Market Vectors Files For India Small-CAP ETF

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October 26, 2009 3:09pm ETF BASIC NEWS

comingsooonMarket Vectors filed a preliminary prospectus for an India Small-Cap ETF with an investment objective to replicate as closely as possible, before fees and expenses, the price and yield performance of the


Market Vectors India Small-Cap Index (the “India Small-Cap Index”). 

Principal Investment Strategies

The Fund will normally invest at least 80% of its total assets in securities of small-capitalization Indian companies. The Fund currently intends to achieve its investment objective by investing substantially all of its assets in the Subsidiary. The Subsidiary in turn will normally invest at least 80% of its total assets in securities that comprise the Fund’s benchmark index and depository receipts based on the securities in the Fund’s benchmark index. The Fund’s benchmark index is currently comprised of small-capitalization companies selected by the index provider on the basis on their relative market capitalizations in India. This 80% investment policy is non-fundamental and requires 60 days’ prior written notice to shareholders before it can be changed. The Adviser serves as investment adviser to both the Fund and the Subsidiary and, through this investment structure, the Fund obtains benefits under the tax treaty between Mauritius and India. Except where otherwise indicated, the term “Fund,” as used throughout this Prospectus, refers to the Fund and/or the Subsidiary, as applicable.

Indexing Investment Approach. The Fund is not managed according to traditional methods of “active” investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, the Fund, utilizing a “passive” or indexing investment approach, attempts to approximate the investment performance of the India Small-Cap Index by investing in a portfolio of securities that generally replicates the India Small-Cap Index.

The Adviser anticipates that, generally, the Fund will hold all of the securities that comprise the India Small-Cap Index in proportion to their weightings in the India Small-Cap Index. However, under various circumstances, it may not be possible or practicable to purchase all of those securities in these weightings. In these circumstances, the Fund may purchase a sample of securities in the India Small-Cap Index. There also may be instances in which the Adviser may choose to overweight a security in the India Small-Cap Index, purchase securities not in the India Small-Cap Index that the Adviser believes are appropriate to substitute for certain securities in the India Small-Cap Index or utilize various combinations of other available investment techniques in seeking to replicate as closely as possible, before fees and expenses, the price and yield performance of the India Small-Cap Index. The Fund may sell securities that are represented in the India Small-Cap Index in anticipation of their removal from the India Small-Cap Index or purchase securities not represented in the India Small-Cap Index in anticipation of their addition to the India Small-Cap Index. The Adviser expects that, over time, the correlation between the Fund’s performance and that of the India Small-Cap Index before fees and expenses will be 95% or better. A figure of 100% would indicate perfect correlation.

The Fund may also utilize derivative instruments, such as swaps, options, warrants, futures contracts, currency forwards (and convertible securities and structured notes), and participation notes to seek performance that corresponds to the India Small-Cap Index. For these purposes, depositary receipts, derivative instruments and participation notes will count towards the 80% investment policy discussed above. A lesser percentage may be so invested to the extent that the

Adviser needs additional flexibility to comply with the requirements of the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and other regulatory requirements.

Sales as a result of India Small-Cap Index changes could result in the realization of short or long-term capital gains by the Fund thereby resulting in a tax liability for shareholders subject to U.S. federal income tax. See “Shareholder Information—Tax Matters.”

Market Capitalization. Constituent stocks for the India Small-Cap Index must have a market capitalization of greater than $150 million on a rebalancing date to be eligible for the India Small-Cap Index. Stocks whose market capitalization falls below $75 million as of any rebalancing date will no longer be eligible for the India Small-Cap Index. Stocks must have a three-month average daily trading volume of at least $1 million to be eligible for the India Small-Cap Index and issuers of such stocks must have traded at least 250,000 shares each month over the last six months.

As of October 20, 2009, the India Small-Cap Index included companies with a market capitalization range of between approximately $150 million and $1.2 billion with an average market capitalization of $500 million across the 225 securities in the India Small-Cap Index at that date. The market capitalization range of companies in the India Small-Cap Index may change at each quarterly rebalance date (and in the case of market movements).

Borrowing Money. The Fund may borrow money from a bank up to a limit of one-third of the market value of its assets for temporary or emergency purposes. To the extent that the Fund borrows money, it will be leveraged; at such times, the Fund will appreciate or depreciate in value more rapidly than its benchmark, the India Small-Cap Index.

Fundamental and Non-Fundamental Policies. The Fund’s investment objective and each of the other investment policies are non-fundamental policies that may be changed by the Board of Trustees without shareholder approval, except as noted in the SAI under the section entitled “Investment Policies and Restrictions—Investment Restrictions.”

For the full prospectus click: HERE

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