As filed with the Securities and Exchange Commission on May 1, 1997.
Registration No. 33-64191
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No.
Post-Effective Amendment No. 2
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 4
(Check appropriate box or boxes)
PEREGRINE FUNDS
(Exact name of registrant as specified in charter)
99 Park Avenue
New York, New York 10016
(Address of principal executive offices) (zip code)
Registrant's telephone number including area code:
(800) 910-5255
Thaddeus Leszczynski, Esq.
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
(Name and address of agent for service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing /X/ on May 1, 1997 pursuant
pursuant to paragraph (b) to paragraph (b)
/ / 60 days after filing pursuant to / / on (date) pursuant
paragraph (a)(1) to paragraph (a)(1)
/ / 75 days after filing pursuant to / / on (date) pursuant to paragraph
paragraph (a)(2) (a)(2) of rule 485
If appropriate, check the following box:
/ / This Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, the
Registrant has previously elected to register an indefinite number of shares of
beneficial interest. The Registrant filed a Rule 24f-2 Notice for the fiscal
year ended December 31, 1996 on February 27, 1997.
<PAGE>
Cross-Reference Sheet
Pursuant to Rule 495(a) of Regulation S-K
under the Securities Act of 1933
Form N-1A
<TABLE>
<CAPTION>
FORM N-1A ITEM NO. CAPTION OR LOCATION IN PROSPECTUS
PART A
<C> <C>
1. Cover Page Cover page
2. Synopsis Expense Table; Key Features
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Key Features; Fund's Investment Objective, Policies and Risks
5. Management of the Fund Management and Administration
5A. Management's Discussion of Fund Performance Not Applicable
6. Capital Stock and Other Securities Key Features; Dividends and Distributions;
Taxes; Additional Information
7. Purchase of Securities Being Offered Purchase and Sales of Shares; Tax-Sheltered
Retirement Plans; Additional Information
8. Redemption or Repurchase Purchase and Sale of Shares
9. Pending Legal Proceedings Not Applicable
CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL
FORM N-1A ITEM NO. INFORMATION
PART B
10. Cover Page Cover page
11. Table of Contents Table of Contents
12. General Information and History General Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL
FORM N-1A ITEM NO. INFORMATION
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PART B
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<C> <C>
13. Investment Objectives and Policies Overview of Investment Objective and Policies
of the Fund; Risk Factors; Investment
Restrictions
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders of Not Applicable
Securities
16. Investment Advisory and Other Services Investment Advisory Services; The Distributor;
Additional Information
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing of Securities Valuation of Shares; Tax-Sheltered Retirement
Being Offered Plans; Investment Programs; Redemptions in
Kind
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
PEREGRINE
---------
ASIA
PACIFIC
GROWTH
FUND
PROSPECTUS
A PEREGRINE FUND
MAY 1, 1997
PEREGRINE ASSET MANAGEMENT
(HONG KONG) LIMITED
<PAGE>
PEREGRINE FUNDS/ASIA PACIFIC GROWTH FUND
PROSPECTUS
May 1, 1997
- --------------------------------------------------------------------------------
99 Park Avenue, New York, New York 10016
Shareholder Services: (800) 910-5525
- --------------------------------------------------------------------------------
The Asia Pacific Growth Fund (the "Fund") seeks long-term capital appreciation
by investing in the securities of companies that are expected to benefit from
the development and growth of the economies of Asia and the Pacific Basin. The
Fund is a series of Peregrine Funds (the "Trust"), an open-end management
investment company. Peregrine Asset Management (Hong Kong) Limited ("Peregrine")
serves as investment adviser to the Fund.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, a bank. The shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other governmental
agency, and are subject to investment risk, including possible loss of
principal.
This Prospectus sets forth concisely information about the Fund that you should
know before investing. It should be read and retained for future reference.
A Statement of Additional Information ("SAI") dated May 1, 1997, about the Fund
has been filed with the United States Securities and Exchange Commission ("SEC")
and is incorporated herein by reference. For a free copy of the SAI, write to
the above address or call the telephone number listed above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<PAGE>
TABLE OF CONTENTS Page
- ----------------- ----
Expense Table............................................................. 3
Financial Highlights...................................................... 4
Key Features.............................................................. 5
Fund's Investment Objective, Policies and Risks........................... 7
Purchase and Sale of Shares............................................... 14
Valuation................................................................. 18
Dividends and Distributions............................................... 18
Management and Administration............................................. 20
Performance Information................................................... 21
Tax-Sheltered Retirement Plans............................................ 22
Taxes..................................................................... 22
Additional Information.................................................... 23
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<PAGE>
EXPENSE TABLE
- -------------
The following table is intended to assist you in understanding the various
direct and indirect fees and expenses you will bear when you invest in the
Fund. All of the Annual Fund Operating Expenses are paid out of Fund assets. The
Fund's adviser, Peregrine, may, from time to time, waive fees and/or reimburse
certain operating expenses of the Fund.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge
Imposed on Purchases.................................. 0%
ANNUAL FUND OPERATING EXPENSES: (as a percent of average net assets)
Management Fees............................................... 1.00%
Other Expenses:
Portfolio Administration Fees ..................... .36%
Transfer Agent and Custodian Fees.................. .45%
Miscellaneous Expenses............................. .71%* 1.52%
----- ------
TOTAL FUND OPERATING EXPENSES 2.52%+
------
+ Peregrine has voluntarily agreed to waive Management Fees and/or assume
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) to limit Total Fund Operating Expenses to an annual
rate of 2.00% of the Fund's average daily net assets until December 31,
1997.
<TABLE>
<CAPTION>
EXAMPLE
-------
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would bear the following
expenses on a $1,000 investment
assuming (1) 5% annual return
and (2) redemption at the end of
each time period:................... $26 $78 $134 $286
</TABLE>
The above example is meant to illustrate the effect of expenses on return and
should not be considered to represent past or future returns or expenses, which
may be greater or less than those shown. For more information see "Management
and Administration."
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<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following selected per share information for the period ended December 31,
1996 has been audited by Price Waterhouse L.L.P., independent accountants for
the Fund. Their report is contained in the Fund's 1996 Annual Report, which is
incorporated by reference into the Fund's Statement of Additional Information.
This information should be read in conjunction with the financial statements and
related notes that appear in the Fund's Annual Report. Further information about
the Fund's performance is also contained in the Annual Report. Both the Annual
Report and the Statement of Additional Information are available at no cost by
calling (800) 910-5525.
FOR THE PERIOD FROM
JANUARY 2, 1996(a)
THROUGH
DECEMBER 31, 1996
------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income From Investment Operations:
Net Investment Income .................................. 0.08
Net Realized and Unrealized Gain on Investments ........ 1.52
-------
Total From Investment Operations ..................... 1.60(b)
LESS: DISTRIBUTIONS FROM:
Net Investment Income ................................... (0.08)
Net Realized Gain on Investments ........................ (0.21)
-------
TOTAL DISTRIBUTIONS .................................. (0.29)
-------
NET ASSET VALUE, END OF PERIOD ............................ $11.31
-------
TOTAL RETURN ......................................... 16.00%(b)
-------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period ('000) .......................... $23,127
Ratio of Gross Expenses to Average Net Assets ............. 2.52%
Ratio of Net Expenses to Average Net Assets ............... 2.00%(c)(d)
Ratio of Net Investment Income to Average Net Assets ...... 0.82%(c)
Portfolio Turnover Rate ................................... 61%
Average Commission Rate Paid .............................. $0.0062(e)
- -------------------------------
(a) Commencement of operations.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period and a redemption on the last day
of the period. Total return calculated for the period ended December 31,
1996 was not annualized.
(c) Annualized.
(d) Reflects expense waiver.
(e) For the year ended December 31, 1996, the average commission rate paid on
trades in which commissions were charged was 0.62% of the trade amount.
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<PAGE>
KEY FEATURES
- ------------
WHO SHOULD CONSIDER INVESTING IN THE FUND
Investors who are interested in investing in the economies of Asia and the
Pacific Basin and are willing to assume the risks associated with these
investments should consider this Fund. Investing in these markets can provide
investors diversification as well as a way to participate in the growth
opportunities available in Asia and the Pacific Basin. See "Purchase and Sale
of Shares."
The value of the Fund's investments will vary from day to day, and generally
reflect market, economic and political conditions, interest rates and company,
political or economic news. In the short-term, stock prices can fluctuate
dramatically in response to these factors. Over time, however, stocks have shown
greater growth potential than other types of securities, such as bonds. Bonds
fluctuate in response to interest rates and the credit rating of the issuer,
generally declining in value when interest rates rise or the credit rating of
the issuer declines. See "Fund's Investment Objective, Policies and Risks."
RISK PROFILE
The value of the Fund's shares can be expected to fluctuate more and to be more
volatile than funds investing only in securities of large U.S. companies or more
developed countries, or bond funds. The Fund is not meant to be a complete or
balanced investment program and is intended for those investors who can assume
greater risk with respect to a portion of their investment portfolio.
The Fund's risks include share price and currency fluctuation, confiscatory
taxation, expropriation, nationalization, inefficient securities markets and
settlement practices and lack of developed legal systems. See "Fund's Investment
Objective, Policies and Risks."
INVESTMENT ADVISER
Peregrine serves as investment adviser of the Fund and handles the other
business affairs of the Fund under supervision of the Board of Trustees.
Peregrine has been registered with the SEC as an investment adviser since April
17, 1995. Peregrine was incorporated in Hong Kong in 1991 and is an indirect
subsidiary of Peregrine Investments Holdings Limited ("Peregrine Holdings").
Peregrine Holdings and its affiliates comprise one of the largest independent
Asian based investment banks located outside Japan. Established in 1988,
Peregrine Holdings and its affiliates have offices in fifteen Asian countries as
well as in Europe and the United States. Peregrine acts as sub-investment
adviser to two other investment companies registered with the SEC. Peregrine and
its affiliates act as adviser to nine offshore funds. As of March 31, 1997,
assets under management and advice of Peregrine were approximately $700 million.
See "Management and Administration."
5
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<PAGE>
Van Eck Securities Corporation ("Distributor"), a Delaware corporation, is a
wholly-owned subsidiary of Van Eck Associates Corporation, and serves as the
distributor of the Fund's shares.
ORGANIZATION OF THE FUND
The Fund is a separate series of Peregrine Funds (the "Trust"), and is an
open-end investment company. The Trust was organized as a Delaware business
trust on December 1, 1995. The Fund is a diversified fund as that term is used
in the Investment Company Act of 1940, as amended (the "1940 Act"). With respect
to 75% of a diversified fund's assets, no more than 5% of its assets may be
invested in the securities of any one issuer and not more than 10% of the
outstanding voting securities of an issuer may be owned.
6
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<PAGE>
FUND'S INVESTMENT OBJECTIVE,
- ----------------------------
POLICIES AND RISKS
- ------------------
OBJECTIVE
The Fund's investment objective is to achieve long-term capital appreciation by
investing in the securities of companies that are expected to benefit from the
development and growth of the markets or economies in Asia and the Pacific
Basin.
The Fund considers the "Asia Pacific" region to include Australia, Bangladesh,
Brunei, Cambodia, Hong Kong, India, Indonesia, Republic of Korea, Laos,
Malaysia, Myanmar (formerly, Burma), Nepal, New Zealand, Pakistan, Papua New
Guinea, the People's Republic of China ("China"), the Philippines, Singapore,
Sri Lanka, Taiwan, Thailand and Vietnam. Other countries may be included in the
future. The Fund will normally invest in at least four countries in the Asia
Pacific region. The Fund does not expect to invest in Japan.
7
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<PAGE>
FUND'S BENEFITS AND RISKS
BENEFITS
- --------
Peregrine believes the Asia Pacific region has potential for dramatic economic
growth. The Fund offers investors who believe in the region's strong long-term
growth potential, the ability to concentrate an investment in Asia Pacific
securities. The Fund's performance is closely tied to economic and political
conditions within the Asia Pacific region. The Fund may not be suitable for all
investors and is intended for investors willing to assume greater risk and as a
complement to a broader investment plan. The Fund is not intended to be a
complete investment program.
Peregrine determines whether an issuer or its principal business are located in
the Asia Pacific region by looking at such factors as its country of
organization, the primary trading market for its securities, and the location of
its assets, personnel, sales and earnings. When allocating the Fund's
investments among countries, Peregrine considers such factors as the potential
for economic growth, political developments, expected levels of inflation,
governmental policies and the outlook for currency relationships. There can be
no assurance that the Fund will achieve its investment objective.
EMERGING MARKET RISKS
- ---------------------
Investors should expect volatility in the value of the Fund's shares as emerging
markets are characterized by wide fluctuations in securities' prices. Countries
in the Asia Pacific region are in various stages of economic development. Each
has its own risks. Some are considered emerging markets, which generally have
low-to-middle-income economies. Except for Australia and New Zealand, the other
Asia Pacific countries are considered emerging markets. Most countries in this
region are heavily dependent on international trade. Some have prosperous
economies, but are sensitive to world commodity prices. Others are especially
vulnerable to recessions and economic factors in other countries. Some countries
in the region have experienced rapid growth recently, and many suffer from
obsolete financial systems, economic problems, or less developed legal systems.
Many are experiencing political and social uncertainty. In addition, the return
of Hong Kong to Chinese control may affect the entire region known as "Greater
China". The securities markets in the Asia Pacific region may be subject to
emergencies caused by governmental actions and political and economic factors.
In the event an emergency exists, the Fund may, with the approval of the SEC,
suspend your right to redeem your Fund shares during the emergency.
INTERNATIONAL INVESTING RISKS
- -----------------------------
The Fund's policy of investing in non-U.S. markets and, in particular, emerging
markets, involves increased or additional economic and political risks from
8
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<PAGE>
those mentioned above as compared to investing in the U.S. or other developed
markets. The Fund's share price will be affected by events and factors in the
various world markets.
These foreign markets have generally less stringent investor protection rules
and enforcement, disclosure standards and governmental regulation. In addition,
some foreign companies are not subject to the same financial accounting,
auditing and reporting standards that are required of U.S. companies. Compared
to U.S. markets, foreign markets are less developed and less liquid, have fewer
issuers, may be more subject to influence by large investors and more
susceptible to manipulation. Some have unstable governments. In addition to the
political and economic factors that can affect the value of foreign securities,
a governmental issuer may be unwilling to repay principal and interest when due
and may require that the conditions for payment be renegotiated. Investing in
countries with emerging economies or securities markets is subject to the
additional risks associated with political and economic structures undergoing
rapid change, economies heavily dependent upon international trade and extremely
sensitive to commodity prices and economic factors in other countries, the lack
of developed securities markets and effective regulations, less developed legal
and economic sectors, restrictions on foreign ownership of securities and
governments that in the past have failed to recognize private ownership, have
nationalized or expropriated private property, imposed currency exchange
controls, levied confiscatory taxes and limited the removal of funds or other
assets.
OTHER RISKS
- -----------
When you sell your Fund shares they may be worth more or less than you paid for
them. Their value will depend upon the value of the Fund's investments, which
varies in response to many factors. Stock values fluctuate in response to the
activities of individual companies, and general market, economic and political
conditions. The securities of smaller, less well-known companies may be
particularly volatile. Bond values fluctuate based on changes in interest rates
and in the credit quality of the issuer. In addition, all of the Fund's
investments may be denominated in foreign currencies which fluctuate in response
to global economic, market and political factors. Peregrine will select
investments for the Fund that it believes offer the greatest opportunity for
long-term capital appreciation. There can be no assurance that Peregrine will be
successful.
In addition, because the Fund may invest in a wide variety of investments and
use various investment techniques, the Fund may be riskier and more volatile
than funds whose investments and investment techniques are less varied. Some of
the more common risks associated with the investments and investment techniques
available to the Fund are discussed below in "Fund's Investments and
Techniques." See also "Risk Factors" in the SAI.
9
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<PAGE>
INVESTMENT POLICIES
- -------------------
In pursuing its goals, the Fund will focus on equity securities but it may also
invest in other types of financial instruments, including debt securities of any
quality. The Fund may invest in the securities of any issuer, including
companies and other business organizations, as well as governments and
governmental and quasi-governmental agencies. The Fund, however, will tend to
focus on the equity securities of both large and small companies in the Asia
Pacific region. Except in unusual circumstances, Peregrine will normally invest
at least 65%, and at times nearly all, of the Fund's total assets in securities
of issuers expected to benefit from the development and growth of the economies
of the Asia Pacific region. The Fund will normally invest in at least four
countries in the Asia Pacific region.
Peregrine may use different investment techniques to attempt to achieve the
Fund's investment objective and to hedge the Fund's risks, but there is no
guarantee that these strategies will work as Peregrine intends. Also, as a
mutual fund, the Fund seeks to spread investment risk by diversifying its
holdings among many companies and industries. Of course, diversification does
not eliminate risk and when you sell your Fund shares, they may be worth more or
less than you paid for them.
The Fund may, in seeking to avoid foreign taxes or comply with foreign
investment restrictions, invest in certain countries in the Asia Pacific region
through wholly-owned entities organized in a foreign country.
The Fund's investments will normally be denominated in a foreign currency. In an
attempt to protect against uncertainties in the markets or in anticipation of
the need for cash to meet redemption requests or settlement of portfolio
transactions, the Fund may, for temporary defensive purposes, invest in
short-term debt securities and money market instruments in excess of 35% of the
Fund's total assets. There is no limit on the amount of foreign currencies or
short-term instruments denominated in a foreign currency the Fund may hold.
The Fund may invest in a variety of instruments that are or may become available
in the market, and Peregrine may use a number of investment techniques and
strategies to achieve the Fund's objective. There are a number of risks and
restrictions associated with these instrument types and investment practices
that should be considered by investors. The investment types and investment
practices that will be used most often are listed below under "Fund's
Investments and Techniques." (A complete listing of the Fund's policies and
limitations and more detailed information about the Fund's investments and
strategies is contained in the Fund's SAI.) Policies and limitations are
considered at the time of purchase; the sale of instruments is not required in
the event of a subsequent change in circumstances.
Peregrine may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the Fund
10
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<PAGE>
achieve its goals. Current holdings and recent investment strategies are
described in the Fund's financial reports which are sent to shareholders twice a
year. For a free SAI or annual or semi-annual report, call (800) 910-5525 or
write to the Fund at the address on page 1.
FUND'S INVESTMENTS AND TECHNIQUES
EQUITY SECURITIES
- -----------------
Equity securities may include common stocks, preferred stocks, direct equity
interests in unincorporated entities or enterprises, convertible securities and
warrants. Common stocks, the most familiar type of equity security, represent an
equity (ownership) interest in a corporation. Although equity securities have a
history of long-term growth in value, their prices fluctuate based on changes in
a company's financial condition and on overall market, economic and political
conditions. Smaller companies are especially sensitive to these factors. The
Fund also considers equity swaps, indexed securities and similar instruments
whose values are tied to one or more equity securities to be equity securities.
DIVERSIFICATION
- ---------------
Diversification of the Fund's investment portfolio can reduce the risks of
investing. This may include limiting the amount of money invested in any one
issuer or, on a broader scale, in any one industry.
Restrictions: With respect to 75% of total assets, the Fund may not invest
more than 5% of its total assets in securities (including debt securities)
of any one issuer. The Fund may not invest more than 25% of its total
assets in any one industry. These limitations do not apply to U.S.
Government securities.
FOREIGN AND EMERGING MARKETS SECURITIES
- ---------------------------------------
The Fund will normally invest a significant portion of its assets in securities
of issuers located outside the U.S. and traded outside the U.S. These securities
will usually be non-U.S. dollar denominated, but also may be dollar denominated,
such as American Depository Receipts ("ADRs"). Changes in the value of foreign
currencies can significantly affect the value of the Fund's investments and
share price. Peregrine may use a variety of techniques to either increase or
decrease the Fund's exposure to any currency.
DEBT SECURITIES
- ---------------
Bond and other debt instruments are used by issuers to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest and
must repay the amount borrowed at maturity. Some debt securities, such as zero
coupon bonds, do not pay current interest, but are purchased at a discount from
11
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<PAGE>
their face values. In general, bond prices rise when interest rates fall and
vice versa. Debt securities have varying degrees of quality and varying levels
of sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are speculative
and involve greater risk of default or price fluctuations due to changes in the
issuer's creditworthiness, or the reality that the issuer may already be in
default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty.
Restrictions: The Fund currently intends to limit its investments in debt
securities rated lower than Baa by Moody's Investors Services ("Moody's")
to 25% of its total assets. Purchase of a debt security is consistent with
the Fund's debt quality policy if it is rated at or above the stated level
by Moody's or rated in the equivalent categories by Standard & Poor's
Corporation ("S&P"), or is unrated but judged to be of equivalent rating
quality by Peregrine. The ratings of Moody's and S&P represent their
respective opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of
quality.
The SAI provides an explanation of the ratings assigned to debt holdings (not
including money market instruments).
ADJUSTING INVESTMENT EXPOSURE
- -----------------------------
The Fund may use various techniques to increase or decrease its exposure to
changing security prices, interest rates, currency exchange rates, commodity
prices, or other factors that affect security values. These techniques may
involve derivative transactions such as buying and selling options, futures and
forward contracts, entering into currency exchange contracts, swap agreements,
purchasing indexed securities and selling securities short.
Peregrine may use these practices to adjust the risk and return characteristics
of the Fund's portfolio of investments. If Peregrine judges market conditions
incorrectly or employs a strategy that does not correlate well with the Fund's
investments, these techniques could result in a loss to the Fund, regardless of
whether the intent was to reduce risk or increase return. These techniques may
increase the volatility of the Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. In addition, these techniques
could result in a loss to the Fund if the counterparty to the transaction does
not perform as promised.
REPURCHASE AGREEMENTS
- ---------------------
In a repurchase agreement, the Fund buys a security at one price and
simultaneously agrees to sell it back at a higher price. The difference between
the sale and repurchase prices represents interest earned by the Fund. Delays or
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<PAGE>
the sale and repurchase prices represents interest earned by the Fund. Delays or
losses to the Fund could result if the other party to the agreement defaults or
becomes insolvent.
FOREIGN REPURCHASE AGREEMENTS
- -----------------------------
Repurchase agreements with foreign dealers may be less well-secured than U.S.
repurchase agreements, and may be denominated in foreign currencies. They also
may involve greater risk of loss or counterparty default. Some counterparties in
these transactions may be less creditworthy and subject to less regulation than
those in U.S. markets.
ILLIQUID AND RESTRICTED SECURITIES
- ----------------------------------
Some investments may be determined by Peregrine, under the supervision of the
Board of Trustees, to be illiquid, which means that they may be difficult to
sell promptly at an acceptable price. Securities subject to legal or contractual
restrictions and repurchase agreements maturing in more than seven days are
considered illiquid. Difficulty in selling these securities may result in a loss
or may be costly to the Fund.
Restrictions: The Fund may not enter into a repurchase agreement maturing
in more than seven days if, as a result, more than 15% of the Fund's net
assets would be invested in these repurchase agreements and other illiquid
securities.
OTHER INSTRUMENTS
- -----------------
Other securities in which the Fund may invest include rights, securities of
investment companies, partly paid shares, and real estate-related investments.
SHORT SELLING
- -------------
Short selling involves selling a security that the Fund does not own and has
borrowed from a broker or bank or other institution. When the Fund purchases the
security to replace the borrowed security, if the value of the security has
declined as anticipated, the Fund will profit to the extent of the difference
between the purchase price and the sale price. If the price of the security
increases, the Fund will suffer a loss.
Restrictions: The value of securities of any one issuer sold short will
constitute no more than 2% of the Fund's net assets or no more than 2% of
the issuer's outstanding class of securities. Only liquid securities will
be sold short. The value of all securities sold short will constitute no
more than 25% of the Fund's net assets.
LEVERAGE
- --------
The Fund may use leverage by borrowing from banks, or through reverse repurchase
agreements, futures, options and similar transactions. Leverage will subject the
Fund's share price to greater fluctuation.
Restrictions: The Fund may not borrow in an amount exceeding 33-1/3% of its
total assets.
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<PAGE>
LENDING OF PORTFOLIO SECURITIES
- -------------------------------
Securities may be lent to broker-dealers and institutions, including affiliates
of Peregrine. Lending is a means for the Fund to earn income. This practice
could result in a loss or a delay in recovering the Fund's securities.
Restrictions: Loans of the Fund's securities, in the aggregate, may not
exceed 33-1/3% of the Fund's total assets.
FUNDAMENTAL POLICIES AND RESTRICTIONS
- -------------------------------------
Some of the policies and restrictions discussed on the preceding pages are
fundamental, which are subject to change only with shareholder approval, and are
all listed below. All policies stated throughout this Prospectus, other than
those identified in this section as fundamental, can be changed without
shareholder approval.
The Fund's investment objective is to seek capital appreciation by investing in
the securities of companies that are expected to benefit from the development
and growth of the economies of the Asia Pacific region. This objective can be
changed only with shareholder approval.
The Fund, with respect to 75% of total assets, may not invest more than 5% of
its total assets in the securities (including debt securities) of any one
issuer, and may not own more than 10% of the outstanding voting securities of a
single issuer, excluding entities of which it is the sole owner. The Fund may
not invest more than 25% of its total assets in any one industry. The Fund may
borrow in an amount not exceeding 33-1/3% of its total assets. Loans of the
Fund's securities, in the aggregate, may not exceed 33-1/3% of total assets.
PURCHASE AND SALE OF SHARES
- ---------------------------
The Fund is a "no-load" mutual fund. The Fund does not currently impose a
transaction or sales charge for investors purchasing shares directly from the
Fund. Full and fractional shares will be purchased or redeemed at the next share
price calculated after the investment or request for redemption is received and
accepted. The share price is calculated at the close of trading on the New York
Stock Exchange ("NYSE"), currently 4:00 P.M., Eastern Time, on each day the NYSE
is open for business. Purchases and sales will be made in U.S. dollars. The Fund
will not issue share certificates. The Fund may, without notice, suspend the
offering of shares or reject any purchase order. The Fund has a policy of
discouraging short-term trading, particularly by market-timers, and may reject
purchase orders at its discretion.
14
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<PAGE>
HOW TO BUY SHARES
THROUGH A FINANCIAL INSTITUTION OR DST SYSTEMS, INC.
- ----------------------------------------------------
Fund shares may be purchased at their net asset value per share without payment
of a sales charge by: (1) ordering the shares through a financial institution
(which may impose a transaction charge for its services) and forwarding a
completed Application or investment firm settlement instructions with payment;
or (2) completing an Application and mailing it with payment to the Fund's
Transfer Agent and Dividend Paying Agent, DST Systems, Inc. ("DST"), c/o
Peregrine Funds, P.O. Box 419558, Kansas City, Missouri, 64141-9558.
DST maintains Fund account records. However, brokers, banks and financial
institutions maintain account records for shares that are held in street name
for their clients. If you purchased your shares from a financial institution,
you must call or write to the institution if you have questions about your
account or want to sell Fund shares you own. DST will have no record of your
account.
BROKERS, BANKS AND FINANCIAL PROFESSIONALS
- ------------------------------------------
You may purchase or sell your shares through a broker, bank or investment
professional, which may charge a fee for its services. A financial institution
having a purchasing agreement with the Distributor, the Fund and/or Peregrine
must submit your order received by it prior to the close of trading on the NYSE
to the Fund not later than 5:00 p.m., Eastern Time, or to DST through the
facilities of the National Securities Clearing Corporation by 7:00 p.m., Eastern
Time, in order to receive that day's price.
Certain financial institutions may enter into purchasing agreements with the
Distributor or Fund and may place confirmed purchase orders on behalf of their
customers, with payment to follow within three business days. If payment is not
received by the Fund, the financial institution will be held liable for any fees
or losses the Fund or the Distributor may incur.
Some unaffiliated financial institutions have entered into agreements with the
Fund, the Distributor and/or Peregrine to provide services to shareholders. If
these financial institutions provide assistance in marketing the Fund, they will
be compensated by Peregrine from its own resources. These financial institutions
also may provide other services to the Fund and its shareholders, for which they
may be compensated by the Fund and/or Peregrine.
PAYMENT
- -------
Payment for shares must be made payable to the Fund in U.S. dollars. Checks
drawn on a foreign bank will not be accepted unless provisions are made for
payment in U.S. dollars through a U.S. bank. Third party checks will not be
accepted.
MINIMUM PURCHASES
- -----------------
Initial purchases must be in the amount of $5,000 or more per account.
Subsequent purchases must be in the amount of $1,000 or more. Purchases may be
made through selected dealers or banks or investment professionals or by
forwarding payment to DST. Either minimum may be waived by the Fund in special
circumstances deemed to be appropriate by the Fund's Board of Trustees.
Financial institutions may impose their own minimums, which may be more or less
than those of the Fund.
15
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<PAGE>
HOW TO SELL SHARES
You may sell your shares on any business day by writing or calling DST or your
financial institution. If you purchased shares through an investment
professional you may be required to sell your shares through that investment
professional if your shares are held in "street name". The redemption price will
be the net asset value per share next determined after the receipt of a request
in proper form as described herein. Currently, the Fund does not impose a fee
for redemption checks or wires, but it may do so at a later date.
IN WRITING
- ----------
To sell shares you may write to DST, c/o Peregrine Funds, P.O. Box 419558,
Kansas City, Missouri 64141-9558. Your redemption request must (1) be signed by
all owners exactly as their names appear on the account, (2) specify the number
of shares or amount of investment to be redeemed if less than all shares in the
account are to be sold, (3) contain a signature guarantee of each owner's
signature by an eligible guarantor institution (notarization by a notary public
is not acceptable) if the redemption amount is $50,000 or more, if the
redemption check is to be made payable to other than the owners or is to be sent
to an address other than the record address or if the record address has been
changed within the past 30 days and (4) provide any additional documents
regarding accounts of estates, trusts, guardianships, custodianships,
partnerships and corporations (e.g., appointments as executor or administrator,
trust instruments or certificates of corporate authority) requested by DST.
Banks, trust companies, savings institutions and broker/dealers are eligible to
guarantee your signature.
BY TELEPHONE
- ------------
If you have elected the telephone redemption privilege, you may sell your shares
by telephone by calling either (1) your financial institution (which may charge
a transaction fee) or (2) DST at 1-800-910-5525, as applicable. Telephone calls
to DST are recorded. Shares will be redeemed by telephone if you provide the
correct social security number, tax identification number or account number and,
to protect against fraud or losses, any additional information required by DST.
The Fund reserves the right to refuse a request for the telephone redemption
privilege without prior notice, either before, during or after the call.
Telephone instructions accepted after the close of business on the NYSE will not
be processed until the following business day. In the case of joint or multiple
owners, one owner's call may effect the telephone redemption. Because of unusual
market conditions it may be difficult and/or impossible to contact DST or your
broker, bank or investment professional to redeem your shares. You should
continue to try contacting them by telephone at their telephone number or
written instructions may be sent by post or courier. Telefaxed instructions will
not be accepted.
16
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<PAGE>
TELEPHONE REDEMPTION--PROCEEDS BY CHECK
- ---------------------------------------
You may request redemption by telephone of $50,000 or less per day if the
proceeds check is to be payable to the registered owner(s) and sent to the
address of record on the account. To protect you and the Fund from fraud, a
telephone redemption request will not be accepted if you changed the registered
address within one month of the request. Accounts registered as estates, trusts,
guardianships, custodianships, partnerships and corporations and accounts held
in street name are not eligible for this privilege.
EXPEDITED REDEMPTION--PROCEEDS BY WIRE
- --------------------------------------
You may request an expedited redemption by telephone with the proceeds
transmitted by wire to the bank account set forth in the Expedited Redemption
section of your completed Application. The Fund reserves the right to impose a
minimum amount that may be wired for redemptions and/or automatically deduct a
wiring fee from the amount wired. Requests to establish or change the expedited
redemption wire instructions on an existing account must be made in writing,
signed by all registered accountholders with any additional documents requested
by DST (see IN WRITING above), and signature guaranteed.
UNAUTHORIZED TELEPHONE REDEMPTIONS
- ----------------------------------
Like most mutual funds, the Fund and DST may only be liable for losses resulting
from unauthorized transactions if they do not follow reasonable procedures
designed to verify the caller's identity. Telephone calls may be recorded and
account number and other information may be requested. If you do not want the
ability to redeem by telephone, check the appropriate box on the Application or
call DST for instructions.
PAYMENT OF SALES PROCEEDS
- -------------------------
Payment for shares sold will normally be made within seven days after a proper
redemption request is received, except for delays which may be permitted under
applicable law or rule. If Fund shares to be redeemed were purchased by check,
to protect the Fund from losses, the Fund will pay the proceeds only after it is
satisfied that your check has been cleared for payment. This may take as long as
15 days.
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<PAGE>
TRANSFER OF OWNERSHIP
- ---------------------
To transfer ownership of (re-register) all or a portion of your shares, you must
provide a written request together with any documents DST may request to satisfy
itself that the request is genuine. DST will require the same information and
certifications, all in proper form, necessary to open and close an account.
MINIMUM ACCOUNT SIZE
- --------------------
If at any time the number of shares in your account falls below a specified
amount, currently 500 shares, you may be notified that you have 30 days to bring
the number of shares you own up to the minimum amount. If you were unable to
comply with the account minimum within 30 days, the Fund could redeem your Fund
shares involuntarily and mail the proceeds to you. Your shares would be redeemed
at the net asset value on the day your account is closed.
SPECIAL SERVICES
- ----------------
You may be charged a fee for special services you request, such as providing
historical account documents.
VALUATION
- ---------
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
The Fund will distribute its net investment income and net capital gains
annually, generally in December. Dividends or distributions declared in December
but paid in the following January will be includable in your income as of the
record date (usually in December) of such dividends or distributions. The fiscal
year of the Fund ends on December 31.
DIVIDEND REINVESTMENT PLAN
DIVIDEND REINVESTMENT
- ---------------------
Dividends and distributions will be automatically reinvested in Fund shares at
net asset value unless you or your financial institution notifies DST that
dividends and distributions are to be paid in cash. If you do not want your
dividends and distributions reinvested automatically, please check "Cash" on the
Application. If you elect to have dividends and/or distributions paid in cash,
and the U.S. Postal Service cannot deliver the check, or if it remains uncashed
for six months, it as well as future dividends and distributions will be
reinvested in additional shares. Dividends and distributions in the amount of
$10 or less will be paid in cash.
18
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<PAGE>
FUND'S BUSINESS DAYS
You may transact business (buy and sell shares) in your account on each day the
NYSE is open. Shares are purchased and sold at the net asset value per share
(NAV) next calculated after your order is received and accepted. The NAV is
calculated at the close of business on the NYSE, currently 4:00 P.M., Eastern
Time.
FUND'S NAV
The Fund's NAV is the value of one share. It is computed by adding the value of
the Fund's investments, cash and other assets, subtracting the Fund's
liabilities and dividing the result by the number of shares outstanding at the
time.
VALUATION OF FUND'S INVESTMENTS
The assets of the Fund are primarily valued on the basis of market quotations.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. If market value is not ascertainable, investments are
valued at fair value as determined in good faith by the Board of Trustees.
Foreign investments will be valued in U.S. dollars using the prevailing exchange
rates on that day. The Fund invests in securities, options or futures contracts
listed or traded on foreign exchanges which may trade on Saturdays or other
19
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<PAGE>
customary U.S. national business holidays (days on which the Fund is not open
for business). Consequently, the Fund's NAV may be affected on days when you may
not purchase or redeem shares.
MANAGEMENT AND ADMINISTRATION
- -----------------------------
BOARD OF TRUSTEES
The Fund is governed by a Board of Trustees, which is responsible for protecting
the interests of shareholders. The Trustees are experienced executives who meet
throughout the year to oversee the Fund's activities, review contractual
arrangements with companies that provide services to the Fund and review
performance. The majority of Trustees are not otherwise affiliated with
Peregrine.
INVESTMENT ADVISER
Peregrine, as the Fund's investment adviser, manages the Fund's portfolio of
investments pursuant to an Investment Advisory Agreement and is paid an
investment advisory fee ("Advisory Fee") by the Fund at an annual rate of 1.00%
of average daily net assets. Peregrine currently acts as sub-adviser to two
other mutual funds registered with the SEC under the 1940 Act and manages
pension plans, offshore mutual funds and other portfolios. Total aggregate
assets under management and advice by Peregrine were approximately $700 million
as of March 31, 1997.
Peregrine has voluntarily agreed to waive the Advisory Fee and/or assume
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) in order to limit the Fund's total expenses to an annual
rate of 2.00% of the Fund's average daily net assets until December 31, 1997.
PORTFOLIO MANAGEMENT
The portfolio manager is responsible for the day-to-day management of the Fund.
Gary Greenberg is portfolio manager of the Fund.
Gary Greenberg, C.F.A., Manager of the Fund, has been serving in such capacity
since the Fund commenced operations. Mr. Greenberg, Chief Investment Officer and
Deputy Managing Director of Peregrine, joined Peregrine in July, 1994 and is
responsible for Peregrine's investment strategy in various regions of the world.
He is also portfolio manager of a U.S. fund investing in emerging markets and of
an offshore fund which invests in smaller companies in India. Prior to joining
Peregrine, Mr. Greenberg served as co-manager of the Acorn International Fund
from 1992 to 1994. During that time period he was principal and portfolio
manager of Wanger Asset Management, which managed over U.S. $4 billion,
including approximately U.S. $2 billion invested in non-U.S. companies. From
1989 to 1992, he was international securities analyst at Harris Associates L.P.
Other investment professionals at Peregrine who are expected to have significant
input in determining the Fund's investments include:
Bruce Seton serves as Chief Executive Officer of Peregrine. Prior to joining
Peregrine in 1994, Mr. Seton spent twenty-two years at Gartmore Investment
Limited managing funds which emphasize Asian emerging market investments.
Aureole Foong, Director of Peregrine, joined Peregrine in December 1994 as a
fund manager. His responsibilities at Peregrine include managing funds which
invest in equities and derivatives in the Asia region. Prior to joining
Peregrine, Mr. Foong worked from 1990 to 1994 at Unifund, a Geneva-based private
investment company, where he served as a Senior Vice President.
Peregrine, its investment personnel and its affiliated companies may invest in
securities for their own accounts pursuant to a code of ethics that establishes
procedures for personal investing and restricts certain activities.
FUND'S PORTFOLIO TRANSACTIONS
Peregrine may use the Peregrine Group's broker-dealer and other affiliates and
other firms that sell Fund shares to purchase and sell the Fund's portfolio
securities and other assets, provided that their services and commissions are
comparable to those of other firms.
SHAREHOLDER MEETINGS
The Fund may hold special shareholder meetings and mail proxy materials. These
meetings may be called to elect or remove Trustees, change the Fund's
fundamental investment objective and policies, approve an investment advisory
contract or for other purposes. You are entitled to one vote for each share you
own. If you cannot attend a shareholder meeting you may vote by proxy.
PORTFOLIO ADMINISTRATOR
Van Eck Associates Corporation ("Van Eck") serves as the Fund's portfolio
administrator pursuant to a Portfolio Accounting and Administration Agreement.
Van Eck is responsible for providing accounting and administrative services for
the Fund and is paid a fee ("Portfolio Administration Fee") at an annual rate of
.25% of the Fund's average daily net assets or $75,000, whichever is greater.
Van Eck is also responsible for calculating the Fund's NAV, maintaining the
Fund's records and providing certain other accounting and administrative
services.
The Advisory and Portfolio Administration Fees paid by the Fund are generally
more than those paid by other comparable mutual funds.
20
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<PAGE>
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its performance. Past performance is
not indicative of future performance.
AVERAGE ANNUAL TOTAL RETURN
The Fund may advertise its performance in terms of average annual total return,
which is computed by finding the average annual compounded rate of return over a
period so that the initial amount invested would equal the ending account value.
The calculation assumes that all dividends and distributions by the Fund are
reinvested and includes all recurring fees charged to all shareholder accounts.
It is not the actual return in each year, but an average. The actual return in
any year may be more or less than the average. Average annual total return for
periods of less than a year is equal to the actual return annualized and assumes
that performance to date will continue for the rest of the year.
AGGREGATE TOTAL RETURN
The Fund may advertise aggregate total return for a specified period of time,
which is the percentage change in the net asset value of Fund shares initially
purchased assuming reinvestment of dividends and capital gains distributions
without giving consideration to the length of time of the investment.
Non-recurring expenses may be excluded from the calculation of rates of return
so that the rates may be higher than if these expenses were included. The SAI
describes the methods used to calculate the Fund's total return.
The Fund may quote performance results from recognized services and publications
which monitor the performance of mutual funds and the Fund may compare its
performance to various published historical indices. These include market,
economic and performance data and indices. For example, the Fund may quote the
market performance of the S&P 500; Morgan Stanley Capital International Europe
Australia Far East (EAFE) Index; the Morgan Stanley Capital International
Combined Far East Ex-Japan Free Index or another appropriate index; performance
of various world economies or economic indicators; or compilations of historical
performance data from rating agencies. The Fund is rated in the Asia/Pacific
Basin Funds Category by performance rating agencies. Micropal, Ltd., a worldwide
mutual fund performance evaluation service, is one rating agency; Lipper
Analytical Services is another.
21
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<PAGE>
TAX-SHELTERED RETIREMENT PLANS
- ------------------------------
You may purchase Fund shares for your tax-sheltered retirement plans. These
plans allow individuals to shelter investment income and capital gains from
current taxes. Contributions may be tax deductible. These accounts require
separate applications to open. Additional information about these plans may be
found in the SAI or may be requested from the Fund.
IRA
An Individual Retirement Account and Spousal Individual Retirement Account
(IRA/SPIRA) are available to anyone who has earned income (investments may also
be made for a spouse, if the spouse has earned income of less than $250).
QUALIFIED PENSION PLAN
A Qualified Pension Plan is available to self-employed individuals,
partnerships, corporations and their employees.
403(B) PLAN
A 403(b)(7) Program is available to employees of certain tax-exempt
organizations and schools.
TAXES
- -----
FUND'S TAX STATUS
The Fund has qualified and intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended, and
will not pay income or excise taxes to the extent that it distributes its net
taxable investment income and capital gains.
TAXATION OF DISTRIBUTIONS YOU RECEIVE
Notice as to the tax status of dividends and distributions will be mailed to you
annually. Income from dividends and distributions is normally taxable whether or
not reinvested. Distributions from net investment income and short-term capital
gains will be taxed as ordinary income. Distributions of long-term capital gains
will be taxed at capital gain rates. If the Fund fulfills certain requirements,
shareholders of the Fund may be able to claim a foreign tax credit or deduction
for foreign taxes paid to foreign governments by the Fund during the year. The
Fund does not anticipate that any portion of the Fund's dividends will be
eligible for the 70% corporate dividends received deduction.
TAXATION ON SALE OF SHARES
When you redeem your shares you may incur a capital gain or loss for tax
purposes. The amount of the capital gain or loss, if any, is the difference
between what you paid for your shares and what you receive. Be sure to keep your
regular statements - they contain the information necessary to calculate the
capital gain or loss.
This discussion was a brief description of the tax consequences of an investment
in the Fund. You should consult your tax adviser for additional tax
consequences, including state and local taxation, of dividends, distributions
and sale of Fund shares.
NON-RESIDENTS
Distributions of net investment income and short-term capital gains, if any,
made to non-resident aliens will be subject to 30% withholding or lower tax
treaty rates because such distributions are considered U.S. source income.
Currently, the Fund is not required to withhold tax from long-term capital gains
distributions paid to non-resident aliens.
22
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<PAGE>
ADDITIONAL INFORMATION
- ----------------------
QUESTIONS ABOUT THE FUND
For further information about the Fund, please call your financial advisor or
the Fund toll free at (800) 910-5525 or write to the Fund at the address on page
1.
CUSTODIAN
The custodian of the assets of the Trust is The Chase Manhattan Bank, 4 Chase
Metrotech Center, Brooklyn, New York 11245.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036, are
the Fund's independent accountants. The Fund's annual financial statements are
audited by Price Waterhouse.
COUNSEL
Kirkpatrick & Lockhart L.L.P., 1800 Massachusetts Avenue, N.W., Washington, DC
20036, serves as outside counsel to the Trust.
TRANSFER AND DIVIDEND DISBURSING AGENT
DST Systems, Inc., 1055 Broadway, Kansas City, Missouri 64105, serves as the
Fund's transfer, dividend disbursing and shareholder servicing agent.
INVESTMENT ADVISER
Peregrine Asset Management (Hong Kong) Limited, 11/F New World Tower II, 16-18
Queens Road, Central, Hong Kong, serves as the investment adviser to the Fund.
DISTRIBUTOR
Van Eck Securities Corporation, 99 Park Avenue, New York, New York 10016, serves
as distributor of the Fund's shares.
PORTFOLIO ADMINISTRATOR
Van Eck Associates Corporation, 99 Park Avenue, New York, New York 10016, serves
as portfolio administrator for the Fund.
23
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<PAGE>
PEREGRINE FUNDS
99 PARK AVENUE, NEW YORK, NEW YORK 10016
SHAREHOLDER SERVICES: TOLL FREE (800) 910-5525
ASIA PACIFIC GROWTH FUND
Peregrine Funds is an open-end investment company organized as a "business
trust" under the laws of the state of Delaware (the "Trust") and is commonly
referred to as a mutual fund. Asia Pacific Growth Fund (the "Fund") is the only
series of the Trust.
TABLE OF CONTENTS PAGE
General Information.......................................................... 2
Overview of Investment Objective and Policies of the Fund.................... 2
Risk Factors ................................................................ 3
Foreign Securities.................................................. 3
Emerging Market Securities.......................................... 4
Foreign Currency Transactions....................................... 7
Futures and Options Contracts and Complex Securities................ 8
Options, Futures and Forward Contracts......................... 8
Hedging and Other Investment Techniques............................. 10
Indexed Securities and Structured Notes............................. 11
Swap Agreements..................................................... 12
Loans of Portfolio Securities....................................... 12
Borrowing .......................................................... 13
Real Estate Securities.............................................. 13
Investment Company Securities....................................... 14
Rights.............................................................. 14
Partly Paid Securities.............................................. 14
Direct Investments.................................................. 14
Repurchase Agreements............................................... 15
Debt Securities..................................................... 16
Rule 144A Securities and Section 4(2) Commercial Paper.............. 16
Investment Restrictions...................................................... 17
Investment Advisory Services................................................. 19
The Distributor.............................................................. 20
Portfolio Transactions and Brokerage......................................... 20
Trustees and Officers........................................................ 22
Valuation of Shares.......................................................... 25
Tax-Sheltered Retirement Plans............................................... 26
Investment Programs.......................................................... 26
Taxes........................................................................ 26
Redemptions in Kind.......................................................... 29
Performance.................................................................. 29
Additional Information....................................................... 30
Financial Statements .................................................... 31
Appendix..................................................................... 32
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE FUND'S CURRENT PROSPECTUS, DATED MAY 1, 1997 (THE
"PROSPECTUS"), WHICH IS AVAILABLE AT NO CHARGE UPON WRITTEN OR TELEPHONE REQUEST
TO THE TRUST AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH AT THE TOP OF THIS
PAGE. SHAREHOLDERS ARE ADVISED TO READ AND RETAIN THIS STATEMENT OF ADDITIONAL
INFORMATION FOR FUTURE REFERENCE.
STATEMENT OF ADDITIONAL INFORMATION - MAY 1, 1997
<PAGE>
GENERAL INFORMATION
-------------------
The Trust is an open-end management investment company organized as a "business
trust" under the laws of the State of Delaware. The Board of Trustees has
authority to create additional series or funds, each of which may issue a
separate class of shares. The Fund is currently the only series of the Trust.
The Fund is classified as a diversified fund under the Investment Company Act of
1940, as amended (the "1940 Act"). A diversified fund is a fund which meets the
following requirements: At least 75% of the value of its total assets is
represented by cash and cash items (including receivables), government
securities, securities of other investment companies and other securities, for
the purpose of this calculation limited in respect of any one issuer to an
amount not greater than 5% of the value of the Fund's total assets and to not
more than 10% of the outstanding voting securities of such issuer.
Peregrine Asset Management (Hong Kong) Limited (the "Adviser") serves as
investment adviser to the Fund.
OVERVIEW OF INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The Fund's investment objective is to achieve long-term capital appreciation by
investing in the securities of companies that are expected to benefit from the
development and growth of the markets or economies of Asia and the Pacific
Basin.
The Fund may invest in a broad range of equity securities, warrants and equity
options of companies located in, or expected to benefit from the development and
growth of the economies of countries located in Asia and the Pacific Basin. The
Fund considers the "Asia Pacific" region to include Australia, Bangladesh,
Brunei, Cambodia, Hong Kong, India, Indonesia, Republic of Korea, Laos,
Malaysia, Myanmar (formerly, Burma), Nepal, New Zealand, Pakistan, Papua New
Guinea, the People's Republic of China (`China"), the Philippines, Singapore,
Sri Lanka, Taiwan, Thailand and Vietnam. Other countries may be added in the
future. Currently, the Fund does not invest in Japan. Equity securities include
common and preferred stocks, structured notes, equity swaps, direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises, special classes of shares available only to foreign
persons in those markets that restrict ownership of certain classes of equity to
nationals or residents of that country, convertible preferred stocks and
convertible debt instruments. The Fund may buy and sell financial futures
contracts and options on financial futures contracts, forward currency contracts
and put or call options on securities, securities indices and foreign
currencies, currency swaps, structured and indexed notes and other instruments
which may be or become available that are consistent with the Fund's investment
objective. The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., leverage its portfolio). Although the Fund will
invest its assets in a manner consistent with its investment objective and
policies, there can be no assurance the Fund will be able to achieve its
objective.
The Fund expects that under normal market conditions at least 65%, and at times,
substantially all of its assets will normally be invested in equity securities,
structured and indexed notes, swaps and other instruments whose return is tied
to one or more issuers in the Asia Pacific region. Issuers that the Fund may
invest in consist of companies that (a) are located in the Asia Pacific region
2
<PAGE>
or whose securities are principally traded in an Asia Pacific country or (b)(i)
have at least 50% of their assets in one or more countries located in the Asia
Pacific region or (ii) derive at least 50% of their gross sales, revenues or
profits from providing goods or services to or from within one or more countries
located in the Asia Pacific region. These investments are typically listed on
stock exchanges or traded in the over-the-counter markets in Asia Pacific
countries, but may be traded on exchanges or in markets outside the Asia Pacific
region. Similarly, the principal offices of these companies may be located
outside these countries. The Fund may commit 25% or more of its total assets to
any one country in the Asia Pacific region, and will normally invest in at least
four Asia Pacific countries. The Fund may invest, without limitation, in
depository shares or depository receipts, such as American Depository Receipts
and Shares, and Global Depository Receipts and Shares. Depository receipts and
shares are generally issued by custodian banks as evidence of ownership of the
underlying foreign securities.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in high grade, liquid debt securities of foreign and United States
companies which are not in the Asia Pacific region, of foreign governments and
the U.S. Government, and their respective agencies, instrumentalities, political
subdivisions and authorities, as well as in money market instruments denominated
in U.S. Dollars or a foreign currency. These money market instruments include,
but are not limited to, negotiable or short-term deposits with domestic or
foreign banks with total surplus and undivided profits of at least $50 million;
high quality commercial paper; and repurchase agreements maturing within seven
days with domestic or foreign dealers, banks and other financial institutions
deemed to be creditworthy under guidelines approved by the Board of Trustees of
the Trust. The commercial paper in which the Fund may invest will, at the time
of purchase, be rated P-1 or better by Moody's Investors Services, Inc.
("Moody's") or A-1 or better by Standard & Poor's Corporation ("S&P") or,
Fitch-1 by Fitch or Duff-1 by Duff & Phelps or if unrated, will be of comparable
high quality as determined by the Adviser.
Some countries in the Asia Pacific region have favorable tax treaties with other
countries, the effect of which is that entities organized under the laws of the
tax favored country pay a lower rate of tax on income or capital gains earned on
investments in the taxing country. The Fund may invest, when it is advantageous
for tax reasons, through wholly-owned entities.
The Fund may invest in collateralized mortgage obligations. The Appendix to this
Statement of Additional Information contains an explanation of the rating
categories of Moody's and S&P relating to the fixed-income securities and
preferred stocks in which the Fund may invest, including a description of the
risks associated with each category.
RISK FACTORS
FOREIGN SECURITIES
Investors should recognize that investing in foreign securities involves certain
special considerations which are not typically associated with investing in
United States securities. Since investments in foreign companies will frequently
involve currencies of foreign countries, and since the Fund may hold securities
and funds in foreign currencies, the Fund may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations, if
any, and may incur costs in connection with conversions between various
currencies. Most foreign stock markets, while growing in volume of trading
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activity, have less volume than the New York Stock Exchange ("NYSE"), and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. Similarly, volume and liquidity in
most foreign bond and equity markets are lower than in the United States, and at
times volatility of price can be greater than in the United States. Fixed
commissions on foreign securities exchanges are generally higher than negotiated
commissions on United States exchanges. There is generally less government
supervision and regulation of securities exchanges, brokers and listed companies
in foreign countries than in the United States. In addition, with respect to
certain foreign countries, in particular emerging market countries, there exists
the possibility of exchange control restrictions, expropriation or confiscatory
taxation, and political, economic or social instability, which could affect
investments in those countries. Foreign securities such as those purchased by
the Fund may be subject to foreign government taxes, higher custodian fees and
dividend collection fees which could reduce the yield on such securities.
EMERGING MARKET SECURITIES
Many countries in the Asia Pacific region are considered developing or emerging
countries. The Fund may have a substantial portion of its assets in these
countries or in countries with developing securities markets. Although there is
no universally accepted definition, a developing or emerging country is
generally considered by the Adviser to be a country which is in the initial
stages of industrialization or economic development. With the exception of
Australia and New Zealand, the other countries of the Asia Pacific region are
considered developing or emerging markets.
Shareholders should be aware that investing in the equity and fixed income
markets of those countries and emerging markets involves exposure to unstable
governments, economies based on only a few industries, and securities markets
which trade a small number of securities. Securities markets of these countries
tend to be more volatile than the markets of developed countries; however, such
markets have, in the past, provided the opportunity for higher rates of return
to investors. Some of these countries do not have securities markets or
exchanges or are in the initial stages of formation.
Political and economic structures in many such countries may be undergoing
significant evolution and rapid development, and therefore, such countries may
lack the social, political and economic stability characteristic of the United
States. Certain of these countries have, in the past, failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. An investment in the Fund presents a greater risk
of loss to investors than would an investment in a fund investing in a more
diversified portfolio of companies located in more stable countries. The
economies of countries with developing markets may be highly vulnerable to
changes in local or global trade conditions, and may suffer from extreme debt
burdens or inflation rates. Local securities markets may be unable to respond
effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times. Securities
of issuers located in developing markets may have limited marketability and may
be subject to abrupt or erratic price movements. However, such markets have in
the past provided the opportunity for higher rates of return to investors. There
is no assurance that these markets will offer such opportunity in the future.
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Since the Fund invests at least 65% of its total assets in Asia Pacific region
investments, the investment performance will be especially affected by events
affecting companies in the Asia Pacific region. The value and liquidity of these
investments may be affected favorably or unfavorably by political, economic,
fiscal, regulatory or other developments in the Asia Pacific region or
neighboring regions. The extent of economic development, political stability and
market depth in the various countries in the Asia Pacific region varies widely.
Certain countries in the Asia Pacific region, including Bangladesh, Cambodia,
China, Laos, Indonesia, Malaysia, Nepal, the Philippines, Thailand and Vietnam,
are either comparatively underdeveloped or are in the process of becoming
developed. Investments in these countries typically involve greater potential
for gain or loss than investments in securities of issuers in developed
countries. Given the Fund's investments, the Fund will likely be particularly
sensitive to changes in China's economy as the result of a reversal of economic
liberalization, political unrest or changes in China's trading status. In
addition, the Fund will invest a significant portion of its assets in Hong Kong
and will be affected by the return of Hong Kong to Chinese control.
The securities markets in the Asia Pacific region are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. A high proportion of the shares of many issuers may be held by a limited
number of persons and financial institutions, which may limit the number of
shares available for investment by the Fund. A limited number of issuers in
securities markets in the Asia Pacific region may represent a disproportionately
large percentage of market capitalization and trading value. The limited
liquidity of securities markets in the Asia Pacific region may also affect the
Fund's ability to acquire or dispose of securities at the price and time it
wishes. Accordingly, during periods of rising securities prices in the more
illiquid securities markets, the Fund's ability to participate fully in such
price increases may be limited by its investment policy of investing not more
than 15% of its net assets in illiquid securities. Conversely, the Fund's
inability to dispose fully and promptly of positions in declining markets will
cause the Fund's net asset value to decline as the value of the unsold positions
is marked to lower prices. In addition, securities markets in the Asia Pacific
region are susceptible to being influenced by large investors trading
significant blocks of securities.
Many emerging countries limit the percentage foreign investors, such as the
Fund, may own of their domestic issuers by requiring that such issuers issue two
classes of shares-"local" and "foreign" shares. Foreign shares may be held only
by investors that are not considered nationals or residents of that country and
in some markets may be convertible into local shares. Foreign shares may be
subject to restrictions on the right to receive dividends and other
distributions, and may have limited voting and other rights, to name a few.
Local shares are intended for ownership by nationals or residents of the
country. The market for foreign shares is generally less liquid than the market
for local shares, although in some cases foreign shares may be converted into
local shares. In addition, foreign shares often trade at a premium to local
shares, while at other times there is no premium. If the Fund were to purchase
foreign shares at a premium and sell when there is a lower or no premium, the
Fund could realize a loss on its investment. Ownership by foreign investors of
local shares may be illegal in some jurisdictions and, in others, foreign owners
of local shares may not be entitled, among other things, to participate in
certain corporate actions such as stock dividends, rights and warrant offerings
(while foreign holders of foreign shares would participate). If the Fund were to
own local shares and could not participate in a stock, warrant or other
distribution, the Fund could suffer material dilution of its interest in that
issuer and the value of its holdings could decline dramatically over a very
short period, causing a loss on its investment. Generally, it is expected that
the Fund will hold foreign shares. However, because of their limited number,
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foreign shares may, at times, not be available for purchase by the Fund or the
premiums may be, in the opinion of the Adviser, unjustified or prohibitively
high. In order to participate in these markets, the Fund may deem it advisable
to purchase local shares which may expose the Fund to the additional risks
described above. The Fund will only purchase local shares where foreign shares
are not available for purchase or premiums are excessive and when, in the
opinion of the Adviser, the potential for gain in these markets outweighs the
risks that issuers will take corporate actions which may result in dilution to
the Fund. Where permitted by local law, the Fund will attempt to convert local
shares to foreign shares promptly. There can be no assurance that the Adviser
will be able to assess these risks accurately, that the Fund will be able to
convert its local shares to foreign shares or that dilution will not result.
The stock markets in certain of the Asia Pacific region countries, particularly
the Chinese markets, are undergoing a period of growth and change which may
result in trading volatility and difficulties in the settlement and recording of
transactions and in interpreting and applying the relevant law and regulations.
In particular, the securities industry in China is not well developed. China has
no securities laws of nationwide applicability. The municipal securities
regulations adopted by Shanghai and Shenzhen municipalities are very new, as are
their respective securities exchanges and other self-regulatory organizations.
In addition, Chinese stockbrokers and other intermediaries may not perform as
well as their counterparts in the United States and other more developed
securities markets. The prices at which the Fund may acquire or dispose of
investments may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by the Fund in particular securities. The securities markets in
Cambodia, Laos and Vietnam are currently non-existent.
Economies of countries in the Asia Pacific region may differ favorably or
unfavorably from the United States economy in such respects as rate of growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. As export-driven economies,
the economies of countries in the Asia Pacific region are affected by
developments in the economies of their principal trading partners. Revocation by
the United States of China's "Most Favored Nation" status under United States
international trade laws, which the United States' President and Congress
consider annually, would adversely affect the trade and economic development of
China and Hong Kong. Hong Kong and Taiwan have limited natural resources,
resulting in dependence on foreign sources for certain raw materials and
economic vulnerability to global fluctuations of price and supply.
Governmental actions in China can have a significant effect on the economic
conditions in the Asia Pacific region, which could adversely affect the value
and liquidity of the Fund's investments. Although the Chinese government has
recently begun to institute economic reform policies, there can be no assurance
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain countries in the region do not have comprehensive systems of
laws, although substantial changes have occurred in China in this regard in
recent years. The corporate form of organization has only recently been
permitted in China and national regulations governing corporations were first
introduced in May, 1992. Prior to the introduction of such regulations, Shanghai
had adopted a set of corporate regulations applicable to corporations located or
listed in Shanghai, and the relationship between the two sets of regulations is
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not clear. Consequently, until a firmer legal basis is provided, even such
fundamental corporate law tenets as the limited liability status of Chinese
issuers and their authority to issue shares remain open to question. Laws
regarding fiduciary duties of officers and directors and the protection of
shareholders are not well developed. China's judiciary is relatively
inexperienced in enforcing the laws that exist, leading to a higher than usual
degree of uncertainty as to the outcome of litigation. Even where adequate law
exists in China, it may be impossible to obtain swift and equitable enforcement
of such law, or to obtain enforcement of a judgment by a court of another
jurisdiction. The bankruptcy laws pertaining to state enterprises have rarely
been used and are untried in regard to an enterprise with foreign shareholders,
and there can be no assurance that such shareholders, including the Fund, would
be able to realize the value of the assets of the enterprise or receive payment
in convertible currency. As the Chinese legal system develops, the promulgation
of new laws, existing laws and the preemption of local laws by national laws may
adversely affect foreign investors, including the Fund. The uncertainties faced
by foreign investors in China are exacerbated by the fact that many laws,
regulations and decrees of China are not publicly available, but merely
circulated internally. Similar risks exist in other Asia Pacific region
countries.
A large portion of Russia is in Asia and therefore the Fund may invest in those
Russian issuers. Political and social conditions in Russia, due to the unsettled
political conditions which could recur there and in neighboring countries,
together with the fact that settlement procedures in Russia are not fully
formalized, may pose certain risks to the Fund's investments. If aggravated by
local or international developments, such risks could have an adverse effect on
investments in Russia, including the Fund's investments and, under certain
conditions, on the liquidity of the Fund's portfolio and its ability to meet
shareholder redemption requests. The ability of the Fund to invest or hold its
investments in Russian companies may be further affected by changes in United
States or Russian laws or regulations.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.
FOREIGN CURRENCY TRANSACTIONS
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the long-term investment decisions made for the
Fund with regard to overall diversification strategies. Although the Fund values
its assets daily in terms of U.S. Dollars, it does not intend physically to
convert holdings of foreign currencies into U.S. Dollars on a daily basis. The
Fund will do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund, at times, will use forward contracts, along
with futures contracts, foreign exchange swaps, structured notes and put and
call options (all types of derivatives), to "lock in" the U.S. Dollar price of a
security bought or sold and as part of its overall hedging strategy, for
defensive purposes and for cash management purposes. The Fund will conduct
foreign currency exchange transactions, either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, through
purchasing put and call options, through entering into futures contracts or
forward contracts to purchase or sell foreign currencies or by using structured
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notes, swap agreements or other instruments that may become available. See
"Futures and Options Contracts and Complex Securities" below.
At the maturity of the forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or may retain the security
and terminate its contractual obligation to deliver the foreign currency prior
to maturity by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. There can be no assurance, however, that the Fund will be able
to effect such a closing purchase transaction.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the forward currency contract. Accordingly, the Fund may
decide to proceed with the purchase or sale as anticipated or may determine not
to proceed. In the first instance, the Fund may have to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security has fluctuated; or in the second, to enter into
an offsetting transaction.
FUTURES AND OPTIONS CONTRACTS AND COMPLEX SECURITIES
The Fund may buy and sell forward, futures and options contracts, structured
notes, swap agreements and other complex securities which are or may become
available for hedging and investment purposes. These are commonly referred to as
"derivatives." Derivatives include financial futures and forward contracts on
foreign or domestic currency, security, interest-rate, stock and bond indices.
Options, Futures and Forward Contracts
A forward contract, like a futures contract, involves an obligation to purchase
or sell a specific asset at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. Unlike futures contracts which are standardized
exchange-traded contracts, forward contracts are usually traded in the
over-the-counter market conducted directly between financial institutions and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades. There is, however, an
interest rate factor reflected in the delivery prices. A security or
interest-rate futures or forward contract is an agreement to buy or sell a
specified security at a set price on a future date. An index contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A foreign currency contract is an agreement to buy or sell a specified
amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation they may have under the
contract. The Fund will not commit more than 5% of its total assets to initial
margin deposits on futures contracts and premiums on options, except that margin
deposits for futures positions entered into for bona fide hedging purposes are
excluded from the 5% limitation.
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In establishing a position in a futures or forward contract, which may be a long
or short position, the Fund will own an offsetting position or appropriate high
grade, liquid assets, such as U.S. Government securities or cash, will be
segregated with the Fund's Custodian to ensure that the position is not
leveraged above applicable limits. See "Borrowing" below. This segregated
account will be marked-to-market daily to reflect changes in the value of the
underlying futures or forward contract. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts. Certain
exchanges do not permit trading in particular futures contracts at prices in
excess of daily price fluctuation limits set by the exchange. Trading in futures
contracts traded on foreign exchanges may be subject to the same or similar
risks as trading in foreign securities.
The Fund may invest in options on futures contracts. Compared to the purchase or
sale of futures contracts, the purchase and sale of options on futures contracts
involves less potential risk to the Fund because the maximum exposure is the
amount of the premiums paid for the options.
The Fund may invest up to 5% of its total assets, taken at market value at the
time of investment, in premiums on call and put options on domestic and foreign
securities, foreign currencies, stock and bond indices and financial futures
contracts (entered into for other than bona fide hedging purposes). As the
holder of a call or put option, the Fund pays a premium and has the right (for
generally 3 to 9 months) to purchase (in the case of a call option) or sell (in
the case of a put option) the underlying asset at the exercise price at any time
during the option period ("American" option) or at expiration of the contract
("European" option). An option on a futures contract gives the purchaser the
right, but not the obligation, in return for the premium paid, to assume a
position in a specified underlying futures contract (which position may be a
long or short position) at a specified exercise price during the option exercise
period. If the call or put is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Fund will lose
its premium payment. The Fund may, with respect to options it has purchased,
sell them, exercise them or permit them to expire.
The Fund may write call or put options. As the writer of an option, the Fund
receives a premium. The Fund keeps the premium whether or not the option is
exercised. If the call or put option is exercised, the Fund must sell (in the
case of a written call option) or buy (in the case of a written put option) the
underlying asset at the exercise price. The Fund may write only covered put and
call options. A covered call option, which is one where the Fund owns the
underlying asset, sold by the Fund exposes it during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying asset or the possible continued holding of an underlying instrument
which might otherwise have been sold to protect against depreciation in the
market price of the underlying instrument. A covered put option written by the
Fund exposes it during the term of the option to a decline in price of the
underlying instrument. A put option sold by the Fund is covered when, among
other things, cash or short-term liquid securities are placed in a segregated
account to fulfill the obligations undertaken. Covering a put option sold does
not reduce the risk of loss.
The Fund may invest in options which are either listed on a domestic securities
exchange, or are traded on a foreign exchange or over-the-counter.
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In general, exchange traded options are third party contracts with standardized
prices and expiration dates. Over-the-counter options are two-party contracts
with price and terms negotiated by the buyer and seller, are generally
considered illiquid, and will be aggregated with other illiquid positions for
purposes of the limitation on illiquid investments. With respect to
over-the-counter options, the Fund is exposed to the risk that the other party
will fail to perform under the contract; in such a case the Fund would incur a
loss equal to the then current "market" value of the option.
HEDGING AND OTHER INVESTMENT TECHNIQUES
The Fund may use options, forward and futures contracts, structured and indexed
notes, swaps and similar investments (commonly referred to as derivatives) as a
defensive technique to protect against declines in the values of assets the
Adviser deems desirable to hold for tax or other considerations and to gain
investment exposure to certain securities, markets or assets. One defensive
technique involves selling a futures or forward contract, purchasing a put
option or structured or indexed note or entering into a swap agreement whose
value is expected to be inversely related to the asset being hedged. If the
anticipated decline in the value of the asset occurs, it would be offset, in
whole or part, by a gain on the instrument. The premium paid for the put option
would reduce any capital gain otherwise available for distribution when the
asset is eventually sold.
Hedging against a change in the value of an asset the Fund holds may reduce or
preclude the opportunity for gain if the value of the hedged asset should
increase.
The Fund may use futures contracts, options, structured and indexed notes,
forward contracts and swaps and other similar instruments for investment
purposes, such as creating "synthetic" positions or implementing "cross-hedging"
strategies. A synthetic position will be covered by segregation of short-term
liquid assets. A synthetic position permits the Fund to obtain investment
exposure and is the duplication of a cash market transaction when deemed
advantageous by the Adviser for cost, liquidity, tax or transactional efficiency
reasons. A cash market transaction is the purchase or sale of a security or
other asset for cash. For example, from time to time the Fund experiences large
cash inflows which may be redeemed from the Fund in a relatively short period.
In this case, the Fund currently can leave the amounts uninvested in
anticipation of the redemption or the Fund can invest in securities for a
relatively short period, incurring transaction costs on the purchase and
subsequent sale. Alternatively, the Fund may create a synthetic position by
investing in a futures contract on an asset, such as a securities index, gaining
investment exposure to the relevant market while incurring lower overall
transaction costs. By segregating cash, the Fund's futures contract position
would generally be no more leveraged or riskier than if it had invested in the
cash market - i.e., purchased the securities. In addition, a structured note may
permit the Fund to gain investment exposure that might not otherwise be
available. For example, some countries permit only residents or nationals to
invest in their markets. The Fund could enter into a structured note whose
principal value would be tied to the performance of that country's market index.
Cross-hedging involves the use of one asset to hedge against the decline in
value of another asset. For example, the Fund could hedge against a decline in
the value of a Taiwanese securities position by taking a position in the Hong
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Kong market that is expected to perform inversely to the Taiwanese market.
The use of such instruments as described herein involves several risks. First,
there can be no assurance that the prices of such instruments and the hedged
asset or the cash market position will move as anticipated. If prices do not
move as anticipated, the Fund may incur a loss on its investment, may not
achieve the hedging protection it anticipated and/or incur a loss greater than
if it had entered into a cash market position. Second, investments in such
instruments may reduce the gains which would otherwise be realized from the sale
of the underlying securities or assets which are hedged. Third, positions in
such instruments can be closed out only on an exchange that provides a market
for those instruments. There can be no assurance that such a market will exist
for a particular futures contract or option. If the Fund cannot close out an
exchange traded futures contract or option which it holds, it would have to
perform its contract obligation or exercise its option to realize any profit and
would incur transaction costs on the sale of the underlying assets. Further, if
the other party to a swap, structured or indexed note, forward contract or
option were to default on its obligation, the Fund would incur a loss. Finally,
certain of these derivative instruments may be illiquid, difficult to value
accurately and subject to extreme volatility.
The futures and options markets in certain of the Asia Pacific region countries
are not as developed as similar markets of more developed countries, and the
Fund may not be able to hedge or employ the strategies described above. In
addition, swaps and indexed or structured notes may not be available. It is the
policy of the Fund to meet the requirements of the Internal Revenue Code of
1986, as amended (the "Code") to qualify as a regulated investment company to
prevent double taxation of the Fund and its shareholders. One of these
requirements is that less than 30% of a fund's gross income must be derived from
gains from the sale or other disposition of securities held for less than three
months. The extent to which the Fund may engage in the foregoing transactions
may be materially limited by this requirement.
INDEXED SECURITIES AND STRUCTURED NOTES
The Fund may invest in securities whose value is linked to one or more
currencies, interest rates, stocks, bonds, financial instruments or indices. An
indexed security or structured note enables the Fund to purchase a note whose
coupons and/or principal redemption are linked to the performance of an
underlying asset. Indexed securities may be positively or negatively indexed
(i.e., their value may increase or decrease if the underlying instrument
appreciates). Indexed securities may have return characteristics similar to
direct investments in the underlying instrument or to one or more options on the
underlying asset or other assets. Indexed securities may be more volatile than
the underlying instrument itself, and present many of the same risks as
investing in forward, futures and options contracts. Indexed securities are also
subject to credit risks associated with the issuer of the security with respect
to both principal and interest. Indexed securities may be publicly traded or may
be two-party contracts (such two-party agreements are referred to here
collectively as "structured notes"). When the Fund purchases a structured note,
it will make a payment of principal to the counterparty. Some structured notes
have a guaranteed repayment of principal while others place a portion (or all)
of the principal at risk. Structured notes may give the Fund increased liquidity
and access to markets that it might otherwise be precluded from investing in.
These instruments may also be difficult to value accurately.
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The Adviser will monitor the liquidity of these instruments under the
supervision of the Board of Trustees and those instruments determined to be
illiquid will be aggregated with other illiquid securities and limited to 15% of
the net assets of the Fund.
SWAP AGREEMENTS
The Fund may enter into swap agreements. Swap agreements permit the Fund to swap
(trade) the performance of one asset for another. For example, the Fund may swap
the performance of the Hang Seng Index (Hong Kong) for the Bombay Index (India).
By entering into such a swap, the Fund could simultaneously hedge a portion of
its exposure to the Hong Kong market and gain exposure to the Indian market.
Rather than enter into a swap agreement, the Fund could have sold its Hong Kong
holdings and purchased Indian securities, thereby incurring transaction and
other costs. Since swaps are individually negotiated, the Fund may expect to
achieve an acceptable degree of correlation between its portfolio investments
and its swap position. Currency swaps usually involve the delivery of the entire
principal value of one designated currency in exchange for the other designated
currency. Therefore, the entire principal value of a currency swap is subject to
the risk that the other party to the swap will default on its contractual
delivery obligations.
The use of swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
transactions. If the Adviser is incorrect in its forecasts of market values and
currency exchange rates, the investment performance of the Fund would be less
favorable than it would have been if this investment technique were not used.
Swaps are generally considered illiquid and will be aggregated with other
illiquid positions for purpose of the limitation on illiquid investments.
High grade, liquid assets, such as U.S. Government securities or cash, will be
segregated with the Fund's Custodian in an amount equal to the Fund's net
obligation on such swap agreements. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Fund's commitments with respect to such contracts.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend to broker-dealers portfolio securities with an aggregate
market value of up to one-third of its total assets. Such loans must be secured
by collateral (consisting of any combination of cash, U.S. Government securities
or irrevocable letters of credit) in an amount at least equal (on a daily
mark-to-market basis) to the current market value of the securities loaned. The
Fund may terminate the loans at any time and obtain the return of the securities
loaned within one business day. The Fund will continue to receive any interest
or dividends paid on the loaned securities and will continue to have voting
rights with respect to the securities. The Fund might experience a loss if the
broker-dealer with which it has engaged in a portfolio loan transaction breaches
its agreement.
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BORROWING
The Fund may borrow up to 33-1/3% of the value of its net assets to increase its
holdings of portfolio securities. Under the 1940 Act, the Fund is required to
maintain continuous asset coverage of 300% with respect to such borrowings and
to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% because of market fluctuations
or other factors, even if the sale would be disadvantageous from an investment
standpoint. Leveraging by means of borrowing will exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's net
asset values, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the investment return from the
securities purchased with borrowed funds. It is anticipated that such borrowings
would be pursuant to a negotiated loan agreement with a commercial bank or other
institutional lender.
REAL ESTATE SECURITIES
Although the Fund will not invest in real estate directly, it may invest its
assets in equity securities of real estate investment trusts ("REITs") and other
real estate industry companies or companies with substantial real estate
investments. Therefore, the Fund may be subject to certain risks associated with
direct ownership of real estate and with the real estate industry in general.
These risks include, among others: possible declines in the value of real
estate; possible lack of availability of mortgage funds; extended vacancies of
properties; risks related to general and local economic conditions;
overbuilding; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates.
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. REITs are not taxed on income
distributed to shareholders, provided they comply with several requirements of
the Code.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for the exemption from tax for distributed income under the
Code. REITs (especially mortgage REITs) are also subject to interest rate risk
(i.e., as interest rates rise, the value of the REIT may decline).
13
<PAGE>
INVESTMENT COMPANY SECURITIES
The Fund may invest in issuers which are considered under the 1940 Act to be
investment companies. These investment companies may or may not be registered
with the Securities and Exchange Commission ("SEC") and may be foreign
investment companies. Investing in foreign investment companies involves the
same risks as investing in foreign securities. Investing in investment companies
permits the Fund to invest in markets that might otherwise have been
inaccessible and to obtain greater diversification. These investments involve
the payment of dual management fees.
RIGHTS
Rights are privileges granted to existing shareholders or may be attached to
other securities. Rights entitle the holder to purchase shares of a new issue
before they are offered to the public, often below the public offering price.
Some rights are registered and are freely transferable while others are not.
Rights are similar to options in that they give the holder the right, not the
obligation, to purchase shares.
PARTLY PAID SECURITIES
Partly paid securities are securities for which the purchaser pays on an
installment basis. A partly paid security trades net of outstanding installment
payments. For this reason, the obligation to make payment is usually transferred
upon sale of the security. Fluctuations in the market value do not affect the
obligation to make installment payments when due. Partly paid securities become
fully paid securities upon payment of the final installment. Until that time,
the issuer of a partly paid security typically may retain the right to restrict
the voting and dividend rights of the security and to impose restrictions and
penalties in the event of a purchaser's default.
High grade, liquid assets, such as U.S. Government securities or cash, will be
segregated with the Fund's Custodian in an amount equal to the "unpaid"
installments on these securities. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Fund's commitments with respect to such contracts.
DIRECT INVESTMENTS
The Fund may invest up to 10% of its total assets in direct investments. Direct
investments include (i) the private purchase from an enterprise of an equity
interest in the enterprise in the form of shares of common stock or equity
interests in trusts, partnerships, joint ventures or similar enterprises, and
(ii) the purchase of such an equity interest in an enterprise from a principal
investor in the enterprise. In each case the Fund will, at the time of making
the investment, enter into a shareholder or similar agreement with the
enterprise and one or more other holders of equity interests in the enterprise.
The Adviser anticipates that these agreements will, in appropriate
circumstances, provide the Fund with the ability to appoint a representative to
the board of directors or similar body of the enterprise and for eventual
disposition of the Fund's investment in the enterprise. Such a representative of
the Fund will be expected to provide the Fund with the ability to monitor its
14
<PAGE>
investment and protect its rights in the investment and will not be appointed
for the purpose of exercising management or control of the enterprise.
Certain of the Fund's direct investments will include investments in smaller,
less seasoned companies. These companies may have limited product lines, markets
or financial resources, or they may be dependent on a limited management group.
The Fund does not anticipate making direct investments in start-up operations,
although it is expected that in some cases the Funds' direct investments will
fund new operations for an enterprise which itself is engaged in similar
operations or is affiliated with an organization that is engaged in similar
operations. Such direct investments may be made in entities that are reasonably
expected in the foreseeable future to benefit from the growth and development in
the Asia Pacific region either by expanding current operations or establishing
significant operations in the Asia Pacific region.
Direct investments may involve a high degree of business and financial risk that
can result in substantial losses. Because of the absence of any public trading
market for these investments, the Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices on
these sales could be less than those originally paid by the Fund. Furthermore,
issuers whose securities are not publicly traded may not be subject to public
disclosure and other investor protection requirements applicable to publicly
traded securities. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration. In addition, in the event the
Fund sells unlisted foreign securities, any capital gains realized on such
transactions may be subject to higher rates of taxation than taxes payable on
the sale of listed securities. Direct investments are generally considered
illiquid and will be aggregated with other illiquid investments for purposes of
the limitation on illiquid investments. Direct investments can be difficult to
price and will generally be valued at fair value as determined in good faith by
the Board of Trustees. The pricing of direct investments may not reflect the
price at which these assets could be liquidated.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund acquires an underlying asset for a
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase, and the Fund to resell, the asset at an
agreed upon price and time, thereby determining the yield during the holding
period. The agreement results in a rate of return that is not subject to market
fluctuations during the holding period. Repurchase agreements could involve
certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying asset. The Adviser, acting under the supervision of the Board of
Trustees, reviews the creditworthiness of those non-bank dealers with which the
Fund enters into repurchase agreements to evaluate these risks. Entering into
repurchase agreements with foreign dealers poses similar risks to investing in
foreign securities.
The Fund will not enter into a repurchase agreement with a maturity of more than
seven business days if, as a result, more than 15% of the value of the Fund's
total assets would then be invested in such repurchase agreements and other
illiquid securities. The Fund will only enter into a repurchase agreement where
15
<PAGE>
(i) the underlying asset is of the type which the Fund's investment policies
would allow it to purchase directly, (ii) the market value of the underlying
security, including accrued interest, will be at all times equal to or exceed
the value of the repurchase agreement, and (iii) payment for the underlying
securities is made only upon physical delivery or evidence of book-entry
transfer to the account of the custodian or a bank acting as agent.
DEBT SECURITIES
The Fund may invest in debt securities. The market value of debt securities
generally varies in response to changes in interest rates and the financial
condition of each issuer. During periods of declining interest rates, the value
of debt securities generally increases. Conversely, during periods of rising
interest rates, the value of such securities generally declines. These changes
in market value will be reflected in the Fund's net asset value. Debt securities
with similar maturities may have different yields, depending upon several
factors, including the relative financial condition of the issuers. For example,
higher yields are generally available from securities in the lower rating
categories of S&P or Moody's. However, the values of lower-rated securities
generally fluctuate more than those of high grade securities. Many securities of
foreign issuers are not rated by these services. Therefore the selection of such
issuers depends to a large extent on the credit analysis performed by the
Adviser.
RULE 144A SECURITIES AND SECTION 4(2) COMMERCIAL PAPER
Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act of 1933, as amended (the "1933 Act") for resales of certain
securities to qualified institutional buyers. The SEC adopted Rule 144A to allow
a broader institutional trading market for securities otherwise subject to
restriction on resale to the general public.
The Adviser will monitor the liquidity of restricted securities in the Fund's
holdings under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Adviser will consider, among other things, the following factors:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanisms of the transfer). In addition, commercial paper may be issued in
reliance on the "private placement" exemption from registration afforded by
Section 4(2) of the 1933 Act. Such commercial paper is restricted as to
disposition under the federal securities laws and, therefore, any resale of such
securities must be effected in a transaction exempt from registration under the
1933 Act. Such commercial paper is normally resold to other investors through or
with the assistance of the issuer or investment dealers who make a market in
such securities, thus providing liquidity.
Securities eligible for resale pursuant to Rule 144A under the 1933 Act and
commercial paper issued in reliance on the Section 4(2) exemption under the Act
may be determined to be liquid in accordance with guidelines established by the
Board of Trustees for purposes of complying with investment restrictions
applicable to investments by the Fund in illiquid securities.
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<PAGE>
INVESTMENT RESTRICTIONS
The following investment restrictions are in addition to those described in the
Prospectus. Policies that are identified as fundamental may be changed only with
the approval of the holders of a majority of the Fund's outstanding shares. Such
majority is defined in the 1940 Act as the vote of the lesser of (i) 67% or more
of the outstanding shares present at a meeting, if the holders of more than 50%
of the Fund's outstanding shares are present in person or by proxy, or (ii) more
than 50% of the Fund's outstanding shares. As to any of the following policies,
if a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in value of portfolio
securities or amount of net assets will not be considered a violation of the
policy. Restrictions 1, 4, 9, 11, 12, 14 and 16 are not fundamental, unless
otherwise provided for by applicable federal or state law.
The Fund may not:
1. Invest in securities which are subject to legal or contractual
restrictions on resale ("restricted securities") or for which there is
no readily available market quotation or engage in a repurchase
agreement maturing in more than seven days with respect to any security
if the result is that more than 15% of the Fund's net assets would be
invested in such securities, excluding securities which are deemed to
be liquid under Rule 144A under the Securities Act of 1933.
2. Purchase or sell real estate, except the Fund may purchase securities
of companies which deal in real estate, including securities of real
estate investment trusts, and may purchase securities which are
collateralized by interests in real estate.
3. Purchase or sell commodities or commodity futures contracts, except
that financial futures contracts which may include stock and bond index
futures contracts, foreign currency futures contracts and similar
contracts or financial assets are not considered commodities or
commodity contracts. The Fund may not commit more than 5% of its total
assets to initial margin deposits on futures contracts not used for
hedging purposes.
4. The Fund may not purchase more than 3% of the total outstanding voting
stock of any investment company or invest more than 5% of its total
assets in the securities of any investment company or invest more than
10% of its total assets in investment companies in general. Such
purchases may involve only customary broker's commissions.
5. Lend to broker-dealers portfolio securities with an aggregate market
value in excess of 33-1/3% of its total assets.
6. As to 75% of the Fund's total assets, purchase securities of any
issuer, if immediately thereafter (i) more than 5% of the Fund's total
assets (taken at market value) would be invested in the securities of
such issuer, or (ii) more than 10% of the outstanding voting securities
of such issuer would be held by the Fund. This restriction does not
apply to any company of which the Fund is the sole beneficial owner or
securities acquired as part of a merger, acquisition of assets or other
reorganization.
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<PAGE>
7. Underwrite any issue of securities (except to the extent that the Fund
may be deemed to be an underwriter within the meaning of the Securities
Act of 1933 in the purchase of securities for investment or disposition
of restricted securities).
8. Borrow money, in excess of 33-1/3% of the value of its net assets
to increase holdings of portfolio securities.
9. Mortgage, pledge or otherwise encumber its assets except to secure
borrowing effected within the limitations set forth in restriction (8).
10. Issue senior securities. The Fund may (i) borrow money in accordance
with restrictions described above, (ii) enter into forward contracts,
(iii) purchase futures contracts on margin, (iv) issue multiple classes
of securities, and (v) enter into swap agreements or purchase
structured notes or similar instruments.
11. Make short sales of securities, except the Fund may engage in the
transactions permitted in these restrictions and under the Fund's
investment policies as set forth in its registration statement without
limitation.
12. Purchase any security on margin, except that it may obtain such
short-term credits as are necessary for clearance of securities
transactions and, may make initial or maintenance margin payments in
connection with options and futures contracts and options on future
contracts and borrowing effected within the limitations set forth in
these restrictions.
13. Invest more than 25% of the value of the Fund's total assets in the
securities of issuers having their principal business activities in the
same industry, except that this limitation does not apply to
obligations issued or guaranteed by the United States Government.
14. Participate on a joint or joint and several basis in any trading
account in securities, although transactions for the Fund and any other
account under common or affiliated management may be combined or
allocated between the Fund and such account.
15. Purchase participations or other interests (other than equity stock
interests) in oil, gas or other mineral, leases or exploration or
development programs.
16. Invest in real estate limited partnerships or in oil, gas or other
mineral leases.
18
<PAGE>
INVESTMENT ADVISORY SERVICES
The Adviser, Peregrine Asset Management (Hong Kong) Limited, manages the
investments of the Fund and provides the Fund with office space, facilities and
simple business equipment and provides the services of executive and clerical
personnel for administering its affairs pursuant to an Investment Advisory
Agreement ("Advisory Agreement") dated December 20, 1995. The Adviser
compensates all executive and clerical personnel and Trustees of the Trust if
such persons are employees or affiliates of the Adviser or its affiliates. The
Adviser's fee is computed daily and paid monthly at an annual rate of 1.00% of
average daily net assets. For the period from January 2, 1996 (commencement of
operations) to December 31, 1996, the Adviser was paid advisory fees of $96,866,
net of $111,437 voluntarily waived by the Adviser in order to cap the Fund's
expenses at 2% of average daily net assets. This limitation will be in effect
until December 31, 1997. Net assets of the Fund at December 31, 1996 were
$23,127,099.
Van Eck Associates Corporation, 99 Park Avenue, New York, New York ("Van Eck")
serves as portfolio administrator (the "Portfolio Administrator") for the Fund
pursuant to a Portfolio Accounting and Administrative Services Agreement dated
December 20, 1995. Van Eck is responsible for providing certain accounting and
administrative services, calculation of the Fund's NAV, and such other services
and assistance as the Fund may request. For the period from January 2, 1996
(commencement of operations) to December 31, 1996, the Fund paid or accrued
$74,950, to Van Eck as Portfolio Administrator of the Fund. At December 31,
1996, the Fund owed Van Eck $6,250 which is included in accounts payable.
Pursuant to the Advisory Agreement, the expenses borne by the Fund include: all
the charges and expenses of the transfer and dividend disbursing agent, the
custodian fees and expenses, legal counsel, auditors' and accounting fees and
expenses, brokerage commissions for portfolio transactions, taxes, if any, the
advisory fee and portfolio accounting and administrative fees, extraordinary
expenses, expenses of shareholders' and Trustees' meetings, expenses of
preparing, printing and mailing proxy statements, reports and other
communications to shareholders, expenses of preparing, setting in type and
mailing to current shareholders, prospectuses and periodic reports, expenses of
registering and qualifying shares for sale, fees and expenses of Trustees who
are not "interested persons" of the Adviser, membership dues of professional
associations, fidelity bond and errors and omissions insurance premiums, the
cost of maintaining the books and records of the Fund, and any other charges and
fees not specifically enumerated as an obligation of the Distributor, Adviser or
Portfolio Administrator.
The Advisory Agreement and the Portfolio Accounting and Administrative Services
Agreement were last approved at a meeting of the Board of Trustees held on March
15, 1996.
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<PAGE>
The Advisory Agreement provides that it shall continue in effect from year to
year as long as it is approved at least annually both (i) by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by the Trustees of the Trust, and (ii) in either event by a vote of
a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement may be
terminated on 60 days written notice by either party and will terminate
automatically in the event of an assignment within the meaning of the 1940 Act.
THE DISTRIBUTOR
Shares of the Fund are offered on a continuous basis and are distributed through
Van Eck Securities Corporation (the "Distributor"), a wholly-owned subsidiary of
the Portfolio Administrator. The Trustees of the Trust last approved the
Distribution Agreement appointing the Distributor as distributor of shares of
the Fund at a meeting held on March 15, 1996.
The Distribution Agreement provides that the Distributor will pay all fees and
expenses in connection with printing and distributing prospectuses and reports
for use in offering and selling shares of the Fund and preparing, printing and
distributing advertising or promotional materials. The Fund will pay all fees
and expenses in connection with registering and qualifying its shares under
federal and state securities laws.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities and other
investments for the Fund, the selection of brokers and dealers to effect the
transactions and the negotiation of brokerage commissions, if any. In
transactions on stock and commodity exchanges in the United States, these
commissions are negotiated, whereas on foreign stock and commodity exchanges
these commissions are generally fixed and are generally higher than brokerage
commissions in the United States. In the case of securities traded on the
over-the-counter markets, there is generally no stated commission, but the price
usually includes an undisclosed commission or markup. In underwritten offerings,
the price includes a disclosed fixed commission or discount.
In purchasing and selling the Fund's portfolio investments, it is the Adviser's
policy to obtain quality execution at the most favorable prices through
responsible broker-dealers. In selecting broker-dealers, the Adviser will
consider various relevant factors, including, but not limited to, the size and
type of the transaction; the nature and character of the markets for the
security or asset to be purchased or sold; the execution efficiency, settlement
capability and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
commissions.
The Adviser may cause the Fund to pay a broker-dealer who furnishes brokerage
and/or research services a commission that is in excess of the commission
another broker-dealer would have received for executing the transaction if it is
determined that such commission is reasonable in relation to the value of the
brokerage and/or research services which have been provided as defined in
20
<PAGE>
Section 28(e) of the Securities Exchange Act of 1934. Such research services may
include, among other things, analyses and reports concerning issuers,
industries, securities, economic factors and trends and portfolio strategy. Any
such research and other information provided by brokers to the Adviser are
considered to be in addition to and not in lieu of services required to be
performed by the Adviser under the Advisory Agreement with the Trust. The
research services provided by broker-dealers can be useful to the Adviser in
serving its other clients or clients of the Adviser's affiliates.
In executing portfolio transactions on behalf of the Fund, the Adviser may
utilize the services of the Distributor and other affiliated persons as broker
pursuant to procedures adopted by the Board of Trustees. The procedures are
designed to ensure that commissions paid are comparable to those charged by
other firms.
The Trustees will periodically review the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund and review the commissions paid by the Fund over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Fund.
Investment decisions for the Fund are made independently from those of the other
investment accounts managed by the Adviser and affiliated companies. Occasions
may arise, however, when the same investment decision is made for more than one
client's account. It is the practice of the Adviser to allocate such purchases
or sales insofar as feasible among its several clients or the clients of its
affiliates in a manner it deems equitable. The principal factors which the
Adviser considers in making such allocations are the relative investment
objectives of the clients, the relative size of the portfolio holdings of the
same or comparable securities, and the availability in the particular account of
funds for investment. Portfolio securities held by one client of the Adviser may
also be held by one or more of its other clients or by clients of its
affiliates. When two or more of its clients or clients of its affiliates are
engaged in the simultaneous sale or purchase of securities, transactions are
allocated as to amount in accordance with formulae deemed to be equitable as to
each client. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
When the Adviser places purchase and sale transactions on behalf of the Fund and
its own account or that of its affiliates, it will coordinate the trading in
such a manner that it is fair to the participants.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
For the period from January 2, 1996 (commencement of operations) to December 31,
1996, the Fund paid $197,276 in brokerage commissions. Of that amount, $18,129
or 9.19% was paid to Peregrine Brokerage Limited and Peregrine Futures (Hong
Kong) Limited, affiliates of the Adviser, representing 1.16% of all portfolio
transactions during the period. During the period ended December 31, 1996, the
Adviser reimbursed the Fund $58,340 in connection with a security transaction.
For the period from January 2, 1996 (commencement of operations) to December 31,
1996, the Fund paid $722 in commissions to broker-dealers providing research
services, representing 0.37% of total commissions paid; such payments involved
$97,073 in portfolio securities purchased and sold.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, the Fund will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser, such transactions are
advisable in light of a change in circumstances of a particular company within a
21
<PAGE>
particular industry or country, or in general market, economic or political
conditions. The Fund anticipates that its annual portfolio turnover rates will
not exceed 100%. For the period from January 2, 1996 (commencement of
operations) to December 31, 1996, the Fund's portfolio turnover rate was 61%.
The Adviser and related persons may, from time to time, buy and sell for their
own accounts securities recommended to clients for purchase or sale. The Adviser
recognizes that this practice may result in conflicts of interest. However, to
minimize or eliminate such conflicts, a Code of Ethics has been adopted by the
Adviser which requires that all trading in securities suitable for purchase by
client accounts must be approved in advance by a person familiar with purchase
and sell orders or recommendations. Approval will be granted if the security has
not been purchased or sold or recommended for purchase or sale on behalf of a
client account within five days; or if the security has been purchased or sold
or recommended for purchase or sale by a client account, it is determined that
the trading activity will not have a negative or appreciable impact on the price
or market of the security or the activity is of such a nature that it does not
present the dangers or potential for abuses or is likely to result in harm or
detriment to a client account. At the end of each calendar quarter, all related
personnel of the Adviser are required to file a report of all transactions
entered into during the quarter. These reports are reviewed by a senior officer
of the Adviser.
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust, their addresses, positions with the
Trust, age and principal occupations during the past five years are set forth
below:
TRUSTEES:
@#+ROGER O. BROWN (71) - TRUSTEE
2 North LaSalle, Chicago, IL 60602; Founding President and Chief Executive
Officer (1976-1990) and Retired President (1991 to Present) of Harris
Associates, Inc.; Director, Thresholds, since 1971; and Director, United
Communications Corporation, since 1960.
@#$*GARY GREENBERG (43) - TRUSTEE
11/F New World Tower II, 16-18 Queen's Road, Central, Hong Kong; President of
the Trust and Portfolio Manager of the Fund since the Fund commenced operations;
Chief Investment Officer and Deputy Managing Director of Peregrine Asset
Management (Hong Kong) Limited, which he joined in July, 1994; director of an
offshore investment company advised by the Adviser; Co-manager of the Acorn
International Fund and principal and portfolio manager of Wanger Asset
Management from 1992 to 1994; and an international securities analyst with
Harris Associates L.P. (investment adviser) from 1989 to 1992.
@+WESLEY G. MCCAIN (54) - TRUSTEE
144 East 30th Street, New York, NY 10016; Chairman and Owner, Towneley Capital
Management, Inc. (investment adviser); Chairman, Eclipse Financial Asset Trust
(mutual fund); Chairman and Owner, Eclipse Financial Services, Inc.; General
Partner, Pharaoh Partners, L.P.; Principal, Pharaoh Partners (Cayman) LDC;
President, Millbrook Associates, Inc.(investment adviser); Trustee, Libre Group
Trust; Former Director, International Investors Incorporated; Former Chairman
and Owner, Finacor, Inc. (financial services); and Trustee of investment
companies advised by Van Eck.
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<PAGE>
*BRUCE SETON (52) - TRUSTEE
11/F New World Tower II, 16-18 Queen's Road, Central, Hong Kong; Executive Vice
President of the Trust. Chief Executive Officer of Peregrine Asset Management
(Hong Kong) Limited, owner of 5% of the holding company of Peregrine Asset
Management (Hong Kong) Limited and executive director of other offshore
investment companies advised by the Adviser. Prior to joining Peregrine in 1994,
Mr. Seton spent twenty-two years at Gartmore Investment Limited managing funds
which emphasize Asian emerging market investments.
#+RICHARD STAMBERGER (37) - TRUSTEE
888 17th Street, N.W., Washington, D.C. 20006; Principal, National Strategies,
Inc., a public policy firm in Washington, D.C.; Partner and Co-founder, Quest
Partners, L.L.C. (management consulting firm) since 1988; Executive Vice
President, Chief Operating Officer and a Director of NuCable Resources
Corporation (technology firm/since 1988); associated with Anderson Benjamin &
Reed, a regulatory consulting firm based in Washington, D.C. (1985-1986); White
House Fellow-Office of Vice President (1984-1985); Director of Special Projects,
National Cable Television Association (1983-1984); and Trustee of investment
companies advised by Van Eck.
+THOMAS C. THEOBALD (59) - TRUSTEE
222 W. Adams Street, Chicago, IL 60606; Director, Private Investor/Corporate
Director (1994 to Present); Chairman, Continental Bank Corporation (1987 to
1994); Partner, William Blair Capital Partners; Director, Enron Global Power &
Pipelines, L.L.C.; Director, Xerox Corporation; Director, Anixter International
Corporation; Director, Stein Roe Funds; Director, LaSalle Income & Growth Fund;
Director, MacArthur Foundation; Advisory Board member, GFTA (builder of models
for foreign exchange, Dusseldorf, Germany); Trustee, Mutual Life Insurance
Company of New York; and Trustee, Northwestern University.
- ----------
An "interested person" as defined in the 1940 Act.
@ Member of Executive Committee - exercises general powers of the Board of
Trustees between meetings of the Board.
# Member of Nominating Committee.
+ Member of Audit Committee - reviews fees, services, procedures, conclusions
and recommendations of independent auditors.
$ Member of Pricing Committee.
OFFICERS:
AUREOLE FOONG (35) - 11/F New World Tower II, 16-18 Queen's Road, Central, Hong
Kong - Vice President of the Trust. Director of Peregrine Asset Management (Hong
Kong) Limited since 1994; prior thereto, Senior Vice President at Unifund, a
Geneva-based private investment company from 1990 to 1994.
LILLIAN WONG (37) - 11/F New World Tower II, 16-18 Queens Road, Central, Hong
Kong - Treasurer of the Trust. Assistant Director of Peregrine Asset Management
(Hong Kong)Limited; prior to joining Peregrine Asset Management (Hong Kong)
Limited in 1995, Senior Manager at Core Pacific, a Taiwan-based broker, from
1994 to 1995; Senior Manager at Fantastic, a family business, from 1990 to 1994.
Ms. Wong has over 16 years experience in accounting and administration, more
than 10 of which were in the investment management industry.
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<PAGE>
THADDEUS LESZCZYNSKI (50) - 99 Park Avenue, New York, NY 10016 - Secretary of
the Trust. An officer of Van Eck and investment companies advised by Van Eck.
BRUCE SMITH (41) - 99 Park Avenue, New York, NY 10016 - Assistant Treasurer of
the Trust and a member of the Pricing Committee. An officer of Van Eck and
investment companies advised by Van Eck.
The Trustees of the Trust who are not "interested" persons of the Trust (as
defined in the 1940 Act) each receive an annual retainer of $10,000, and are
reimbursed for expenses in attending Board of Trustees' meetings. During the
period from January 2, 1996 (commencement of operations) through December 31,
1996, no Trustee or executive officer of the Trust or any affiliated person of
the Trust received annual compensation from the Fund in excess of $60,000.
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement Estimated From the Fund
Aggregate Benefits Accrued Annual and Fund
Name of Person, Compensation As Part of Fund Benefits Upon Complex Paid
Position From the Fund Expenses Retirement to Trustees
<S> <C> <C> <C> <C>
Roger O. Brown $10,000 $0 $0 $10,000
Trustee
Gary Greenberg $0 $0 $0 $0
Trustee
Wesley G. McCain $10,000 $0 $0 $10,000
Trustee
Bruce Seton $0 $0 $0 $0
Trustee
Richard Stamberger $10,000 $0 $0 $10,000
Trustee
Thomas C. Theobald $10,000 $0 $0 $10,000
Trustee
</TABLE>
As of April 18, 1997, all officers and Trustees as a group owned approximately
8.57% of the outstanding shares of the Fund.
The following persons owned over 5% of the Fund's outstanding shares as of April
18, 1997:
NUMBER OF NATURE OF PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OWNED
Peregrine Nominees Ltd. 1,606,016.477 Beneficial 80.25%
11/F, New World Tower II
16-18 Queens Road
Hong Kong
Thomas C. Theobald 141,598.940 Beneficial 7.08%
222 W. Adams Street
Chicago, Illinois 60606
As a result of its ownership of over 25% of the Fund's shares, Peregrine
Nominees Ltd., organized under the laws of Hong Kong and an indirect subsidiary
of Peregrine Investments Holdings Limited, is considered a "control person" of
the Fund. A "control Person" could effectively control the outcome of a
shareholder vote of the Fund. The impact of this control is significantly
lessened, however, because the Fund does not expect to hold annual shareholders'
meetings. However, the Trustees of the Fund are required to call a special
meeting of the shareholders of the Fund upon written request of the holders of
at least 10% of the outstanding shares of the Fund, and the shareholders may,
among other actions, terminate the Adviser at such a meeting.
VALUATION OF SHARES
The net asset value per share of the Fund is computed by dividing the value of
all of the Fund's securities plus cash and other assets, less liabilities, by
the number of shares outstanding. The net asset value per share is computed as
of the close of the NYSE, Monday through Friday, exclusive of national business
holidays. The Fund will be closed on the following national business holidays:
New Years Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas.
The net asset value need not be computed on a day in which no orders to
purchase, sell or redeem shares of the Fund have been received.
The value of a financial futures or commodity futures contract equals the
unrealized gain or loss on the contract that is determined by marking it to the
current settlement price for a like contract acquired on the day on which the
commodity futures contract is being valued. A settlement price may not be used
if the market makes a limit move with respect to a contract. Securities or
futures contracts for which market quotations are readily available are valued
at market value, which is currently determined using the last reported sale
price. If no sales are reported, as in the case of most securities traded
over-the-counter, securities are valued at the mean of their bid and asked
prices at the close of trading on the NYSE. Short-term investments having a
maturity of 60 days or less are valued at amortized cost, which approximates
market. Options are valued at the last sales price unless the last sales price
does not fall within the bid and ask prices at the close of the market, in which
case the mean of the bid and ask prices is used. All other securities are valued
at their fair value as determined in good faith by the Board of Trustees.
24
<PAGE>
Foreign securities or futures contracts quoted in foreign currencies are valued
at appropriately translated foreign market closing prices or as the Board of
Trustees may prescribe.
Generally, trading in foreign securities and futures contracts, as well as
corporate bonds, U.S. Government securities and money market instruments is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in determining the net asset value of
the shares of the Fund may be computed as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the NYSE.
Occasionally, events affecting the value of such foreign securities and foreign
exchange rates may occur between such times and the close of the NYSE which will
not be reflected in the computation of the Fund's net asset values. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by the Trustees.
TAX-SHELTERED RETIREMENT PLANS
The Trust does not offer a prototype tax-sheltered retirement plan. However,
banks, broker- dealers and other financial intermediaries may offer such plans
through which shares of the Fund may be purchased. These plans include:
Individual Retirement Accounts (IRAs) and Spousal IRAs (SPIRAs); qualified
pension plans; and 403(b)(7) programs. Persons who wish to establish a
tax-sheltered retirement plan should consult their financial institutions as to
the availability of such plans, their own tax advisers or attorneys regarding
their eligibility to do so and the laws applicable thereto, such as the
fiduciary responsibility provisions and diversification requirements, and the
reporting and disclosure obligations under the Employee Retirement Income
Security Act of 1974. The Trust is not responsible for compliance with such
laws. Further information regarding the retirement plans, including applications
and fee schedules, may be obtained upon request to the Fund.
The rules regarding retirement plans are complex. Individuals and their
employers should consult with their tax advisers and legal counsel regarding the
advantages and disadvantages of the different plans.
25
<PAGE>
INVESTMENT PROGRAMS
DIVIDEND REINVESTMENT PLAN. Reinvestments of dividends of the Fund will occur on
a date selected by the Board of Trustees.
26
<PAGE>
TAXES
TAXATION OF THE FUND -- IN GENERAL
The Fund intends to qualify and elect to be treated each taxable year as a
"regulated investment company" under Subchapter M of the Code. To so qualify,
the Fund must, among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of any of the following which was held less than three months (the
"30% test"): (i) short sales of securities; (ii) stock or securities; (iii)
options, futures or forward contracts (other than on foreign currencies); or
(iv) foreign currencies (or options, futures or forward contracts on foreign
currencies) but only if such currencies (or options, futures or forward
contracts) are not directly related to the Fund's principal business of
investing in stock or securities; and (c) satisfy certain diversification
requirements.
As a regulated investment company, the Fund will not be subject to federal
income tax on its net investment income and capital gain net income (capital
gains in excess of its capital losses) that it distributes to shareholders if at
least 90% of its net investment income and short-term capital gains for the
taxable year are distributed. However, if for any taxable year the Fund does not
satisfy the requirements of Subchapter M of the Code, all of its taxable income
will be subject to tax at regular corporate rates without any deduction for
distribution to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of the Fund's current or
accumulated earnings or profits.
The Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid this tax, during each calendar year the Fund must
distribute (i) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (ii) at least 98% of its capital
gain net income for the twelve month period ending on October 31 (or December
31, if the Fund so elects), and (iii) any portion (not taxed to the Fund) of the
2% balance from the prior year. The Fund intends to make sufficient
distributions to avoid this 4% excise tax.
TAXATION OF THE FUND'S INVESTMENTS
ORIGINAL ISSUE DISCOUNT. For federal income tax purposes, debt securities
purchased by the Fund may be treated as having an original issue discount.
Original issue discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption price at
maturity of a debt obligation over the issue price. Original issue discount is
treated for federal income tax purposes as income earned by the Fund, whether or
not any income is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of original issue
discount included in the income of the Fund each year is determined on the basis
of a constant yield to maturity which takes into account the compounding of
accrued interest.
Debt securities may be purchased by the Fund at a discount which exceeds the
original issue discount remaining on the securities, if any, at the time the
Fund purchased the securities. This additional discount represents market
27
<PAGE>
discount for income tax purposes. In the case of any debt security issued after
July 18, 1984, having a fixed maturity date of more than one year from the date
of issue and having market discount, the gain realized on disposition will be
treated as interest to the extent it does not exceed the accrued market discount
on the security (unless the Fund elects to include such accrued market discount
in income in the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Fund may be required to capitalize,
rather than deduct currently, part or all of any direct interest expense
incurred or continued to purchase or carry any debt security having market
discount, unless it makes the election to include market discount currently.
Because the Fund must include original issue discount in income, it will be more
difficult for the Fund to make the distributions required for it to maintain its
status as a regulated investment company under Subchapter M of the Code or to
avoid the 4% excise tax described above.
OPTIONS AND FUTURES TRANSACTIONS. Certain of the Fund's investments may be
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Fund's income for purposes of the 90% test, the 30% test, the
excise tax and the distribution requirements applicable to regulated investment
companies, (ii) defer recognition of realized losses, and (iii) characterize
both realized and unrealized gain or loss as short-term or long-term gain or
loss. Such provisions may apply to options and futures contracts. The extent to
which the Fund makes such investments may be materially limited by these
provisions of the Code.
FOREIGN CURRENCY TRANSACTIONS. Under Section 988 of the Code, special rules are
provided for certain foreign currency transactions. Foreign currency gains or
losses from foreign currency contracts (whether or not traded in the interbank
market), from futures contracts that are not "regulated futures contracts" and
from unlisted options are treated as ordinary income or loss under Section 988.
The Fund may elect to have foreign currency-related regulated futures contracts
and listed options subject to ordinary income or loss treatment under Section
988. In addition, in certain circumstances, the Fund may elect capital gain or
loss for foreign currency transactions. The rules under Section 988 may also
affect the timing of income recognized by the Fund.
TAXATION OF THE SHAREHOLDERS
Distributions of net investment income and the excess of net short-term capital
gain over net long-term capital loss are taxable as ordinary income to
shareholders. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Any loss realized upon a taxable
disposition of shares within six months from the date of their purchase will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received by shareholders during such period.
Distributions of net investment income and capital gain net income will be
taxable as described above, whether received in cash or reinvested in additional
shares. When distributions are received in the form of shares issued by the
Fund, the amount of the distribution deemed to have been received by
participating shareholders is the fair market value of the shares received
rather than the amount of cash which would otherwise have been received. In such
a case, participating shareholders will have a basis for federal income tax
purposes in each share received from the Fund equal to the fair market value of
such share on the payment date.
28
<PAGE>
Distributions by the Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain as described above,
even though, from an investment standpoint, it may constitute a partial return
of capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a distribution will then receive
a return of their investment upon distribution which will nevertheless be
taxable to them.
Income received by the Fund may give rise to withholding and other taxes imposed
by foreign countries. If more than 50% of the value of the Fund's assets at the
close of a taxable year consists of securities of foreign corporations, the Fund
may make an election that will permit an investor to take a credit (or, if more
advantageous, a deduction) for foreign income taxes paid by the Fund, subject to
limitations contained in the Code. If the Fund satisfies this requirement, the
Fund will make such an election. As an investor, you would then include in gross
income both dividends paid to you and the foreign taxes paid by the Fund on its
foreign investments. The Fund cannot assure investors that they will be eligible
for the foreign tax credit. The Fund will advise shareholders annually of their
share of any creditable foreign taxes paid by the Fund.
The Fund may be required to withhold federal income tax at a rate of 31% from
dividends made to any shareholder who fails to furnish a certified taxpayer
identification number ("TIN") or who fails to certify that he or she is exempt
from such withholding or who the Internal Revenue Service notifies the Fund as
having provided the Fund with an incorrect TIN or failed to properly report for
federal income tax purposes. Any such withheld amount will be fully creditable
on each shareholder's individual federal income tax return.
The foregoing discussion is a general summary of certain of the current federal
income tax laws affecting the Fund and investors in Fund shares. The discussion
does not purport to deal with all of the federal income tax consequences
applicable to the Fund, or to all categories of investors, some of which may be
subject to special rules. Investors should consult their own advisors regarding
the tax consequences to them, including state and local tax consequences of
investment in the Fund.
REDEMPTIONS IN KIND
The Fund has elected to have the ability to redeem its shares in kind,
committing itself to pay in cash all requests for redemption by any shareholder
of record limited in amount with respect to each shareholder of record during
any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of the net asset
value of such company at the beginning of such period.
PERFORMANCE
The Fund may advertise performance in terms of average annual total return for
1, 5 and 10 year periods, or for such lesser periods as the Fund has been in
existence. Average annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
29
<PAGE>
================================================================================
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10
year periods at the end of the year or period;
================================================================================
The calculation assumes all dividends and distributions by the Fund are
reinvested at the price stated in the Prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
The Fund may also advertise performance in terms of aggregate total return.
Aggregate total return for a specified period of time is determined by
ascertaining the percentage change in the net asset value of shares of the Fund
initially acquired assuming reinvestment of dividends and distributions and
without giving effect to the length of time of the investment according to the
following formula:
================================================================================
[(B-A)(PI)A](100) = ATR
Where A = initial investment
B = value at end of period
ATR = aggregate total return
================================================================================
The calculation assumes all distributions by the Fund are reinvested at the
price stated in the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
The Fund's aggregate total return for the period from January 2, 1996
(commencement of operations) to December 31, 1996 was 16.0%.
ADVERTISING PERFORMANCE
As discussed in the Fund's Prospectus, the Fund may quote performance results
from recognized publications which monitor the performance of mutual funds, and
the Fund may compare its performance to various published historical indices.
These publications are listed in Part B of theAppendix. In addition, the Fund
30
<PAGE>
may quote and compare its performance to the performance of various economic and
market indices and indicators, such as the S&P 500, Financial Times Index,
Morgan Stanley Capital International Europe, Australia, Far East Index, Morgan
Stanley Capital International World Index, Morgan Stanley Capital International
Combined Far East (ex-Japan) Free Index, Salomon Brothers World Bond Index,
Salomon Brothers World Government Bond Index, GNP and GDP data. Descriptions of
these indices are provided in Part B of the Appendix.
ADDITIONAL INFORMATION
CUSTODIAN. The Chase Manhattan Bank is the custodian of the Trust's portfolio
securities, cash, coins and bullion. The custodian is authorized, upon the
approval of the Trust, to establish credits or debits in dollars or foreign
currencies with, and to cause portfolio securities of the Fund to be held by its
overseas branches or subsidiaries, and foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the Securities and Exchange Commission.
TRANSFER AGENT. DST Systems, Inc., 1004 Baltimore, Kansas City, Missouri
64105-1802, serves as transfer, dividend disbursing and shareholder servicing
agent for the Fund.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York 10036, are the independent accountants for the Fund.
COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036, serves as counsel to the Trust.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for the period from January 2, 1996
(commencement of operations) to December 31, 1996, with related footnotes, are
incorporated herein by reference from the Fund's Annual Report to Shareholders
for the period from January 2, 1996 (commencement of operations) through
December 31, 1996, as filed with the Securities and Exchange Commission, and are
available at no charge upon written or telephone request to the Trust at the
address or telephone number set forth on the first page of this Statement of
Additional Information.
31
<PAGE>
APPENDIX
PART A.
CORPORATE BOND RATINGS
Description of Moody's Investors Service, Inc. corporate bond ratings:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high quality bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be greater or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Description of Standard & Poor's Corporation corporate bond ratings;
AAA -- Bonds rated AAA have the highest rating assigned by S&P to debt
obligations. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
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<PAGE>
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
PREFERRED STOCK RATINGS
Moody's Investors Service, Inc. describes its preferred stock ratings as:
aaa - An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of convertible preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba - An issue which is rated ba is considered to have speculative elements,
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safe-guarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa - An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payment.
ca - An issue which is rated ca is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.
c - This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard & Poor's Corporation describes its preferred stock ratings as:
AAA - This is the highest rating that may be assigned by S&P to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations.
33
<PAGE>
AA - A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effect of
changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B, CCC - Preferred stocks rated BB, B, and CCC are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. BBB indicates the lowest degree of speculation and
CCC the highest degree of speculation. While such issues will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
SHORT-TERM DEBT RATINGS
Description of Moody's short-term debt ratings:
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries, higher rates of return
of funds employed, conservative capitalization structure with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3--Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime--Issuers rated Not Prime do not fall within any of the Prime rating
categories.
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<PAGE>
Description of S&P's short-term debt ratings:
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B--Issues rated B are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
PART B
The publications and services from which the Fund will quote performance are:
Micropal, Ltd. (an international investment fund information service), Fortune,
Changing Times, Money, U.S. News & World Report, Money Fund Scorecard,
Morningstar, Inc., Business Week, Institutional Investor, The Wall Street
Journal, Wall Street Transcripts, The New York Post, Investment Company
Institute publications, The New York Times, Barron's, Forbes, Research,
Donaghues Money Fund Report, Donaghue's Money Letter, The Economist, FACS, FACS
of the Week, Financial Planning, Investment Daily, Johnson's Charts, Mutual Fund
Profiles (S&P), Powell Monetary Analysis, Sales & Marketing Management, Life,
Black Enterprise, Fund Action, Speculators Magazine, Time, NewsWeek, U.S.A.
Today, Wiesenberger Investment Service, Mining Journal Quarterly, Mining Journal
Weekly, Northern Miner, Gold Gazette, George Cross Newsletter, Engineering and
Financial Times, Journal of Commerce, Mikuni's Credit Ratings, Money Market
Directory of Pension Funds, Oil and Gas Journal, Pension Funds and Their
Advisers, Investment Company Data, Inc., Mutual Funds Almanac, Callan
Associates, Inc., Media General Financial Services, Financial World, Pensions &
Investment Age, Registered Investment Advisors, Aden Analysis, Baxter Weekly,
Congressional Yellow Book, Crain's New York Business, Survey of Current
Business, Treasury Bulletin, U.S. Industrial Outlook, Value Line Survey, Bank
Credit Analyst, S&P Corporation Records, Euromoney, Moody's, Investment Dealer's
Digest, Financial Mail, Financial Post, Futures, Grant's Interest Rate Observer,
Institutional Investor, International Currency Review, International Bank Credit
Analyst, Investor's Daily, German Business Weekly, GATT Trade Annual Report, and
Dimensional Fund Advisers, Inc.
Market Index Descriptions
FINANCIAL TIMES INDEX: A capitalization-weighted index of securities traded on
the London Stock Exchange. It is calculated on a total return basis with
dividends reinvested.
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<PAGE>
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX (US$
TERMS): An arithmetic, market value-weighted average of the performance of over
1,079 companies listed on the stock exchanges of Europe, Australia, New Zealand
and the Far East. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX (US$ TERMS): An arithmetic,
market value-weighted average of the performance of over 1,515 companies listed
on the stock exchanges of the following countries: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. The index is calculated
on a total return basis, which includes reinvestment of gross dividends before
deduction of withholding taxes. The combined market capitalization of these
countries represents approximately 60% of the aggregate market value of the
stock exchanges of the above 22 countries.
MORGAN STANLEY CAPITAL INTERNATIONAL COMBINED FAR EAST EX-JAPAN FREE INDEX: An
arithmetic, market value-weighted average of the performance of companies listed
on the stock exchanges of the following countries: Hong Kong, Indonesia, Korea
(Korea is included at 20% of its market capitalization in the Combined Free
Index), Malaysia, Philippines, Singapore and Thailand. The combined market
capitalization of these countries represents approximately 60% of the aggregate
market value of the stock exchanges of the above seven countries.
SALOMON BROTHERS WORLD BOND INDEX (US$ TERMS): Measures the total return
performance of high quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
Australian Dollars, Canadian Dollars, European Currency Units, French Francs,
Japanese Yen, Netherlands Guilder, Swiss Francs, UK Pounds Sterling, US Dollars
and German Deutsche Marks. Only high-quality, straight issues are included. The
index is calculated on both a weighted basis and an unweighted basis. Generally,
index samples for each market are restricted to bonds with at least five years'
remaining life.
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (US$ TERMS): The WGBI includes the
Government bonds markets of the United States, Japan, Germany, France, the
United Kingdom, Canada, Italy, Australia, Belgium, Denmark, the Netherlands,
Spain, Sweden and Austria. Country eligibility is determined based on market
capitalization and investability criteria. A market's eligible issues must total
at least US$20 billion, (Y)2.5 trillion and DM30 billion for three consecutive
months for the market to be considered eligible foR inclusion. Once a market
satisfies this criteria, it will be added at the end of the following quarter.
Guidelines by which a market may be excluded from the index have also been
established. A market will be excluded if the market capitalization of eligible
issues falls below half of all of the entry levels for six consecutive months.
Once again, the market will be removed at the end of the following quarter. In
addition, market entry barriers are a reason for exclusion despite meeting the
size criteria (for example, if a market discourages foreign investor
participation).
GROSS DOMESTIC PRODUCT: The market value of all final goods and services
produced by labor and property supplied by residents of a country in a given
period of time, usually one year. Gross Domestic Product ("GDP") comprises (1)
purchases of persons, (2) purchases of governments (Federal, State & Local), (3)
gross private domestic investment (includes change in business inventories), and
36
<PAGE>
(4) international trade balance from exports. Nominal GDP is expressed in 1993
dollars. Real GDP is adjusted for inflation and is currently expressed in 1987
dollars. Gross National Product (GNP) also includes the above components of GDP
of foreign subsidiaries of domestic companies.
37
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements included in Parts A and B:
Part A
Financial Highlights table for the period from
January 2, 1996 (commencement of operations)
through December 31, 1996 (audited).
Part B
The following audited financial statements of the Fund are
included in the Fund's Annual Report to Shareholders for the
period from January 2, 1996 (commencement of operations)
through December 31, 1996, filed with the Securities and
Exchange Commission under Section 30(b)(1) of the Investment
Company Act of 1940, and have been incorporated in Part B
hereof by reference:
1. Investment Portfolio at December 31, 1996 and
related notes thereto.
2. Statement of Assets and Liabilities for the
Fund as of December 31, 1996, and related notes
thereto.
3. Statement of Operations for the Fund for the
period January 2, 1996 (commencement of
operations) through December 31, 1996, and related
notes thereto.
4. Statement of Changes in Net Assets for the Fund
for the period January 2, 1996 (commencement of
operations) through December 31, 1996, and related
notes thereto.
5. Financial Highlights for the period January 2,
1996 (commencement of operations) through December
31, 1996.
6. Report of Independent Accountants.
b) Exhibits (An * denotes inclusion in this filing)
(1) (a) Form of Master Trust Agreement (incorporated
by reference to the Registration Statement filed
on November 13, 1995) (b) Master Trust Agreement
(incorporated by reference to Pre- Effective
Amendment No. 2 filed on December 28, 1995)
<PAGE>
(c) First Amendment to the Master Trust Agreement
changing Fund name to Asia Pacific Growth Fund
(incorporated by reference to Post-Effective
Amendment No. 1 filed on August 15, 1996)
(2) (a) Form of By-Laws of the Registrant
(incorporated by reference to the Registration
Statement filed on November 13, 1995) (b) By-Laws
of the Registrant (incorporated by reference to
Pre- Effective Amendment No. 2 filed on December
28, 1995)
(3) Not Applicable
(4) Not Applicable
(5) (a) Form of Investment Advisory Agreement
(incorporated by reference to the Registration
Statement filed on November 13, 1995) (b)
Investment Advisory Agreement made between
Peregrine Asset Management (Hong Kong) Limited and
Peregrine Funds (incorporated by reference to
Pre-Effective Amendment No. 2 filed on December
28, 1995)
(6) (a) Form of Distribution Agreement (incorporated
by reference to the Registration Statement filed
on November 13, 1995) (b) Distribution Agreement
made between Peregrine Funds and Van Eck
Securities Corporation (incorporated by reference
to Pre-Effective Amendment No. 2 filed on December
28, 1995)
(7) Not Applicable
(8) (a) Form of Global Custody Agreement (incorporated
by reference from the Registration Statement filed
on November 13, 1995) (b) Global Custody Agreement
made between The Chase Manhattan Bank, N.A. and
Peregrine Funds (incorporated by reference to
Post-Effective Amendment No. 2 filed on August 15,
1996
(9) (a) Form of Transfer Agency Agreement
(incorporated by reference to the Registration
Statement filed on November 13, 1995) (b) Form of
Portfolio Accounting and Administrative Services
Agreement (incorporated by reference to the
Registration Statement filed on November 13, 1995)
(c) Portfolio Accounting and Administrative
Services Agreement between Peregrine Funds and Van
Eck Associates Corporation (incorporated by
reference to Pre-Effective Amendment No. 2 filed
on December 28, 1995)
<PAGE>
(10) Opinion of Mayer, Brown & Platt (incorporated by
reference to Pre-Effective Amendment No. 2 filed
on December 28, 1995)
(11)* Consent of Price Waterhouse LLP, independent
accountants
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16)* Performance Calculation
(18) Powers of Attorney (incorporated by reference to
Pre-Effective Amendment No. 2 filed on December
28, 1995)
(27)* Financial Data Schedule
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Set forth below are the number of record holders, as of April 18, 1997, of
each class of securities of the Registrant:
Number of
Title or Class Record Holders
-------------- --------------
Shares of beneficial interest 21
of Asia Pacific Growth Fund
ITEM 27. INDEMNIFICATION
Reference is made to Article VI of the Master Trust Agreement of the
Registrant filed as Exhibit (1) to Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the Form ADV of Peregrine Asset Management (Hong Kong)
Limited, File No. 801-48793, as currently on file with the Securities and
Exchange Commission, and to the caption "Management and Administration" in the
Registrant's Prospectus and to the captions "The Distributor" and "Trustees and
Officers" in the Registrant's Statement of Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) and (b) The business and other connections of the principal underwriter
is listed in the Form BD of Van Eck Securities Corporation as currently on file
with the NASD -File number 2269 and the SEC - File No. 8-4618.
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The following table sets forth information as to the location of accounts,
books and other documents required to be maintained pursuant to Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated thereunder (17 CFR
270.31a-1 to 31a-3).
ACCOUNTS, BOOKS AND DOCUMENTS
LISTED BY REFERENCE TO
SPECIFIC SUBSECTION OF
17 CFR 270 31A-1 TO 31A-3 PERSON IN POSSESSION AND ADDRESS
- ------------------------- --------------------------------
31a-1(b)(1) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(i) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(ii) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
Van Eck Associates Corporation
31a-1(b)(2)(iii) 99 Park Avenue
New York, NY 10016
31a-1(b)(2)(iv) DST Systems Inc.
21 West Tenth Street
Kansas City, MO 64105
31a-1(b)(3) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
<PAGE>
ACCOUNTS, BOOKS AND DOCUMENTS
LISTED BY REFERENCE TO
SPECIFIC SUBSECTION OF
17 CFR 270 31A-1 TO 31A-3 PERSON IN POSSESSION AND ADDRESS
- ------------------------- --------------------------------
31a-1(b)(4) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(5) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-1(b)(6) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(7) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(8) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-1(b)(9) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-1(b)(10) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-1(b)(11) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
<PAGE>
ACCOUNTS, BOOKS AND DOCUMENTS
LISTED BY REFERENCE TO
SPECIFIC SUBSECTION OF
17 CFR 270 31A-1 TO 31A-3 PERSON IN POSSESSION AND ADDRESS
- -------------------------- --------------------------------
31a-1(c) Not Applicable
31a-1(d) Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-1(e) Not Applicable
31a-1(f) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-2(a)(1) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
DST Systems, Inc.
21 West Tenth Street
Kansas City, MO 64105
Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-2(a)(2) Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
<PAGE>
ACCOUNTS, BOOKS AND DOCUMENTS
LISTED BY REFERENCE TO
SPECIFIC SUBSECTION OF
17 CFR 270 31A-1 TO 31A-3 PERSON IN POSSESSION AND ADDRESS
- ------------------------- --------------------------------
31a-2(a)(3) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-2(b) Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-2(c) Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-2(d) Peregrine Asset Management
(Hong Kong) Limited
11/F New World Tower II
16-18 Queen's Road Central
Hong Kong
31a-2(e) Not Applicable
31a-3 Not Applicable
ITEM 31. MANAGEMENT SERVICES
All management related service contracts entered into by or for Asia
Pacific Growth Fund are described in Parts A and B of this Registration
Statement.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the latest Annual Report to Shareholders upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485 (b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, and State
of New York, on the 30th day of April, 1997.
The Registrant represents that this Post-Effective Amendment is filed
solely for one or more of the purposes set forth in paragraph (b)(1) of Rule 485
under the Securities Act of 1933 and that no material event requiring disclosure
in the prospectus, other than one listed in paragraph (b)(1) of such Rule or one
for which the Commission has approved a filing under paragraph (b)(1)(ix) of the
Rule, has occurred since the latest of the following three dates: (i) the
effective date of the Registrant's Registration Statement; (ii) the effective
date of the Registrant's most recent Post-Effective Amendment to its
Registration Statement which included a prospectus; or (iii) the filing date of
a post-effective amendment filed under paragraph (a) of Rule 485 which has not
become effective.
PEREGRINE FUNDS
BY: /S/ THADDEUS LESZCZYNSKI
Thaddeus Leszczynski
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ GARY GREENBERG* Trustee and President 4/30/97
Gary Greenberg
/S/ ROGER O. BROWN Trustee 4/30/97
Roger O. Brown
/S/ WESLEY G. MCCAIN* Trustee 4/30/97
Wesley G. McCain
/S/ BRUCE SETON Trustee 4/30/97
Bruce Seton
/S/ RICHARD STAMBERGER* Trustee 4/30/97
Richard Stamberger
/S/ THOMAS C. THEOBALD Trustee 4/30/97
Thomas C. Theobald
*Executed on behalf of the Trustee by Thaddeus Leszczynski, attorney-in-fact.
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. ITEM
- ----------- ----
Exhibit 11 Consent of Price Waterhouse LLP
Exhibit 16 Performance calculation
Exhibit 17 Financial Data Schedule
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 2 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 25, 1997, relating to the financial
statements and financial highlights appearing in the December 31, 1996 Annual
Report to Shareholders of Asia Pacific Growth Fund (the portfolio constituting
Peregrine Funds), which is also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in the Prospectus and under the
heading "Additional Information" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
April 30, 1997
PEREGRINE ASIA PACIFIC GROWTH FUND
DATE NAV
---- ----
PEREGRINE ASIA PACIFIC GROWTH FUND
1996 PERFORMANCE
# of Shares
Starting NAV 10 1
Div.* 0.08 1.007
Short Term Gain* 0.21 1.0256
Year End NAV 11.31 11.59954
Total Return 1996 16.00%
*Reinvest NAV 11.31
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<NAME> Asia Pacific Growth
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-02-1996
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<INVESTMENTS-AT-COST> 17,090,083
<INVESTMENTS-AT-VALUE> 17,894,519
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