidential and highly restricted data;
denial of service attacks; unauthorized access to relevant systems; compromises
to networks or devices that the Fund and its service providers use to service
the Fund’s operations; and operational disruption or failures in the physical
infrastructure or operating systems that support
the
Fund and its service providers. Cyber attacks against or security breakdowns of
the Fund or its service providers may adversely impact the Fund and its
shareholders, potentially resulting in, among other things, financial losses;
the inability of Fund shareholders to transact business and the Fund to process
transactions; the inability to calculate the Fund’s NAV; violations of
applicable privacy and other laws; regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs; and/or additional compliance
costs. The Fund may incur additional costs for cyber security risk management
and remediation purposes. In addition, cyber security risks may also impact
issuers of securities in which the Fund invests, which may cause the Fund’s
investments in such issuers to lose value. There can be no assurance that the
Fund or its service providers will not suffer losses relating to cyber attacks
or other information security breaches in the future.
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 Absolute Return Advisers Corporation with respect to the Fund (the
“Investment Management Agreement”), Van Eck Absolute Return Advisers Corporation
will serve as the adviser to the Fund and, subject to the supervision of the
Board of Trustees, will be responsible for the day-to-day investment management
of the Fund. The Adviser has been an investment adviser since 1995 and also acts
as adviser or sub-adviser to mutual funds, other ETFs, other pooled investment
vehicles and separate accounts. The Adviser is a wholly-owned subsidiary of Van
Eck Associates Corporation (“VEAC”). As of October 31, 2022, VEAC managed
approximately $63.90 billion in assets. VEAC 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 is available in the Trust’s semi-annual report for the
period ending June 30, 2022.
The
Adviser is responsible for all expenses of the Fund (inclusive of any Subsidiary
expenses), 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 of the Fund
and the Subsidiary. For its services to the Fund, the Fund has agreed to pay the
Adviser an annual unitary management fee equal to 0.55% of its average daily net
assets. For purposes of calculating the fees for the Fund, the net assets of the
Fund include the value of the Fund’s interest in the Subsidiary. The Subsidiary
does not pay the Adviser a fee for managing the Subsidiary’s portfolio. 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 and trading expenses that are net account or similar fees charged
by FCMs until at least February 1, 2024.
To
minimize the duplication of fees, the Adviser has agreed to waive the management
fee it charges to the Fund by any amount it collects as a management fee from an
underlying fund managed by the Adviser or VEAC, as a result of an investment of
the Fund’s assets in such underlying fund.
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 Absolute Return Advisers Corporation is the administrator for the Fund
(the “Administrator”), and State Street Bank and Trust Company is the custodian
of the Fund’s assets (including assets held by the Subsidiary) 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 David Schassler and John
Lau.
Mr.
Schassler has been employed by the Adviser as a portfolio manager since May
2016, a deputy portfolio manager from 2015 to 2016 and a director of manager
research from 2012 to 2015. Mr. Schassler graduated from the State University of
New York College at Cortland in 2003 with a Bachelor of Arts and from the NYU
Stern School of Business in 2012 with a Masters of Business
Administration.
Mr.
Lau is deputy portfolio manager of the Fund. He has been employed with the
Adviser since 2007 and has over 10 years’ experience in the financial markets.
Mr. Lau received his BS in Business Administration, with a concentration in
Financial Analysis from the State University of New York at Buffalo.
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.
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 the Fund’s
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 from writing options and capital gains or losses whenever it sells
securities. Any net realized long-term capital gains they are anticipated, 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, if any, is typically distributed to shareholders at least
annually, and net realized capital gains, if any, are typically distributed
annually. Dividends may be declared and paid more frequently 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
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 Internal Revenue 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 Internal Revenue 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.
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. PricewaterhouseCoopers
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
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For
more detailed information about the Fund, see the SAI dated December 20, 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].
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Transfer
Agent: State Street Bank and Trust Company
SEC
Registration Number: 333-123257
1940
Act Registration Number: 811-10325
PITPRO |
800.826.2333
www.vaneck.com |