ck0001137360-20221231
Bitcoin
Strategy ETF XBTF
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Principal
U.S. Listing Exchange for the Fund: Cboe BZX Exchange,
Inc. |
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U.S. Securities and Exchange Commission and the Commodity Futures Trading
Commission 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. |
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800.826.2333 vaneck.com
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VANECK®
BITCOIN
STRATEGY ETF |
SUMMARY
INFORMATION
INVESTMENT
OBJECTIVE
VanEck®
Bitcoin
Strategy ETF (the “Fund”) seeks 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 |
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 |
0.65 |
% |
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Current
and Deferred Income Tax Expense/(Benefit)(a) |
0.10 |
% |
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Other
Expenses(b) |
0.08 |
% |
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Total
Annual Fund Operating Expenses Before Expense Reimbursement |
0.83 |
% |
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Expense
Reimbursement |
-0.07 |
% |
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Total
Annual Fund Operating Expenses(b) |
0.76 |
% |
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(a)The Fund is classified for
federal income tax purposes as a taxable regular corporation or Subchapter “C”
corporation. As a “C” corporation, the Fund accrues a current and deferred tax
expense. The deferred tax expense represents the future tax liability associated
with the capital appreciation of its investments. The Fund’s accrued current and
deferred tax liabilities, if any, are reflected in its net assets value per
share. Current and deferred income tax expenses/(benefit) is dependent upon the
Fund’s net investment income/(loss) and realized and unrealized gains/(losses)
on investments, and such expenses/(benefits) may vary greatly from year to year
and from day to day depending on the performance of the Fund’s investments and
general market conditions. Therefore, any estimate of current and deferred
income tax expenses/(benefit) cannot be reliably predicted from year to year.
Future actual income tax expense (if any) will be incurred over many years
depending on if and when investment gains are realized, the then-current tax
basis of assets and federal income tax rates, the level of net loss
carryforwards and other factors.
(b)
Van Eck Absolute Return
Advisers Corporation (the “Adviser”) will pay all expenses of the Fund, except
for the fee payment under the investment management agreement, acquired fund
fees and expenses, interest expense, offering costs, trading expenses, taxes and
extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to
pay 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 May 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 Adviser's agreement to pay certain costs and fees 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 |
EXPENSES |
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1 |
$78 |
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3 |
$258 |
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5 |
$454 |
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10 |
$1,019 |
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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 at the Fund level
and may increase the Fund’s current and accumulated earnings and profits, which
will result in a greater portion of the Fund’s
distributions
being treated as dividends. These taxes and costs, which are not reflected in
annual fund operating expenses or in the example, may affect the Fund’s
performance. During the most recent fiscal year, the Fund’s portfolio turnover
rate was 0% of the average value of its
portfolio.
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
standardized, cash-settled bitcoin futures contracts (“Bitcoin Futures”) traded
on commodity exchanges registered with the Commodity Futures Trading Commission
(“CFTC”), such as the Chicago Mercantile Exchange (the “CME”). The
Fund does not invest in bitcoin or other digital assets directly.
The
Fund seeks to invest in Bitcoin Futures so that the total value of the bitcoin
to which the Fund has economic exposure is approximately 100% of the total
assets of the Fund (the “Target Exposure”). To the extent that the Fund’s
economic exposure to bitcoin exceeds 100% of the net assets of the Fund, the
Fund will generally have leveraged exposure to the value of bitcoin. This means
that any changes in the value of bitcoin will generally result in proportionally
larger changes in the Fund’s net asset value (“NAV”), including the potential
for greater losses than if the Fund’s exposure to the value of bitcoin were
unleveraged. There can be no assurance that the Fund will be able to achieve or
maintain the Target Exposure.
The
Fund seeks to achieve and maintain the Target Exposure by using leverage
inherent in Bitcoin Futures, and may also obtain leverage in the form of
borrowings, which would typically be in the form of loans from banks, and may be
on a secured or unsecured basis and at fixed or variable rates of interest.
Therefore, the Fund is subject to leverage risk as described further below.
The
Adviser may determine to modify the Fund’s exposure to bitcoin in response to
extreme market conditions, as determined in the sole discretion of the Adviser,
and to avoid exceeding any position limits applicable to Bitcoin Futures
established by the CME, another futures exchange or the CFTC. The position
limits by a futures exchange prevent any single investor, such as the Fund
(together with all other accounts managed by the Adviser required to be
aggregated), from holding more than a specified number of Bitcoin Futures. The
CME’s current Bitcoin Futures spot-month net position limit is 4,000 contracts
and position accountability level is 5,000 contracts. These position limits may
prevent the Fund from entering into the desired amount of Bitcoin Futures at
times. Because the Fund is new, it does not anticipate that the CME’s and any
other futures exchange’s position limits will adversely affect the Fund’s
ability to achieve the Target Exposure until the Fund’s assets under management
grow significantly. Any modification to the Fund’s exposure to bitcoin may cause
the Fund to exit its Bitcoin Futures at disadvantageous times or prices,
potentially subjecting the Fund to substantial losses, and prevent the Fund from
achieving its investment objective. The Fund may not succeed in achieving or
maintaining its Target Exposure, possibly maintaining substantially lower
exposure for extended periods of time.
The
Fund expects to invest its remaining assets in any one or more of the following
to provide liquidity, serve as margin or collateralize the Fund’s investments in
Bitcoin Futures: U.S. Treasuries, other U.S. government obligations, money
market funds, 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”).
The
Fund is classified as a non-diversified fund under the Investment Company Act of
1940, as amended (the “Investment Company Act of 1940”), and, therefore, may
invest a greater percentage of its assets in a particular issuer.
Bitcoin
and Bitcoin Futures are relatively new asset classes and therefore the Fund’s
investments in Bitcoin Futures are subject to unique and substantial risks,
including the risk that the value of the Fund’s investments could decline
rapidly, including to zero. Bitcoin and Bitcoin Futures have historically been
more volatile than traditional asset classes. You should be prepared to lose
your entire investment.
The
Fund may engage in active and frequent trading of portfolio
holdings.
Bitcoin
Bitcoin
is a digital asset, the ownership and behavior of which are determined by
participants in an online, peer-to-peer network that connects computers that run
publicly accessible, or “open source,” software that follows the rules and
procedures governing the Bitcoin network, commonly referred to as the Bitcoin
protocol. The value of bitcoin and Bitcoin Futures, like the value of other
digital assets, and related derivatives, are not backed by any government,
corporation or other identified body. Ownership and the ability to transfer or
take other actions with respect to bitcoin is protected through public-key
cryptography. The supply of bitcoin is constrained formulaically by the Bitcoin
protocol instead of being explicitly delegated to an identified body (e.g., a
central bank or corporate treasury) to control. Units of bitcoin are treated as
fungible, meaning they can be traded or exchanged for one another. Bitcoin and
certain other types of digital assets are sometimes referred to as digital
currencies or cryptocurrencies. No single entity owns or operates the Bitcoin
network, the infrastructure of which is collectively maintained by (1) a
decentralized group of participants who run computer software that results in
the recording and validation of transactions (commonly referred to as
“miners”),
(2) developers who propose improvements to the Bitcoin protocol and the software
that enforces the protocol and (3) users who choose what Bitcoin software to
run. Bitcoin was released in 2009 and, as a result, there is little data on its
long-term investment potential. Bitcoin and Bitcoin Futures are not backed by a
government-issued legal tender or other assets or currency.
Bitcoin
Futures
Futures
contracts are financial contracts the value of which depends on, or is derived
from, the underlying reference asset. In the case of Bitcoin Futures, the
underlying reference asset is bitcoin. Futures contracts may be
physically-settled or cash-settled. The only futures contracts in which the Fund
invests are cash-settled Bitcoin Futures traded on commodity exchanges
registered with the CFTC, such as the CME. “Cash-settled” means that when the
relevant futures contract expires, if the value of the underlying asset exceeds
the futures contract price, the seller pays to the purchaser cash in the amount
of that excess, and if the futures contract price exceeds the value of the
underlying asset, the purchaser pays to the seller cash in the amount of that
excess. In a cash-settled futures contract on bitcoin, the amount of cash to be
paid is equal to the difference between the value of the bitcoin underlying the
futures contract at the close of the last trading day of the contract and the
futures contract price specified in the agreement. The CME has specified that
the value of bitcoin underlying Bitcoin Futures traded on the CME will be
determined by reference to a volume-weighted average of bitcoin trading prices
on multiple bitcoin trading venues, as discussed below.
Futures
contracts exhibit “futures basis,” which refers to the difference between the
current market value of the underlying bitcoin (the “spot” price) and the price
of the cash-settled futures contracts. A negative futures basis exists when
cash-settled Bitcoin Futures generally trade at a premium to the current market
value of bitcoin. If a negative futures basis exists, the Fund’s investments in
Bitcoin Futures will generally underperform a direct investment in bitcoin, and,
therefore, it may be more difficult for the Fund to maintain the Target
Exposure.
Cash
and Fixed Income Investments
In
addition to the Fund’s Bitcoin Futures, the Fund expects to have significant
holdings of Cash and Fixed Income Investments. The Cash and Fixed Income
Investments are intended to provide liquidity and to serve as collateral for the
Fund’s Bitcoin Futures. The amount of Cash and Fixed Income Investments held by
the Fund may change over time and will be determined primarily by the amount
needed to seek to achieve or maintain the Target
Exposure.
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.
Market
and Volatility Risk.The
value of the Fund’s investments, including Bitcoin Futures, is subject to market
risk. Market risk is the risk that the value of the investments to which the
Fund is exposed will fall, which could occur due to general market or economic
conditions or other factors.
The
value of bitcoin and, therefore, of the Fund’s Bitcoin Futures, could decline
rapidly, including to zero. You should be prepared to lose your entire
investment.
Bitcoin
and Bitcoin Futures Investment Risk. The
Fund will generally hold its Bitcoin Futures during periods in which the value
of bitcoin is flat or declining as well as during periods in which the value of
bitcoin is rising, and the Adviser will generally not seek to change the Fund’s
exposure based on daily price changes.
The
further development and acceptance of the Bitcoin network, which is part of a
new and rapidly changing industry, is subject to a variety of factors that are
difficult to evaluate. The slowing, stopping or reversing of the development or
acceptance of the Bitcoin network may adversely affect the price of bitcoin and
therefore cause the Fund to suffer losses. Regulatory changes or actions may
alter the nature of an investment in bitcoin or restrict the use of bitcoin or
the operations of the Bitcoin network or venues on which bitcoin trades in a
manner that adversely affects the price of bitcoin and, therefore, the Fund’s
Bitcoin Futures. Bitcoin generally operates without central authority (such as a
bank) and is not backed by any government. Bitcoin is not legal tender and
federal, state and/or foreign governments may restrict the use and exchange of
Bitcoin, and regulation in the United States is still developing. For example,
it may become difficult or illegal to acquire, hold, sell or use bitcoin in one
or more countries, which could adversely impact the price of bitcoin, and
therefore the value of the Fund’s Bitcoin Futures.
From
time to time, the developers suggest changes to the bitcoin software. If a
sufficient number of users and miners elect not to adopt the changes, a new
digital asset, operating on the earlier version of the bitcoin software, may be
created. This is often referred to as a “fork.” In August 2017, bitcoin “forked”
into bitcoin and a new digital asset, bitcoin cash, as a result of a
several-year dispute over how to increase the rate of transactions that the
Bitcoin network can process. Since then, bitcoin has been forked numerous times
to launch new digital assets, such as bitcoin gold, bitcoin silver and bitcoin
diamond. Additional hard forks of the Bitcoin blockchain could impact demand for
bitcoin or other digital assets and could adversely impact the Fund’s Bitcoin
Futures. A fork in the Bitcoin network could adversely affect the market for
Bitcoin Futures in which the Fund invests and,
therefore,
an investment in the Fund. A substantial giveaway of bitcoin (sometimes referred
to as an “air drop”) may also result in a significant and unexpected declines in
the value of bitcoin, Bitcoin Futures, and the Fund.
The
market price of bitcoin has been subject to extreme fluctuations. If bitcoin
markets continue to be subject to sharp fluctuations, the Fund’s shareholders
may experience losses. In addition, the Fund’s performance may be adversely
impacted by industry-wide developments beyond its control, including the fallout
from the recent insolvency proceedings of digital asset market participants such
as digital asset exchange FTX Trading Ltd., et al. (and its affiliated hedge
fund Alameda Research LLC), digital asset hedge fund Three Arrows Capital and
digital asset lenders Celsius Network LLC, et al., Voyager Digital Ltd., et al.
and BlockFi Inc. Although the Fund has no exposure to any of these market
participants, the price of bitcoin and therefore the Fund may be negatively
impacted by unfavorable investor sentiment resulting from these recent
developments in the broader digital asset industry. Similar to fiat currencies
(i.e., a currency that is backed by a central bank or a national, supra-national
or quasi-national organization), bitcoin is susceptible to theft, loss and
destruction. Cybersecurity risks of the bitcoin protocol and of entities that
custody or facilitate the transfers or trading of bitcoin could result in a loss
of public confidence in bitcoin, a decline in the value of bitcoin and, as a
result, adversely impact the Fund’s Bitcoin Futures.
Bitcoin
exchanges and other trading venues on which bitcoin trades are relatively new
and, in most cases, largely unregulated and may therefore be more exposed to
fraud and failure than established, regulated exchanges for securities,
derivatives and other currencies. The Fund’s indirect investment in bitcoin
remains subject to volatility experienced by the bitcoin exchanges and other
bitcoin trading venues. Such volatility can adversely affect an investment in
the Fund. Bitcoin exchanges have in the past, and may in the future, stop
operating or permanently shut down due to fraud, cybersecurity issues,
manipulation, technical glitches, hackers or malware, which may also affect the
price of bitcoin and thus the Fund’s indirect investment in
bitcoin.
All
networked systems are vulnerable to various kinds of attacks. As with any
computer network, the Bitcoin network contains certain flaws. For example, the
Bitcoin network is currently vulnerable to a “51% attack” where, if a mining
pool were to gain control of more than 50% of the “hash” rate, or the amount of
computing and process power being contributed to the network through mining, a
malicious actor would be able to gain full control of the network and the
ability to manipulate the blockchain. A significant portion of bitcoin is held
by a small number of holders sometimes referred to as “whales.” These holders
have the ability to manipulate the price of bitcoin. As a digital asset, bitcoin
is subject to cybersecurity risks, including the risk that malicious actors will
exploit flaws in its code or structure that will allow them to, among other
things, steal bitcoin held by others, control the blockchain, steal personally
identifying information, or issue significant amounts of bitcoin in
contravention of the Bitcoin protocols. The occurrence of any of these events is
likely to have a significant adverse impact on the price and liquidity of
bitcoin and Bitcoin Futures and therefore the value of an investment in the
Fund. Additionally, the Bitcoin network’s functionality relies on the Internet.
A significant disruption of Internet connectivity affecting large numbers of
users or geographic areas could impede the functionality of the Bitcoin network.
Any technical disruptions or regulatory limitations that affect Internet access
may have an adverse effect on the Bitcoin network, the price of bitcoin and
Bitcoin Futures, and the value of an investment in the Fund.
Bitcoin
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. The market for Bitcoin Futures may be less
developed, and potentially less liquid and more volatile, than more established
futures markets. While the Bitcoin Futures market has grown substantially since
Bitcoin Futures commenced trading, there can be no assurance that this growth
will continue. Bitcoin Futures are subject to collateral requirements and daily
limits that may limit the Fund’s ability to achieve the Target Exposure. Margin
requirements for Bitcoin Futures traded on the CME or other futures exchanges
currently are, and may continue to be substantially higher than margin
requirements for many other types of futures contracts. 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 bitcoin (the “spot” price) and the price of the cash-settled
futures contracts. A negative futures basis exists when cash-settled Bitcoin
Futures generally trade at a premium to the current market value of bitcoin. If
a negative futures basis exists, the Fund’s investments in Bitcoin Futures will
generally underperform a direct investment in bitcoin, and, therefore, it may be
more difficult for the Fund to maintain the Target Exposure. If the Fund’s
ability to achieve the Target Exposure is disrupted for any reason, including
limited liquidity in the Bitcoin Futures market, a disruption to the Bitcoin
Futures, or as a result of margin requirements or position limits imposed by the
Fund’s futures commission merchant), the CME, another futures exchange or the
CFTC, the Fund may not be able to achieve its investment objective and may
experience significant losses.
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 on bitcoin 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 bitcoin. 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 of
bitcoin tend to be greater than the spot price of bitcoin. 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. Bitcoin Futures have historically experienced extended periods of
contango. Extended
period
of contango may cause significant and sustained losses. Additionally, because of
the frequency with which the Fund may roll Bitcoin Futures, the impact of
contango on Fund performance may be greater than it would have been if the Fund
rolled Bitcoin Futures less frequently.
Bitcoin
Futures Derivatives Risk.
The Fund currently intends to invest only in Bitcoin Futures traded on commodity
exchanges registered with the CFTC, such as the CME. 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. Bitcoin Futures require the Fund to post margin or
collateral or otherwise maintain liquid assets in a manner that satisfies
contractual undertakings. 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 at the Fund level and may increase the Fund’s current and accumulated
earnings and profits, which will result in a greater portion of the Fund’s
distributions being treated as dividends, 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 with which it transacts Bitcoin Futures, which may heighten such risk.
Investment
Capacity Risk.
If the Fund’s ability to achieve the Target Exposure is disrupted for any reason
including, for example, limited liquidity in the Bitcoin Futures market, a
disruption to the Bitcoin Futures market, or as a result of margin requirements
or position limits imposed by the Fund’s FCMs, the CME, another futures exchange
or the CFTC, the Fund may not be able to achieve its investment objective and
may experience significant losses. If the Fund is unable for any reason to
achieve the Target Exposure, the Adviser, in its sole discretion, may invest the
Fund’s assets in Cash and Fixed Income Investments. To the extent that the Fund
invests in Cash and Fixed Income Investments, the Fund’s performance should be
expected to differ from the performance of Bitcoin Futures and its returns may
be lower than expected.
Target
Exposure and Rebalancing Risk.
Although the Fund seeks to achieve and maintain the Target Exposure to bitcoin,
it is possible in certain circumstances that the Fund may not succeed in
achieving or maintaining its target exposure, possibly maintaining substantially
lower exposure for extended periods of time.
Borrowing
and Leverage Risk. The
Fund seeks to achieve and maintain the Target Exposure by using leverage
inherent in Bitcoin Futures, and may also obtain leverage in the form of
borrowings, which would typically be in the form of loans from banks, and may be
on a secured or unsecured basis and at fixed or variable rates of interest.
Therefore, the Fund is subject to leverage risk. Leverage can have the effect of
magnifying the Fund’s exposure to changes in the value of its assets and may
also result in increased volatility in the Fund’s net asset value. This means
the Fund will have the potential for greater gains, as well as the potential for
greater losses, than if the Fund owned its assets on an unleveraged
basis.
Indirect
Investment Risk.
There are several factors, such as deviations between the price of Bitcoin
Futures and the price of bitcoin and the potential for “negative roll yields” in
“contango” markets, that may cause the returns of the Fund to differ
substantially from the returns from holding an amount of bitcoin
directly.
Bitcoin
Futures Credit Risk. The
Fund invests in cash-settled Bitcoin Futures traded on commodity exchanges
registered with the CFTC, such as the CME. Credit risk refers to the possibility
that the issuer or guarantor of a debt security or a counterparty to
exchange-traded Bitcoin 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.
Bonds
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 and preferred 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. Debt securities 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. Changing interest rates may have unpredictable effects
on markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Illiquidity
Risk. Illiquidity
risk is the risk that the investments held by the Fund may be difficult or
impossible to sell at the time that the Fund would like without significantly
changing the market value of the investment. The Fund may invest at the time of
purchase up to 15% of its net assets in illiquid securities. The market for
Bitcoin Futures is still developing and may experience periods of significant
illiquidity. During such times it may be difficult or impossible for the Fund to
buy or sell a position at the desired price. Market disruptions or volatility
can also make it difficult to transact a position at a reasonable price and
sufficient size. Illiquid markets may cause losses, which could be significant.
The large size of the positions which the Fund and other similar funds may
acquire may increase the risk of illiquidity by making positions more difficult
to liquidate or by increasing the losses incurred while trying to do
so.
Risk
of Investing in Other Funds.
The Fund may invest in shares of other funds, including ETFs. As a result, the
Fund will indirectly be exposed to the risks of an investment in the underlying
funds. As a shareholder in a fund, the Fund would bear its ratable share of that
entity’s expenses. At the same time, the Fund would continue to pay its own
investment management fees and other expenses. As a result, the Fund and its
shareholders will be absorbing additional levels of fees with respect to
investments in other funds, including ETFs.
Active
Management Risk.
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. Investment decisions
made by the Adviser in seeking to achieve the Fund’s investment objective may
cause a decline in the value of the investments held by the Fund and, in turn,
cause the Fund’s shares to lose value or underperform other funds with similar
investment objectives.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified” fund under the Investment Company
Act of 1940. The Fund is subject to the risk that it will be more volatile than
a diversified fund because the Fund may invest a relatively high percentage of
its assets in a smaller number of issuers or may invest a larger proportion of
its assets in a single issuer. Moreover, the gains and losses on a single
investment may have a greater impact on the Fund’s net asset value and may make
the Fund more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
High
Portfolio Turnover Risk.
The Fund’s portfolio turnover and frequent trading of Bitcoin Futures may result
in higher transaction costs than if the Fund traded less frequently. 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 Bitcoin Futures and on reinvestment of the Fund’s assets. High
portfolio turnover may also result in higher taxes at the Fund level and may
increase the Fund’s current and accumulated earnings and profits, which will
result in a greater portion of Fund’s distributions being treated as
dividends.
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 “commodity pool operator” (“CPO”) under
the U.S. Commodity Exchange Act of 1936, as amended 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 Securities and Exchange Commission 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
Securities and Exchange Commission 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.
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.
Corporation
Tax Risk.
Unlike traditional mutual funds that are structured as regulated investment
companies for U.S. federal income tax purposes, the Fund will be taxable as a
regular corporation for U.S. federal income tax purposes and, as a result, the
Fund will be subject to corporate income tax (currently at a rate of 21%) to the
extent the Fund recognizes taxable income, and will also be subject to state and
local income taxes.
In
calculating the Fund’s daily net asset value, the Fund will, among other things,
account for its current taxes and deferred tax liability and/or asset balances.
The Fund will accrue a deferred income tax liability balance, at the effective
statutory U.S. federal income tax rate (currently at a rate of 21%) plus an
estimated state and local income tax rate, for its future tax liability
associated with the capital appreciation of its investments and the
distributions received by the Fund (if any) and for any net operating gains. Any
deferred tax liability balance will reduce the Fund’s net asset value. The Fund
may also accrue a deferred tax asset balance, which reflects an estimate of the
Fund’s future tax benefit associated with net operating losses and unrealized
losses. Any deferred tax asset balance will increase the Fund’s net asset value.
To the extent the Fund has a deferred tax asset balance, consideration is given
as to whether or not a valuation allowance, which would offset the value of some
or all of the deferred tax asset balance, is required. The daily estimate of the
Fund’s current taxes and deferred tax liability and/or asset balances used to
calculate the Fund’s net asset value could vary significantly from the Fund’s
actual tax liability or benefit, and, as a result, the determination of the
Fund’s actual tax liability or benefit may have a material impact on the Fund’s
net asset value. From time to time, the Fund may modify its estimates or
assumptions regarding its current taxes and deferred tax liability and/or asset
balances as new information becomes available, which modifications in estimates
or assumptions may have a material impact on the Fund’s net asset value and
trading price. Shareholders, including Authorized Participants, who sell their
shares or who redeem their shares at a net asset value that is based on
estimates of the Fund’s current taxes and deferred tax liability and/or asset
balances may benefit at the expense of remaining shareholders (or remaining
shareholders may benefit at the expense of redeeming shareholders) if the
estimates are later revised or ultimately differ from the Fund’s actual tax
liability and/or asset balances.
The
rules dealing with U.S. federal income taxation and the rates themselves are
constantly under review in the legislative process and by the Internal Revenue
Service and the U.S. Treasury Department. Changes in tax laws or regulations or
future interpretations of such laws or regulations could adversely affect the
Fund and/or the Fund’s shareholders.
Cash
Transactions and Taxation Risk.
Because the Fund currently intends to effect redemptions for cash, rather than
for 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. Taxable gains may result in higher taxes at the Fund level and may
increase the Fund’s current and accumulated earnings and profits, which will
result in a greater portion of Fund’s distributions, if any, being treated as
dividends. In addition, the Fund will not be taxable as a RIC. 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 RICs and are able to make in-kind
redemptions and avoid realizing gains in connection with transactions designed
to raise cash to meet redemption requests. 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.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Trading
Issues Risk.
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 relevant 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 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 net asset
value, the intraday value of the Fund’s holdings and supply and demand for
Shares. Shares may trade above, below, or at their most recent net asset value.
Factors including 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), may result in Shares trading at a
significant premium or discount to net asset value 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 net asset value or sells Shares at a time when the
market price is at a discount to the net asset value, the shareholder may pay
significantly more or receive significantly less than the underlying value of
the Shares. The securities held by the Fund may be traded in markets that close
at a different time than the exchange on which the Shares are traded. 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’ net asset value 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 and a shareholder may be unable to sell
his or her Shares.
U.S.
Government Securities Risk.
Different U.S. government securities are subject to different levels of credit
risk depending on the nature of the particular government support for that
security. The market value of U.S. government securities may fluctuate and are
subject to investment risks, and the value of U.S. government securities may be
adversely affected by changes in interest rates. In addition, it is possible
that the issuers of some U.S. government securities will not be able to timely
meet their payment obligations in the future, and there is a risk of default.
Debt
Securities Risk. Debt
securities are subject to credit risk and interest rate risk. Credit risk refers
to the possibility that the issuer of a debt security will be unable to make
interest payments or repay principal when it becomes due. Various factors could
affect the issuer’s ability to make timely interest or principal payments,
including changes in the issuer’s financial condition or in general economic
conditions. Interest rate risk refers to fluctuations in the value of a debt
security resulting from changes in the general level of interest rates. When the
general level of interest rates rises, the value of debt securities will tend to
fall, and if interest rates fall, the values of debt securities will tend to
rise.
Certain
financial instruments in which the Fund may invest may pay interest based on, or
otherwise have payments tied to, the London Inter-bank Offered Rate (“LIBOR”),
Euro Interbank Offered Rate and other similar types of reference rates (each, a
“Reference Rate”). Due to the uncertainty regarding the future utilization of
LIBOR and certain other Reference Rates, and the nature of any replacement rate,
the potential effect of a transition away from LIBOR and certain other Reference
Rates could, among other negative consequences, adversely impact the pricing,
liquidity, value of, return on and trading for a broad array of financial
products, including any Reference Rate-linked securities, loans and derivatives
in which the Fund may invest; require extensive negotiations of and/or
amendments to agreements and other documentation governing Reference Rate-linked
investments products; lead to disputes, litigation or other actions with
counterparties or portfolio companies regarding the interpretation and
enforceability of “fallback” provisions that provide for an alternative
reference rate in the event of Reference Rate unavailability; or cause the Fund
to incur additional costs in relation to any of the above factors.
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. 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 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. 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 to
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 net asset value, 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
bar chart that follows shows how the Fund performed for the calendar years
shown. The table below the bar chart shows the Fund’s average annual returns
(before and after taxes). The bar chart
and table provide an indication of the risks of investing in the Fund by
comparing the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the one year, five year, ten year and/or since
inception periods, as applicable, compared with the Fund’s benchmark index and a
broad measure of market performance. All returns assume
reinvestment of dividends and distributions. The Fund’s
past performance (before and after taxes) is not necessarily indicative of how
the Fund will perform in the future. Updated performance
information is available online at www.vaneck.com.
Annual Total
Returns (%)—Calendar Year
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| Best
Quarter: |
4.08% |
3Q 2022 |
| Worst
Quarter: |
-59.26% |
2Q
2022 |
Average
Annual Total Returns for the Periods Ended December 31, 2022
The after-tax
returns presented in the table below are calculated using the highest historical
individual federal marginal income tax rates and do not reflect the impact of
state and local taxes. Your actual after-tax returns will depend
on your specific tax situation and may differ from those shown below.
After-tax
returns are not relevant to investors who hold Shares of the Fund through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts.
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Past
One
Year |
Since
Inception (11/16/2021) |
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VanEck
Bitcoin Strategy ETF (return before taxes) |
-62.72% |
-69.40% |
|
|
VanEck
Bitcoin Strategy ETF (return after taxes on
distributions) |
-62.72% |
-69.40% |
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|
VanEck
Bitcoin Strategy ETF (return after taxes on distributions and sale of Fund
Shares) |
-37.13% |
-51.88% |
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MarketVector
Bitcoin Benchmark Rate Index (reflects no deduction for fees, expenses or
taxes) |
-63.98% |
-69.85% |
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|
S&P
500®
Index
(reflects
no deduction for fees, expenses or
taxes) |
-18.11% |
-14.79% |
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PORTFOLIO
MANAGEMENT
Investment
Adviser.
Van Eck Absolute Return Advisers Corporation.
Portfolio
Manager.
The following individual is primarily 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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Gregory
F. Krenzer |
Portfolio
Manager |
November
2021 |
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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 is treated as a regular corporation, or “C” corporation, for U.S. federal,
state and local income tax purposes. Distributions by the Fund of cash or
property in respect of the Shares will be treated as dividends for U.S. federal
income tax purposes to the extent paid from the Fund’s current or accumulated
earnings and profits (as determined under U.S. federal income tax principles).
Subject to certain holding period and other requirements, any such dividend will
be eligible (i) to be treated as “qualified dividend income” taxable at long
term capital gain rates (subject to certain holding period requirements) in the
case of shareholders taxed as individuals and (ii) for the dividends received
deduction (subject to certain holding period requirements) in the case of
corporate shareholders. If the Fund’s distributions exceed the Fund’s current
and accumulated earnings and profits, such excess will be treated first as a
tax-free return of capital to the extent of the shareholder’s tax basis in the
Shares (thus reducing a shareholder’s adjusted tax basis in the Shares), and
thereafter as capital gain assuming the Shares are held as a capital asset.
There can be no assurance as to what portion of any future distribution will
consist of return of capital (as opposed to taxable dividend income). Unlike a
regulated investment company, the Fund will not be able to pass-through the
character of its recognized net capital gain by paying “capital gain dividends.”
Upon the sale of Shares, a shareholder generally will recognize capital gain or
loss equal to the difference between the amount realized on the sale and the
shareholder’s adjusted tax basis in the Shares sold. See the section of this
prospectus entitled “Shareholder Information- Tax Information” for more
information.
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 pursues its investment strategy primarily by investing in Bitcoin Futures.
In addition, the Fund expects to have significant holdings of Cash and Fixed
Income Investments. The Cash and Fixed Income Investments are intended to
provide liquidity and to serve as collateral for the Fund’s Bitcoin
Futures.
The Fund does not invest in bitcoin or other digital assets
directly.
The
Fund seeks to invest in Bitcoin Futures until it reaches the Target Exposure. To
the extent that the Fund’s economic exposure to bitcoin exceeds 100% of the net
assets of the Fund, the Fund will generally have leveraged exposure to the value
of bitcoin. This means that any changes in the value of bitcoin will generally
result in proportionally larger changes in the Fund’s NAV, including the
potential for greater losses than if the Fund’s exposure to the value of bitcoin
were unleveraged. There can be no assurance that the Fund will be able to
achieve or maintain the Target Exposure.
Bitcoin
and Bitcoin Futures are relatively new asset classes and therefore the Fund’s
investments in Bitcoin Futures are subject to unique and substantial risks,
including the risk that the value of the Fund’s investments could decline
rapidly, including to zero. Bitcoin and Bitcoin Futures have historically been
more volatile than traditional asset classes. You should be prepared to lose
your entire investment.
For
cash management or temporary defensive purposes in times of adverse or unstable
market, economic or political conditions, the Fund can invest up to 100% of its
assets in investments that may be inconsistent with its principal investment
strategy. Generally, the Fund would invest in money market instruments or in
other short-term U.S. or foreign government securities. The Fund might also hold
these types of securities as interim investments pending the investment of
proceeds from the sale of its shares or the sale of its portfolio investments or
to meet anticipated redemptions of its shares.
The
Fund may engage in active and frequent trading of portfolio
holdings.
Overview
of the Bitcoin Industry and Market
Bitcoin
Bitcoin
is the digital asset that is native to, and created and transmitted through the
operations of, the peer to peer Bitcoin Network, a decentralized network of
computers that operates on cryptographic protocols. No single entity owns or
operates the Bitcoin Network, the infrastructure of which is collectively
maintained by a decentralized user base. The Bitcoin Network allows people to
exchange tokens of value, called bitcoin, which are recorded on a public
transaction ledger known as the Blockchain. Bitcoin can be used to pay for goods
and services, or it can be converted to fiat currencies, such as the U.S.
dollar, at rates determined on bitcoin trading platforms or in individual end
user to end user transactions under a barter system. Although nascent in use,
bitcoin may be used as a medium of exchange, unit of account or store of
value.
The
Bitcoin Network is decentralized and does not require governmental authorities
or financial institution intermediaries to create, transmit or determine the
value of bitcoin. In addition, no party may easily censor transactions on the
Bitcoin Network. As a result, the Bitcoin Network is often referred to as
decentralized and censorship resistant.
The
value of bitcoin is determined by the supply of and demand for bitcoin. New
bitcoin are created and rewarded to the miners in exchange for their expending
computational power to verifying transactions and add them to the Blockchain.
The Blockchain is effectively a decentralized database that includes all blocks
that have been solved by miners and it is updated to include new blocks as they
are solved. Each bitcoin transaction is broadcast to the Bitcoin Network and,
when included in a block, recorded in the Blockchain. As each new block records
outstanding bitcoin transactions, and outstanding transactions are settled and
validated through such recording, the Blockchain represents a complete,
transparent and unbroken history of all transactions of the Bitcoin
Network.
Bitcoin
is not an income-generating asset, and the Fund’s investments are not expected
to pay dividends or other distributions in the way common stock of companies
may.
Bitcoin
Mining – Creation of New Bitcoins
Mining
Process
The
process by which bitcoins are created and bitcoin transactions are verified is
called mining. To begin mining, a user, or “miner,” can download and run a
mining client, which, like regular Bitcoin Network software, turns the user’s
computer into a “node” on the Bitcoin Network that validates blocks. Each time
transactions are validated and bundled into new blocks added to the Blockchain,
the Bitcoin Network awards the miner solving such blocks with newly issued
bitcoin and any transaction fees paid by bitcoin transaction senders. This
reward system is the method by which new bitcoins enter into circulation to the
public. Over time, the size of the fixed reward of new bitcoin decreases, and
miners increasingly rely on transaction fees to compensate them for exerting
computational power in solving blocks.
Each
block contains the details of some or all of the most recent transactions that
are not memorialized in prior blocks, as well as a record of the award of
bitcoins to the miner who solved the new block. In order to add blocks to the
Blockchain, a miner must map an input data set (i.e., the Blockchain, plus a
block of the most recent Bitcoin Network transactions and an arbitrary number
called a “nonce”) to a desired output data set of a predetermined length (the
“hash value”) using the SHA 256 cryptographic hash
algorithm.
Each unique block can only be solved and added to the Blockchain by one miner;
therefore, all individual miners and mining pools on the Bitcoin Network are
engaged in a competitive process of constantly increasing their computing power
to improve their likelihood of solving for new blocks. As more miners join the
Bitcoin Network and its processing power increases, the Bitcoin Network adjusts
the complexity of the block solving equation to maintain a predetermined pace of
adding a new block to the Blockchain approximately every ten
minutes.
Mathematically
Controlled Supply
The
method for creating new bitcoin is mathematically controlled in a manner so that
the supply of bitcoin grows at a limited rate pursuant to a pre set schedule.
The number of bitcoin awarded for solving a new block is automatically halved
every 210,000 blocks. Thus, the current fixed reward for solving a new block is
6.25 bitcoin per block; the reward decreased from 25 bitcoin in July 2016 and
12.5 in May 2020. It is estimated to halve again at the start of 2024. This
deliberately controlled rate of bitcoin creation means that the number of
bitcoin in existence will never exceed 21 million and that bitcoin cannot be
devalued through excessive production unless the Bitcoin Network’s source code
(and the underlying protocol for bitcoin issuance) is altered. As of December
31, 2022, approximately 19,247,000 bitcoin have been mined. It is estimated that
more than 90% of the 21 million bitcoin will have been produced by 2023. The
controlled supply of bitcoin is subject to the risk of a “51% attack,” as
discussed below.
Forms
of Attack Against the Bitcoin Network
All
networked systems are vulnerable to various kinds of attacks. As with any
computer network, the Bitcoin network contains certain flaws. For example, the
Bitcoin network is currently vulnerable to a “51% attack” where, if a mining
pool were to gain control of more than 50% of the “hash” rate, or the amount of
computing and process power being contributed to the network through mining, a
malicious actor would be able to gain full control of the network and the
ability to manipulate the blockchain, including interrupting the recording of
new blocks by preventing other miners from completing blocks. A significant
portion of bitcoin is held by a small number of holders sometimes referred to as
“whales.” These holders have the ability to manipulate the price of
bitcoin.
In
addition, many digital asset networks have been subjected to a number of denial
of service attacks, which has led to temporary delays in block creation and in
the transfer of bitcoin. Any similar attacks on the Bitcoin Network that impact
the ability to transfer bitcoin could have a material adverse effect on the
price of bitcoin.
Bitcoin
Market and Bitcoin Trading Platforms
In
addition to using bitcoin to engage in transactions, investors may purchase and
sell bitcoin to speculate as to the value of bitcoin in the bitcoin market, or
as a long term investment to diversify their portfolio. The value of bitcoin
within the market is determined, in part, by the supply of and demand for
bitcoin in the bitcoin market, market expectations for the adoption of bitcoin
by individuals, the number of merchants that accept bitcoin as a form of payment
and the volume of private end user to end user transactions.
The
most common means of determining a reference value is by surveying trading
platforms where secondary markets for bitcoin exist. The most prominent bitcoin
trading platforms are often referred to as “exchanges”, although they are not
regulated and do not report trade information in the same way as a national
securities exchange. As such, there is some difference in the form, transparency
and reliability of trading data from bitcoin trading platforms. Generally
speaking, bitcoin data is available from these trading platforms with publicly
disclosed valuations for each executed trade, measured by one or more fiat
currencies such as the U.S. dollar or Euro or another digital asset such as
ether or tether. Over-the-counter (“OTC”) dealers or market makers do not
typically disclose their trade data.
Competition
More
than 5,000 other digital assets have been developed since the inception of
Bitcoin, currently the most developed digital asset because of the length of
time it has been in existence, the investment in the infrastructure that
supports it, and the network of individuals and entities that are using Bitcoin.
Some industry groups are also creating private, permissioned blockchains that
may or may not feature cryptocurrencies or other digital assets. In addition,
private enterprises and governments are exploring the use of stablecoins
including central bank backed digital currencies.
Regulation
of Bitcoin
Bitcoin
and other digital assets have increasingly attracted attention from U.S. and
foreign regulators. Such regulatory attention has included enforcement actions
for violations of securities and commodities laws, as well as the release of
regulatory guidance explaining how existing regulatory regimes apply to digital
assets, and orders approving certain digital asset related products. In more
limited cases, new legislation or regulations have been proposed or adopted to
govern the use of digital assets and their networks.
U.S.
federal and state agencies have been examining the operations of digital asset
networks, digital asset users and the digital asset trading platforms, with
particular focus on the extent to which digital assets can be used to launder
the proceeds of illegal activities or fund criminal or terrorist enterprises and
the safety and soundness of trading platforms or other service providers that
hold digital assets for users. Many of these state and federal agencies have
issued consumer advisories regarding the risks posed by digital assets to
investors. In addition, federal and state agencies, and other countries have
issued rules or guidance about the treatment of digital asset transactions or
requirements for businesses engaged in digital asset activity. For example, on
February 26, 2021, the SEC’s Division of Examinations issued a risk alert
entitled “Continued Focus on Digital Asset Securities” discussing observations
made by its staff during examinations of investment advisers, broker-dealers,
and transfer agents regarding digital asset securities. In November 2022, U.S.
Treasury Secretary Yellen called for “more effective oversight of cryptocurrency
markets” following the insolvency of digital asset exchange FTX.
Various
U.S. federal and state and foreign jurisdictions have, and may continue to, in
the near future, adopt laws, regulations or directives that affect the Bitcoin
Network, the bitcoin markets, and their users, particularly digital asset
trading platforms and service providers that fall within such jurisdictions’
regulatory scope. There remains significant uncertainty regarding the US and
foreign government and quasi-governmental regulatory actions with respect to
digital assets and digital asset exchanges. Foreign laws, regulations or
directives may conflict with those of the U.S. and may negatively impact the
acceptance of bitcoin by users, merchants and service providers and may
therefore impede the growth or sustainability of the Bitcoin economy in the
European Union, China, South Korea, India and the U.S. and globally, or
otherwise negatively affect the value of bitcoin.
The
effect of any future regulatory change on the Fund or bitcoin is impossible to
predict, but such change could be substantial and adverse to the Fund and the
value of the Fund’s shares.
Target
Exposure, Borrowing and Leverage
Although
the Fund seeks to maintain the Target Exposure to bitcoin, the maximum exposure
to bitcoin that the Fund is able to achieve will be primarily determined by: the
amount of exposure to bitcoin provided by the Bitcoin Futures held by the Fund.
In addition, the Fund expects to periodically rebalance its positions in Bitcoin
Futures in order to seek to achieve or maintain the Target Exposure and may
carry out any such rebalancing over a period of time in order to allow the Fund
to rebalance its positions in a manner intended to reduce transaction
costs.
In
addition, the Fund’s actual exposure to bitcoin at any particular point in time
may be less than the Target Exposure, and may be materially less. At any time at
which the Fund’s exposure to bitcoin is less 100% of the Fund’s net assets, any
changes in the value of bitcoin will generally result in proportionally smaller
changes in the Fund’s NAV. At any time at which the Fund’s exposure to bitcoin
is greater than 100% of the Fund’s net assets, any changes in the value of
bitcoin will generally result in proportionally larger changes in the Fund’s
NAV. In addition, because the Fund does not invest directly in bitcoin, the Fund
is exposed to futures basis and to deviations between the price of Bitcoin
Futures and the price of bitcoin, and any changes in the value of bitcoin may
result in proportionally smaller or larger changes in the value of the Fund’s
Bitcoin Futures. As a result, there can be no assurance that changes in the
value of the Fund resulting from the Fund’s investments will track changes in
the value of bitcoin.
The
Fund seeks to achieve and maintain the Target Exposure by using leverage
inherent in Bitcoin Futures and may also obtain leverage in the form of
borrowings, which would typically be in the form of loans from banks, may be on
a secured or unsecured basis and at fixed or variable rates of interest. The
Fund’s Bitcoin Futures will provide leverage to the extent they give the Fund
exposure to an amount of underlying bitcoin with a greater value than the amount
of collateral the Fund is required to post to its FCM. An FCM is a brokerage
firm that solicits or accepts orders to buy or sell futures contracts and
accepts money or other assets from customers to support such orders. FCMs are
required to be registered with the CFTC and to be members of the NFA. From time
to time, the Fund may only have one FCM with which it transacts Bitcoin Futures,
which may heighten such risk.
The
Fund’s investments in Bitcoin Futures will be treated as “derivatives” under
Rule 18f-4 (“Rule 18f-4”) under the Investment Company Act of 1940. Rule 18f-4
regulates the use of derivative instruments and certain related transactions by
funds. Pursuant to Rule 18f-4, the Fund will in the future adopt and implement a
derivatives risk management program to govern its use of derivatives, and the
Fund’s derivatives exposure (including its use of Bitcoin Futures) is limited
through a value-at-risk (“VaR”) test. Very generally, VaR is an estimate of an
instrument’s or portfolio’s potential losses over a given time horizon and at a
specified confidence level. Rule 18f-4 may restrict the Fund’s ability to engage
in certain derivatives transactions and/or increase the costs of such
derivatives transactions.
The
Investment Company Act of 1940 requires the Fund to maintain continuous asset
coverage of not less than 300% with respect to all borrowings. This means that
the value of the Fund’s total indebtedness may not exceed one-third of the value
of its total assets (including such indebtedness). The Fund also may borrow
money from banks or other lenders for temporary purposes in an amount not to
exceed 5% of the Fund’s assets. Such temporary borrowings are not subject to the
asset coverage requirements discussed above. Under current regulatory guidance,
until the Fund complies with rule 18f-4 investments or trading practices that
involve contractual obligations to pay in the future may be subject to the same
requirements unless the Fund designates liquid assets in an amount the Fund
believes to be equal to the Fund’s contractual obligations (marked-to-market on
a daily basis) or, for certain instruments, appropriately “covers” such
obligations with offsetting positions.
Bitcoin
Reference Rates
The
CME CF Bitcoin Reference Rate (“BRR”) is a daily reference rate of the U.S.
Dollar price of one bitcoin, and serves as the underlying rate used to determine
the final settlement of CME-traded Bitcoin Futures. The BRR was introduced on
November 14, 2016 to provide market participants with a reliable credible source
for the price of bitcoin and intended to facilitate the creation of financial
products based on bitcoin.
The
BRR is calculated by the aggregation of executed trade flow of major bitcoin
spot exchanges during a specific one-hour calculation window. All relevant
transactions are added to a joint list, recording the trade price and size for
each transaction. This one-hour window is then partitioned into twelve,
five-minute intervals. For each partition, the volume-weighted median trade
price is calculated from the trade prices and sizes of all relevant
transactions, i.e., across all constituent exchanges. The BRR is then given by
the equally-weighted average of the volume-weighted medians of all partitions.
Calculation rules are geared toward a maximum of transparency and replicability
in the underlying spot markets.
The
CME CF Bitcoin Real Time Index (“BRTI”) is spot price index based on the U.S.
Dollar price of bitcoin on several bitcoin exchanges and trading platforms, as
reported by Bloomberg, L.P. or another reporting service. The BRTI is published
once per second (24 hours per day, 7 days per week, 365 days per year). It is
representative of current bids and offers of market participants to buy or sell
bitcoin on constituent exchanges. The BRTI is calculated in real time based on
the universe of the currently unmatched limit orders to buy or sell in the
BTC/USD pair on the constituent platforms that is reported and disseminated by
CF Benchmarks Ltd., as the BRTI calculation agent.
FUNDAMENTAL
AND NON-FUNDAMENTAL POLICIES
The
Fund’s investment objective and each of its other investment policies are
non-fundamental policies that may be changed by the Board of Trustees of the
Trust (the “Board of Trustees”) without shareholder approval, except as noted in
this Prospectus or the Statement of Additional Information (“SAI”) under the
section entitled “Investment Policies and Restrictions— Investment
Restrictions.”
RISKS
OF INVESTING IN THE FUND
The
following section provides additional information regarding the principal risks
identified under “Principal Risks of Investing in the Fund” in the Fund’s
“Summary Information” section followed by additional risk information.
Investors
in the Fund should be willing to accept a high degree of volatility in the price
of the Fund’s Shares and the possibility of significant losses. An investment in
the Fund involves a substantial degree of risk. An investment in the Fund is not
a deposit with a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Therefore, you should
consider carefully the following risks before investing in the Fund, each of
which could significantly and adversely affect the value of an investment in the
Fund.
Market
and Volatility Risk.The
value of the Fund’s investments, including Bitcoin Futures, is subject to market
risk. Market risk is the risk that the value of the investments to which the
Fund is exposed will fall, which could occur due to general market or economic
conditions or other factors.
The
value of bitcoin and, therefore, of the Fund’s Bitcoin Futures, could decline
rapidly, including to zero. You should be prepared to lose your entire
investment.
Bitcoin
and Bitcoin Futures Investment Risk.
The Fund will generally hold its Bitcoin Futures during periods in which the
value of bitcoin is flat or declining as well as during periods in which the
value of bitcoin is rising, and the Adviser will generally not seek to change
the Fund’s exposure based on daily price changes.
The
Fund may be subject to the following risks as a result of its Bitcoin
Futures:
Bitcoin
Adoption Risk.
The further development and acceptance of the Bitcoin network, which is part of
a new and rapidly changing industry, is subject to a variety of factors that are
difficult to evaluate. For example, the Bitcoin network faces significant
obstacles to increasing the usage of bitcoin without resulting in higher fees or
slower transaction settlement times, and attempts to increase the volume of
transactions may not be effective. The slowing, stopping or reversing of the
development or acceptance of the Bitcoin network may adversely affect the price
of bitcoin and therefore cause the Fund’s Bitcoin Futures to suffer
losses.
The
use of bitcoin to, among other things, buy and sell goods and services is part
of a new and rapidly evolving industry that employs digital assets based upon
computer-generated mathematical and/or cryptographic protocols. Bitcoin is a
prominent, but not unique, part of this industry. The growth of this industry is
subject to a high degree of uncertainty. The factors affecting the further
development of this industry, include, but are not limited to:
•
continued worldwide growth or possible cessation or
reversal in the adoption and use of bitcoin and other
digital assets;
• government
and quasi-government regulation of bitcoin and other digital assets and their
use, including taxation of bitcoin transactions, or restrictions on or
regulation of access to and operation of the Bitcoin network and other digital
asset networks;
• changes
in consumer demographics and public tastes and preferences, including the
possibility that market participants or government regulators may come to prefer
other digital assets to bitcoin for a variety of reasons, including that such
other digital currencies may have features (like less energy-intensive consensus
mechanisms) or uses (like the ability to facilitate smart contracts) that
bitcoin lacks;
• the
maintenance and development of the open-source software protocol of the Bitcoin
network;
• the
availability and popularity of other forms or methods of buying and selling
goods and services, including new means of using fiat currencies;
• the
use of the networks supporting digital assets for developing smart contracts and
distributed applications;
• general
economic conditions and the regulatory environment relating to digital assets;
and
• negative
consumer or public perception of bitcoin specifically and other digital assets
generally.
Currently,
there is relatively limited use of bitcoin in the retail and commercial
marketplace in comparison to relatively extensive use as a store of value, thus
contributing to price volatility that could adversely affect the Fund’s Bitcoin
Futures. Bitcoin is not currently a form of legal tender in the United States
and has only recently become selectively accepted as a means of payment for
goods and services by some retail and commercial outlets, and the use of bitcoin
by consumers to pay such retail and commercial outlets remains limited. Banks
and other established financial institutions may refuse to process funds for
bitcoin transactions; process wire transfers to or from bitcoin trading venues,
bitcoin-related companies or service providers; or maintain accounts for persons
or entities transacting in bitcoin or providing bitcoin-related services. In
addition, some taxing jurisdictions, including the U.S., treat the use of
bitcoin as a medium of exchange for goods and services to be a taxable sale of
bitcoin, which could discourage the use of bitcoin as a medium of exchange,
especially for a holder of bitcoin that has appreciated in value.
Conversely,
a significant portion of bitcoin’s demand is generated by investors seeking a
long-term store of value or speculators seeking to profit from the short- or
long-term holding of the asset. Price volatility undermines bitcoin’s role as a
medium of exchange, as retailers are much less likely to accept it as a form of
payment. Use of bitcoin as a medium of exchange and payment method may always be
low. A lack of expansion by bitcoin into retail and commercial markets, or a
contraction of such use, may result in damage to the public perception of
bitcoin and the utility of bitcoin as a payment system, as well as increased
volatility or a reduction in the value of bitcoin, all of which could adversely
impact the Fund’s Bitcoin Futures. There can be no assurance that such
acceptance will grow, or not decline, in the future.
While
bitcoin, the first widely used digital asset, and many other digital assets were
created and mainly serve as a form of money, digital assets can be used to do
more complicated things. Some digital assets were built specifically with more
complex use cases in mind. For example, the Ethereum network was designed
primarily to facilitate smart contracts, with the digital asset ether serving as
the transactional mechanism for many portions of such contracts. Smart contracts
are programs that automatically execute on a blockchain, allowing for a myriad
of interesting applications to be built. It is possible that market demand for
digital assets with use cases beyond serving as a form of money could over time
reduce the market demand for bitcoin, which would adversely impact the price of
bitcoin and, as a result, an investment in the Fund. Additionally, certain
digital assets use non-blockchain technologies, like Directed Acyclic Graph data
structures, to maintain consensus. To the extent market participants come to
prefer these other consensus mechanisms or digital assets that use
non-blockchain technology, the value of bitcoin, and therefore the Fund’s
Bitcoin Futures, may be adversely affected.
Bitcoin
Scaling Risk.
The Bitcoin network faces significant scaling challenges. Currently, the Bitcoin
network can process, on average, five to seven transactions per second. For
several years, participants in the Bitcoin ecosystem debated potential
approaches to increasing the average number of transactions per second that the
Bitcoin network could handle. As of August 2017, the Bitcoin network was
upgraded with a technical feature known as “segregated witness” that, among
other things, would potentially increase the transactions per second that can be
handled on-chain, although to-date it has not made a meaningful difference in
the number of transactions per second. More importantly, segregated witness also
enables so-called second layer solutions, such as the Lightning Network or
payment channels, that could potentially allow greater transaction
throughput.
An
increasing number of wallets and digital asset intermediaries, such as
exchanges, have begun supporting segregated witness and the Lightning Network,
or similar technology. However, the Lightning Network does not yet have material
adoption. Additionally, the Lightning Network has not yet seen significant use,
and there are open questions about Lightning Network services, such as its cost
and who will serve as intermediaries, among other questions.
As
the use of digital asset networks increases without a corresponding increase in
throughput of the networks, average fees and settlement times can increase
significantly. Bitcoin’s network has been, at times, at capacity, which has led
to increased transaction fees.
Increased
fees and decreased settlement speeds could preclude certain use cases for
bitcoin (e.g., micropayments), and could reduce demand for and the price of
bitcoin, which could adversely impact the Fund’s Bitcoin Futures.
There
is no guarantee that any of the mechanisms in place or being explored for
increasing the scale of settlement of transactions in bitcoin will be effective,
or how long these mechanisms will take to become effective, which could
adversely impact the Fund’s Bitcoin Futures.
Miner
Collusion Risk.
Miners, functioning in their transaction confirmation capacity, collect fees for
each transaction they confirm. Miners validate unconfirmed transactions by
adding the previously unconfirmed transactions to new blocks in the blockchain.
Miners are not forced to confirm any specific transaction, but they are
economically incentivized to confirm valid transactions as a means of collecting
fees. Miners have historically accepted relatively low transaction confirmation
fees. If miners collude in an anticompetitive manner to reject low transaction
fees, then bitcoin users could be forced to pay higher fees, thus reducing the
attractiveness of the Bitcoin network. Mining occurs globally, and it may be
difficult for authorities to apply antitrust regulations across multiple
jurisdictions. Any collusion among miners may adversely impact the
attractiveness of the Bitcoin network and may adversely impact the Fund’s
Bitcoin Futures.
Competition
from Other Digital Assets Risk.
Central banks have introduced digital forms of legal tender, or central bank
digital currencies (“CBDCs”). China’s CBDC project, known as Digital Currency
Electronic Payment, has reportedly been tested in a live pilot program conducted
in multiple cities in China. A recent study published by the Bank for
International Settlements estimated that at least 36 central banks have
published retail or wholesale CBDC work ranging from research to pilot projects.
Whether or not they incorporate blockchain or similar technology, CBDCs, as a
form of legal tender in the issuing jurisdiction, could have an advantage in
competing with, or replace, bitcoin and other digital assets as a medium of
exchange or store of value. Competing digital assets may adversely affect the
value of bitcoin and the Fund’s Bitcoin Futures. Promoters of other digital
assets claim that those digital assets have solved certain of the purported
drawbacks of the Bitcoin network, for example, allowing faster settlement times,
reducing mining fees, or reducing electricity usage in connection with mining.
If these digital assets are successful, such success could reduce demand for
bitcoin and adversely affect the value of bitcoin and the Fund’s Bitcoin
Futures.
Stablecoin
Risk.
While the Fund does not invest in stablecoins, it may nonetheless be exposed to
the risks that stablecoins pose for the bitcoin market through its exposure to
bitcoin. Stablecoins are digital assets designed to have a stable value over
time as compared to typically volatile digital assets, and are typically
marketed as being pegged to a fiat currency, such as the U.S. dollar. Although
the prices of stablecoins are intended to be stable, in many cases their prices
fluctuate, sometimes significantly. This volatility has in the past apparently
impacted the price of bitcoin. Stablecoins are a relatively new phenomenon, and
it is impossible to know all of the risks that they could pose to participants
in the bitcoin market. In addition, some have argued that some stablecoins,
particularly Tether, are improperly issued without sufficient backing in a way
that could cause artificial rather than genuine demand for bitcoin, raising its
price. The New York Attorney General filed suit against Tether’s operators and
its affiliates in 2019 in connection with some of these allegations. In February
2021, the New York Attorney General entered into a settlement agreement with
Tether requiring Tether to, among other things, pay a penalty and discontinue
trading activity with any New York person or entity. Volatility in stablecoins,
operational issues with stablecoins (for example, technical issues that prevent
settlement), issues relating to the quality and liquidity of reserves of
stablecoins (such as whether the stablecoin issuer is able to liquidate reserves
quickly enough to meet redemption requestions) or regulatory concerns about
stablecoin issuers or intermediaries, such as exchanges, that support
stablecoins, could impact individuals’ willingness to trade on trading venues
that rely on stablecoins and could impact the price of bitcoin, and in turn, the
Fund’s Bitcoin Futures.
Open-Source
Risk.
The Bitcoin network operates based on open-source protocol maintained by a group
of core developers. As the Bitcoin network protocol is not sold and its use does
not generate revenue for development teams, core developers may not be directly
compensated for maintaining and updating the Bitcoin network protocol.
Consequently, developers may lack a financial incentive to maintain or develop
the network, and the core developers may lack the resources to adequately
address emerging issues with the network. There can be no guarantee that
developer support will continue or be sufficient in the future. Additionally,
some development and developers are funded by companies whose interests may be
at odds with other participants in the network or with investors’ interests. To
the extent that material issues arise with the Bitcoin network protocol and the
core developers and open-source contributors are unable or unwilling to address
the issues adequately or in a timely manner, the Bitcoin network and the Fund’s
Bitcoin Futures may be adversely affected. Because any developer or computer
scientist may review, propose changes to or develop software for the Bitcoin
network, there may be fissures in the network resulting from disagreement as to
whether to implement a modification.
Bitcoin
Corporate Governance Risk.
Governance of decentralized networks, such as the Bitcoin network, is by
voluntary consensus and open competition. Bitcoin has no central decision-making
body or clear manner in which participants can come to an agreement other than
through overwhelming consensus. The lack of clarity on governance may adversely
affect bitcoin’s utility and ability to grow and face challenges, both of which
may require solutions and a directed effort to overcome problems, especially
long-term problems. Seemingly simple, technical issues have divided the bitcoin
community: such as, whether to increase the block size of the blockchain or to
implement other change to increase the scalability of bitcoin. Because the
resolution of scaling issues has taken several years, some have referred to it
as a “governance crisis” for decentralized assets. To the extent lack of clarity
in corporate governance of bitcoin leads to ineffective decision-making that
slows development and growth, the Fund’s Bitcoin Futures may be adversely
affected.
Insufficient
Mining Reward Risk.
Miners generate revenue from both newly created bitcoin, known as the “block
reward” and from fees taken upon verification of transactions. If the aggregate
revenue from transaction fees and the block reward is below a miner’s cost, the
miner may cease operations. If the award of new units of bitcoin for solving
blocks declines and/or the difficulty of solving blocks increases, and
transaction fees voluntarily paid by participants are not sufficiently high,
miners may not have an adequate incentive to continue mining and may cease their
mining operations. The current fixed reward for solving a new block on the
Bitcoin network is 6.25 bitcoin per block, which decreased from 12.5 bitcoin in
May 2020. It will further reduce to 3.125 bitcoin in 2024. This reduction may
result in a reduction in the aggregate hash rate of the Bitcoin network as the
incentive for miners decreases. Miners ceasing operations would reduce the
collective processing power on the Bitcoin network, which would adversely affect
the confirmation process for transactions (i.e., temporarily decreasing the
speed at which blocks are added to the blockchain until the next scheduled
adjustment in difficulty for block solutions) and make the Bitcoin network more
vulnerable to a malicious actor or botnet obtaining sufficient control to alter
the blockchain and hinder transactions. Any reduction in confidence in the
confirmation process or processing power of the Bitcoin network may adversely
affect the Fund’s Bitcoin Futures.
Excluded
Transactions Risk. To
the extent that any miners solve blocks that exclude some or all transactions
that have been transmitted to the Bitcoin network, such transactions will not be
recorded on the blockchain until another miner solves a block that incorporates
those transactions. Some in the bitcoin community have suspected that certain
technologies enhance speed and reduce electricity use of mining while reducing
the number of transactions that are included in mined blocks on the Bitcoin
network. To the extent that more blocks are mined without transactions,
transactions will settle more slowly and fees will increase. This could result
in a loss of confidence in the Bitcoin network, which could adversely impact an
investment in the Fund.
Blockchain
“Fork” Risk.
From time to time, the developers suggest changes to the bitcoin software. If a
sufficient number of users and miners elect not to adopt the changes, a new
digital asset, operating on the earlier version of the bitcoin software, may be
created. This is often referred to as a “fork.” In August 2017, bitcoin “forked”
into bitcoin and a new digital asset, bitcoin cash, as a result of a
several-year dispute over how to increase the rate of transactions that the
Bitcoin network can process. Since then, bitcoin has been forked numerous times
to launch new digital assets, such as bitcoin gold, bitcoin silver and bitcoin
diamond. Additional hard forks of the Bitcoin blockchain could impact demand for
bitcoin or other digital assets and could adversely impact the Fund’s Bitcoin
Futures.
Furthermore,
a hard fork can introduce new security risks. For example, when Ethereum and
Ethereum Classic split in July 2016, replay attacks, in which transactions from
one network were rebroadcast to nefarious effect on the other network, plagued
trading venues through at least October 2016. An exchange announced in July 2016
that it had lost 40,000 ether from the Ethereum Classic network, which was worth
about $100,000 at that time, as a result of replay attacks. Another possible
result of a hard fork is an inherent decrease in the level of security. After a
hard fork, it may become easier for an individual miner or mining pool’s hashing
power to exceed 50% of the processing power of the Bitcoin network, thereby
making the network more susceptible to attack.
A
fork could also be introduced by an unintentional, unanticipated software flaw
in the multiple versions of otherwise compatible software users run. Such a fork
could adversely affect bitcoin’s viability. It is possible, however, that a
substantial number of users and miners could adopt an incompatible version of
bitcoin while resisting community-led efforts to merge the two chains. This
would result in a permanent fork, as in the case of Ethereum and Ethereum
Classic, as detailed above.
A
fork in the Bitcoin network could adversely affect the market for Bitcoin
Futures and therefore an investment in the Fund.
Bitcoin
“Air Drop” Risk. A
substantial giveaway of bitcoin (sometimes referred to as an “air drop”) may
also result in significant and unexpected declines in the value of bitcoin,
Bitcoin Futures, and the Fund.
“51%
Attack” and Bitcoin “Whales” Risks.
The Bitcoin network is currently vulnerable to a “51% attack” where, if a mining
pool were to gain control of more than 50% of the “hash” rate, or the amount of
computing and process power being contributed to the network through mining, a
malicious actor would be able to gain full control of the network and the
ability to manipulate the blockchain, including interrupting the recording of
new blocks by preventing other miners from completing blocks. A significant
portion of bitcoin is held by a small number of holders sometimes referred to as
“whales.” These holders have the ability to manipulate the price of
bitcoin.
Bitcoin
Cybersecurity Risk.
If the source code or cryptography underlying bitcoin proves to be flawed or
ineffective, malicious actors may be able to steal bitcoin held by others, which
could negatively impact the demand for bitcoin and therefore adversely impact
the price of bitcoin. In the past, flaws in the source code for bitcoin have
been discovered, including those that resulted in the loss of users’ bitcoin.
Several errors and defects have been publicly found and corrected, including
those that disabled some functionality for users and exposed users’ personal
information. Discovery of flaws in or exploitations of the source code that
allow malicious actors to take or create money in contravention of known network
rules have occurred. In addition, the cryptography underlying bitcoin could
prove to be flawed or ineffective, or developments in mathematics and/or
technology, including advances in digital computing, algebraic geometry and
quantum computing, could result in such cryptography becoming ineffective. In
any of these circumstances, a malicious actor may be able to steal bitcoin held
by others, which could adversely affect the demand for bitcoin and therefore
adversely impact the price of bitcoin. Even if the affected digital asset is not
bitcoin, any reduction in confidence in the source code or cryptography
underlying digital assets generally could negatively impact the demand for
bitcoin and therefore adversely affect the Fund’s Bitcoin Futures.
Additionally,
if a malicious actor or botnet (i.e.,
a volunteer or hacked collection of computers controlled by networked software
coordinating the actions of the computers) obtains control of more than 50% of
the processing power of the Bitcoin network, such actor or botnet could alter
the blockchain and adversely affect the value of bitcoin, which would adversely
affect the Fund’s Bitcoin Futures. The Bitcoin network is subject to control by
entities that capture a significant amount of the network’s processing power or
a significant number of developers or intermediaries important for the operation
and maintenance of the Bitcoin network. The Bitcoin network is secured by proof
of work and depends on the strength of processing power of participants to
protect the network. If a malicious actor or botnet obtains a majority of the
processing power dedicated to mining on the Bitcoin network, it may be able to
alter the blockchain on which the network and most transactions rely by
constructing fraudulent blocks or preventing certain transactions from being
completed in a timely manner, or at all. The malicious actor or botnet could
control, exclude or modify the ordering of transactions. However, it could not
generate new bitcoin units or transactions using such control. The malicious
actor could “double-spend” its own bitcoin units (i.e.,
spend the same units in more than one transaction) and prevent the confirmation
of other users’ transactions for so long as it maintained control. To the extent
that such malicious actor or botnet did not yield its control of the processing
power on the Bitcoin network or the network community did not reject the
fraudulent blocks as malicious, reversing any changes made to the blockchain may
not be possible. Further, a malicious actor or botnet could create a flood of
transactions in order to slow down confirmations of transactions on the Bitcoin
network.
If
an exploitation or attack on the Bitcoin network occurs, it could result in a
loss of public confidence in bitcoin and a decline in the value of bitcoin and,
as a result, adversely impact the Fund’s Bitcoin Futures.
Internet
Disruption Risk.
Bitcoin is dependent upon the internet. A significant disruption in internet
connectivity could disrupt the Bitcoin network’s operations until the disruption
is resolved and have an adverse effect on the price of bitcoin. In particular,
some variants of digital assets have been subjected to a number of
denial-of-service attacks, which have led to temporary delays in block creation
and in the transfer of the digital assets. While in certain cases in response to
an attack, an additional hard fork has been introduced to increase the cost of
certain network functions, the relevant network has continued to be the subject
of additional attacks. Moreover, it is possible that if bitcoin increases in
value, it may become a bigger target for hackers and subject to more frequent
hacking and denial-of-service attacks.
Bitcoin
is also susceptible to border gateway protocol (“BGP”) hijacking. Such an attack
can be a very effective way for an attacker to intercept traffic en route to a
legitimate destination. BGP hijacking impacts the way different nodes and miners
are connected to one another to isolate portions of them from the remainder of
the network, which could lead to a risk of the network allowing double-spending
and other security issues. If BGP hijacking occurs on the Bitcoin network,
participants may lose faith in the security of bitcoin, which could adversely
affect bitcoin’s value and consequently the Fund’s Bitcoin Futures.
Any
future attacks that impact the ability to transfer bitcoin could have a material
adverse effect on the price of bitcoin and on the Fund’s Bitcoin
Futures.
Bitcoin
Regulatory Risk.
As bitcoin and digital assets have grown in both popularity and market size, the
U.S. Congress and a number of U.S. federal and state agencies have been
examining the operations of digital asset networks, digital asset users and the
digital asset exchange market. Many of these state and federal agencies have
brought enforcement actions and issued advisories and rules relating to digital
asset markets. Ongoing and future regulatory
actions
with respect to digital assets generally or any single digital asset in
particular may alter, perhaps to a materially adverse extent, the nature of an
investment in the bitcoin and/or the ability of the Fund to continue to
operate.
Future
Regulatory Action Risk. Current
and future legislation, SEC and CFTC rulemaking, and other regulatory
developments may impact the manner in which bitcoin is treated for
classification and clearing purposes. In particular, certain transactions in
bitcoin may be deemed to be commodity interests under the CEA or bitcoin may be
classified by the SEC as a “security” under U.S. federal securities laws. Public
statements by senior officials at the SEC, including a June 2018 speech by the
director of the SEC’s Division of Corporation Finance, indicate that such
officials do not believe that bitcoin is a security. Such statements are not
official policy statements by the SEC and reflect only the speaker’s views,
which are not binding on the SEC or any other agency or court. If bitcoin is
determined to be a “security” under federal or state securities laws by the SEC
or any other agency, or in a proceeding in a court of law or otherwise, it may
have material adverse consequences for bitcoin as a digital asset.
Bitcoin
Tax Treatment Risk. Current
Internal Revenue Service guidance indicates that convertible virtual currency,
defined as a digital representation of value that functions as a medium of
exchange, a unit of account, and/or a store of value that has an equivalent
value in real currency, or that acts as a substitute for real currency, should
be treated and taxed as property, and that transactions involving the payment of
convertible virtual currency for goods and services should be treated as barter
transactions. While this treatment allows for the possibility of capital gains
treatment, it creates a potential tax reporting requirement in any circumstance
where the ownership of convertible virtual currency passes from one person to
another, usually by means of convertible virtual currency transactions
(including off-blockchain transactions), which could discourage the use of
bitcoin as a medium of exchange, especially for a holder of bitcoin that has
appreciated in value.
A
number of states have issued their own guidance regarding the tax treatment of
certain digital assets for state income or sales tax purposes. The New York
State Department of Taxation and Finance (“NYSDTF”), for example, has issued
guidance regarding the application of state tax law to virtual currency. The
agency determined that New York State would follow IRS guidance with respect to
the treatment of virtual currency for state income tax purposes. Furthermore,
the NYSDTF concluded that virtual currency is a form of “intangible property,”
meaning that transactions using virtual currency to purchase goods or services
may be subject to state sales tax under barter transaction treatment. Where a
state adopts a different treatment, such treatment may have negative
consequences for investors in digital assets, including the potential imposition
of a greater tax burden on investors in digital assets or the potential
imposition of greater costs on the acquisition and disposition of digital
assets. In either case, such different tax treatment may potentially have a
negative effect on the price of bitcoin and on the Fund’s Bitcoin
Futures.
Intellectual
Property Risk.
Third parties may assert intellectual property claims relating to the holding
and transfer of bitcoin and its source code. Regardless of the merit of any
intellectual property or other legal action, any threatened action that reduces
confidence in long-term viability or the ability of end-users to hold and
transfer bitcoin may adversely affect the Fund’s Bitcoin Futures. Additionally,
a meritorious intellectual property claim could prevent end-users from
accessing, holding, or transferring bitcoin. As a result, an intellectual
property claim against large bitcoin participants could adversely affect the
Fund’s Bitcoin Futures.
Bitcoin
Trading Venues Operational Risk.
Venues through which bitcoin trades are relatively new. Bitcoin trading venues
are generally subject to different regulatory requirements than venues for
trading more traditional assets, and may be subject to limited or no regulation,
especially outside the U.S. Furthermore, many such trading venues, including
exchanges and over-the-counter trading venues, do not provide the public with
significant information regarding their ownership structure, management teams,
corporate practices or regulatory compliance. Bitcoin trading venues may impose
daily, weekly, monthly or customer-specific transaction or distribution limits
or suspend withdrawals entirely, rendering the exchange of bitcoin for fiat
currency difficult or impossible. Participation in bitcoin trading on some
venues requires users to take on credit risk by transferring digital assets from
a personal account to a third party’s account, which could discourage trading on
those venues.
Over
the past several years, a number of bitcoin exchanges have been closed due to
fraud, failure or security breaches. In many of these instances, the customers
of such exchanges were not compensated or made whole for the partial or complete
losses of their account balances in such exchanges. For example, in November
2022, digital asset exchange FTX and its subsidiaries, including its affiliated
hedge fund Alameda Research LLC, filed for Chapter 11 bankruptcy after FTX was
unable to meet customer withdrawal requests. The price of bitcoin dropped
approximately 17% on the news of FTX’s withdrawal freeze and subsequent
bankruptcy, demonstrating its impact across the digital asset industry. While
smaller trading venues are less likely to have the infrastructure and
capitalization that make larger trading venues more stable, larger trading
venues are more likely to be appealing targets for hackers and “malware” (i.e.,
software used or programmed by attackers to disrupt computer operation, gather
sensitive information or gain access to private computer systems). Bitcoin
trading venues that are regulated typically must comply with minimum net worth,
cybersecurity, and anti-money laundering requirements, but are not typically
required to protect customers to the same extent that regulated securities
exchanges or futures exchanges are required to do so.
Furthermore,
many bitcoin trading venues lack certain safeguards put in place by exchanges
for more traditional assets to enhance the stability of trading on the exchanges
and prevent “flash crashes,” such as limit-down circuit breakers. As a result,
the prices of bitcoin on trading venues may be subject to larger and/or more
frequent sudden declines than assets traded on more traditional
exchanges.
Operational
problems or failures by bitcoin trading venues and fluctuations in bitcoin
prices may reduce confidence in these venues or in bitcoin generally, which
could adversely affect the price of bitcoin and therefore adversely affect the
Fund’s Bitcoin Futures.
Political
or Economic Crisis Risk.
As an alternative to fiat currencies that are backed by central governments,
bitcoin is subject to supply and demand forces based upon the desirability of an
alternative, decentralized means of buying and selling goods and services, and
it is unclear how such supply and demand will be impacted by geopolitical
events. Nevertheless, political or economic crises may motivate large-scale
acquisitions or sales of bitcoin, either globally or locally. Large-scale sales
of bitcoin would result in a reduction in its price and adversely affect the
Fund’s Bitcoin Futures.
Large
Scale Bitcoin Sale Risk.
There
is no registry showing which individuals or entities own bitcoin or the quantity
of bitcoin that is owned by any particular person or entity. It is possible, and
in fact, reasonably likely, that a small group of early bitcoin adopters hold a
significant proportion of the bitcoin that has been created to date. There are
no regulations in place that would prevent a large holder of bitcoin from
selling bitcoin it holds. To the extent such large holders of bitcoin engage in
large-scale sales or distributions, either on nonmarket terms or in the ordinary
course, it could result in a reduction in the price of bitcoin and adversely
affect an investment in the Fund.
Environmental
Risk.
Bitcoin mining currently requires computing hardware that consumes large amounts
of electricity. By way of electrical power generation, many bitcoin miners rely
on fossil fuels to power their operations. Public perception of the impact of
bitcoin mining on climate change may reduce demand for bitcoin and increase the
likelihood of regulation that limits bitcoin mining or restricts energy usage by
bitcoin miners. Such events could have a negative impact on the price of
bitcoin, Bitcoin Futures, and the performance of the Fund.
Bitcoin
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. The market for Bitcoin Futures may be less developed, and
potentially less liquid and more volatile, than more established futures
markets. While the Bitcoin Futures market has grown substantially since Bitcoin
Futures commenced trading, there can be no assurance that this growth will
continue. Bitcoin Futures are subject to collateral requirements and daily
limits that may limit the Fund’s ability to achieve the Target Exposure. Margin
requirements for Bitcoin Futures traded on the CME or other futures exchanges
currently are, and may continue to be substantially higher than margin
requirements for many other types of futures contracts. 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 bitcoin (the “spot” price) and the price of the cash-settled
futures contracts. A negative futures basis exists when cash-settled Bitcoin
Futures generally trade at a premium to the current market value of bitcoin. If
a negative futures basis exists, the Fund’s investments in Bitcoin Futures will
generally underperform a direct investment in bitcoin, and, therefore, it may be
more difficult for the Fund to maintain the Target Exposure. If the Fund’s
ability to achieve the Target Exposure is disrupted for any reason including,
for example, limited liquidity in the Bitcoin Futures market, a disruption to
the Bitcoin Futures market, or as a result of margin requirements or position
limits imposed by the Fund’s FCMs, the CME, another futures exchange or the
CFTC, the Fund may not be able to achieve its investment objective and may
experience significant losses. If the Fund is unable for any reason to achieve
the Target Exposure, the Adviser, in its sole discretion, may invest the Fund’s
assets in Cash and Fixed Income Investments. To the extent the Fund invests in
Cash and Fixed Income Investments, the Fund’s performance should be expected to
differ from the performance of Bitcoin Futures and its returns may be lower than
expected.
This
risk may be adversely affected by “negative roll yields” in “contango” markets.
The
Fund will “roll” out of one Bitcoin Futures as the expiration date approaches
and into another Bitcoin Futures 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
bitcoin. 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 Bitcoin Futures prices tend to be greater than
the spot price of bitcoin. 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. Bitcoin Futures have
historically experienced extended periods of contango. Extended periods 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.
Bitcoin
Futures Derivatives Risk.
The term “derivatives” covers a broad range of financial instruments, including
swap agreements, options, warrants, futures contracts, currency forwards and
structured notes, whose values are derived, at least in part, from the value of
one or more indicators, such as a security, commodity, asset, index or reference
rate. The Fund currently intends to invest only in Bitcoin Futures traded on
commodity exchanges registered with the CFTC, such as the CME.
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. Bitcoin Futures 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 at the
Fund level and may increase the Fund’s current and accumulated earnings and
profits, which will result in a greater portion of the Fund’s distributions
being treated as dividends, 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.
Under
Rule 18f-4 (the “derivatives rule”), funds need to trade derivatives and other
transactions that create future fund payment or delivery obligations subject to
a value-at-risk (“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 Securities and Exchange Commission also
provided guidance in connection with the derivatives rule regarding use of
securities lending collateral that may limit a fund's securities lending
activities. In addition, under the derivatives rule, the 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 Investment Company Act of 1940, 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”). The 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,
the 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 Investment Company Act of 1940, 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 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 with which it transacts Bitcoin Futures, which may heighten such risk.
Investment
Capacity Risk.
If the Fund’s ability to achieve the Target Exposure is disrupted for any reason
including, for example, limited liquidity in the Bitcoin Futures market, a
disruption to the Bitcoin Futures market, or as a result of margin requirements
or position limits imposed by the Fund’s FCMs, the CME, another futures exchange
or the CFTC, the Fund may not be able to
achieve
its investment objective and may experience significant losses. If the Fund is
unable for any reason to achieve the Target Exposure, the Adviser, in its sole
discretion, may invest the Fund’s assets in Cash and Fixed Income Investments.
To the extent that the Fund invests in Cash and Fixed Income Investments, the
Fund’s performance should be expected to differ from the performance of Bitcoin
Futures and its returns may be lower than expected.
Target
Exposure and Rebalancing Risk.
Although the Fund seeks to achieve and maintain the Target Exposure to bitcoin,
it is possible in certain circumstances that the Fund may not succeed in
achieving or maintaining its target exposure, possibly maintaining substantially
lower exposure for extended periods of time.
Borrowing
and Leverage Risk. The
Fund seeks to achieve and maintain the Target Exposure by using leverage
inherent in Bitcoin Futures and may also obtain leverage in the form of
borrowings, which would typically be in the form of loans from banks, and may be
on a secured or unsecured basis and at fixed or variable rates of interest.
Therefore, the Fund is subject to leverage risk. Leverage can have the effect of
magnifying the Fund’s exposure to changes in the value of its assets and may
also result in increased volatility in the net asset value. This means the Fund
will have the potential for greater gains, as well as the potential for greater
losses, than if the Fund owned its assets on an unleveraged basis. To manage the
risk associated with leveraging, under current SEC guidance the Fund may
segregate liquid assets, or otherwise “cover” its derivatives position in a
manner consistent with the Investment Company Act of 1940 and the rules and SEC
interpretations thereunder. The Fund may modify its asset segregation policies
at any time to comply with any changes in the SEC’s positions regarding asset
segregation.
Indirect
Investment Risk.
There are several factors, such as deviations between the price of Bitcoin
Futures and the price of bitcoin and the potential for “negative roll yields” in
“contango” markets, that may cause the returns of the Fund to differ
substantially from the returns from holding an amount of bitcoin
directly.
Bitcoin
Futures Credit Risk. The
Fund invests in cash-settled Bitcoin Futures traded on commodity exchanges
registered with the CFTC, such as the CME. Credit risk is the risk that the
issuer or guarantor of a debt security or a counterparty to exchange-traded
Bitcoin 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 that the issuers of the securities will have
their credit ratings downgraded or will default, potentially reducing the value
of the securities.
Interest Rate Risk.
Debt securities and preferred 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. Debt securities 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. Changing interest rates may have unpredictable effects
on markets, may result in heightened market volatility and may detract from Fund
performance to the extent the Fund is exposed to such interest rates and/or
volatility. It is difficult to predict the magnitude, timing or direction of
interest rate changes and the impact these changes will have on the markets in
which the Fund invests.
Illiquidity
Risk. Illiquidity
risk is the risk that the investments held by the Fund may be difficult or
impossible to sell at the time that the Fund would like without significantly
changing the market value of the investment. The Fund may invest at the time of
purchase up to 15% of its net assets in illiquid securities. The market for
Bitcoin Futures is still developing and may experience periods of significant
illiquidity. During such times it may be difficult or impossible for the Fund to
buy or sell a position at the desired price. Market disruptions or volatility
can also make it difficult to transact a position at a reasonable price and
sufficient size. Illiquid markets may cause losses, which could be significant.
The large size of the positions which the Fund and other similar funds may
acquire may increase the risk of illiquidity by making positions more difficult
to liquidate or by increasing the losses incurred while trying to do
so.
Risk
of Investing in Other Funds.
The Fund may invest in shares of other funds, including ETFs. As a result, the
Fund will indirectly be exposed to the risks of an investment in the underlying
funds. Shares of other funds have many of the same risks as direct investments
in common stocks or bonds. In addition, the market value of such funds’ shares
is expected to rise and fall as the value of the underlying securities rise and
fall. If the shares of such funds are traded on a secondary market, the market
value of such funds’ shares may differ from the net asset value of the
particular fund. As a shareholder in a fund, the Fund will bear its ratable
share of the underlying fund’s expenses. At the same time, the Fund will
continue to pay its own investment management fees and other expenses. As a
result, the Fund and its shareholders will be absorbing duplicate levels of fees
with respect to investments in other funds, including ETFs. The expenses of such
underlying funds will not, however, be counted towards the Fund’s expense cap.
The Fund is subject to the conditions set forth in provisions of the Investment
Company Act of 1940 that limit the amount that the Fund and its affiliates, in
the aggregate, can invest in the outstanding voting securities of any one
investment company.
Active
Management Risk.
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. Investment decisions
made by the Adviser in seeking to achieve the Fund’s investment objective may
cause a decline in the value of the investments held by the Fund and, in turn,
cause the Fund’s shares to lose value or underperform other funds with similar
investment objectives.
Market
Risk for Fund’s Investments. The
value of certain of the Fund’s investments, including Bitcoin Futures, is
subject to the risks associated with investing in the securities market,
including general economic conditions, sudden and unpredictable drops in value,
exchange trading suspensions and closures and public health risks. These risks
may be magnified if certain social, political, economic and other conditions and
events (such as natural disasters, epidemics and pandemics, terrorism, conflicts
and social unrest) adversely interrupt the global economy; in these and other
circumstances, such events or developments might affect companies world-wide.
Overall securities values could decline generally or could underperform other
investments. An investment in the Fund may lose money.
The
“COVID-19” strain of coronavirus has resulted in instances of market closures
and dislocations, extreme volatility, liquidity constraints and increased
trading costs. Efforts to contain its spread have resulted in travel
restrictions, disruptions of healthcare systems, business operations and supply
chains, layoffs, lower consumer demand, and defaults, among other significant
economic impacts that have disrupted global economic activity across many
industries. Such economic impacts may exacerbate other pre-existing political,
social and economic risks locally or globally. The ongoing effects of COVID-19
are unpredictable and may result in significant and prolonged effects on the
Fund’s performance.
Non-Diversified
Risk.
The Fund is classified as a “non-diversified” fund under the Investment Company
Act of 1940. The Fund is subject to the risk that it will be more volatile than
a diversified fund because the Fund may invest a relatively high percentage of
its assets in a smaller number of issuers or may invest a larger proportion of
its assets in a single issuer. Moreover, the gains and losses on a single
investment may have a greater impact on the Fund’s net asset value and may make
the Fund more volatile than more diversified funds. The Fund may be particularly
vulnerable to this risk if it is comprised of a limited number of
investments.
Operational
Risk.
The Fund is exposed to operational risk arising from a number of factors,
including 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.
High
Portfolio Turnover Risk.
The Fund’s portfolio turnover and frequent trading of Bitcoin Futures may result
in higher transaction costs than if the Fund traded less frequently. 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 Bitcoin Futures and on reinvestment of the Fund’s assets. High
portfolio turnover may also result in higher taxes at the Fund level and may
increase the Fund’s current and accumulated earnings and profits, which will
result in a greater portion of Fund’s distributions being treated as
dividends.
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 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 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.
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.
Corporation
Tax Risk. Unlike
traditional funds that are structured as regulated investment companies for U.S.
federal income tax purposes, the Fund will be taxable as a regular corporation
for U.S. federal income tax purposes and, as a result, the Fund will be subject
to corporate income tax (currently at a rate of 21%) to the extent the Fund
recognizes taxable income, and will also be subject to state and local income
taxes.
In
calculating the Fund’s daily net asset value, the Fund will, among other things,
account for its current taxes and deferred tax liability and/or asset balances.
The Fund will accrue a deferred income tax liability balance, at the effective
statutory U.S. federal income tax rate (currently at a rate of 21%) plus an
estimated state and local income tax rate, for its future tax liability
associated with the capital appreciation of its investments and the
distributions received by the Fund (if any) and for any net operating gains. Any
deferred tax liability balance will reduce the Fund’s net asset value. The Fund
may also accrue a deferred tax asset balance,
which
reflects an estimate of the Fund’s future tax benefit associated with net
operating losses and unrealized losses. Any deferred tax asset balance will
increase the Fund’s net asset value. To the extent the Fund has a deferred tax
asset balance, consideration is given as to whether or not a valuation
allowance, which would offset the value of some or all of the deferred tax asset
balance, is required. The daily estimate of the Fund’s current taxes and
deferred tax liability and/or asset balances used to calculate the Fund’s net
asset value could vary significantly from the Fund’s actual tax liability or
benefit, and, as a result, the determination of the Fund’s actual tax liability
or benefit may have a material impact on the Fund’s net asset value. From time
to time, the Fund may modify its estimates or assumptions regarding its current
taxes and deferred tax liability and/or asset balances as new information
becomes available, which modifications in estimates or assumptions may have a
material impact on the Fund’s net asset value or trading price. Shareholders,
including APs, who sell their shares or who redeem their shares at a net asset
value that is based on estimates of the Fund’s current taxes and deferred tax
liability and/or asset balances may benefit at the expense of remaining
shareholders (or remaining shareholders may benefit at the expense of redeeming
shareholders) if the estimates are later revised or ultimately differ from the
Fund’s actual tax liability and/or asset balances.
The
Fund’s taxable dividends paid will be qualified dividend income eligible for
taxation at long term capital gains rates in most circumstances (subject to
certain holding period requirements). The Fund will not pay capital gains
dividends. Bitcoin futures are expected to be marked to market for tax purposes
as of each year end. The total realized gain or loss from such Bitcoin Futures
required to be marked-to-market will be taxed to Fund as 60% long-term and 40%
short-term capital gain or loss.
The
rules dealing with U.S. federal income taxation and the rates themselves are
constantly under review in the legislative process and by the Internal Revenue
Service and the U.S. Treasury Department. Changes in tax laws or regulations or
future interpretations of such laws or regulations could adversely affect the
Fund and/or the Fund’s shareholders.
Cash
Transactions and Taxation Risk. Because
the Fund currently intends to effect redemptions for cash, rather than for
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. Taxable gains may result in higher taxes at the Fund level and may
increase the Fund’s current and accumulated earnings and profits, which will
result in a greater portion of Fund’s distributions, if any, being treated as
dividends. 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. 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.
Authorized
Participant Concentration Risk.
The Fund may have a limited number of Authorized Participants, none of which are
obligated to engage in creation and/or redemption transactions. To the extent
that those Authorized Participants exit the business, or do not process creation
and/or redemption orders, there may be a significantly diminished trading market
for Shares or Shares may trade like closed-end funds at a discount (or premium)
to net asset value and possibly face trading halts and/or de-listing. This can
be reflected as a spread between the bid-ask prices for the Fund. The Authorized
Participant concentration risk may be heightened in cases where Authorized
Participants have limited or diminished access to the capital required to post
collateral.
No
Guarantee of Active Trading Market Risk. There
can be no assurance that an active trading market for the Shares will develop or
be maintained, as applicable. 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 Authorized
Participants 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 net asset value.
Van
Eck Securities Corporation, the distributor of the Shares, 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 Authorized Participants creating and redeeming directly
with the Fund.
Decisions
by market makers or Authorized Participants 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 net asset value and also in greater than normal intraday
bid/ask spreads for Fund Shares.
Trading
Issues Risk.
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 relevant 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 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 net asset value or to the intraday value of the Fund’s holdings.
The net asset value of the Shares will fluctuate with changes in the market
value of the Fund’s securities holdings. The market price of Shares may
fluctuate, in some cases materially, in accordance with changes in net asset
value and the intraday value of the Fund’s holdings, as well as supply and
demand on the Exchange. Shares may trade below, at or above their net asset
value. 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 net asset value 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 net asset value or sells Shares at a
time when the market price is at a discount to the net asset value, 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 net asset value. In addition, because certain of the Fund’s underlying
securities may trade on exchanges that are closed when 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 net asset value 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’ net asset value 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.
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 net
asset value, and the discount is likely to be greatest during significant market
volatility.
U.S.
Government Securities Risk.
Different U.S. government securities are subject to different levels of credit
risk depending on the nature of the particular government support for that
security. The market value of U.S. government securities may fluctuate and are
subject to investment risks, and the value of U.S. government securities may be
adversely affected by changes in interest rates. In addition, it is possible
that the issuers of some U.S. government securities will not be able to timely
meet their payment obligations in the future, and there is a risk of default.
Debt
Securities Risk. Debt
securities may include bonds and other forms of debentures or obligations. When
an issuer sells debt securities, it sells them for a certain price, and for a
certain term. Over the term of the security, the issuer promises to pay the
buyer a certain rate of interest, then to repay the principal at maturity. Debt
securities are also bought and sold in the “secondary market”—that is, they are
traded by people other than their original issuers.
Debt
securities are subject to credit risk and interest rate risk. Credit risk refers
to the possibility that the issuer of a debt security will be unable to make
interest payments or repay principal when it becomes due. Various factors could
affect the issuer’s ability to make timely interest or principal payments,
including changes in the issuer’s financial condition or in general economic
conditions. Interest rate risk refers to fluctuations in the value of a debt
security resulting from changes in the general level of interest rates. When the
general level of interest rates rises, the value of debt securities will tend to
fall, and if interest rates fall, the values of debt securities will tend to
rise. Debt securities with longer durations have higher risk and volatility.
Changes in government policies, such as raising the federal funds rate and/or
further tapering “quantitative easing” measures, may increase interest rates
which are currently at or near historic lows. These policy changes, along with
changing market conditions, may lead to periods of heightened volatility in the
debt securities market, reduced liquidity for certain Fund investments and an
increase in Fund redemptions. Interest rate changes and their impact on the Fund
and its share price can be sudden and unpredictable. Changes in the value of a
debt security usually will not affect the amount of income the Fund receives
from it but may affect the value of the Fund’s shares.
Certain
financial instruments in which the Fund may invest may pay interest based on, or
otherwise have payments tied to LIBOR, Euro Interbank Offered Rate and other
similar types of reference rates (each, a “Reference Rate”). Due to the
uncertainty regarding the future utilization of LIBOR and certain other
Reference Rates, and the nature of any replacement rate, the potential effect of
a transition away from LIBOR and certain other Reference Rates could, among
other negative consequences, adversely impact the pricing, liquidity, value of,
return on and trading for a broad array of financial products, including any
Reference Rate-linked securities, loans and derivatives in which the Fund may
invest; require extensive negotiations of and/or amendments to agreements and
other documentation governing Reference Rate-linked investments products; lead
to disputes, litigation or other
actions
with counterparties or portfolio companies regarding the interpretation and
enforceability of “fallback” provisions that provide for an alternative
reference rate in the event of Reference Rate unavailability; or cause the Fund
to incur additional costs in relation to any of the above factors.
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 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. 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 Internal Revenue Service 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 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. 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 to
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 net asset value, 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. 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.
If
the Fund is unable to achieve the Target Exposure because it is approaching or
has exceeded position limits or because of liquidity or other constraints, the
Fund may invest in equity securities of “bitcoin-related companies.” For these
purposes, bitcoin-related companies are companies listed on a U.S. stock
exchange that the Adviser believes provide returns that generally correspond, or
are closely related, to the performance of bitcoin or Bitcoin Futures. For
example, the Fund may invest in U.S. listed companies engaged in digital asset
mining or offering digital asset trading platforms.
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. 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 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.
INVESTMENTS
IN OTHER EQUITY AND FIXED INCOME SECURITIES
The
investments of the Fund may include, but not be limited to, common stocks,
preferred stocks (either convertible or non-convertible), rights, warrants,
direct equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises, convertible debt instruments and special
classes of shares available only to foreigners in markets that restrict
ownership of certain shares or classes to their own nationals or
residents.
INVESTING
DEFENSIVELY
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.
BORROWING
MONEY
The
Fund may borrow money from a bank up to a limit of one-third of the market value
of its assets. The Fund is expected to enter into a credit facility to borrow
money for temporary, emergency or other purposes, including the funding of
shareholder redemption requests, trade settlements and as necessary to
distribute to shareholders any income required to maintain the Fund’s status as
a regulated investment company. To the extent that the Fund borrows money, it
may be leveraged. 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 investments in bitcoin-related companies, U.S. Treasuries and
other U.S. government obligations to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, the Fund receives cash, U.S.
government securities and stand-by letters of credit not issued by the Fund’s
bank lending agent equal to at least 102% of the value of the portfolio
securities being loaned. This collateral is marked-to-market on a daily basis.
Although the Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower fail to return the borrowed securities (e.g., the Fund would have to
buy replacement securities and the loaned securities may have appreciated beyond
the value of the collateral held by the Fund) or become insolvent. The Fund may
pay fees to the party arranging the loan of securities. In addition, the Fund
will bear the risk that it may lose money because the borrower of the loaned
securities fails to return the securities in a timely manner or at all. The Fund
could also lose money in the event of a decline in the value of any cash
collateral or in the value of investments made with the cash collateral. These
events could trigger adverse tax consequences for the Fund. Substitute payments
for dividends received by the Fund for securities loaned out by the Fund will
not be considered qualified dividend income.
ADDITIONAL
NON-PRINCIPAL RISKS
Bitcoin-Related
Company Risk. If
the Fund is unable to achieve the Target Exposure because it is approaching or
has exceeded position limits or because of liquidity or other constraints, the
Fund may invest in equity securities of “bitcoin-related companies.” There can
be no assurance that the returns of bitcoin-related companies will correspond,
or be closely-related, to the performance of bitcoin or Bitcoin Futures.
Bitcoin-related companies face rapid changes in technology, intense competition
including
the development and acceptance of competing platforms or technologies, loss or
impairment of intellectual property rights, cyclical economic patterns, shifting
consumer preferences, evolving industry standards, adverse effects of changes to
a network’s or software’s protocols, a rapidly changing regulatory environment,
and dependency on certain key personnel (including highly skilled financial
services professionals and software engineers). Bitcoin-related companies may be
susceptible to operational and information security risks including those
associated with hardware or software failures, interruptions, or delays in
service by third party vendors, and security breaches. Certain bitcoin-related
companies may be subject to the risks associated with investing directly in
digital assets, including cryptocurrencies and crypto tokens.
Equity Securities Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the markets in which the issuers
of securities held by the Fund participate, or factors relating to specific
issuers in which the Fund invests. Equity securities are subordinated to
preferred securities and debt in a company’s capital structure with respect to
priority to a share of corporate income, and therefore will be subject to
greater dividend risk than preferred securities or debt instruments. In
addition, while broad market measures of equity securities have historically
generated higher average returns than fixed income securities, equity securities
have generally also experienced significantly more volatility in those returns.
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 Authorized Participant,
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.
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 net asset value; 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 December 31, 2022, VEAC managed
approximately $81.93 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 annual report for the period
ending December 31, 2022.
Pursuant
to the Investment Management Agreement, the Adviser is responsible for all
expenses of the Fund, including the costs of transfer agency, custody, fund
administration, legal, audit and other services, except for the fee payment
under the Investment Management Agreement, acquired fund fees and expenses,
interest expense, offering costs, trading expenses, taxes and extraordinary
expenses. For its services to the Fund, the Fund has agreed to pay the Adviser
an annual unitary management fee equal to 0.65% of its average daily net assets.
Offering costs excluded from the annual unitary management fee are: (a) legal
fees pertaining to the Fund’s Shares offered for sale, (b) SEC and state
registration fees; and (c) initial fees paid for Shares of the Fund to be listed
on an exchange. Notwithstanding the foregoing, the Adviser has agreed to pay
and/or reimburse the Fund for all such offering costs and trading expenses that
are net account or similar fees charged by FCMs until at least May 1,
2024.
Manager
of Managers Structure.
The Adviser and the Trust may rely on an exemptive order (the “Order”) from the
SEC that permits the Adviser to enter into investment sub-advisory agreements
with unaffiliated sub-advisers without obtaining shareholder approval. The
Adviser, subject to the review and approval of the Board of Trustees, may select
one or more sub-advisers for the Fund and supervise, monitor and evaluate the
performance of each sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board of
Trustees, to replace sub-advisers and amend investment sub-advisory agreements,
including applicable fee arrangements, without shareholder approval whenever the
Adviser and the Board of Trustees believe such action will benefit the Fund and
its shareholders. The Adviser thus would have the responsibility (subject to the
oversight of the Board of Trustees) to recommend the hiring and replacement of
sub-advisers as well as the discretion to terminate any sub-adviser and
reallocate the Fund’s assets for management among any other sub-adviser(s) and
itself. This means that the Adviser would be able to reduce the sub-advisory
fees and retain a larger portion of the management fee, or increase the
sub-advisory fees and retain a smaller portion of the management fee. The
Adviser would compensate each sub-adviser out of its management
fee.
Administrator,
Custodian and Transfer Agent.
Van Eck Associates Corporation is the administrator for the Fund (the
“Administrator”), and State Street Bank and Trust Company is the custodian of
the Fund’s assets and provides transfer agency and fund accounting services to
the Fund. The Administrator is responsible for certain clerical, recordkeeping
and/or bookkeeping services which are required to be provided pursuant to the
Investment Management Agreement.
Distributor.
Van Eck Securities Corporation is the distributor of the Shares (the
“Distributor”). The Distributor will not distribute Shares in less than a
specified number of Shares, each called a “Creation Unit,” and does not maintain
a secondary market in the Shares. The Shares are traded in the secondary
market.
The
portfolio manager who is currently responsible for the day-to-day management of
the Fund’s portfolio is Gregory F. Krenzer, CFA. Mr. Krenzer has been with VEAC
since 1994 and has over 25 years of experience in the international and
financial markets.
See
the Fund’s SAI for additional information about the portfolio manager’s
compensation, other accounts managed by the portfolio manager and his 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. 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 Board of Trustees has designated the Adviser as the valuation designee
pursuant to Rule 2a-5 under the Investment Company Act of 1940 to perform fair
valuation for such security or asset in accordance with the Trust’s and
Adviser’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
As
a shareholder of the Fund, you are entitled to your share of the Fund’s
distributions.
The
Fund typically earns interest from debt securities. These amounts, net of
expenses, may be passed along to Fund shareholders as dividends. The Fund
realizes capital gains or losses whenever it sells securities. Distributions by
the Fund of cash or property in respect of the Shares will be treated as
dividends for U.S. federal income tax purposes to the extent paid from the
Fund’s current or accumulated earnings and profits (as determined under U.S.
federal income tax principles). Subject to certain holding period and other
requirements, any such dividend will be eligible (i) to be treated as “qualified
dividend income” taxable at long term capital gain rates (subject to certain
holding period requirements) in the case of shareholders taxed as individuals
and (ii) for the dividends received deduction (subject to certain holding period
requirements) in the case of corporate shareholders. If the Fund’s distributions
exceed the Fund’s current and accumulated earnings and profits, such excess will
be treated first as a tax-free return of capital to the extent of the
shareholder’s tax basis in the Shares (thus reducing a shareholder’s adjusted
tax basis in the Shares), and thereafter as capital gain assuming the Shares are
held as a capital asset. There can be no assurance as to what
portion
of any future distribution will consist of return of capital (as opposed to
taxable dividend income). Upon the sale of Shares, a shareholder generally will
recognize capital gain or loss equal to the difference between the amount
realized on the sale and the shareholder’s adjusted tax basis in the Shares
sold. See the section of this prospectus entitled “Shareholder Information - Tax
Information” for more information.
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, or (ii)
you sell Shares.
The
following is a summary of the material U.S. federal income tax considerations
generally applicable to shareholders that acquire and hold Shares as capital
assets (generally, for investment). The discussion is based upon the Internal
Revenue Code of 1986, as amended (the “Code”), Treasury regulations, judicial
authorities, published positions of the IRS and other applicable authorities,
all as in effect on the date hereof and all of which are subject to change or
differing interpretations (possibly with retroactive effect). This summary does
not address all of the potential U.S. federal income tax consequences that may
be applicable to the Fund or to all categories of investors, some of which may
be subject to special tax rules. No ruling has been or will be sought from the
IRS regarding any matter discussed herein. No assurance can be given that the
IRS would not assert, or that a court would not sustain, a position contrary to
any of the tax aspects set forth below. This summary of U.S. federal income tax
consequences is for general information only.
Prospective investors must consult their own tax advisors as to the U.S. federal
income tax consequences of acquiring, holding and disposing of Shares, as well
as the effects of state, local and non-U.S. tax laws.
For
purposes of this summary, the term “U.S. Shareholder” means a beneficial owner
of Shares that, for U.S. federal income tax purposes, is one of the
following:
•an
individual who is a citizen or resident of the United States;
•a
corporation or other entity taxable as a corporation created in or organized
under the laws of the United States, any state thereof or the District of
Columbia;
•an
estate the income of which is subject to U.S. federal income taxation regardless
of its source; or
•a
trust (i) if a U.S. court is able to exercise primary supervision over the
administration of such trust and one or more U.S. persons have the authority to
control all substantial decisions of such trust or (ii) that has a valid
election in effect under applicable U.S. Treasury regulations to be treated as a
U.S. person.
A
“Non-U.S. Shareholder” is a beneficial owner of Shares that is neither a U.S.
Shareholder nor a partnership for U.S. federal income tax purposes. If a
partnership (including any other entity treated as a partnership for U.S.
federal income tax purposes) holds Shares, the U.S. federal income tax treatment
of a partner in such partnership generally will depend upon the status of the
partner and the activities of the partnership. Partners of partnerships that
hold Shares should consult their tax advisors.
The
Fund
The
Fund is treated as a regular corporation, or “C” corporation, for U.S. federal
income tax purposes. Accordingly, the Fund generally is subject to U.S. federal
income tax on its taxable income at the rates applicable to corporations
(currently 21%). In addition, as a regular corporation, the Fund is subject to
state and local income tax. The extent to which the Fund is required to pay U.S.
corporate income tax could materially reduce the Fund’s cash available to make
distributions on the Shares.
The
Fund will recognize gain or loss on the sale, exchange or other taxable
disposition of its assets equal to the difference between the amount realized by
the Fund on the sale, exchange or other taxable disposition and the Fund’s
adjusted tax basis in such asset. Any such gain will be subject to U.S. federal
income tax at regular corporate rates, regardless of how long the Fund has held
such asset. The Fund will also recognize gain on redemptions in kind of
appreciated positions held by the Fund. To the extent that the Fund has a net
capital loss in any tax year, the net capital loss can be carried back three
years and forward five years to reduce the Fund’s current taxes payable, subject
to certain limitations. The use of ordinary net operating loss carryforwards is
subject to limitation under the Code. In the event a capital loss carryover or
net operating loss carryforward cannot be utilized in the carryover periods, the
Fund’s federal income tax liability may be higher than expected which will
result in less cash available to distribute to shareholders.
A
federal excise tax on stock repurchases may apply to the Fund with respect to
net share redemptions occurring on or after January 1, 2023. The excise tax is
one-percent (1%) of the fair market value of Fund share redemptions less the
fair market value of Fund share issuances (in excess of $1 million of fair
market value) annually on a taxable year basis.
The
Fund’s transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) and certain other investments, to the extent permitted, will be
subject to special provisions of the Code (including provisions relating to
“hedging transactions” and “straddles”) that, among other things, may affect the
character of gains and losses recognized by the Fund (i.e.,
may
affect whether gains or losses are ordinary versus capital or short-term versus
long-term), accelerate recognition of income to the Fund and defer Fund losses.
These provisions also (i) will require the Fund to mark-to-market certain types
of the positions in its portfolio (i.e., treat them as if they were closed out
at the end of each year) including Bitcoin Futures purchased on U.S. exchanges
and (ii) may cause the Fund to recognize income without receiving the
corresponding amount of cash.
U.S.
Shareholders
Distributions.
Distributions by the Fund of cash or property in respect of the Shares, whether
taken in cash or reinvested in Shares, will be treated as dividends for U.S.
federal income tax purposes to the extent paid from the Fund’s current or
accumulated earnings and profits (as determined under U.S. federal income tax
principles) and will be includible in gross income by a U.S. Shareholder upon
receipt. Any such dividend will be eligible for the dividends received deduction
if received by an otherwise qualifying corporate U.S. Shareholder that meets the
holding period and other requirements for the dividends received deduction.
Dividends paid by the Fund to certain non-corporate U.S. Shareholders (including
individuals) are eligible for U.S. federal income taxation at the rates
generally applicable to long-term capital gains for individuals, provided that
the U.S. Shareholder receiving the dividend satisfies applicable holding period
and other requirements.
If
the amount of the Fund distribution exceeds the Fund’s current and accumulated
earnings and profits, such excess will be treated first as a tax-free return of
capital to the extent of the U.S. Shareholder’s tax basis in the Shares
(reducing that basis accordingly), and thereafter as capital gain. Any such
capital gain will be long-term capital gain if such U.S. Shareholder has held
the applicable Shares for more than one year. A distribution will be wholly or
partially taxable to a shareholder if the Fund has current earnings and profits
(as determined for U.S. federal income tax purposes) in the taxable year of the
distribution, even if the Fund has an overall deficit in the Fund’s accumulated
earnings and profits and/or net operating loss or capital loss carryforwards
that reduce or eliminate corporate income taxes in that taxable
year.
Sales
of Shares.
Upon the sale, exchange or other taxable disposition of Shares, a U.S.
Shareholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the sale, exchange or other taxable
disposition and the U.S. Shareholder’s adjusted tax basis in the Shares. Any
such capital gain or loss will be a long-term capital gain or loss if the U.S.
Shareholder has held the Shares for more than one year at the time of
disposition. Long-term capital gains of certain non-corporate U.S. Shareholders
(including individuals) are currently subject to reduced U.S. federal income tax
rates. The deductibility of capital losses is subject to limitations under the
Code.
A
U.S. Shareholder’s adjusted tax basis in its Shares may be less than the price
paid for the Shares as a result of distributions by the Fund in excess of the
Fund’s earnings and profits (i.e.,
returns of capital).
Information
Reporting and Backup Withholding Requirements.
In general, distributions on the Shares, and payments of the proceeds from a
sale, exchange or other disposition of the Shares paid to a U.S. Shareholder are
subject to information reporting and may be subject to backup withholding unless
the U.S. Shareholder (i) is a corporation or other exempt recipient or (ii)
provides an accurate taxpayer identification number and certifies that it is not
subject to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld under the backup withholding rules from a payment to a U.S.
Shareholder will be refunded or credited against the U.S. Shareholder’s U.S.
federal income tax liability, if any, provided that the required information is
furnished to the IRS.
Each
shareholder will receive, if appropriate, various written notices after the
close of the Fund’s taxable year describing the amount and the U.S. federal
income tax status of distributions that were paid (or that are treated as having
been paid) by the Fund to the shareholder, and the amount of any U.S. federal
taxes withheld, during the preceding taxable year.
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.
The following discussion is a summary of certain United States federal income
tax consequences that will apply to Non-U.S. Shareholders. Special rules may
apply to certain Non-U.S. Shareholders, such as “controlled foreign
corporations,” “passive foreign investment companies” and certain expatriates,
among others, that are subject to special treatment under the Code. Such
Non-U.S. Shareholders should consult their own tax advisors to determine the
United States federal, state, local and other tax consequences that may be
relevant to them.
Distribution.
Distributions
paid by the Fund to Non-U.S. Shareholders that are treated as dividends are
generally subject to withholding tax at a 30% rate, unless the tax is reduced or
eliminated by an applicable income tax treaty or the distributions are
effectively connected with a U.S. trade or business of the shareholder. A
Non-U.S. Shareholder who wishes to claim the benefits of an applicable income
tax treaty for dividends will be required (a) to complete Form W-8BEN or Form
W-8BEN-E (or other applicable form) and certify under penalty of perjury that
such holder is not a United States person as defined under the Code and is
eligible for treaty benefits or (b) if Shares are held through certain foreign
intermediaries, to satisfy the relevant certification requirements of applicable
United States Treasury regulations. A Non-U.S. Shareholder eligible for a
reduced rate of United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate
claim for refund with the IRS.
If
the amount of a distribution to a Non-U.S. Shareholder exceeds the Fund’s
current and accumulated earnings and profits, such excess will be treated first
as a tax-free return of capital to the extent of the Non-U.S. Shareholder’s tax
basis in the Shares, and then as capital gain. Capital gain recognized by a
Non-U.S. Shareholder as a consequence of a distribution by the Fund in excess of
its current and accumulated earnings and profits will generally not be subject
to United States federal income tax, except as described below under the caption
“Sales of Shares.”
Sales
of Shares.
Any capital gain realized by a Non-U.S. Shareholder upon a sale of Shares of the
Fund will generally not be subject to U.S. federal income or withholding tax
unless (i) the gain is effectively connected with the shareholder’s trade or
business in the United States, or in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met or (ii) the Fund is or has been a U.S. real property holding corporation, as
defined below, at any time within the five-year period preceding the date of
disposition of the Fund’s Shares or, if shorter, within the period during which
the Non-U.S. Shareholder has held the Shares. Generally, a corporation is a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests, as defined in the Code and applicable regulations, equals or
exceeds 50% of the aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business. The
Fund may be, or may prior to a Non-U.S. Shareholder’s disposition of Shares
become, a U.S. real property holding corporation.
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
financial highlights table which follows is intended to help you understand the
Fund’s financial performance for the past five years or as indicated. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the fiscal year ended December 31, 2022 has
been audited by PricewaterhouseCoopers LLP, the Trust's independent registered
public accounting firm, whose report, along with the Fund’s financial
statements, is included in the Fund’s Annual Report, which is available upon
request. The information for periods prior to the fiscal year ended December 31,
2022 was audited by another independent registered public accounting
firm.
For
a share outstanding throughout each period:
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Bitcoin
Strategy ETF |
|
|
|
Year
Ended
December
31, 2022 |
|
Period
Ended
December
31,
2021(a) |
|
|
| Net
asset value, beginning of period |
$ |
45.18 |
|
|
$ |
63.91 |
|
|
|
| Net
investment income (loss) (b) |
0.12 |
|
|
(0.04) |
|
|
|
| Net
realized and unrealized loss on investments |
(28.47) |
|
|
(18.69) |
|
|
|
| Total
from investment operations |
(28.35) |
|
|
(18.73) |
|
|
|
| Net
asset value, end of period |
$ |
16.83 |
|
|
$ |
45.18 |
|
|
|
| Total
return (c) |
(62.75) |
|
% |
(29.31) |
|
%(d) |
|
| Ratios
to average net assets |
|
|
|
|
|
| Gross
expenses |
0.73 |
|
% |
0.65 |
|
%(e) |
|
| Net
expenses |
0.66 |
|
% |
0.65 |
|
%(e) |
|
| Net
expenses excluding interest and taxes |
0.65 |
|
% |
0.65 |
|
%(e) |
|
|
|
|
|
|
|
| Net
investment income (loss) |
0.49 |
|
% |
(0.62) |
|
%(e) |
|
| Supplemental
data |
|
|
|
|
|
| Net
assets, end of period (in millions) |
$ |
21 |
|
|
$ |
16 |
|
|
|
| Portfolio
turnover rate (f) |
— |
|
% |
— |
|
%(d) |
|
(a) For
the period November 16, 2021 (commencement of operations) through December 31,
2021.
(b) Calculated
based upon average shares outstanding
(c) Returns
include adjustments in accordance with U.S. Generally Accepted Accounting
Principles. Net asset values and returns for financial reporting purposes may
differ from those for shareholder transactions.
(d) Not
Annualized
(e) Annualized
(f) Portfolio
turnover rate excludes in-kind transactions.
|
|
|
| PREMIUM/DISCOUNT
INFORMATION |
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 Investment Company Act of 1940. 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 Investment Company
Act of 1940 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 Investment
Company Act of 1940 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:
publicinfo@sec.gov.
The
SAI for the Fund, which has been filed with the SEC, provides more information
about the Fund. The SAI for the Fund is incorporated herein by reference and is
legally part of this Prospectus. Additional information about the Fund’s
investments is available in the Fund’s annual and semi-annual reports to
shareholders. In the Fund’s annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund’s performance during its last fiscal year. The SAI and the Fund’s annual
and semi-annual reports may be obtained without charge by writing to the Fund at
Van Eck Securities Corporation, the Fund’s Distributor, at 666 Third Avenue, 9th
Floor, New York, New York 10017 or by calling the Distributor at the following
number: Investor Information: 800.826.2333.
Shareholder
inquiries may be directed to the Fund in writing to 666 Third Avenue, 9th Floor,
New York, New York 10017 or by calling 800.826.2333.
The
Fund’s SAI is available at www.vaneck.com.
(Investment
Company Act file no. 811-10325)
[THIS
PAGE INTENTIONALLY LEFT BLANK]
For
more detailed information about the Fund, see the SAI dated May 1, 2023, 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: publicinfo@sec.gov.
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Transfer
Agent: State Street Bank and Trust Company
SEC Registration Number:
333-123257
1940 Act Registration Number: 811-10325 |
800.826.2333
vaneck.com |
|
XBTFPRO |
