<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. [_]
VAN ECK FUNDS
(Exact Name of Registrant as Specified in Charter)
99 Park Avenue, New York, New York 10016
(Address of Principal Executive Offices)
212-687-5200
(Registrant's Telephone Number)
Thaddeus Leszczynski, Esq.
Van Eck Associates Corporation
99 Park Avenue, New York, New York 10016
(Name and Address of Agent for Service)
Copy to: Philip H. Newman, Esq., Goodwin Procter & Hoar
Exchange Place, Boston, Massachusetts 02109
__________________________________________________________________
Approximate Date of Proposed Public Offering: As soon as practicable after
the registration statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on the thirtieth day
after the date of filing pursuant to Rule 488 under the Securities Act of 1933.
No filing fee is required because the Registrant has heretofore declared
its intention to register an indefinite number of shares of beneficial interest,
$.001 par value, of the Asia Dynasty Fund series, pursuant to Rule 24f-2(a)(1)
under the Investment Company Act of 1940, as amended (the "Act"). A Rule 24f-2
Notice was filed on or about February 24, 1995 for the Registrant.
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VAN ECK FUNDS
Cross-Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
Form N-14 Item No. Location in Proxy Statement/Prospectus
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Part A
1. Cover Page of Registration Statement; Prospectus Cover Page
2. Table of Contents
3. Synopsis; Special Considerations and Risk Factors
4. Synopsis, The Reorganization
5. Prospectus Cover Page; Synopsis; Asia Dynasty Fund and
Additional Information
6. Prospectus Cover Page; Synopsis; Asia Infrastructure Fund;
Additional Information
7. Notice of Special Meeting; Introduction; Synopsis; The
Reorganization; Asia Dynasty Fund; Asia Infrastructure
Fund; Information Concerning Special Meeting; Additional
Information
8. Not Applicable
9. Not Applicable
Part B
10. Cover Page of Statement of Additional Information
11. Table of Contents
12. General Information
13. General Information
14. Financial Statements
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VAN ECK FUNDS
Asia Infrastructure Fund
99 Park Avenue, New York, New York 10016
1-800-221-2220
______________________________________________
NOTICE OF MEETING OF SHAREHOLDERS
September __, 1995
______________________________________________
A MEETING OF SHAREHOLDERS OF THE ASIA INFRASTRUCTURE FUND SERIES OF VAN ECK
FUNDS (the "Fund") will be held at 99 Park Avenue, 8th Floor, New York, New
York, on ______, _______ __, 1995 at 3:00 P.M., New York Time, for the following
purposes:
(1) To consider approval of the Agreement and Plan of Reorganization and
Liquidation between the Fund and the Asia Dynasty Fund series of Van Eck
Funds which contemplates the exchange of substantially all of the Fund's
assets for shares of Asia Dynasty Fund and the distribution of such shares
to the Fund's shareholders, and the liquidation of the Fund; and
(2) To act upon such other matters as may properly come before the meeting or
any adjournment or adjournments thereof.
Shareholders of record at the close of business on September __, 1995 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
By order of the Board of Trustees
THADDEUS M. LESZCZYNSKI,
Secretary
August __, 1995
_____________________________________________________________________________
YOUR VOTE IS IMPORTANT!
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
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PROXY
VAN ECK FUNDS
ASIA INFRASTRUCTURE FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING TO BE HELD SEPTEMBER __, 1995
The undersigned shareholder of ASIA INFRASTRUCTURE FUND series of Van Eck
Trust (the "Fund"), having received Notice of the Meeting of Shareholders of the
Fund to be held on September __, 1995 and the Proxy Statement/Prospectus
accompanying such Notice, hereby constitutes and appoints Barbara Allen and
Jennifer Barber and each of them, true and lawful attorneys or attorney for the
undersigned, with several powers of substitution, for and in the name, place and
stead of the undersigned, to attend and vote all shares of the Fund which the
undersigned would be entitled to vote at the Meeting to be held at 99 Park
Avenue, 8th Floor, New York, New York, on ______, _______ __, 1995, at 9:00
A.M., New York Time, and at any and all adjournments thereof, with all powers
the undersigned would possess if personally present.
MANAGEMENT RECOMMENDS A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE HEREOF. THE
---
SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR
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THE PROPOSAL IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope which requires no postage if mailed in the
United States.
________________________________________________________________________________
PROPOSAL
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1. To approve the Agreement and Plan of Reorganization and Liquidation between
the Fund and the Asia Dynasty Fund series of Van Eck Funds which
contemplates the exchange of substantially all of the Fund's assets for
shares of Asia Dynasty Fund and the distribution of such shares to the
shareholders of the Fund and the subsequent liquidation of the Fund.
FOR _____ AGAINST ____ ABSTAIN _____
Dated: __________________________________ 1995
________________________________________________
Signature of Shareholder
________________________________________________
Signature of Co-Owner
For joint accounts, all co-owners must sign.
Executors, administrators, trustees, etc. should
so indicate when signing.
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Investors are advised to read and retain this Proxy Statement/Prospectus for
- ----------------------------------------------------------------------------
future reference.
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VAN ECK FUNDS
99 PARK AVENUE, 8TH FLOOR, NEW YORK, NEW YORK 10016
1-800-221-2220
PROXY STATEMENT/PROSPECTUS
Van Eck Funds (the "Trust") has filed a Registration Statement with
the Securities and Exchange Commission for the registration of the Class A
shares of Asia Dynasty Fund series of the Trust ("ADF") to be offered to the
shareholders of Asia Infrastructure Fund series of the Trust ("AIF") pursuant to
an Agreement and Plan of Reorganization and Liquidation between ADF and AIF
which contemplates the acquisition of AIF's assets and the assumption by ADF of
certain liabilities of AIF in exchange for Class A shares of ADF and the
distribution of such shares to AIF's shareholders (the "Reorganization"). This
Proxy Statement also constitutes a Prospectus of the Trust filed as part of such
Registration Statement.
ADF is an open-end, non-diversified management investment company
which seeks long-term capital appreciation. ADF attempts to achieve its
investment objective by investing in equity securities of companies that are
expected to benefit from the development and growth of the economies of the Asia
region. There can be no guarantee that ADF will achieve its investment
objective.
A copy of the prospectus for ADF and AIF dated March 17, 1995 (the
"Prospectus") and Statement of Additional Information for ADF and AIF, dated
March 17, 1995 (the "Statement of Additional Information") are incorporated by
reference in this Proxy Statement/Prospectus. A copy of the Prospectus
accompanies this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus sets forth concisely information about
ADF and AIF that the shareholders of AIF should know before considering the
Reorganization and should be retained for future reference. AIF has authorized
the solicitation of proxies in connection with the Reorganization solely on the
basis of this Proxy Statement/Prospectus and the accompanying documents.
A Statement of Additional Information relating to the Reorganization,
including historical financial statements of ADF and AIF, dated August __, 1995,
is incorporated by reference into this Proxy Statement/Prospectus and is
available from the Funds by calling the telephone number listed above or by
writing to the Funds at the above address.
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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement/Prospectus is dated August __, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction......................................................... 3
Synopsis
Investment Objectives and Policies.............................. 4
Reasons for the Transaction..................................... 4
Investment Advisory Fees........................................ 5
Other Fees...................................................... 6
Purchase of Shares.............................................. 7
Exchange Rights................................................. 7
Redemption Procedures........................................... 7
Dividends and Distributions..................................... 8
Net Asset Value................................................. 8
Tax Consequences................................................ 8
Special Considerations and Risk Factors.............................. 8
The Reorganization
Procedures...................................................... 9
Terms of the Agreement and Plan of Reorganization............... 9
Benefits to AIF as a Result of Reorganization................... 10
Benefits to ADF as a Result of Reorganization................... 11
Tax Consequences................................................ 12
Capitalization.................................................. 13
Asia Dynasty Fund and Asia Infrastructure Fund
Financial Highlights............................................ 13
Investment Objectives and Policies.............................. 15
Management Discussion and Analysis.............................. 15
Management...................................................... 16
Shares of ADF to be Issued in Reorganization and Shares of AIF.. 17
Purchase of Shares.............................................. 18
Redemption Procedures........................................... 19
Other Matters................................................... 19
Information Concerning the Special Meeting
Date, Time and Place of Meeting................................. 19
Solicitation, Revocation and Use of Proxies..................... 19
Record Date and Outstanding Shares.............................. 19
Security Ownership of Certain Beneficial Owners and Management.. 19
Voting Rights and Required Vote................................. 19
Additional Information............................................... 20
Plan of Reorganization and Liquidation............................... Exhibit A
</TABLE>
2
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VAN ECK FUNDS
ASIA INFRASTRUCTURE FUND
ASIA DYNASTY FUND
99 Park Avenue, 8th Floor, New York, New York 10016
1-800-221-2220
PROXY STATEMENT/PROSPECTUS
Meeting of Shareholders of Van Eck Funds
To Be Held on September __, 1995, 3:00 P.M.
99 Park Avenue, 8th Floor, New York, New York
INTRODUCTION
This proxy statement is furnished to the shareholders of AIF and ADF in
connection with the solicitation by the Board of Trustees of the Trust of
proxies to be used at the special meeting of shareholders of the Trust to be
held on September 18, 1995, or any adjournments thereof (the "Meeting"), to
approve or disapprove a Plan of Reorganization and Liquidation (the "Plan")
which contemplates the acquisition of assets of AIF and the assumption by ADF of
certain liabilities of AIF in exchange for Class A shares of ADF and the
distribution of such shares to the shareholders of AIF as set forth herein (the
"Reorganization"). As of August __, 1995, the record date, there were
approximately _________ shares of AIF outstanding and __________ shares of ADF
(representing _______ Class A shares and ________ Class B shares). Each
shareholder of AIF will be entitled to one vote for each share and a fractional
vote for each fractional share held on the record date. Shareholders of each
class of ADF will not vote at the Special Meeting. It is expected that the
mailing of this proxy statement will commence on or about August __, 1995.
The enclosed form of proxy, if properly executed and returned, will be
voted in accordance with the choice specified thereon. The proxy will be voted
in favor of the proposal unless a choice is indicated to vote against the
proposal. Proxies properly executed and returned, but which fail to specify how
the shares are to be voted, will be voted FOR the proposal.
The proxy may be revoked at any time prior to the voting thereof by
executing a superseding proxy, by giving written notice to the Secretary of the
Trust at the address listed on the front cover of this Proxy
Statement/Prospectus or by voting in person at a Meeting.
In the event there are not sufficient votes to approve the proposal at the
time of the Special Meeting, the Special Meeting may be adjourned in order to
permit further solicitations of proxies by the Funds. If the Funds propose to
adjourn the Special Meeting by a vote of the shareholders, the persons named in
the enclosed proxy card will vote all shares for which they have voting
authority in favor of such adjournment.
To the knowledge of AIF as of record date, no shareholder owned of record
or beneficially more than 5% or more of the outstanding shares of the Fund,
except __________________ which owned of record approximately ____%. To the
knowledge of ADF, as of record date, no shareholder owned of record or
beneficially more than 5% of the outstanding shares of the Fund, except
______________________ which owned of record approximately ___%. In addition,
as of record date, the Trustees and officers of AIF and ADF as a group owned
___% of the outstanding shares each of ADF and AIF.
The cost of the preparation and distribution of the proxies and proxy
statements and any other direct out-of-pocket expenses associated with the Plan
incurred directly by each Fund shall be paid by that Fund. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers of the
Trust and DST Systems, Inc., the Funds' Transfer Agent and Dividend Paying Agent
(the "Transfer Agent" or "DST"), personally or by telephone or telegraph. These
expenses and other expenses of solicitation of proxies
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incurred will be borne by AIF. Brokerage houses, banks and other fiduciaries
will be requested to forward soliciting material to the beneficial owners of the
shares of the Funds and to obtain authorization for the execution of proxies.
For those services, they will be reimbursed by the Funds for their out-of-pocket
expenses.
SYNOPSIS
The following is a synopsis of the information contained in or incorporated
by reference in this Proxy Statement/Prospectus regarding the Reorganization,
and presents key considerations for shareholders of AIF and ADF to assist them
in determining whether to approve the Reorganization.
INVESTMENT OBJECTIVES AND POLICIES
ADF, which has been in operation since March 22, 1993, is an open-end,
diversified management investment company which is a series of Van Eck Funds
(the "Trust"), a Massachusetts business trust. ADF seeks long-term capital
appreciation. ADF attempts to achieve its investment objective by investing in
equity securities of companies that are expected to benefit from the development
and growth of the economies of the Asia Region. ADF will, under normal market
conditions, have at least 65% of its assets in equity securities of companies
located in, or expected to benefit from the growth of the economies of countries
located in the "Asia Region". Asia Region countries include Burma, Cambodia,
Hong Kong, India, Indonesia, Korea, Loas, Malaysia, Pakistan, China, the
Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam. ADF may invest
in equity and debt securities, warrants, options, swaps and futures.
AIF is an open-end, non-diversified management investment company which is
also a series of the Trust. AIF seeks long-term capital appreciation by
investing in equity securities of infrastructure companies that are expected to
benefit from the development and growth of the economies of the Asia Region.
AIF may invest in equity and debt securities, warrants, options, swaps, futures,
collateralized mortgage obligations and asset-backed securities.
While both Funds invest in equity securities of companies expected to
benefit from the development and growth of Asia Region economies, AIF is limited
to investing only in infrastructure companies. Therefore, ADF's investment
objectives and policies are broader than those of AIF bacause ADF can invest in,
among other things, banking and finance and insurance companies. This greater
diversification may lead to less portfolio risk. The investment objectives of
ADF and AIF are more fully described under "Investment Objectives and Policies"
in the Prospectus and some of the risks associated with ADF are outlined in
"Special Considerations and Risk Factors" hereunder.
REASONS FOR THE TRANSACTION
Assets of AIF have not grown. In fact, AIF has experienced a high level of
redemptions. Total net assets of the Fund have declined from $6.3 million as of
November 1, 1994 to approximately $1 million as of May 31, 1995. This was
largely due to a $4.8 million redemption on November 21, 1994 by a market timer.
This decline in the net asset level has meant that the Fund's expense ratio has
been higher than anticipated, and, if redemptions continue, the expense ratio
will, in all likelyhood, continue to rise in the future as fixed costs are
distributed over a smaller asset base.
ADF's net assets were approximately $138 million on November 1, 1994. As of
December 31, 1994 net assets were approximately $119 million and as of May 31,
1995 they were $130 million. Over the same period when AIF's net assets
materially decreased, the net assets of ADF have remained relatively stable. Van
Eck Securities Corporation (the "Distributor") anticipates that assets of ADF,
whether the Reorganization is approved or not, will continue to remain stable.
However, there can be no assurance that ADF will not decline significantly. It
is estimated that after the Reorganization, shareholders of AIF will be subject
to a
4
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lower total expense ratio. As described more fully below, ADF pays the
same fee pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act") as is paid by AIF. The advisory and administrative
rates for ADF are the same as those for AIF. However, certain fixed share
expenses (such as accounting, transfer agent, legal, etc.) will be lower for ADF
than they currently are for AIF. Thus, the total expense ratio which will be
borne by AIF shareholders is expected to decline. It should be noted that the
Adviser has been waiving advisory fees and assuming certain operating expenses.
See "Synopsis--Investment Advisory Fees" and "Synopsis--Other Fees" hereafter
for more information regarding the funds' fee structures.
Although AIF and ADF differ in some respects, they have similar investment
objectives and portfolios. Both ADF and AIF seek long-term capital appreciation
by investing in equity securities of companies that are expected to benefit from
the development and growth of the economies of the Asia region. ADF's portfolio
contains securities of issuers which are not infrastructure companies; while
AIF's portfolio consists primarily of infrastructure companies. It is expected
that ADF will have no difficulty absorbing the net assets of AIF while
continuing to attempt to achieve its investment objective. See "Investment
Objectives and Policies" above and "Special Considerations and Risk Factors"
hereafter for more information.
The Board of Trustees considered a number of factors and alternatives. In
particular, the Board considered continuation of operations in the face of an
eroding asset base and an increasing expense ratio, merger of AIF with ADF or
liquidate AIF. The Trustees determined that the Reorganization, as described
herein, provided greater benefits to shareholders than liquidation. Both
options required AIF to call a shareholder meeting. Liquidating AIF would have
required most shareholders to recognize either gains or losses in the current
tax year when many shareholders might have preferred to defer such gains or
losses. In addition, as more fully described in "Synopsis--Redemption of
Shares", the exchange privilege allows all shareholders of AIF to exchange into
another fund within the Van Eck group of funds without imposition of any
exchange fees or sales charges or to redeem their shares without imposition of a
sales charge. If a shareholder exchanges into ADF, the shareholder will be
required to recognize a gain or loss for tax purposes. The merger will achieve
the same result as an exchange, but on a tax-free basis. Thus, the shareholder
may elect the tax consequences by either participating in the reorganization,
exchanging into the Class A shares of another Fund or liquidating. The
redemption procedure and exchange privilege allow any shareholder not desiring
to participate in the Reorganization to achieve the same results as liquidation
of AIF. The Board considered the fact that AIG Asset Management, Inc. ("AIG")
serves as sub-adviser to both funds. By merging AIF into ADF, the capabilities,
resources and unique knowledge of emerging Asian markets of AIG will still be
available by the AIF shareholders. The Board also considered the compatibility
of the funds' investment objectives, policies, restrictions and portfolios; any
factors which might require an adjustment to the exchange price or formula, such
as costs or tax and other benefits to be derived by the funds; tax consequences
of the reorganization; relative benefits to be derived by the Adviser and/or its
affiliates or other persons; and other factors.
INVESTMENT ADVISORY FEES
Van Eck Associates Corporation (the "Adviser") acts as the investment
adviser for ADF and AIF. The Adviser acts as investment adviser or
sub-investment adviser to other mutual funds registered with the Securities and
Exchange Commission under the 1940 Act and manages or advises managers of
portfolios of pension plans and others. Total aggregate assets under management
of the Adviser at May 31, 1995 were approximately $1.82 billion. John C. van
Eck, Chairman and President of Van Eck Funds and Van Eck Worldwide Insurance
Trust, and members of his immediate family own 100% of the voting stock of the
Adviser.
AIG serves as sub-investment adviser (the "Sub-Adviser") to AIF and ADF.
AIG is a wholly-owned subsidiary of AIG Investment Corporation, which, in turn,
is a wholly-owned subsidiary of American International Group, Inc. ("American
International"). American International is an international insurance
5
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organization which has more than 30 years of experience in managing investments
in the international markets. AIG has access to all of American International's
investment infrastructure. The Adviser believes AIG has unique knowledge and
experience in global investing.
ADF and AIF each pay to the Adviser an investment advisory fee (the
"Management Fee") of .75% of average daily net assets.
OTHER FEES
ADF adopted a Plan of Distribution pursuant to Rule 12b-1 of the 1940 Act
for its Class A shares. Under this plan, ADF pays a fee to the Distributor
accrued daily at an annual rate of 0.50% of the average daily net assets. Of
the 12b-1 fee paid by ADF, the Distributor retains 50% of the fee and pays the
balance to Brokers who have sold shares of ADF and to Brokers and Agents (as
defined below) who service shareholder accounts of the Fund. ADF's 12b-1 Plan
is a "reimbursement plan". Under a reimbursement plan, any fees accrued by a
fund in excess of payments to Brokers and Agents and reimbursement of the
Distributor for its actual expenses will be retained by the Fund. ADF's 12b-1
Plan is also subject to a "carry-forward provision". In the event that any
reimbursable or payable amount attributable to a fiscal year is in excess of
ADF's annual limitation (.50% of average daily net assets) for that fiscal year
(a "Carry-Forward Amount"), such expenses may be paid in a subsequent fiscal
year, including after termination of the Plan, subject to the annual limitation.
For the period ended April 30, 1996, the Distributor has agreed to waive its
right to any Carry-Forward Amounts in the event the Plan is terminated unless
the Board of Trustees has determined that reimbursement of such Carry-Forward
amounts is appropriate. The Plan of Distribution in effect for ADF is described
in more detail in the Prospectus under "Plan of Distribution."
AIF also adopted a 12b-1 Plan and AIF pays a fee to the Distributor accrued
daily at an annual rate of .50% of the average daily net assets. Of the 12b-1
fee paid by AIF, the Distributor retains 50% of the fee and pays the balance to
Brokers who have sold shares of AIF and to Brokers and Agents who service
shareholder accounts of the Fund. The Fund's 12b-1 Plan is a "compensation
plan". Under a compensation plan, the fees paid by a fund under the Plan are
not directly tied to expenses and payments by a fund and may be more or less
than the actual expenses incurred under the Plan. AIF's 12b-1 Plan is also
subject to a "carry-forward provision".
ADF and AIF also pay the Adviser a fee for administrative and accounting
services (the "Administrative Fee") at an annual rate of .25% of daily net
assets. ADF's expense ratio, annualized as of May 31, 1995, was 1.93% of
average daily net assets; AIF's actual expense ratio before waivers and
reimbursements was 9.48%, and .84% after waivers and reimbursements. AIF's
actual expense ratio as of December 31, 1994 was 2.71%, of which the Adviser
reimbursed 2.43%. The following chart provides a comparison of the fund
operating expenses of ADF and AIF. The expenses for AIF assume that there are
$30 million in net assets.
6
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Fund Operating Expenses
<TABLE>
<CAPTION>
Expense ADF-A/(1)/ AIF/(2)/
- ------- ---------- --------
<S> <C> <C> <C> <C>
Management Fee .75% .75%
12b-1 Fees/Shareholder Servicing Fee .50% .50%
Administration Fee .25% .25%
Other Expenses .35% .56%
---- ----
Transfer and Dividend Disbursing .16% .15%
Custodian Fees .14% .12%
Other Expenses .05% .29%
---- ----
Total Fund Expenses 1.85% 2.06%
==== ====
</TABLE>
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(1) As of December 31, 1994
(2) Assuming $30 million in net assets
PURCHASE OF SHARES
Shares of ADF and AIF may be purchased either by (1) ordering the shares
through a selected broker-dealer or bank (a "Broker or Agent"), and forwarding a
completed application or brokerage firm settlement instruction with payment or
(2) completing an application and mailing it with payment to the Funds' Transfer
Agent. ADF offers its Class A shares and AIF offers its shares continuously at
a price equal to net asset value plus a front-end sales charge of 4.75% of the
offering price, subject to discounts on transactions greater than $100,000. In
addition, ADF offers its Class B shares continuously at a price equal to net
asset value without a front-end sales charge, but such shares are subject to a
contingent deferred sales charge ("CDSC") if the shares are redeemed after being
held for less than 6 years (such shares also are subject to a higher 12b-1 fee).
See "Purchase of Shares" in the accompanying Prospectus.
EXCHANGE RIGHTS
Shares of the Funds may be exchanged for shares in the following funds which
are also advised by the Adviser at the current net asset value: World Trends
Fund, Gold/Resources Fund (Class A), U.S. Government Money Fund, Global Income
Fund (Class A), International Investors Gold Fund (Class A and C), Asia Dynasty
Fund (Class A), Global Balanced Fund (Class A), Asia Infrastructure Fund (in the
case of ADF), Global SmallCap Fund (Class A), Global Hard Assets Fund (Class A
and C), and Gold Opportunity Fund (Class A and C). Shareholders of ADF and AIF
are limited to six exchanges per calendar year. In addition, each Fund reserves
the right to terminate, modify or impose a fee in connection with the exchange
privilege as described in more detail in the Statement of Additional Information
under "Exchange Privilege".
REDEMPTION PROCEDURES
Class A Shares of ADF and shares of AIF may be redeemed at net asset value at
any time. Shares of either of the funds may be redeemed by writing to DST,
through the shareholder's Broker or Agent (although the Broker or Agent may
charge a fee for its services) or, if the shareholder has so elected, by
contacting DST by telephone. See "Redemption of Shares" in the accompanying
Prospectus for more information.
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DIVIDENDS AND DISTRIBUTIONS
ADF and AIF each intend to make distributions from net investment income in
January and August. Each Fund intends to make distributions from net realized
capital gains resulting from investment activities annually in January. If the
Reorganization is approved by shareholders, AIF intends to declare any
applicable dividends and distributions prior to the Exchange Date.
NET ASSET VALUE
The net asset value of ADF and AIF is determined at the close of business of
each day the New York Stock Exchange is open for trading. Each Fund computes
its net asset value by dividing the value of the Fund's securities, plus cash
and other assets (including interest and dividends accrued but not yet
received), less all liabilities (including accrued expenses), by the number of
shares outstanding. Expenses, including fees paid to the Adviser, are accrued
daily for the Funds.
TAX CONSIDERATIONS
In the opinion of Goodwin, Procter & Hoar, except as otherwise noted herein
under "Tax Considerations" and based on certain representations of ADF and AIF
(i) the transfer of the net assets of AIF to ADF solely in exchange for ADF
Class A shares and the distribution of such shares to the shareholders of AIF,
as provided in the Plan, will constitute a reorganization within the meaning of
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) AIF will not recognize gain or loss on the transfer of its assets
to ADF in the Reorganization, (iii) AIF will not recognize gain or loss upon its
distribution to its shareholders of the ADF shares received in the
Reorganization, (iv) ADF will not recognize a gain or loss upon the receipt of
the assets of AIF in exchange for the ADF shares, (v) shareholders of AIF will
not recognize a gain or loss in the exchange of shares of AIF for shares of ADF,
(vi) the basis of ADF in the assets of AIF transferred in the Reorganization
will be the same as the basis of AIF in such assets immediately prior to the
Reorganization, (vii) the basis of the ADF shares received by the shareholders
of AIF will be the same as the basis of the AIF shares exchanged, (viii) the
holding period of the ADF shares received by shareholders of AIF will include
the holding period of the AIF shares exchanged (provided that the AIF shares
exchanged were held as a capital asset on the date of the reoganization) and
(ix) ADF's holding period of AIF's net assets transferred in the Reorganization
will include the period for which such assets were held by AIF immediately prior
to the Reorganization. For a discussion of additional tax considerations, see
"Tax Consequences".
SPECIAL CONSIDERATIONS AND RISK FACTORS
Since both ADF and AIF invest primarily in equity securities of companies that
expect to benefit from the development and growth of the economies of the Asia
Region, any risks inherent in such investments are applicable to both entities.
Investments in the equity markets of developing countries involves exposure to
potentially unstable governments, economies based on only a few industries, and
securities markets which trade a small number of securities and may therefore at
times be illiquid. Securities markets of developing countries tend to be more
volatile than the markets of developed countries. AIF will, under normal market
conditions, invest at least 65% of its assets in equities securities of "Asia
Region Infrastructure companies" while ADF is not required to do this. Thus, ADF
may be exposed to less risk because its investment objectives and policies are
broader and not limited to infrastructure companies. See "Risk Factors" in the
Prospectus for a more detailed discussion of the risks involved with investments
in developing countries.
ADF is a diversified investment company while AIF is a non-diversified
investment company. A diversified fund is one which meets the following
definition: 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
8
<PAGE>
companies and other securities; for purposes of this calculation limited in
respect to 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 voting securities of such
issuer. A non-diversified fund is any other fund. By virtue of being a
diversified fund, ADF can not concentrate its portfolio of investments in a
small number of issuers. Such diversification would reduce ADF's exposure to
loss in the event of a price decline in one or more issuers in which it held
substantial positions. As of April 30, 1995, ADF had not invested more than 5%
of its assets in any one issuer.
Both ADF and AIF may borrow up to 30% of the value of their net assets to
increase holdings of portfolio securities (i.e., engage in leveraging).
Leveraging by means of borrowing will exaggerate the effect of any increase or
decrease in the value of the portfolio securities on the fund's net asset values
and money borrowed will be subject to interest and other costs which may or may
not exceed the income received from the securities purchased with borrowed
funds. In addition, both funds 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 at least equal to the market value of the
securities loaned and the funds will continue to receive any interest or
dividends paid on the loaned securities and will retain voting rights with
respect to the securities. The funds might experience a loss if the broker-
dealer involved in such a loan breaches its agreement.
Investments in foreign securities may involve a greater degree of risk than
investments in domestic securities due to the possibility of exchange controls,
less publicly available information, and the possibility of expropriation,
confiscatory taxation or political, economic or social instability. In
addition, some foreign companies are not generally subject to the same uniform
accounting, auditing and financial reporting standards as are American
companies, and there may be less government supervision and regulation of
foreign stock exchanges, brokers and companies. Foreign securities may also be
subject to foreign taxes, higher custodian fees and dividend collection fees
which could reduce the yield or return on such securities. Foreign securities,
unless fully hedged, will be subjected to fluctuations in currency exchange
rates.
Both ADF and AIF, subject to certain restrictions, are allowed to utilize
portfolio strategies involving options, futures, and repurchase agreements which
may involve additional risks. See "Risk Factors" in both the Prospectus and the
Statement of Additional Information for a more detailed discussion of the risks
involved with these practices and strategies as well as the other practices and
strategies discussed in this section.
THE REORGANIZATION
PROCEDURES
The Trustees are hereby soliciting a shareholder vote of AIF to approve the
Reorganization. It is anticipated that the shareholders meeting of Van Eck
Funds, of which this proposal is a part, will be held on September __, 1995 at
99 Park Avenue, 8th Floor, New York, New York at 3:00 P.M. If the shareholders
of AIF approve the Reorganization, the Reorganization will take place on or
about September__, 1995.
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
The following is a summary of the significant terms of the Plan which has been
considered and approved by the Trustees of Van Eck Funds at a meeting held on
July 18, 1995 and is attached to this Proxy Statement/Prospectus as Exhibit A.
This summary is qualified in its entirety by reference to the Plan.
Valuation of Assets and Liabilities. The assets of ADF and AIF will be valued
on the business day prior to the date on which the Reorganization will take
place (the "Exchange Date"). The assets in each portfolio
9
<PAGE>
will be valued according to the procedures set forth under "Determination of Net
Asset Value" in the Statement of Additional Information (a summary of that
method appears herein under "Synopsis--Net Asset Value"). Redemption requests
for AIF which have not been settled as of the Exchange Date will be treated as
liabilities for purposes of the Reorganization. Exchange requests for AIF shares
received on the Exchange Date will be treated and processed as exchanges from
ADF and will be effected as of the close of business on the Exchange Date.
Distribution of Shares and Transfer of Assets. On the Exchange Date, ADF will
issue to AIF a number of Class A shares of beneficial interest, the aggregate
net asset value of which will equal the aggregate net asset value of the assets
transferred to ADF by AIF on the Exchange Date. Each shareholder of AIF will
receive a number of Class A shares of ADF having an aggregate net asset value of
his or her shares of AIF. No sales charge or fee of any kind will be charged to
the shareholders of AIF in connection with their receipt of Class A shares of
ADF in the Reorganization.
Expenses. The expenses of the Reorganization that are directly attributable
to each Fund will be borne by that Fund. Expenses attributable to ADF are
expected to be minimal and will not exceed $________. The expenses of the
Reorganization to be borne by AIF are expected to amount to approximately
$_________. These expenses are expected to include the expenses incurred in
printing and distributing AIF's proxy statement, legal fees and accounting fees
associated with each Fund's financial statements. The expenses of the
Reorganization that are attributable to the transaction itself will be borne by
AIF. These expenses are expected to include expenses incurred in connection
with Board of Trustees meetings, portfolio transaction costs, if any, and other
ordinary operating costs. Any registration fees under the Securities Act of
1933 and state securities commission registration and filing fees in connection
with the Reorganization will be borne by ADF.
Required Approvals. Approval of the Plan requires that a majority of AIF's
outstanding voting shares, as defined in the 1940 Act, must vote in favor of the
Plan. Such majority is defined as the lesser of (i) 67% or more of the
outstanding shares present at the meeting, provided the holders of 50% or more
of the outstanding shares are present in person or by proxy, or (ii) more than
50% of the outstanding shares.
Amendments and Conditions. The Plan may be amended at any time prior to the
Exchange Date with respect to any of the terms therein. The obligations of ADF
and AIF are subject to various conditions, including approval of the
Reorganization by the shareholders of AIF, an opinion of counsel as to tax
matters being received and the continuing accuracy of various representations
and warranties of ADF and AIF being confirmed by the respective parties.
BENEFITS TO AIF AS A RESULT OF REORGANIZATION
1. Certain fixed costs, such as costs of printing shareholder reports,
prospectuses, statements of additional information and proxy statements, legal
expenses, transfer agency fees, audit fees, registration fees, mailing costs and
other expenses will be spread across a larger asset base, resulting in a lower
overall expense ratio.
The asset level of AIF has declined over the last six months from $6.3 million
as of November 1, 1994 to approximately $1.0 million as of December 31, 1994 and
were $1.0 million as of May 31, 1995. Net redemptions since November 1, 1994
were approximately $5.3 million This decrease in net assets has meant that some
fixed costs, such as those listed above have been spread over a smaller asset
base. AIF's expense ratio, before any waivers and/or reimbursements by the
Adviser, has increased from 2.71% as of December 31, 1994 to 9.48% as of May 31,
1995. Of these amounts, the Adviser has reimbursed 2.43% and 8.64%, so that
actual expense ratios were .28% and .84%. These waivers and/or reimbursements
are due to cease by September 30, 1995. If AIF's net assets continue to
decline, it is expected that its expense ratio will continue to rise.
Restrictions under various state securities laws prohibit total expenses of AIF
(excluding
10
<PAGE>
certain expenses such as, but not limited to, interest, taxes, brokerage costs
and litigation) from increasing beyond 3.00% (inclusive of distribution
expenses) of average daily net assets.
ADF's net assets were approximately $138 million on November 1, 1994. As of
December 31, 1994 net assets were approximately $119 million and as of May 31,
1995 they were $130 million. Over the same period when AIF's net assets
materially decreased, the net assets of ADF have remained relatively stable. The
Distributor anticipates that net assets of ADF, whether the Reorganization is
approved or not, will continue to remain stable. It is estimated that after the
Reorganization, assuming that substantially all of the assets of AIF are part of
the Reorganization, the total expense ratio of ADF would remain approximately
the same. There can be no guarantee that ADF's net assets or expense ratio will
remain at current levels.
2. ADF's net assets have been stable while the continuing redemptions in AIF
may have adverse effects on the investment management strategies of the Fund.
As described above, net redemptions in AIF during the past six months have
exceeded $5 million, or roughly 80% of the Fund's net assets. During the same
period, ADF has had net sales of Class A shares of approximately $4 million
(including reinvested dividend). The continuing net redemptions and the lack of
sales in AIF can be detrimental to the Fund and its shareholders for a number of
reasons: investment programs which the Adviser may wish to implement or has
implemented for AIF may be impaired; portfolio holdings which would otherwise be
retained for investment reasons may have to be liquidated and additional
transaction costs from the forced sale of securities to raise cash to meet
redemptions would be incurred; and the recognition by a Fund of gains or losses
from such forced sales which, from the shareholder's standpoint, might be
detrimental. A stable and growing asset base, as the Distributor believes will
be the case with ADF, with predictable cash flows, enables purchases of larger
denomination investments and the resulting increase in negotiating capability;
and increases the ability of AIF to diversify. There can be no guarantee that
ADF's net assets will continue to grow. Should such growth not materialize or
ADF begin to experience net redemptions, the same portfolio management problems
described may affect ADF.
3. The Reorganization allows shareholders of AIF to defer recognition of gains
or losses on their shares until they choose to do so.
As more fully explained in "The Reorganization--Tax Consequences" below, AIF
and ADF will obtain an opinion of counsel to the effect that the Reorganization
will, for Federal income tax purposes, be on a tax-free basis. Thus, a
shareholder of AIF will be able to defer the recognition of any gains or losses
on his or her shares of AIF until shares of ADF received pursuant to the
Reorganization are exchanged or sold. If AIF were liquidated rather than
reorganized, a shareholder would have no choice but to recognize any gains or
losses in the current tax year.
BENEFITS TO ADF AS A RESULT OF THE REORGANIZATION
1. Certain fixed costs, such as costs of printing shareholder reports,
prospectuses, statements of additional information and proxy statements, legal
expenses, transfer agency fees, audit fees, registration fees, mailing costs and
other expenses will be spread across a larger asset base, resulting in a lower
overall expense ratio.
As of May 31, 1995, the annualized expense ratio for the Class A shares of ADF
("ADF-A") was 1.93% (the total expense ratio of ADF-B was higher due to the
higher 12b-1 fee paid by Class B shareholders) of average daily net assets. Of
this total expense ratio, .43% represents other expenses. A majority of these
expense are fixed costs which include printing costs, legal expenses, transfer
agency fees and the like. As the assets of ADF grows, these costs are spread
over a larger asset base and the total expense ratio usually declines. After
the Reorganization, assuming that substantially all of the assets of AIF are
transferred in the
11
<PAGE>
Reorganization, the total expense ratio of ADF-A may decrease. Although this
amount may not be significant on a per share basis, it is achieved at relatively
little or no cost to ADF. All costs will be borne either by AIF or the Adviser;
and little or no adjustment to ADF's portfolio will be required. In addition,
the ADF portfolio may receive shares of companies that it would not of otherwise
invested in without incurring brokerage costs. In turn, this leads to greater
diversification for the ADF shareholders.
2. ADF will receive the portfolio securities of AIF without incurring the
normal transaction costs associated with purchasing such securities in the open
market (brokerage commissions, etc.)
The Adviser and AIG have reviewed the portfolio of AIF and have determined
that no substantial alterations of the portfolio will be necessary. The
transfer of the assets from AIF will increase the diversification of ADF while
not requiring ADF to incur the normal transaction costs which ADF would have
borne had the securities so transferred been purchased in the open market. In
addition, the Adviser, AIG and the Trustees have determined that ADF will not
suffer adverse tax consequences as a result of the transfer of assets from AIF
in connection with the Reorganization.
TAX CONSEQUENCES
The Reorganization has been structured with the intention that it will qualify
for Federal income tax purposes as a tax-free reorganization under Section
368(a)(1)(C) of the Code. ADF and AIF have both elected to qualify as a
regulated investment company under the Code and ADF intends to continue to elect
to so qualify. The funds have requested an opinion of counsel substantially to
the effect that for Federal income tax purposes: (i) the transfer of the assets
of AIF to ADF solely in exchange for ADF shares and the distribution of such
shares to the shareholders of AIF, as provided in the Plan, will constitute a
reorganization within the meaning of section 368(a)(1)(C) the Code, (ii) AIF
will not recognize gain or loss on the transfer of its assets to ADF in the
Reorganization, (iii) AIF will not recognize gain or loss upon its distribution
to its shareholders of the ADF shares received in the Reorganization, (iv) ADF
will not recognize a gain or loss upon the receipt of the assets of AIF in
exchange for the ADF shares, (v) shareholders of AIF will not recognize a gain
or loss on the exchange of shares of AIF for shares of ADF, (vi) the basis of
ADF in the assets of AIF transferred in the Reorganization will be the same as
the basis of AIF in such assets immediately prior to the Reorganization, (vii)
the basis of the ADF shares received by the shareholders of AIF will be the same
as the basis of AIF shares exchanged, (viii) the holding period of the ADF
shares received by shareholders of AIF will include the holding period of AIF
shares exchanged and (ix) ADF's holding period of AIF's assets transferred in
the Reorganization will include the period for which such assets were held by
AIF immediately prior to the Reorganization.
While an opinion of counsel does not bind the Internal Revenue Service or the
courts, it will reflect such counsel's view as of the closing of the
Reorganization, as to the expected Federal income tax treatment of the
Reorganization. If the Internal Revenue Service were to take a position
contrary to the views expressed by such counsel and succeed in asserting such a
position, shareholders of AIF would be treated as having received shares of ADF
in a transaction in which a gain or loss would be recognized for Federal income
tax purposes, and ADF would be treated for such purposes as having purchased the
assets of AIF for their fair market value.
Shareholders should consult their tax advisers regarding the Plan in light of
their individual circumstances. As the foregoing relates only to Federal income
tax consequences, shareholders should also consult with their tax advisers as to
the state and local tax consequences of such transactions.
12
<PAGE>
CAPITALIZATION
The following table sets forth, as of May 31, 1995, the capitalization of ADF
(Class A and B shares) and the capitalization of AIF.
Capitalization(1)
<TABLE>
<CAPTION>
Proforma Reorganization(2)
--------------------------
ADF-A ADF-B AIF ADF-A (3) ADF-B
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Net Assets............ $95,809,698 $34,014,139 $1,067,883 $96,877,581 $34,014,139
Shares Outstanding.......... 7,564,888 2,702,502 155,231 7,649,172 2,702,502
Net Asset Value Per Share... $ 12.67 $ 12.59 $ 6.88 $ 12.67 $ 12.59
</TABLE>
- -------------------
(1) Unaudited
(2) Data does not take into account expenses incurred in the Reorganization.
(3) Had the Reorganization been consummated on May 31, 1995, AIF would have
received 84,284 Class A shares of ADF, which would then have been available
for distribution to its shareholders. No assurance can be given as to how
many shares of ADF shareholders of AIF will receive on the date the
Reorganization takes place, and the foregoing should not be relied upon to
reflect the number of shares of ADF that will actually be received on or
after such date.
ASIA DYNASTY FUND AND ASIA INFRASTRUCTURE FUND
For a general description of ADF and AIF, see the Prospectus. For the
information of AIF's shareholders, certain cross references, as well as
additional information regarding ADF are set forth below:
FINANCIAL HIGHLIGHTS
The Financial Highlights below give selected information for a share of ADF
and AIF outstanding for the year or period indicated. The Financial Highlights
presented have been audited by Coopers & Lybrand, L.L.P., independent
accountants, and whose reports thereon appear in ADF's and AIF's Annual
Reports, which are incorporated by reference into the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes that also appear in ADF's Annual Report.
13
<PAGE>
ASIA DYNASTY FUND (CLASS A)
<TABLE>
<CAPTION>
For the Period
March 22, 1993
For the Year (Commencement of
Ended Operations)
December 31, 1994 to December 31, 1993
----------------- --------------------
<S> <C> <C>
Net Asset Value, Beginning of Period............ $ 15.28 $ 9.525
--------- ---------
Income from Investment Operations:
Net Investment Income/(loss).................. ---- (0.062)
Net Gain/(Loss) on Securities
(both realized and unrealized)............... (2.86) 5.887
--------- ---------
Total from Investment Operations................ (2.86) 5.825
--------- ---------
Less Distributions:
Dividends in excess of Net Investment Income.. (.07) ----
Distributions from Capital Gains.............. (.22) (.070)
--------- ---------
Total Distributions............................. (.29) (.070)
Net Asset Value, End of Period.................. $ 12.13 $ 15.28
========= =========
Total Return (a)................................ (18.72%) 61.16%
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Ratios/Supplementary Data
<S> <C> <C>
Net assets, End of Period (000)................. $ 83,787 $ 108,661
Ratio of Expenses to Average
Net Assets..................................... 1.85% 1.92%(b)*
Ratio of Net Investment Loss to Average
Net Assets..................................... ---- (0.68%)*
Portfolio Turnover Rate......................... 51.08% 14.63%
</TABLE>
- ---------------------
* Annualized
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of capital gains at
net asset value during the year and a redemption on the last day of the
period. A sales charge is not reflected in the calculations of total
return. Total return for the period ended December 31, 1993 was not
annualized.
(b) The expense ratio for Class A shares would have been 2.09% if the expenses
were not assumed by the Adviser.
ASIA INFRASTRUCTURE FUND (CLASS A)
<TABLE>
<CAPTION>
For the Period
August 3, 1994
(Commencement of
Operations)
to December 31, 1994
--------------------
<S> <C>
Net Asset Value, Beginning of Period..... $ 9.53
----
Income from Investment Operations:
Net Investment Income/(loss)......... 0.18
Net Gain/(Loss) on Securities
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
(both realized and unrealized)...... (2.50)
-----
Total from Investment Operations......... (2.32)
-----
Less Distributions:
Dividends from Net Investment Income... (.17)
Distributions from Capital Gains....... -----
Total Distributions...................... (.17)
-----
Net Asset Value, End of Period........... $ 7.04
=====
Total Return (a)......................... (24.3%)
<CAPTION>
- ----------------------------------------------------------------------
Ratios/Supplementary Data
<S> <C>
Net assets, End of Period (000).......... $ 1,038
Ratio of Expenses to Average
Net Assets.............................. .28%(b)*
Ratio of Net Investment Income to Average
Net Assets.............................. 1.78%*
Portfolio Turnover Rate.................. 147%
</TABLE>
- ---------------------
* Annualized
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of dividends at net
asset value during the period and a redemption on the last day of the
period. A sales charge is not reflected in the calculations of total
return. Total return for the period ended December 31, 1994 was not
annualized.
(b) The expense ratio for Class A shares would have been 2.71% if the expenses
were not assumed by the Adviser.
INVESTMENT OBJECTIVES AND POLICIES
For a discussion of ADF's and AIF's investment objective and policies, see
"Investment Objective and Policies" in the accompanying prospectus and
"Synopsis--Investment Objectives and Policies" herein.
MANAGEMENT DISCUSSION AND ANALYSIS
ASIA DYNASTY FUND
Although the economic miracles in Asia may be slowing, its economies, however
are set to grow at more than double the rate of the rest of the industrialized
world according to the latest forecast released by the Organization for Economic
Co-operation and Development. Despite this, the Asian stock markets were
particularly hard hit in 1994 and hence performed generally worse than other
regions. Some of the factors that contributed to such sharp drops were the
unsustainable liquidity-driven rallies over the last quarter of 1993, six
successive interest rate hikes in the U.S., and increased speculative activities
by hedge funds.
At 1994 year-end, ADF was fully invested with approximately 81% of its net
assets in the equity markets of the Big Four Asian markets, namely Hong Kong,
Thailand, Malaysia and Singapore. The balance of the assets were invested in
smaller markets such as China, India, Indonesia, Korea and the Philippines. The
Fund returned 16.4% since it commenced operations in March 1993, although 1994's
performance was a rather disappointing -18.7%.
15
<PAGE>
ASIA DYNASTY FUND (CLASS A) vs. S&P 500**
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Asia Dynasty Fund S&P 500
----------------- -------
<S> <C> <C>
Mar-93 9,520 10,000
Apr-93 10,140 9,746
May-93 10,649 9,967
Jun-93 10,490 10,047
Jul-93 10,629 9,994
Aug-93 11,239 10,338
Sep-93 11,568 10,306
Oct-93 13,047 10,506
Nov-93 13,147 10,370
Dec-93 15,335 10,544
Jan-94 14,492 10,887
Feb-94 13,990 10,560
Mar-94 12,515 10,148
Apr-94 12,926 10,265
May-94 13,247 10,392
Jun-94 12,555 10,191
Jul-94 13,237 10,512
Aug-94 14,080 10,907
Sep-94 13,849 10,689
Oct-94 14,191 10,913
Nov-94 12,826 10,481
Dec-94 12,464 10,687
</TABLE>
ASIA INFRASTRUCTURE FUND
The Asian stock markets witnessed severe volatility and declines in 1994 after
achieving exceptional returns in 1993. 100% of the Fund was invested in Asia.
Since its inception on August 3, 1994, AIF declined 24.3%.
About 73% of the Fund was invested in Hong Kong. U.S. rate hikes reversed a
negative real interest rate environment that had prevailed over the past several
years and the market declined 31% in 1994. Further volatility is expected over
the short term as interest rates ascend further and trade disputes between the
U.S. and China heat up.
About 20% of the Fund was invested in Malaysia. The Malaysian market declined
about 24% for the year as the government moved to limit excessive volatility and
speculation in the stock market by decelerating the growth of the money supply
and imposing tougher regulations on trading activities.
The remaining 7% was invested in Thailand. For the year ended 1994, the
market fell 19% on worries of political instability, rising interest rates and
lackluster corporate earnings.
MANAGEMENT
Trustees. The management of the business and affairs of ADF and AIF is the
responsibility of the Board of Trustees. The Trustees of Van Eck Funds (of
which ADF and AIF are series), consist of nine persons, five of whom are not
"interested persons" as defined in the 1940 Act.
Investment Adviser and Administrator. Van Eck Associates Corporation, 99 Park
Avenue, 8th Floor, New York, New York 10016, the Adviser, serves as the
investment adviser and manager for the Funds pursuant to Advisory Agreements
with the Trust. The Adviser manages the business and affairs of ADF and AIF
pursuant to the Investment Advisory Agreement and Accounting and Administrative
Services Agreement.
16
<PAGE>
AIG serves as sub-investment adviser to both Funds and provides the Funds with a
continuous investment program which includes determining which securities should
be bought and sold. ADF and AIF pay an Advisory fee of .75% of average daily net
assets. From that, the Adviser pays the Sub-Adviser fee of .50% of average daily
net assets. The Advisory fees paid to the Adviser with respect to ADF and AIF
are higher than the fees paid by most investment companies because of the
complexities of managing these types of funds (such as following interest rates,
currency exchange rates, industries and companies in many different countries
and financial markets throughout the world). For a more complete description of
the Adviser and its agreements with ADF see "Management" in the Prospectus and
"Investment Advisory Services" in the Statement of Additional Information.
Portfolio Manager. Peter Soo is a Vice President and Regional Chief
Investment Officer of AIG Investment Corporation (Asia) Ltd. ("AIG Asia"), an
indirect subsidiary of American International. AIG Asia, which forms part of the
Adviser's global investment network, is resposible for managing both ADF's and
AIF's portfolio of investments and has been serving in such capacity since the
funds commenced operations.
Transfer Agent. The Transfer Agent and Dividend Paying Agent for the funds is
DST Systems, Inc., P.O. Box 418407, Kansas City, Missouri 64141.
Expenses. For a discussion of the funds' expenses, see "Transaction Data",
"Purchase of Shares", "Management" and "Plan of Distribution" in the Prospectus
and "Investment Advisory Services" and "The Distributor" in the Statement of
Additional Information.
Brokerage. For a discussion of the funds' policies regarding brokerage
commissions and transactions, see "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.
SHARES OF ADF TO BE ISSUED IN THE REORGANIZATION AND SHARES OF AIF
Shares. On the Exchange Date, all shareholders of AIF will be issued a number
of Class A shares of beneficial interest, par value $.001 per share, of ADF
having an aggregate net asset value equal to the net asset value of his or her
shares of AIF. The shares of ADF to be issued in the Reorganization will be
identical in all respects to all Class A shares of ADF then outstanding.
Voting Rights. Shareholders of ADF and AIF are entitled to one vote for each
share and a fractional vote for each fractional share held in the election of
Trustees (to the extent hereafter provided) and on other matters submitted to a
vote of shareholders. With respect to the 12b-1 Plans in effect for ADF, Class
A shareholders are only entitled to vote on matters affecting their particular
plan. Under the Amended and Restated Master Trust Agreement, no annual or
regular meeting of shareholders is required. Thus, there will ordinarily be no
shareholder meeting unless required by the 1940 Act. The Board of Trustees is a
self-perpetuating body until fewer than 50% of the Trustees serving as such are
Trustees who were elected by the shareholders. Under the Amended and Restated
Master Trust Agreement, any Trustee may be removed by a vote of two-thirds of
the outstanding Trust shares (outstanding Trust shares include shares of all
series of the Trust and not solely shares of ADF or AIF); and holders of ten
percent or more of the outstanding shares of the Trust can require Trustees to
call a meeting of shareholders for purposes of voting on the removal of one or
more Trustees. With respect to each of ADF and AIF, each issued and outstanding
share is entitled to participate equally in dividends and distributions declared
by such fund and, upon liquidation or dissolution, in the net assets of such
fund remaining after satisfaction of outstanding liabilities.
Shareholder Liability. Under Massachusetts law, the Shareholders of the Trust
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Amended and Restated Master Trust
Agreement of the Trust disclaims shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Amended and Restated Master Trust Agreement provides
17
<PAGE>
for indemnification out of the Trust's property for all losses and expenses of
any shareholder held personally liable for the obligations of the Trust. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations. The Adviser believes that, in view of the above, the
risk of personal liability to shareholders is remote. The liability provisions
are identical for shareholders of ADF and AIF.
Control. There are no persons who exercise control over ADF as "control" is
defined in the 1940 Act except _____________. There are no persons who exercise
control over AIF except _____________.
Other Classes. AIF does not have any other classes of securities outstanding
as defined in the 1940 Act. ADF has two classes of shares outstanding which are
designated Class A and Class B shares. The two classes are identical in all
respects except that: (1) the Class A shares will be subject to a front-end
sales charge while the Class B shares will be subject to a Contingent Deferred
Sales Charge, (2) each class has adopted its own Rule 12b-1 Plan, (3) the two
classes will vote separately on their respective 12b-1 Plans and (4) any higher
incremental transfer agency costs and any other costs attributable solely to
Class A or Class B shares will be borne exclusively by such class. ADF has no
other classes of securities outstanding.
Shareholder Inquiries. Shareholder inquiries with respect to ADF or AIF
should be addressed to the Funds by telephone at (800) 544-4653 or in writing at
the address set forth on the cover page of the Proxy Statement/ Prospectus.
Dividends and Distributions. Both ADF and AIF intend to make distributions
from net investment income in January and August. Each Fund intends to make
distributions from net realized capital gains resulting from investment
activities annually in January. Dividends and capital gains may be received by
the shareholder in cash or may be reinvested in ADF or AIF at the net asset
value (without imposition of a sales charge) on the day so determined by the
Board of Trustees. In addition, dividends and capital gains may also be
reinvested in any other series of Van Eck Funds.
Tax Consequences. For a discussion of the tax consequences associated with an
investment in ADF or AIF, see "Taxes" in the Statement of Additional
Information. Under present Massachusetts law, neither ADF nor AIF is subject to
any Massachusetts income taxation during any year in which it qualifies as a
regulated investment company under the Code. Either ADF or AIF may be subject
to Massachusetts income taxes for any taxable year in which it does not so
qualify. Shareholders are urged to consult their tax advisers regarding
specific questions as to Federal, foreign, state and local taxes.
PURCHASE OF SHARES
Both prior to, and subsequent to the Reorganization, shares of ADF will be
offered continuously for sale by the Distributor or by Brokers and Agents which
have entered into selling group or selling agency agreements with the
Distributor, 99 Park Avenue, 8th Floor, New York, New York 10016. The
Reorganization will have no effect on the purchase procedures for shares of ADF.
The purchase procedures for AIF are identical to those of ADF. See "Purchase of
Shares" in the Prospectus. For more information on the Distributor, see "The
Distributor" in the Statement of Additional Information.
ADF and AIF have each adopted a 12b-1 Plan in accordance with the 1940 Act.
Both ADF and AIF shareholders pay a 12b-1 fee accrued daily at an annual rate of
.50% of the average daily net assets. The 12b-1 Plan must be approved annually
by the Board of Trustees. For more discussion of the 12b-1 Plan, see "Plan of
Distribution" in the Prospectus.
18
<PAGE>
REDEMPTION PROCEDURES
Redemption procedures for shares of ADF are identical to the redemption
procedures currently in effect for AIF. Shares of the funds will be redeemed at
the net asset value on the day on which proper instructions are received by DST.
See "Redemption of Shares" in the Prospectus.
OTHER MATTERS
It is not anticipated that any matters other than the adoption of the Plan
described above will be brought before the Meeting. If, however, any other
business is properly brought before the special meetings, proxies will be voted
in accordance with the judgment of the persons designated on such proxies.
INFORMATION CONCERNING THE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The Meeting for shareholders of AIF will be held on September __, 1995 at
99 Park Avenue, 8th Floor, New York, New York at 3:00 P.M.
SOLICITATION, REVOCATION AND USE OF PROXIES
A shareholder executing and returning a proxy has the power to revoke it at
any time prior to its exercise by executing a superseding proxy or by submitting
a notice of revocation to the Secretary of the Fund at 99 Park Avenue, 8th
Floor, New York, New York 10016. Although mere attendance at the Meeting will
not revoke a proxy, a shareholder present at the Meeting may withdraw his or her
proxy and vote in person.
All shares represented by properly executed proxies, unless such proxies have
previously been revoked, will be voted at the Special Meeting in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the approval of the Plan and the other proposals.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of each Fund's shares of beneficial interest, par value
$.001 per share, at the close of business on June __, 1995 (the "Record Date")
are entitled to vote at the Special Meeting and any adjournment thereof. At the
close of business on the Record Date, there were approximately _________ shares
of AIF outstanding and entitled to vote and _________ shares of ADF (consisting
of _________ Class A shares and ________ Class B shares) outstanding and
entitled to vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person or entity owns beneficially 5% or more of AIF's shares except
____________________. No person or entity owns beneficially more than 5% or
more of ADF's shares except __________________.
VOTING RIGHTS AND REQUIRED VOTE
Voting procedures are described under "The Reorganization--Terms of the
Agreement and Plan of Reorganization".
19
<PAGE>
A proxy that is properly executed and returned accompanied by instructions to
withhold authority to vote with respect to the reorganization represents a
broker "non-vote" (that is, a proxy from a broker or nominee indicating that
such person has not received instructions from the beneficial owner or other
person entitled to vote shares on the particular matter with respect to which
the broker or nominee does not have the discretionary power), and the shares
represented thereby will be considered not to be present at the Special Meeting
for purposes of determining the existence of a quorum for the transaction of
business for that proposal and be deemed not cast with respect to such proposal.
Also, a properly executed and returned proxy marked with an abstention will be
considered present at the Special Meeting for purposes of determining the
existence of a quorum for the transaction of business. However, abstentions and
broker "non-votes" do not constitute a vote "for" or "against" the matter, and,
therefore have the effect of a negative vote on matters which require approval
by a requisite percentage of the outstanding shares.
In the event a quorum is not present at the Special Meeting or in the event
that a quorum is present but sufficient votes to approve the reorganization are
not received, the persons named as proxies may propose one or more adjournments
of such Special Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
voted at the Special Meeting in person or by proxy. The persons named as proxies
will vote those proxies that they are entitled to vote in such manner as they
determine to be in the best interest of shareholders with respect to any
proposal to adjourn the Special Meeting. A shareholder vote may be taken on the
reorganization prior to such adjournment if sufficient votes have been received
for approval.
Under Massachusetts law, shareholders of a registered investment company are
not entitled to demand fair value of the shares and will be bound by the terms
of the Reorganization if the Plan is approved at the Meeting. Any shareholder
in AIF may, however, either redeem his or her shares at net asset value or
exchange his or her shares into another Van Eck fund (without imposition of any
sales or redemption charge) prior to the date of the Reorganization.
ADDITIONAL INFORMATION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not include all the information set forth in the registration
statements and exhibits relating thereto which ADF and AIF, respectively, have
filed with the Securities and Exchange Commission, Washington, DC 20549, under
the Securities Act of 1933 and the Investment Company Act of 1940, to which
reference is hereby made.
Reports, proxy statements, registration statements and other information filed
by ADF and AIF can be inspected and copied at the public reference facilities of
the Securities and Exchange Commission in Washington, DC and Regional Offices of
the Commission located at 7 World Trade Center, New York, New York 10048 and
Suite 1400, 500 West Madison Street, Chicago, Illinois 60621. Copies of such
material can also be obtained by mail from the Public Reference Branch, Office
of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, DC 20549 and its public reference facilities in New
York, New York and Chicago, Illinois, at prescribed rates.
20
<PAGE>
EXHIBIT A
PLAN OF REORGANIZATION AND LIQUIDATION
PLAN OF REORGANIZATION AND LIQUIDATION dated as of July --, 1995, adopted by
Van Eck Funds, a Massachusetts business trust (the "Trust"), on behalf of the
Asia Infrastructure Fund, a series of the Trust, and the Asia Dynasty Fund, a
series of the Trust. The Asia Infrastructure Fund and the Asia Dynasty Fund are
referred to collectively as the "Funds" and individually as a "Fund."
W I T N E S S E T H:
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, this Plan is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended, such reorganization to consist of the
transfer of all of the assets of the Asia Infrastructure Fund in exchange solely
for Class A shares of beneficial interest, par value $0.001 per share, of the
Asia Dynasty Fund ("Asia Dynasty Fund Shares") and the assumption by the Asia
Dynasty Fund of all of the stated liabilities of the Asia Infrastructure Fund
and the distribution, after the Closing hereinafter referred to, of Asia Dynasty
Fund Shares to the shareholders of the Asia Infrastructure Fund in liquidation
of the Asia Infrastructure Fund, all upon the terms and conditions hereinafter
set forth in this Plan; and
WHEREAS, the Trustees of the Trust, including a majority of the Trustees who
are not interested persons, have determined with regard to each Fund that
participating in the transactions contemplated by this Plan is in the best
interests of the respective Funds.
NOW, THEREFORE, the Trustees hereby declare the following Plan:
1. Transfer of Assets. Subject to the terms and conditions set forth herein,
------------------
at the closing provided for in Section 5 (herein referred to as the "Closing"),
the Trust shall transfer all of the assets of the Asia Infrastructure Fund, and
assign all Assumed Liabilities (as hereinafter defined) to the Asia Dynasty
Fund, and the Asia Dynasty Fund shall acquire all such assets, and shall assume
all such Assumed Liabilities, upon delivery to the Trust of Asia Dynasty Fund
Shares having a net asset value equal to the value of the net assets of the Asia
Infrastructure Fund transferred (the "New Shares"). "Assumed Liabilities" shall
mean all liabilities, expenses, costs, charges and reserves reflected in an
unaudited statement of assets and liabilities of the Asia Infrastructure Fund as
of the close of business on the Valuation Date (as hereinafter defined),
determined in accordance with generally accepted accounting principles
consistently applied from the prior audited period. The net asset value of the
New Shares and the value of the net assets of the Asia Infrastructure Fund to be
transferred shall be determined as of the close of regular trading on the New
York Stock Exchange on the business day next preceding the Closing (the
"Valuation Date") using the valuation procedures set forth in the then current
prospectus and statement of additional information of the Asia Dynasty Fund.
All Assumed Liabilities of the Asia Infrastructure Fund, to the extent that
they exist at or after the Closing, shall after the Closing attach to the Asia
Dynasty Fund and may be enforced against the Asia Dynasty Fund to the same
extent as if the same had been incurred by the Asia Dynasty Fund.
2. Liquidation of the Asia Infrastructure Fund. At or as soon as practicable
-------------------------------------------
after the Closing, the Asia Infrastructure Fund will be liquidated and the New
Shares delivered to the Trust on behalf of the Asia Infrastructure Fund will be
distributed to shareholders of the Asia Infrastructure Fund, each shareholder to
receive the number of New Shares equal to the pro rata portion of shares of
beneficial interest of the Asia Infrastructure Fund held by such shareholder as
of the close of business on the Valuation Date. Such
<PAGE>
liquidation and distribution will be accompanied by the establishment of an open
account on the share records of the Asia Dynasty Fund in the name of each
shareholder of the Asia Infrastructure Fund and representing the respective pro
rata number of New Shares due such shareholder. As soon as practicable after the
Closing, the Trust shall file on behalf of the Asia Infrastructure Fund such
instruments of dissolution, if any, as are necessary to effect the dissolution
of the Asia Infrastructure Fund and shall take all other steps necessary to
effect a complete liquidation and dissolution of the Asia Infrastructure Fund.
3. Conditions Precedent. The obligations of the Trust to effectuate the Plan
--------------------
of Reorganization and Liquidation hereunder shall be subject to the satisfaction
of the following conditions:
(a) At or immediately prior to the Closing, the Trust shall have declared and
paid a dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to the shareholders of the Asia
Infrastructure Fund all of the Fund's investment company taxable income for
taxable years ending at or prior to the Closing (computed without regard to any
deduction for dividends paid) and all of its net capital gain, if any, realized
in taxable years ending at or prior to the Closing (after reduction for any
capital loss carry-forward);
(b) Such authority and orders from the Securities and Exchange Commission (the
"Commission") and state securities commissions as may be necessary to permit the
Trust to carry out the transactions contemplated by this Plan shall have been
received;
(c) A registration statement of the Trust on Form N-14 under the Securities
Act of 1933, as amended (the "Securities Act"), registering the New Shares under
the Securities Act, and such amendment or amendments thereto as are determined
by the Board of Trustees of the Trust to be necessary and appropriate to effect
such registration of the New Shares (the "Registration Statement"), shall have
been filed with the Commission and the Registration Statement shall have become
effective, and no stop-order suspending the effectiveness of such Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the Commission (and not withdrawn or
terminated);
(d) The New Shares shall have been duly qualified for offering to the public
in all states in which such qualification is required for consummation of the
transactions contemplated hereunder;
(e) The Trustees of the Trust shall have received a legal opinion from
Goodwin, Procter & Hoar, counsel to the Trust, in form and substance reasonably
satisfactory to the Trustees of the Trust, as to such matters as the Trustees
may reasonably request;
(f) A vote approving this Plan and the reorganization contemplated hereby
shall have been adopted by at least a majority (as defined in the 1940 Act) of
the outstanding shares of beneficial interest of the Asia Infrastructure Fund
entitled to vote at the special meeting of shareholders of the Asia
Infrastructure Fund duly called for such purpose.
4. Closing. The Closing shall be held at the offices of the Trust and shall
-------
occur (a) as of the close of business on [September __, 1995], (b) if all
regulatory or shareholder approvals shall not have been received, then on the
first Monday following receipt of all necessary regulatory approvals and the
final adjournment of the meetings of shareholders of the Asia Infrastructure
Fund at which this Agreement is considered or (c) such later time as the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously unless otherwise provided. At, or as soon as may be practicable
following the Closing, the Trust shall distribute the New Shares to the Asia
Infrastructure Fund Record Holders (as herein defined) by instructing the Asia
Dynasty Fund to register the appropriate number of New Shares in the names of
the Asia Infrastructure Fund's shareholders and the Asia Dynasty Fund agrees
promptly to comply with said instruction. The shareholders of record of the Asia
Infrastructure Fund as of the close of business on the Valuation Date shall be
certified by the Trust's transfer agent (the "Asia Infrastructure Fund Record
Holders").
A-1
<PAGE>
5. Expenses. The expenses of the transactions contemplated by this Plan shall
--------
be borne by Asia Infrastructure Fund and Asia Dynasty Fund, except those
expenses which are expressly set forth herein as expenses to be borne by Van Eck
Associates Corporation, in its capacity as the sponsor of the Asia
Infrastructure Fund (the "Sponsor"). Such expenses shall be borne by Asia
Infrastructure Fund, Asia Dynasty Fund and the Sponsor whether or not the
transactions contemplated hereby are consummated, except that the Sponsor shall
have no responsibility with respect to pre-paid expenses in the event the
transactions contemplated hereunder are not consummated. The expenses to be
borne by the Sponsor shall consist of the following: (i) Asia Infrastructure
Fund's pre-paid fidelity bond and errors and omissions insurance premiums, and
(ii) operating expenses, costs, and liabilities arising in the ordinary course
of business of the Asia Infrastructure Fund to the extent such expenses were
not properly accrued for as of the Closing Date.
6. Termination. This Plan and the transactions contemplated hereby may be
-----------
terminated and abandoned by resolution of the Board of Trustees of the Trust
with respect to either of the Asia Infrastructure Fund or the Asia Dynasty Fund,
at any time prior to the Closing, if circumstances should develop that, in the
opinion of the Board, in its sole discretion, make proceeding with this Plan
inadvisable for either Fund. In the event of any such termination, there shall
be no liability for damages on the part of either the Asia Infrastructure Fund
or the Asia Dynasty Fund, or their respective trustees or officers, to the other
party or its trustees or officers.
7. Amendments. This Plan may be amended, waived or supplemented in such manner
----------
as may be mutually agreed upon in writing by the authorized officers of the
Trust with respect to either Fund; provided, however, that following the meeting
of the Asia Infrastructure Fund shareholders called by the Trust pursuant to
Section 3(f) of this Agreement, no such amendment, waiver or supplement may have
the effect of changing the provisions for determining the number of Asia Dynasty
Fund Shares to be issued to the Asia Infrastructure Fund shareholders under this
Plan to the detriment of such shareholders without their further approval.
8. Governing Law. This Plan shall be governed and construed in accordance with
-------------
the laws of the Commonwealth of Massachusetts, without giving effect to the
conflicts of laws provisions thereof.
9. Further Assurances. The Trust, with respect to Asia Infrastructure Fund and
------------------
Asia Dynasty Fund, shall take such further action, prior to, at, and after the
Closing, as may be necessary or desirable and proper to consummate the
transactions contemplated hereby.
10. Limitations of Liability. The term "Van Eck Funds" means and refers to the
------------------------
trustees from time to time serving under the Amended and Restated Master Trust
Agreement (the "Master Trust Agreement") of the Trust, as the same may
subsequently thereto have been, or subsequently hereto be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding-upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the assets and property of the
Asia Infrastructure Fund or the Asia Dynasty Fund series of the Trust, as the
case may be, as provided in the Master Trust Agreement. With respect to each
Fund, the execution and delivery of this Plan has been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization nor such execution and delivery shall be
deemed to have been made individually or to impose any personal liability, but
shall bind only the Trust property of the respective series of the Trust as
provided in its Master Trust Agreement. The Master Trust Agreement of the Trust
provides, and it is expressly agreed, that each Fund shall be solely and
exclusively responsible for the payment of its debts, liabilities and
obligations, and that no other Fund shall be responsible for the same.
A-2
<PAGE>
IN WITNESS WHEREOF, the Trustees have caused this Plan to be executed on
behalf of each Fund as of the date first set forth above by their duly
authorized representatives.
Attest: VAN ECK FUNDS
on behalf of Asia Infrastructure Fund
By:
- ------------------------------ -------------------------------
Attest: VAN ECK FUNDS
on behalf of Asia Dynasty Fund
By:
- ------------------------------ -------------------------------
The undersigned hereby accept their obligation to pay expenses pursuant to
Section 5 hereof.
Attest: VAN ECK ASSOCIATES CORPORATION
By:
- ------------------------------ -------------------------------
A-3
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VAN ECK FUNDS
ASIA DYNASTY FUND
ASIA INFRASTRUCTURE FUND
99 Park Avenue, 8th Floor
New York, New York 10016
1-800-221-2220
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Proxy Statement/Prospectus of Asia Infrastructure
Fund (the "Fund" or "AIF"), a series of Van Eck Funds dated July __, 1995, which
is enclosed. This Statement of Additional Information has been incorporated by
reference into the Proxy Statement/Prospectus.
Further information about the Asia Dynasty Fund series of Van Eck Funds
("ADF") is contained in and incorporated by reference to its latest prospectus,
dated March 17, 1995, its latest Statement of Additional Information, dated
March 17, 1995, and its Annual Report to shareholders for the year ended
December 31, 1994, all of which are incorporated by reference herein and are
available at no cost by either calling the Funds at the phone number listed
above or by writing to the Funds at the above address.
Further information about the Fund is contained in and incorporated by
reference to the Statement of Additional Information, dated March 17, 1995, as
filed with the Securities and Exchange Commission; and its Annual Report to
Shareholders for the year ended December 31, 1994, all of which are incorporated
by reference herein.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED JULY __, 1995
<PAGE>
TABLE OF CONTENTS
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General Information............................................. 2
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GENERAL INFORMATION
The shareholders of AIF are being asked to approve an Agreement and Plan of
Reorganization (the "Plan") which contemplates the exchange of assets of AIF for
Class A shares of ADF and the distribution of such shares to the shareholders of
AIF. ADF is an open-end, diversified management investment company and Van Eck
Funds is organized as a Massachusetts business trust. A Special Meeting of
Shareholders to consider the Plan and other matters described in the Proxy
Statement/Prospectus will be held at 99 Park Avenue, 8th Floor, New York, New
York on September __, 1995 at 3:00 P.M.
For detailed information about the Plan, shareholders of AIF should refer
to the Proxy Statement/Prospectus. For further information about AIF and ADF,
shareholders should refer to the Van Eck Funds Statement of Additional
Information, dated March 17, 1995 and each Fund's Annual Report to shareholders
for the year ended December 31, 1994, all of which are incorporated by reference
into this Statement of Additional Information.
2
<PAGE>
VAN ECK ASIA DYNASTY FUND
1994 ANNUAL REPORT
Dear Fellow Shareholder:
After achieving exceptional returns in 1993 and despite continued strong
economic growth throughout much of Asia, the Asian stock markets witnessed
severe volatility and declines for the year. World markets reacted negatively to
increases in U.S. interest rates. The Asian markets were hit particularly hard
as interest rate hikes signaled a decline in liquidity and the U.S. capital
influx that had helped fuel these markets last year. In an effort to stem losses
and increase overall stability, we increased our emphasis on higher quality,
large capitalization stocks while we decreased holdings in the property sector.
We continue to favor the more established markets, such as Hong Kong, Singapore
and Malaysia. Since its inception in March 1993, the Van Eck Asia Dynasty Fund
has achieved a total return of 31%, although for the twelve months ended
December 31, 1994, the Fund was down 18.7%.
In Hong Kong, the six U.S. rate hikes reversed a negative real interest rate
environment that had prevailed over the past several years, and the market
declined 31% for the year. As we enter 1995, we expect this market to experience
further volatility short term, as interest rates ascend further and trade
disputes between the U.S. and China heat up. Still, we believe both these issues
will be resolved, or at least discounted in the market, by mid-year. Since
valuations are at attractive levels and corporate earnings continue to be solid,
we believe that 1995 should be a better year.
The Singapore market was down 8% for 1994, as short-term interest rates
increased and capital inflows diminished. Local economic fundamentals remain
strong with forecasted GDP growth of 8%-9% and corporate earnings growth of
15%-20%. However, investor sentiment has been decidedly cautious and even
bearish. This stock market's performance in 1995 depends somewhat on the extent
of U.S. interest rate hikes and remains vulnerable to global sentiment swings.
The Malaysian market declined about 24% for the year as the government moved to
limit excessive volatility and speculation in the stock market by decelerating
the growth of the money supply and imposing tougher regulations on trading
activities. With the economy operating at full strength and posting an average
8.3% GDP growth per annum over the past seven years, there have been concerns
that it may be overheating, particularly given the expansion of the current
account deficit and mounting inflationary pressures. Notwithstanding these
issues, there are selective stocks which stand to benefit from the continuation
of the infrastructure buildup underway in Malaysia.
Throughout most of 1994, the Thai bourse experienced volatility that was
exacerbated by external factors and foreign investment activities. By year-end,
the Stock Exchange of Thailand Index had fallen 19% on worries of political
instability, rising interest rates, and lackluster corporate earnings. While
regional sentiment remains uncertain and further interest rate rises may lie
ahead, local factors could provide support for a more positive market
environment in 1995. Most economists expect growth to be robust at about 9%,
driven by rising investments and expenditures.
Corporate earnings are also expected to remain solid, which could lead to a
higher weighting for Thailand in your portfolio as the year unfolds.
<PAGE>
Indonesia's market was down 20% for the year. Adding to general market pressures
were high deposit rates of 17%-18%, making cash holdings attractive to many
local investors, and a host of new IPOs. Looking ahead, Indonesia's solid
economic growth, bolstered by ongoing privatization of key sectors of the
economy, high consumer demand and continued foreign direct investment, should
benefit long-term investors.
Select markets did achieve gains for 1994, such as South Korea and India, up 19%
and 17%, respectively. However, we have not augmented the small positions
(approximately 3.8% and 1.1% of total investments) held in these countries since
there are several near-term problems. India's market weakened considerably in
the end of '94 due to political uncertainty and an oversupply of securities. The
defeat of Prime Minister Rao's Congress Party in key elections calls into doubt
whether the government will pursue the economic reforms needed to sustain
India's competitiveness over the longer term. However, if the government
succeeds in stabilizing its political platform for the 1996 national election,
it should restore confidence to the market later this year and we could increase
the position. In South Korea, the government has begun to tighten the money
supply on the back of a resilient economy and solid corporate earnings growth.
Many fear these measures may be premature and that market performance could be
hindered.
THE OUTLOOK
We believe better performance will emerge after the Asian market's current cycle
of turbulence. Asian growth continues at twice the rate of most of the
industrialized world according to the latest forecast released by the OECD.
There have been positive earnings revisions for Thailand, Indonesia, Malaysia
and Singapore. Stock valuations are now attractive: price-to-earnings ratios for
Asia, ex-Japan, have steadily declined from their high of 16 times in February
of 1994 to the current low of 13.4 times. With most of the Asian markets
currently trading at the lower end of their historical trading ranges, our
outlook for 1995 is positive, although we expect further short-term volatility.
We will continue to position the portfolio with quality stocks with solid
earnings growth. It should be reiterated that Asia should be viewed as a
long-term investment, and we believe those investors who do so will be rewarded.
We appreciate your participation in the Asia Dynasty Fund and look forward to
helping you meet your investment objectives in the future.
/s/John C. van Eck
John C. van Eck [photo]
Chairman
/s/Peter Soo
Peter Soo [photo]
Portfolio Manager
January 27, 1995
- --------------------------------------------------------------------------------
PERFORMANCE RECORD as of 12/31/94
- --------------------------------------------------------------------------------
AVERAGE ANNUAL AFTER MAXIMUM BEFORE
TOTAL RETURN SALES CHARGE* SALES CHARGE
- --------------------------------------------------------------------------------
A shares-Life (since 3/22/93) 13.3% 16.4%
- --------------------------------------------------------------------------------
1 year (22.5)% (18.7)%
- --------------------------------------------------------------------------------
B shares-Life (since 9/1/93) 3.2% 6.9%
- --------------------------------------------------------------------------------
1 year (23.9)% (19.1)%
- --------------------------------------------------------------------------------
The performance data represents past performance and is not indicative of future
results. Investment return and principal value of an investment in the Fund will
vary so that shares, when redeemed, may be worth more or less than their
original cost.
* A shares: maximum sales charge = 4.75%
B shares: maximum contingent deferred sales charge = 6.00%
<PAGE>
TOP 10 EQUITY HOLDINGS*
AS OF DECEMBER 31, 1994
THE HONG KONG SHANGHAI BANKING CORPORATION, LTD. (HSBC HOLDINGS PLC)
(HONG KONG, 4.6%)
The largest international bank listed on the Hong Kong stock exchange and one of
the largest banking and financial services organizations in the world.
Regionally, the bank holds 61% of the largest local bank in Hong Kong, the Hang
Seng Bank, and also lists other major banks in Singapore and Malaysia among its
subsidiaries.
UNITED OVERSEAS BANK LTD.
(SINGAPORE, 4.4%)
One of Singapore's most profitable and well-capitalized banks as measured by the
company's return on equity and capital ratio. The bank also has the largest
branch network in Singapore with its key strength in retail lending, mortgages
and credit cards. UOB has banking subsidiaries in Malaysia, Indonesia and China.
HUTCHISON WHAMPOA LTD.
(HONG KONG, 2.9%)
A major diversified international corporation involved in property development,
shipping container terminals, retailing, telecommunications and media, energy,
and hotels. The company is committed to both the growth of its existing
businesses in Hong Kong and overseas, and to long-term investment opportunities
presented by the economic growth taking place in the region.
HONG KONG TELECOMMUNICATIONS LTD.
(HONG KONG, 2.7%)
This utility holds the international telephone franchise in Hong Kong for most
areas of telecommunications, including data, fax and voice transmission.
China-related businesses have become the fastest growth components of Hong Kong
Telecommunications.
CITIC PACIFIC LTD.
(HONG KONG, 2.5%)
CITIC Pacific serves as the investment holding company of the Chinese government
and has significant interests in transportation, telecommunications, power
plants, trading and finance companies. The company is a major beneficiary of the
infrastructure development currently underway in Hong Kong.
CHEUNG KONG HOLDINGS LTD.
(HONG KONG, 2.4%)
This company is one of the largest property developers in Hong Kong and has
diverse interests in other commercial areas through its substantial ownership of
Hutchison Whampoa and other listed companies. Regional growth will benefit the
company, particularly in China, where Cheung Kong has interests in property
development and infrastructure projects.
SWIRE PACIFIC LTD.
(HONG KONG, 2.2%)
One of the best known companies in Hong Kong, Swire Pacific's principal
activities and investments encompass aviation, property, shipping, trading,
insurance, hotels and cable television.
CHINA LIGHT & POWER CO., LTD.
(HONG KONG, 1.9%)
CLP is the monopoly supplier of electricity to the Kowloon Peninsula and the
outerlying areas of Hong Kong. In addition, CLP supplies electricity to the
neighboring province of Guangdong, an important manufacturing base fueling
China's phenomenal growth. The company has also received approval to invest in
power generating facilities in China's fast growing coastal provinces. Its
consistent earnings and growth rate make CLP a core portfolio holding.
* Portfolio is subject to change.
<PAGE>
SUN HUNG KAI PROPERTIES LTD.
(HONG KONG, 1.8%)
Principally a property development and investment company, Sun Hung Kai has
broadened its businesses to include hotels, construction, finance, insurance,
cinemas, public transportation, telecommunications and trading. The company is
developing the fourth digital cellular phone network in Hong Kong.
SIAM CITY CEMENT PUBLIC CO., LTD.
(THAILAND, 1.5%)
This company is one of Thailand's largest producers of cement in addition to
producing a full range of construction materials and porcelain products. As one
of the main cement suppliers to the government, SCCC holds a strong advantage
for the coming years as construction growth becomes increasingly public-sector
driven. Given its manufacturing base in the northeastern part of Thailand, the
company is also in a strong position to export to IndoChina.
Note: Equities listed as percentage of investments held.
GEOGRAPHICAL WEIGHTING
DECEMBER 31, 1994
PERCENT OF TOTAL INVESTMENTS HELD
[The following table appears in the printed report in the form of a pie chart]
Hong Kong ...............35.3%
Malaysia ................17.7%
Thailand ................16.4%
Singapore ...............16.0%
Philippines ............. 5.0%
Indonesia ............... 4.0%
S. Korea ................ 3.8%
India ................... 1.1%
China ................... .4%
Other ................... .3%
<PAGE>
ASIA DYNASTY FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1994
- ----------------------------------------------------------
NO. OF SHARES
OR PRINCIPAL
AMOUNT SECURITIES(A) VALUE (NOTE 1)
- ----------------------------------------------------------
AUSTRALIA: 0.0%
65,000 Odin Mining Investment Company+ $ 18,645
------------
CHINA: 0.4%
57,500 Shanghai Diesel Engine "B"+ 46,000
300,000 Shanghai Lujiazui Finance
& Company+ 243,000
200,000 Shanghai Shangling Ele. App. "B"+ 172,000
------------
461,000
------------
HONG KONG: 35.3%
500,000 Amoy Properties Ltd. 452,313
$1,000,000 Amoy Properties Conv. Bonds
5.50% due 12/29/49 732,500
1,598,000 Benelux International Ltd. 119,778
666,000 Cafe de Coral Holdings Ltd. 163,531
677,000 Cheung Kong (Holdings) Ltd. 2,755,945
608,000 China Foods Holdings, Ltd. 121,003
532,000 China Light & Power Co., Ltd. 2,268,803
900,000 China Merchants Hai Hong Hldgs. 186,095
1,956,000 Chevalier International 285,640
1,195,000 CITIC Pacific Ltd. 2,880,169
665,664 Dairy Farm International
Holdings Ltd. 714,010
2,926,000 Fountain Set (Holdings) Ltd. 423,510
$1,000,000 Guangdong Investment C.V.
4.50% due 10/18/98 1,035,000
1 ,500,000 Guangzhou Investment Co., Ltd. 304,342
200,000 Guoco Group Ltd. 855,518
160,000 Hang Seng Bank Limited 1,147,583
350,000 Harbin Power Equipment Co. Ltd. H+ 117,601
500,000 HSBC Holdings PLC 5,395,451
60,000 Henderson Investment Ltd.
(Warrants expiring 03/31/96)+* 4,730
600,000 Henderson Investment Company 395,451
100,000 Hong Kong Building &
Loan Agency Ltd. 192,556
350,000 Hong Kong Electric Holdings, Ltd. 956,643
476,070 Hong Kong Land Holdings, Ltd. 929,007
1,630,000 Hong Kong Telecommunications Ltd. 3,107,069
850,000 Hopewell Holdings Ltd. 703,024
850,000 Hutchison Whampoa Ltd. 3,438,227
379,000 Hysan Development Co., Ltd. 751,829
1,750,000 Innovative International
Holdings, Ltd. 497,545
800,000 Interform Ceramics Tech., Ltd.
(Rights expiring 04/30/97)+ 20,677
8,000,000 Interform Ceramics Technology, Ltd. 630,654
548,000 Kumagai Gumi (Hong Kong) Ltd. 439,080
1,000,000 Luks Industrial Co., Ltd. 142,156
1,200,000 Mansion Holdings Ltd. 158,180
2,650,000 S. Megga International Holdings Ltd. 297,945
760,000 Shun Tak Holdings Ltd. 540,191
352,000 Sing Tao Holdings 220,625
800,000 South China Morning Post
(Holdings) Ltd. 467,821
343,000 Sun Hung Kai Properties Ltd. 2,047,894
420,000 Swire Pacific Ltd. (A) 2,616,180
1,500,000 Peregrine HSBC
(Warrants expiring 1/17/96)+ 122,125
1,824,000 UDL Holdings 174,433
100,000 Wai Kee Holdings Ltd.
(Warrants expiring 12/31/96)+ 1,654
500,000 Wai Kee Holdings Ltd. 116,309
830,000 Wheelock & Company Ltd. 1,378,328
2,300,000 Wing Fai International 205,092
460,000 Wing Fai International
(Warrants expiring 10/31/97)+ 7,371
600,000 Yaohan Food Processing & Trading 94,598
2,400,000 Zhenhai Refining & Chemicals `H'+ 611,011
------------
41,227,197
------------
INDIA: 1.1%
3,000 CESC, Ltd. (units)+ 114,000
$550,000 ICICI Convertible Bonds
2.50% due 04/03/00 411,125
55,000 Indo Gulf Fertilizers &
Chemicals Co. (GDR)+ 156,750
10,000 Raymond Woollen Mills (GDR)+ 141,250
140 TATA Electric Companies (GDS)+ 61,250
$300,000 TATA Iron and Steel Convertible Bonds
2.25% due 04/01/99 270,750
10,000 Videocon International Ltd. (GDR)+ 52,500
------------
1,207,625
------------
INDONESIA: 4.0%
30,000 Hanjaya Mandala Sampoerna "F"+ 147,407
70,000 Indofood "F"+ 275,478
160,000 Panin Bank "F" 196,542
40,000 P.T. Fajar Surya Wisesa "F"+ 58,235
83,000 P.T. Kabelmetal "F" 113,285
150,000 P.T. Hero Supermarkets "F" 242,266
26,400 P.T. Indonesia Satellite (ADR)+ 943,800
202,500 P.T. Jaya Real Property "F" 644,904
330,000 P.T. Lippo Land Development "F" 450,409
52,000 P.T. Mayora Indah "F" 255,505
10,000 P.T. Semen Gresik "F" 46,861
63,000 P.T. Sumalindo Lestari Jaya "F"+ 134,713
200,000 P.T. Trias Sentosa "F" 318,471
17,500 P.T. Tri Polyta Indonesia (ADR)+ 424,375
195,000 Sinar Mas Agro Research &
Technology "F" 248,408
37,500 Tempo Scan Pacific "F" 179,993
------------
4,680,652
------------
KOREA: 3.8%
9,000 Boram Bank "F" 118,706
2,139 Boram Bank "F" New 28,213
8,000 Chung Ho Computer Co.+ 654,407
2,198 Chung Ho Computer Co. NEW+ 172,001
19,590 Daewoo Heavy Industries "F" 305,589
3,500 Dongbu Steel Co. "F" 116,741
3,360 Dongbu Steel-Pfd.+ 55,396
3,000 Dong Kuk Steel Mill Co. "F"+ 89,410
2,150 Dong Kuk Steel Mill Co. NEW "F"+ 61,623
10,000 Goldstar Company+ 155,000
5,320 Korea Electric Power Corp. "F" 183,518
6,000 Korea Long Term Credit Bank "F" 186,430
5,500 Pohang Iron & Steel Co., Ltd. 444,325
10,886 Samsung Electronics (Pfd.) 822,835
7,500 Samsung Electronics Ltd. (GDR)+ 371,250
165 Samsung Electronics Company
(GDR) NEW+ 8,168
451 Samsung Electronics (Pfd.) NEW 34,090
1,058 Samsung Heavy Industries "F" NEW 42,937
8,530 Samsung Heavy Industries "F" 354,831
278 Sang Up Securities Co. "F" NEW 7,827
$100,000 Ssangyong Oil Convertible Bonds
3.75% due 12/31/08 106,975
3,000 Ssangyong Cement Co. 114,902
------------
4,435,174
------------
MALAYSIA: 17.7%
122,000 Aokam Perdana Berhad 754,885
121,800 Cement Manufacturers Sarwak 524,692
40,000 Datuk Keramat Holdings Berhard 92,422
98,750 DCB Holdings Berhard (Rights)+* 161,461
395,000 Development & Commercial Bank Berhad 881,731
100,000 Edaran Otomobil Nasional Berhad 759,742
75,000 Faber Group Berhad 65,498
136,500 Genting Berhad 1,170,687
50,000 Hock Hua Bank Berhad 150,773
250,000 Hume Industries (Malaysia) Berhad 1,116,115
62,500 Kim Hin Industry Berhad 313,295
12,500 Kim Hin Industry Berhad
(Transferable Subscription Rights
expiring 06/18/98)+ 16,742
260,000 Land & General Berhad 1,079,303
301,667 Leader Universal Holdings Berhad 968,736
195,000 Malayan Banking Berhad 1,176,033
34,000 Malaysian Helicopter Services 63,912
163,333 Malaysian International Shipping "F" 466,940
380,000 Malaysian Resources Corporation
Berhad 702,408
270,000 Public Bank Berhad "F" 539,260
300,000 Public Finance Berhad "F" 498,140
690,000 Renong Berhad 853,887
120,000 Resorts World Berhad 704,915
679,200 Sime Darby (Malaysia) Berhad 1,556,029
225,000 Technology Resources Industries
Berhad 718,132
70,000 Telekom Malaysia Berhad 474,251
147,000 Tenaga Nasional Berhad 581,437
20,000 T.H. Loy Industries (M) Berhard 70,100
239,000 Time Engineering Berhad 594,341
117,000 Uniphone Telecommunications
(Rights expiring 09/07/99)+* 78,351
234,000 Uniphone Telecommunications Berhad+ 452,696
180,000 United Engineers (Malaysia) Berhad 888,193
MYR 65,000 United Engineers (Malaysia) Berhad
ICULS 4.00% due 05/22/49 27,746
100,000 Westmont Berhad 622,675
7,800 YTL Corporation Berhad (Rights)+$ 23,215
223,600 YTL Corporation Berhad
(Warrants expiring 6/30/97)+ 1,436,084
------------
20,584,827
------------
PHILIPPINES: 5.0%
397,000 Aboitz Equity Ventures+ 92,063
1,000,000 Alaska Milk Corp.+* 248,169
162,000 Ayala Land Incorporated B+ 250,448
326,500 Bacnotan Cement Corporation+ 425,061
20,000 Bacnotan Consolidated Industries 227,828
1,178,000 Filinvest Land inc. 469,666
55,266 First Philippine Holdings Corporation
(Class B) 221,469
200,000 International Container Terminal
Services, Inc 158,666
$600,000 J.G. Summit Holdings, Inc. Conv. Bonds
3.50% due 12/23/03 418,500
35,515 Manila Electric Company (Class B) 484,033
12,829 Metropolitan Bank & Trust Co. 362,735
749,000 Petron Corporation ORD 655,146
2,910 Philippine Long Distance
Telephone Co. 159,825
10,000 Philippine Savings Bank 264,443
143,400 San Miguel Corporation (Class B) 746,753
500,000 S.M. Prime Holdings Inc.+ 162,734
4,000,000 South East Asia Cement Holdings Inc 393,816
50,000 Steniel Manufacturing Corp. 14,036
10,000 Steniel Manufacturing Corp. (Rights)+* 1,180
34,500 Union Bank of the Philippines 55,441
------------
5,812,012
------------
SINGAPORE: 16.0%
504,000 ACMA Electrical Industries Ltd. 1,652,346
266,000 City Development Ltd. 1,486,900
119,357 City Development Ltd.
(Warrants expiring 07/18/98)+ 466,622
10,000 Creative Technology Ltd. 142,500
329,000 DBS Land Ltd. 979,328
210,000 Far East Levingston Shipbuilding Ltd. 972,222
230,000 Hotel Properties Ltd. 418,038
31,000 Jurong Engineering Ltd. 212,620
138,000 Keppel Corporation Ltd. 1,173,660
165,000 Overseas- Chinese Banking Corp. "F" 1,697,531
187,500 Pentex Schweizer Circuits Ltd. 257,202
200,000 Republic Hotels & Resorts Ltd. 329,218
100,000 Sembawang Maritime CULS
1.50% due 10/25/98 156,379
145,000 Singapore Airlines Ltd."F" 1,332,647
62,000 Singapore Press Holdings Ltd. "F" 1,126,886
70,000 Ssangyong Cement (Singapore) Ltd. 217,010
243,000 Straits Steamship Land 833,333
100,000 United Engineers Ltd. 199,588
485,375 United Overseas Bank Ltd."F" 5,126,732
------------
18,780,762
------------
TAIWAN: 0.3%
16,000 Microelectronics Technology+ $ 164,000
$200,000 Sincere Navigation Convertible Bonds
3.75% due 5/26/03 200,000
------------
364,000
------------
THAILAND: 16.4%
63,000 Advanced Info Services "F" 873,292
50,000 Ban- Pu Coal Co., Ltd. 1,095,399
130,000 Bangkok Bank Public Co., Ltd. "F" 1,387,771
$500,000 Bangkok Bank Public Co., Convertible
3.25% due 03/03/04 457,500
39,000 Charoong Thai Wire & Cable
Public Co., Ltd. "F" 262,537
25,000 Dhana Siam Finance & Securities "F" 176,260
75,00 Dhana Siam Finance & Securities
(Rights)+* 469,030
105,000 Finance One Ltd. "F" 1,631,149
24,900 Finance One Ltd. "F"
(Warrants expiring 3/15/99)+ 208,285
7,300 International Cosmetics Co., Ltd. "F" 136,666
50,000 Italian-Thai Develop Public Co "F" 573,591
123,300 Lanna Lignite Public Co Ltd 1,208,198
75,000 Land & House Co., Ltd. "F" 1,338,379
$300,000 MDX Public Co., Ltd. Conv Bonds
4.75% due 09/17/03 190,500
160,000 National Financial & Securities "F" 873,133
40,000 National Financial & Securities "F"
(Warrants expiring 11/16/99)+* 216,690
140,000 Phatra Thanakit Co., Ltd. "F" 1,081,856
$125,000 Phatra Thanakit Co., Ltd."F"
3.5% due 12/13/03 157,500
20,000 Post Publishing Co., Ltd.* 146,584
95,400 Property Perfect Public Co.,
Ltd. "F" 1,090,611
21,200 Property Perfect Public Co., Ltd.
(Warrants expiring 07/07/99)+ 61,645
30,800 PTT Exploration and Production 318,980
26,000 Regional Container Lines "F" 456,722
5,000 Siam Cement Public Co.,Ltd. "F" 299,542
86,672 Siam City Cement Public Co.,
Ltd. "F" 1,740,000
250,000 Siam City Bank Public Company Ltd. 318,662
55,000 Siam Commercial Bank Ltd. "F" 503,884
20,000 Sino Thai Engineering & Constructon
Public Co. "F" 262,896
80,000 Thai Farmers Bank, Ltd.(The) "F" 650,070
44,400 Thai Granite Co., Ltd. "F" 77,817
22,200 Thai Granite Co., Ltd. (Rights)+* 30,066
32,000 United Communication Industry
(Rights)+* 433,380
32,000 United Communication Industry 446,126
------------
19,174,721
------------
TOTAL INVESTMENTS
(Cost: $116,006,364) $116,746,615
============
- -------------------
(a) Unless otherwise indicated, securities owned are shares of common stock.
"F"--Foreign registry.
+ Non-income producing security
* Valued at fair value as determined by the Board of Trustees.
See Notes to Financial Statements.
<PAGE>
ASIA DYNASTY FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
ASSETS:
Investments at value (cost, $116,006,364)
(Note 1) $116,746, 615
Cash 2,260,711
Receivables:
Securities sold 258,325
Capital shares sold 3,369,539
Dividends and interest 236,258
Other 41,219
-----------
Total assets 122,912,667
-----------
LIABILITIES:
Payables:
Dividends payable 2,630,228
Securities purchased 569,781
Capital shares repurchased 730,362
Distribution fees payable 23,580
Accounts payable 147,755
-----------
Total liabilities 4,101,706
-----------
NET ASSETS $118,810,961
===========
CLASS A
Net asset value and redemption price
per share ($83,786,613/6,908,700) $12.13
======
Maximum offering price per share
(NAV/(1-maximum sales commission)) $12.73
======
CLASS B
Net asset value, offering price and
redemption price per share
($35,024,348/2,897,664) (Redemptions may
be subject to a contingent deferred
sales charge within the first six years
of ownership) $12.09
======
Net assets consist of:
Aggregate paid in capital $118,364,031
Unrealized appreciation of investments 740,251
Distributions in excess of net investment
income (293,321)
Cumulative undistributed realized gains --
-----------
$118,810,961
===========
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
INVESTMENT INCOME:
INCOME:
Dividends (less foreign taxes withheld
of $223,672) $ 2,265,972
Interest 239,214
-----------
Total income 2,505,186
EXPENSES:
Management (Note 2) $ 1,011,806
Distribution - Class A (Note 4) 494,293
Distribution - Class B (Note 4) 360,487
Administrative (Note 2) 344,015
Transfer agent 199,619
Professional 85,395
Reports to shareholders 39,421
Registration 44,530
Other 107,245
----------
Total expenses 2,686,811
-----------
Net investment loss (181,625)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Realized gain from security transactions
(excluding short-term securities):
Proceeds from sales 61,923,587
Cost of securities sold 59,331,309
----------
Realized gain 2,592,278
Realized gain from foreign currency
transactions 128,678
Unrealized appreciation (depreciation) of investments:
Beginning of year 28,152,464
End of year 740,251
----------
Change in unrealized appreciation
of investments (27,412,213)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (24,872,882)
===========
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR FOR THE PERIOD
ENDED MARCH 22, 1993+
DECEMBER 31, TO
1994 DECEMBER 31, 1993
------------ -----------------
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment loss $ (181,625) $ (259,542)
Realized gain from
security transactions 2,592,278 919,195
Realized gain (loss)
from foreign currency
transactions 128,678 (244,708)
Change in unrealized
appreciation
of investments (27,412,213) 28,152,464
----------- -----------
Increase (decrease)
in net assets resulting
from operations (24,872,882) 28,567,409
Dividends and Distributions:
In excess of net
investment income:
Class A Shares (468,634) --
Class B Shares (57,388) --
----------- -----------
(526,022) --
----------- -----------
Realized gains:
Class A Shares (1,472,941) (499,313)
Class B Shares (631,265) (118,056)
----------- -----------
(2,104,206) (617,369)
----------- -----------
Capital share transactions*
Net proceeds from sales
of shares:
Class A Shares 327,601,188 132,049,835
Class B Shares 21,696,938 23,770,613
----------- -----------
349,298,126 155,820,448
----------- -----------
Reinvestment of
dividends:
Class A Shares 353,377 --
Class B Shares 52,490 --
----------- -----------
405,867 --
----------- -----------
Cost of shares reacquired
Class A Shares (333,150,480) (48,409,603)
Class B Shares (5,105,262) (495,065)
----------- -----------
(338,255,742) (48,904,668)
----------- -----------
Increase in net assets
resulting from capital
share transactions 11,448,251 106,915,780
----------- -----------
Total increase
(decrease)
in net assets (16,054,859) 134,865,820
NET ASSETS:
Beginning of period 134,865,820 --
----------- -----------
End of period (including
distributions in excess
of net investment income
of $293,321 and $0,
respectively) $118,810,961 $134,865,820
=========== ===========
*SHARES OF BENEFICIAL INTEREST
ISSUED AND REDEEMED
CLASS A CLASS A
------- -------
Shares sold 24,551,270 10,967,964
Reinvestment of
dividends 23,112 --
----------- -----------
24,574,382 10,967,964
Shares reacquired (24,776,332) (3,857,314)
----------- -----------
Net increase (decrease) (201,950) 7,110,650
=========== ===========
CLASS B CLASS B
------- -------
Shares sold 1,553,312 1,754,334
Reinvestment of
dividends 3,442 --
----------- -----------
1,556,754 1,754,334
Shares reacquired (377,818) (35,606)
----------- -----------
Net increase 1,178,936 1,718,728
=========== ===========
- ----------------
+ Commencement of operations.
See Notes to Financial Statements.
<PAGE>
ASIA DYNASTY FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
CLASS A CLASS B
---------------------------------- -------------------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 22, 1993(A) YEAR ENDED SEPTEMBER 1, 1993(A)
YEAR ENDED TO DECEMBER 31, TO
DECEMBER 31, 1994 DECEMBER 31, 1993 1994 DECEMBER 31, 1993
----------------- ----------------- ------------ -------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $15.28 $9.525 $15.25 $11.33
Income from Investment Operations:
Net Investment Loss........................ -- (0.062)(b) (0.06) (0.07)(b)
Net Gains (Losses) on Securities
(both realized and unrealized)........... (2.86) 5.887 (2.86) 4.06
Total from Investment Operations............. (2.86) 5.825 (2.92) 3.99
Less Distributions:
Dividends in excess of Net Investment Income (0.07) -- (0.02) --
Distributions from Capital Gains........... (0.22) (0.070) (0.22) (0.07)
Total Distributions.......................... (0.29) (0.070) (0.24) (0.07)
Net Asset Value, End of Period............... $12.13 $15.28 $12.09 $15.25
Total Return (c)............................. (18.72%) 61.16% (19.15%) 35.22%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000).............. $83,787 $108,661 $35,024 $26,205
Ratio of Expenses to Average Net Assets...... 1.85% 1.92%(d)(e) 2.38% 3.04%(d)
Ratio of Net Investment Loss to
Average Net Assets......................... --% (0.68%)(d) (0.50%) (2.17%)(d)
Portfolio Turnover Rate...................... 51.08% 14.63% 51.08% 14.63%
</TABLE>
- ----------------
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of capital gains at
net asset value during the year and a redemption on the last day of the
period. A sales charge is not reflected in the calculation of total return.
Total return for the period of less than one year is not annualized.
(d) Annualized.
(e) The expense ratio for Class A shares would have been 2.09% if expenses were
not assumed by the advisor.
See Notes to Financial Statements.
<PAGE>
ASIA DYNASTY FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Asia Dynasty Fund series, a diversified fund (the "Fund") of the Trust in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. SECURITY VALUATION -- Securities traded on national or foreign exchanges
are valued at the last sales prices reported at the close of business on
the last business day of the year. Over-the-counter securities and listed
securities for which no sale was reported are valued at the mean of the bid
and asked prices. Short-term obligations are valued at cost which with
accrued interest approximates value. Securities for which quotations are
not available are stated at fair value as determined by the Board of
Trustees.
B. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
C. CURRENCY TRANSLATION -- Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated
into U.S. dollars at the mean of the bid and asked prices of such
currencies. Purchases and sales of investments are translated at the
exchange rates prevailing when such investments were acquired or sold.
Income and expenses are translated at the exchange rates prevailing when
accrued. The portion of realized and unrealized gains and losses on
investments that result from fluctuations in foreign currency exchange rates
are not separately disclosed. Recognized gains or losses attributable to
foreign currency fluctuations on other foreign denominated assets and
liabilities are recorded as net realized gains and losses from foreign
currency transactions.
D. OTHER -- Security transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is accrued as earned.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions and passive foreign investment companies. The
effect of these differences for the year ended December 31, 1994, decreased
distributions in excess of net investment income by $414,326, decreased
cumulative realized gains by $918,576 and increased aggregate paid in
capital by $504,250.
E. Deferred organization expenses are being amortized over a period not
exceeding five years.
NOTE 2 -- Van Eck Associates Corporation (the "Advisor") earned fees of
$1,011,806 for the year ended December 31, 1994 for investment management and
advisory services. The fee is based on an annual rate of .75 of 1% of the Fund's
average daily net assets. Van Eck Associates Corporation also earned fees of
$344,015 for the year ended December 31, 1994 for administrative and operating
services. The fee is based on an annual rate of .25 of 1% of the Fund's average
daily net assets. AIG Asset Management, Inc., the sub-investment advisor, earned
fees of $674,537 for the year ended December 31, 1994 for investment management.
The fee is based on an annual rate of .50 of 1% of the Fund's average daily net
assets and is paid by the Advisor from the advisory fees it receives from the
Fund. Van Eck Securities Corporation received $236,565 for the year ended
December 31, 1994 from commissions earned on sales of shares of beneficial
interest of the Fund after deducting $1,181,535 allowed to other dealers.
Certain of the officers and trustees of the Trust are officers, directors or
stockholders of Van Eck Associates Corporation and Van Eck Securities
Corporation.
NOTE 3 -- Purchases of investments other than short-term obligations aggregated
$102,639,555 for the year ended December 31, 1994. For federal income tax
purposes the cost of investments owned at December 31, 1994 was $16,212,200. As
of December 31, 1994, net unrealized appreciation for federal income tax
purposes aggregated $534,415 of which $15,011,681 related to appreciated
investments and $14,477,266 related to depreciated investments.
NOTE 4 -- Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund
is authorized to incur distribution expenses which will principally be payments
to securities dealers who have sold shares and service shareholder accounts and
payments to Van Eck Securities Corporation ("VESC"), the distributor, for
reimbursement of other actual promotion and distribution expenses incurred by
the distributor on behalf of the Fund. The amount paid under the Plan in any one
year is limited to .50% of average daily net assets for Class A shares and 1% of
average daily net assets for Class B shares (the "Annual Limitation").
Distribution expenses incurred under the Plan that have not been paid because
they exceed the Annual Limitation may be carried forward to future years and
paid by the Fund within the Annual Limitation. VESC has waived its right to
reimbursement for the carried forward amounts incurred for the year ended
December 31, 1994 through April 30, 1995 in the event the Plan is terminated,
unless the Board of Trustees determines that reimbursement of carried forward
amounts is appropriate.
The excess of distribution expenses incurred over the annual limitation for the
year ended December 31, 1994 was $364,545 for Class A shares and $1,098,315 for
Class B shares.
NOTE 5 -- The Fund declared the following per share dividends and distributions
which are payable on January 9, 1995 to shareholders of record on December 29,
1994 with a reinvestment date of December 30, 1994.
CLASS A CLASS B
-------- -------
Income dividend $0.07 $0.02
Short-term capital gain distribution $0.07 $0.07
Long-term capital gain distribution $0.15 $0.15
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Trustees of the Van Eck Funds:
We have audited the accompanying statement of assets and liabilities of the Asia
Dynasty Fund (the "Fund") (one of the series constituting the Van Eck Funds),
including the investment portfolio, as of December 31, 1994, and the related
statement of operations for the year then ended, the statements of changes in
net assets and the financial highlights for the year then ended and the period
March 22, 1993 (commencement of operations) to December 31, 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. We conducted
our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion. In our opinion, the
financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of the Asia Dynasty Fund series
of the Van Eck Funds as of December 31, 1994, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for the year then ended and the period March 22, 1993 (commencement of
operations) to December 31, 1993, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 24, 1995
<PAGE>
VAN ECK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS FUND (A&C)
Seeks long-term capital appreciation by investing globally, primarily in "Hard
Asset Securities". Income is a secondary consideration.
INTERNATIONAL INVESTORS GOLD FUND (A&C)
Founded in 1955, this Fund is the oldest gold-oriented mutual fund in the U.S.
It invests in gold-mining shares globally and seeks long-term capital
appreciation, moderate yield and protection against monetary uncertainties.
GOLD/RESOURCES FUND (A&C)
Seeking a long-term global hedge against inflation and other risks, this Fund
invests in gold-mining and natural resources companies outside South Africa.
GOLD OPPORTUNITY FUND (A&C)
Seeks capital appreciation by investing globally in equity securities of
companies engaged in the exploration, development, production and distribution
of gold and other precious metals, and through active asset allocation between
gold-related assets and cash instruments.
ASIA DYNASTY FUND-A
This Fund seeks long-term capital appreciation by investing in the equity
securities of companies that are expected to benefit from the development and
growth of the economies in the Asia Region. AIG Asset Management, Inc. serves as
sub-investment advisor to this Fund.
ASIA INFRASTRUCTURE FUND (A&C)
Seeks long-term capital appreciation by investing in the equity securities of
infrastructure companies that are expected to benefit from the development and
growth of the economies in the Asia Region. AIG Asset Management, Inc. serves as
sub-investment advisor to this Fund.
GLOBAL SMALLCAP FUND (A&C)
Seeks long-term capital appreciation by investing globally in equity securities
of companies with small market capitalizations. The Fund is sub-advised by
Pictet International Management, Ltd.
GLOBAL BALANCED FUND-A
This Fund seeks long-term capital appreciation together with current income by
investing in stocks, bonds and money market instruments worldwide. Fiduciary
International, Inc. serves as sub-investment advisor to this Fund.
WORLD TRENDS FUND
This Fund combines trend investing and risk-control strategies to seek long-term
capital appreciation in the global marketplace.
GLOBAL INCOME FUND-A
This Fund emphasizes the current income component of total return by investing
principally in debt securities of foreign or U.S. government entities.
U.S. GOVERNMENT MONEY FUND
This Fund seeks the highest safety of principal and daily liquidity by investing
in U.S. Treasury bills and repurchase agreements collateralized by U.S.
Government obligations.
- --------------------------------------------------------------------------------
This report must be accompanied or preceded by a Van Eck Global Funds prospectus
which includes more complete information such as charges and expenses and the
risks associated with international investing including currency fluctuations or
controls, expropriation, nationalization and confiscatory taxation. For a free
Van Eck Gold & Money Funds prospectus, please call the number listed below.
Please read the prospectus before investing.
VAN ECK GLOBAL [LOGO]
THE UNUSUAL FUNDS
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
FOR ACCOUNT ASSISTANCE PLEASE CALL (800) 544-4653
B95-0201-012
<PAGE>
- --------------------------------------------------------------------------------
DECEMBER 31, 1994
VAN ECK
ASIA
DYNASTY
FUND
ANNUAL
REPORT
VAN ECK GLOBAL [LOGO]
THE UNUSUAL FUNDS
<PAGE>
VAN ECK ASIA INFRASTRUCTURE FUND
1994 ANNUAL REPORT
Dear Fellow Shareholder:
The Asian stock markets witnessed severe volatility and declines in 1994 after
achieving exceptional returns in 1993 and despite continued strong economic
growth throughout much of Asia. World markets reacted negatively to increases in
U.S. interest rates. The Asian markets were hit particularly hard as interest
rate hikes signaled a decline in liquidity and the foreign capital influx that
helped fuel these markets last year. Since its inception on August 3, 1994, your
Fund declined 24.3%. However, Asia continues to experience rapid economic
growth, as it has over the past decade, and that growth has given rise to an
urgent call for infrastructure development across the region. Given attractive
stock valuations on average at this time, we believe your Fund is poised for
better results in 1995 and for strong results long term.
ASIAN MARKETS OVERVIEW
In Hong Kong, the six U.S. rate hikes reversed a negative real interest rate
environment that had prevailed over the past several years and the market
declined 31% for the year. As we enter 1995, we expect this market to experience
further volatility short term as interest rates ascend further, and trade
disputes between the U.S. and China heat up. Still, we believe both these issues
will be resolved, or at least discounted in the market, by mid-year. Since
valuations are again at attractive levels and corporate earnings continue to be
solid, we believe that 1995 should be a better year.
The Malaysian market declined about 24% for the year as the government moved to
limit excessive volatility and speculation in the stock market by decelerating
the growth of the money supply and imposing tougher regulations on trading
activities. With the economy operating at full strength and posting an average
8.3% GDP growth per annum over the past seven straight years, there have been
concerns that the economy may be overheating, particularly given the expansion
of the current account deficit and mounting inflationary pressures.
Notwithstanding these issues, there are selective stocks which stand to benefit
from the continuation of the infrastructure buildup underway in Malaysia.
Throughout most of 1994, the Thai bourse experienced volatility that was
exacerbated by external factors and foreign investment activities. By year-end,
the Stock Exchange of Thailand Index had fallen 19% on worries of political
instability, rising interest rates, and lackluster corporate earnings. While
regional sentiment remains uncertain and further interest rate rises may lie
ahead, local factors could provide support for a more positive market
environment in 1995. Most economists expect growth to be robust at about 9%,
driven by rising investments and expenditures and improving corporate earnings
this year.
THE OUTLOOK
We believe better performance will emerge after the Asian market's current cycle
of turbulence and that the infrastructure sector remains a dynamic long-term
growth area. The demand for electricity, for example, in places like China,
India and Indonesia, three of the most populous and fastest growing economies in
the world, far outstrip current supply. In all three cases their respective
governments have deemed the power sector to be one of the critical areas for
development. The antiquated communications systems that serve as vital links
between Asia and the rest of the world are expected to be updated at a cost of
over $100 billion by the end of the millennium. On these and other
infrastructure projects, Asia is expected to spend approximately $1 trillion by
the year 2000.
Meanwhile, world GDP is rising as many of the industrialized nations experience
economic recovery and new markets continue to emerge. This means the volume of
trade for the export-oriented Asia region will force companies to refurbish
facilities and transport vehicles. The scramble by the world's leading
infrastructure companies to form joint ventures with local Asian partners in a
bid to obtain contracts on Asian infrastructure projects attests to the
long-term opportunities in the infrastructure sector.
Asia's growth continues at twice the rate of most of the industrialized world
according to the latest forecast released by the OECD, and most of the Asian
markets are currently trading at the lower end of their historical trading
ranges. Therefore, we continue to believe long-term investors in this sector
will be rewarded.
/s/John C. van Eck
John C. van Eck [photo]
Chairman
/s/Peter Soo
Peter Soo [photo]
Portfolio Manager
- -------------------------------------------------------
PERFORMANCE RECORD AS OF 12/31/94*
- -------------------------------------------------------
After Maximum Before
Total Return Sales Charge+ Sales Charge
- -------------------------------------------------------
A Shares-Life (since 8/3/94) (28.0)% (24.3)%
- -------------------------------------------------------
C Shares-Life (since 10/14/94) (24.9)% (24.1)%
- -------------------------------------------------------
The performance data reflects past performance and is not indicative of future
results. Investment return and principal value of an investment in the Fund will
vary so that shares, when redeemed, may be worth more or less than their
original cost.
* Not annualized
+ A shares: maximum sales charge = 4.75%
C shares: 1% redemption charge, 1st year.
<PAGE>
ASIA INFRASTRUCTURE FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1994
NO. OF SHARES SECURITIES(A) VALUE (NOTE 1)
- --------------------------------------------------------------------------------
HONG KONG 72.8%
1,814,000 Chevalier International $264,903
186,000 Chevalier International Hldgs.
(Warrants expiring 9/30/97)+ 3,966
258,000 Singamas Container Holdings 75,019
3,000,000 Wing Fai International 267,511
600,000 Wing Fai Int'l. (Warrants
expiring 10/31/97)+ 9,615
350,000 Zhenhai Refining & Chemical
Series`H'+ 89,106
-------
710,120
-------
MALAYSIA 20.1%
20,000 Hume Industries (M) Bhd. 89,289
33,333 Leader Universal Holdings Bhd. 107,043
-------
196,332
-------
THAILAND 7.1%
5,000 Advanced Info Services 69,309
-------
TOTAL STOCKS AND WARRANTS 100% $975,761
========
(Cost $1,192,400)
- ----------------
(a) Unless otherwise indicated, securities owned are shares of common stock.
+ Non-income producing security.
See Notes to Financial Statements.
<PAGE>
ASIA INFRASTRUCTURE FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
ASSETS:
Investments at value (cost 1,192,400) (Note 1) $975,761
Cash 29,322
Receivables:
Securities sold 42,978
From Advisor 32,020
Capital shares sold 19,683
Dividends 11,217
Deferred organization expense (Note 1) 30,144
Other assets 542
----------
Total assets 1,141,667
----------
LIABILITIES:
Payables:
Capital shares repurchased 14,930
Distribution fee payable 284
Dividends payable 24,973
Deferred organization expense payable 25,871
Accounts payable 25,296
----------
Total liabilities 91,354
----------
NET ASSETS $1,050,313
==========
CLASS A
Net asset value and redemption price per share $7.04
($1,038,198 / 147,437) =====
Maximum offering price per share $7.39
(NAV/(1-maximum sales commission)) =====
CLASS C
Net asset value, offering price and redemption
price per share ($12,115 / 1,720)
(Redemptions may be subject to a contingent
deferred sales charge within the
first year of ownership) $7.04
=====
Net assets consist of:
Aggregate paid in capital $1,635,099
----------
Unrealized depreciation of investments (216,639)
Distribution in excess of net
investment income (4,348)
Cumulative realized losses (363,799)
$1,050,313
==========
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the period August 3, 1994
(commencement of operations) to December 31, 1994
INCOME:
Dividends (less foreign taxes withheld of $739) $34,658
Interest 468
-------
Total income 35,126
EXPENSES:
Management (Note 2) $12,806
Distribution Class A (Note 4) 8,562
Distribution Class C (Note 4) 26
Professional 14,150
Custodian 9,319
Reports to shareholders 4,703
Administrative (Note 2) 4,269
Amortization of deferred
organization expense 2,151
Other 2,130
-------
Total expenses 58,116
Expenses assumed by the
Advisor (Note 2) (53,376) 4,740
------- -------
Net investment income 30,386
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3)
Realized loss from security transactions (excluding short-term securities):
Proceeds from sales $4,111,428
Cost of securities sold 4,465,629
----------
Realized loss $(354,201)
Realized loss from foreign currency transactions (19,359)
Unrealized depreciation of investments:
Beginning of period --
End of period (216,639)
--------
Change in
unrealized depreciation (216,639)
--------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(559,813)
=========
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the Period
August 3, 1994+
to
December 31, 1994
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 30,386
Realized loss from security transactions (354,201)
Realized loss from foreign currency
transactions (19,359)
Change in unrealized depreciation
of investments (216,639)
----------
Decrease in net assets resulting
from operations (559,813)
----------
Dividends to shareholders from
Net investment income:
Class A Shares (24,646)
Class C Shares (327)
----------
(24,973)
----------
Capital share transactions*:
Net proceeds from sales of shares
Class A Shares 7,717,794
Class C Shares 16,387
----------
7,734,181
----------
Cost of shares reacquired:
Class A Shares (6,099,082)
Class C Shares --
----------
(6,099,082)
----------
Increase in net assets resulting from
capital share transactions 1,635,099
----------
Total increase in net assets 1,050,313
NET ASSETS:
Beginning of period --
End of period including distributions
in excess of net investment income
of $4,348 $1,050,313
==========
*SHARES OF BENEFICIAL INTEREST ISSUED AND REDEEMED
Class A
Shares sold 836,254
Shares reacquired (688,817)
----------
Net increase 147,437
==========
Class C
Shares sold 1,720
Shares reacquired --
----------
Net increase 1,720
==========
+Commencement of operations.
See Notes to Financial Statements.
<PAGE>
ASIA INFRASTRUCTURE FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
CLASS A CLASS C
FOR THE PERIOD FOR THE PERIOD
AUGUST 3, 1994(A) OCTOBER 14, 1994(A)
TO TO
DECEMBER 31, 1994 DECEMBER 31, 1994
----------------- ------------------
<S> <C> <C>
Net Asset Value, Beginning of Period ................................................. $9.53 $9.53
----- -----
Income from Investment Operations:
Net Investment Income ............................................................. 0.18+ 0.06
Net Losses on Securities (both realized and unrealized) ........................... (2.50) (2.36)
----- -----
Total from Investment Operations ..................................................... (2.32) (2.30)
----- -----
Dividends from Net Investment Income ................................................. (.17) (.19)
---- ----
Net Asset Value, End of Period ....................................................... $7.04 $7.04
===== =====
Total Return (b) ..................................................................... (24.3%) (24.1%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period (000) ...................................................... $1,038 $12
Ratio of Expenses to Average Net Assets (c) .......................................... 0.28%* 1.02%*
Ratio of Net Investment Income to Average Net Assets ................................. 1.78%* 4.15%*
Portfolio Turnover Rate .............................................................. 147% 147%
</TABLE>
- ---------------
(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. A sales charge is not reflected in the calculation of total
return. Total return calculated for a period of less than one year is not
annualized.
(c) The expense ratios for Class A shares and Class C shares would have been
2.71% and 24.29%, respectively if the expenses were not assumed by the
Advisor.
* Annualized.
+ Based on average shares outstanding.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Asia Infrastructure Fund series, a non-diversified fund (the "Fund") of
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. SECURITY VALUATION -- Securities traded on national or foreign exchanges
are valued at the last sales prices reported at the close of business on
the last day of the period. Over-the- counter securities and listed
securities for which no sale was reported are valued at the mean of the bid
and the asked prices. Short-term obligations are valued at cost which with
accrued interest approximates value. Securities for which quotations are
not available are stated at fair value as determined by the Board of
Trustees.
B. FEDERAL INCOME TAXES-- It is the Fund's policy to comply with the
provisions of the Internal Revenue Code applicable to regulated companies
and to distribute all of its taxable income to its shareholders. Therefore,
no federal income tax provision is required.
C. CURRENCY TRANSLATION -- Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated
into U.S. Dollars at the mean of the quoted bid and asked prices of such
currencies. Purchases and sales of investments are translated at the
exchange rates prevailing when such investments were acquired or sold.
Income and expenses are translated at the exchange rates prevailing when
accrued. The portion of realized and unrealized gains and losses on
investments that result from fluctuations in foreign currency exchange
rates are not separately disclosed. Recognized gains or losses on security
transactions attributable to foreign currency fluctuations on other foreign
denominated assets and liabilities are recorded as net realized gains and
losses from foreign currency transactions.
D. OTHER-- Security transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is accrued as earned.
Income distributions and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from
generally accepted accounting principles. The differences are primarily due
to differing treatments for foreign currency transactions, passive foreign
investment companies, and post October capital losses. The effect of these
differences for the period ended December 31, 1994 decreased net investment
income by $9,761 and decreased cumulative realized losses by $9,761.
E. DEFERRED ORGANIZATION COSTS -- Deferred organization costs are being
amortized over a period not exceeding five years.
<PAGE>
NOTE 2 - VAN ECK ASSOCIATES Corporation (the "Advisor") earned fees of $12,806
for investment management and advisory services. The fee is based on an annual
rate of .75 of 1% of the Fund's average daily net assets. Van Eck Associates
Corporation also earns fees for accounting and administrative services. The fee
is based on an annual rate of .25 of 1% of the Fund's average daily net assets.
AIG Asset Management, Inc., the sub-investment advisor, earns fees for
investment management. The fee is based on an annual rate of .50 of 1% of the
Fund's average daily net assets and is paid by the Advisor from the advisory
fees it receives from the Fund. For the period August 3, 1994 (commencement of
operations) to December 31, 1994 Van Eck Associates Corporation agreed to assume
for Class A shares the distribution expenses in excess of 0.25 of 1% of average
daily net assets of Class A shares. Van Eck Associates Corporation also agreed
to waive its management fees and administrative fees and to assume all other
expenses of the Fund for the period August 3, 1994 to December 31, 1994. Van Eck
Securities Corporation received $1,142 for the period ended December 31, 1994
from commissions earned on sales of Class A shares after deducting $36,798
allowed to other dealers. Certain of the officers and Trustees of the Trust are
officers, directors or stockholders of Van Eck Associates Corporation and Van
Eck Securities Corporation.
NOTE 3-- Purchases of investments other than short-term obligations aggregated
$5,658,029 for the period ended December 31, 1994. For federal income tax
purposes the cost of investments owned at December 31, 1994 was $1,192,400. At
December 31, 1994, net unrealized depreciation for federal income tax purposes
aggregated $216,639 of which $13,581 related to appreciated investments and
$230,220 related to depreciated investments.
NOTE 4 -- Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund
is authorized to incur distribution expenses which will principally be payments
to securities dealers who have sold shares and service shareholder accounts and
payments to Van Eck Securities Corporation ("VESC"), the distributor, for
reimbursement of other actual promotion and distribution expenses incurred by
the distributor on behalf of the Fund. The amount paid under the Plan in any one
year is limited to .50% of average daily net assets for Class A shares and 1.00%
of average daily net assets for Class C shares (the "Annual Limitations" ). For
Class C shares, the Fund will pay to the selling broker at the time of sale 1%
of the amount of the purchase. Such advanced fees will be collected by the Fund
over the course of the first twelve months from the time of purchase from 12b-1
fees. Should the payments to the brokers made by the Fund exceed, on an annual
basis, 1% of average daily net assets, VESC will reimburse any excess.
Shareholders redeeming within one year of purchase will be subject to a 1%
redemption charge which will be retained by the Fund. After the first year, the
1% 12b-1 fee will be paid to VESC which will retain a portion of the fee for
distribution services and pay the remainder to brokers.
Distribution expenses incurred under the Plan that have not been paid because
they exceed the Annual Limitation may be carried forward to future years and
paid by the Fund within the Annual Limitation. VESC has waived its right to
reimbursement of the carried forward amounts incurred for the period August 3,
1994 (commencement of operations) through April 30, 1995 in the event the Plan
is terminated, unless the Board of Trustees determines that reimbursement of the
carried forward amounts is appropriate. The excess of distribution expenses
incurred over the Annual Limitation for the period ended December 31, 1994, was
$32,332 for Class A shares and $2,905 for Class C shares.
NOTE 5 - The Fund declared income dividends of $0.17 a share to Class A
shareholders and a $0.19 a share to Class C shareholders payable on January 9,
1995 to shareholders of record on December 29, 1994 with a reinvestment date of
December 30, 1994.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of the
Van Eck Funds:
We have audited the accompanying statement of assets and liabilities of the Asia
Infrastructure Fund (the "Fund") (one of the series constituting the Van Eck
Funds) including the investment portfolio as of December 31, 1994, and the
related statements of operations, changes in net assets and the financial
highlights for the period August 3, 1994 (commencement of operations) to
December 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Asia Infrastructure Fund series of the Van Eck Funds as of December 31, 1994,
the results of its operations and changes in its net assets, and the financial
highlights for the period August 3, 1994 (commencement of operations) to
December 31, 1994, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 17, 1995
<PAGE>
VAN ECK FAMILY OF FUNDS
- --------------------------------------------------------------------------------
GLOBAL HARD ASSETS FUND (A&C)
Seeks long-term capital appreciation by investing globally, primarily in "Hard
Asset Securities". Income is a secondary consideration.
INTERNATIONAL INVESTORS GOLD FUND (A&C)
Founded in 1955, this Fund is the oldest gold-oriented mutual fund in the U.S.
It invests in gold-mining shares globally and seeks long-term capital
appreciation, moderate yield and protection against monetary uncertainties.
GOLD/RESOURCES FUND (A&C)
Seeking a long-term global hedge against inflation and other risks, this Fund
invests in gold-mining and natural resources companies outside South Africa.
GOLD OPPORTUNITY FUND (A&C)
Seeks capital appreciation by investing globally in equity securities of
companies engaged in the exploration, development, production and distribution
of gold and other precious metals, and through active asset allocation between
gold-related assets and cash instruments.
ASIA DYNASTY FUND-A
This Fund seeks long-term capital appreciation by investing in the equity
securities of companies that are expected to benefit from the development and
growth of the economies in the Asia Region. AIG Asset Management, Inc. serves as
sub-investment advisor to this Fund.
ASIA INFRASTRUCTURE FUND (A&C)
Seeks long-term capital appreciation by investing in the equity securities of
infrastructure companies that are expected to benefit from the development and
growth of the economies in the Asia Region. AIG Asset Management, Inc. serves as
sub-investment advisor to this Fund.
GLOBAL SMALLCAP FUND (A&C)
Seeks long-term capital appreciation by investing globally in equity securities
of companies with small market capitalizations. The Fund is sub-advised by
Pictet International Management, Ltd.
GLOBAL BALANCED FUND-A
This Fund seeks long-term capital appreciation together with current income by
investing in stocks, bonds and money market instruments worldwide. Fiduciary
International, Inc. serves as sub-investment advisor to this Fund.
WORLD TRENDS FUND
This Fund combines trend investing and risk-control strategies to seek long-term
capital appreciation in the global marketplace.
GLOBAL INCOME FUND-A
This Fund emphasizes the current income component of total return by investing
principally in debt securities of foreign or U.S. government entities.
U.S. GOVERNMENT MONEY FUND
This Fund seeks the highest safety of principal and daily liquidity by investing
in U.S. Treasury bills and repurchase agreements collateralized by U.S.
Government obligations.
- --------------------------------------------------------------------------------
This report must be accompanied or preceded by a Van Eck Global Funds prospectus
which includes more complete information such as charges and expenses and the
risks associated with international investing including currency fluctuations or
controls, expropriation, nationalization and confiscatory taxation. For a free
Van Eck Gold & Money Funds prospectus, please call the number listed below.
Please read the prospectus before investing.
VAN ECK GLOBAL [LOGO]
THE UNUSUAL FUNDS
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
For account assistance please call (800) 544-4653
B95-0201-012
- --------------------------------------------------------------------------------
DECEMBER 31, 1994
VAN ECK
ASIA
INFRASTRUCTURE
FUND
ANNUAL
REPORT
VAN ECK GLOBAL [LOGO]
THE UNUSUAL FUNDS
<PAGE>
PROSPECTUS MARCH 17, 1995
VAN ECK GLOBAL FUNDS
- -------------------------------------------------------------------------------
The Van Eck Global Funds consist of separate mutual funds (the "Funds")
each of which has a specific investment objective and is a
separate series of Van Eck Funds, a Massachusetts
business trust. The Funds are managed by Van
Eck Associates Corporation (the
"Adviser"), 99 Park Avenue, New
York, N.Y. 10016
. Account Assistance: (800) 544-4653
- -------------------------------------------------------------------------------
See "Purchase of Shares--Alternative Purchase Arrangements" on page 33 herein
to determine your purchase options for Funds offering two classes of shares.
Global Hard Assets Fund (Class A and Class C)--seeks long-term capital
appreciation by investing globally, primarily in "Hard Asset Securities."
Income is a secondary consideration.
Global Balanced Fund (Class A and Class B)--seeks long-term capital
appreciation together with current income. Fiduciary International, Inc.
("FII" or "Sub-Adviser") serves as sub-investment adviser to this Fund. The
Fund is part of the Van Eck "Global Partnership Series."SM Class B shares are
closed to new sales.
GLOBAL SMALLCAP FUND (CLASS A)--seeks long-term capital appreciation by
investing globally in equity securities of companies with small market
capitalizations. Pictet International Management Limited ("PIML" or "Sub-
Adviser") serves as sub-investment adviser to this Fund. The Fund is part of
the Van Eck "Global Partnership Series." SM
ASIA DYNASTY FUND (CLASS A AND CLASS B)--seeks long-term capital appreciation
by investing in the equity securities of companies that are expected to
benefit from the development and growth of the economies of the Asia region.
AIG Asset Management, Inc., ("AIGAM" or "Sub-Adviser") serves as sub-
investment adviser to this Fund. The Fund is part of the Van Eck "Global
Partnership Series."SM Class B shares are closed to new sales.
ASIA INFRASTRUCTURE FUND (CLASS A)--seeks long-term capital appreciation by
investing in the equity securities of infrastructure companies that are
expected to benefit from the development and growth of the economies of the
Asia Region. AIGAM serves as sub-investment adviser to this Fund. The Fund is
part of the Van Eck "Global Partnership Series." SM
GLOBAL INCOME FUND (CLASS A)--seeks high total return through a flexible
policy of investing globally, primarily in debt securities. The Fund
emphasizes the current income component of total return.
WORLD TRENDS FUND--seeks long-term capital appreciation by identifying new and
changing worldwide economic and investment trends and investing its assets
globally to benefit therefrom. Current income is a secondary objective.
Investors should be aware that an investment in the Global Hard Assets Fund,
Global Balanced Fund, Global SmallCap Fund, Asia Dynasty Fund and Asia
Infrastructure Fund have greater investment risk than many mutual funds. The
Funds intend to engage in a number of investment activities including
borrowing for investment purposes (i.e., engage in leveraging), investing in
countries with emerging securities markets and economies and investing in
restricted securities of unseasoned issuers and non-readily marketable
securities. These investment activities are considered to be speculative and
could result in additional cost and investment risk to the Funds.
Consequently, these Funds are not intended to be a complete investment and are
intended for those investors who can assume greater risk with respect to a
portion of their investment portfolio. Further information on the Funds and
these activities is provided under "Risk Factors" on pages 25-32 and investors
should read this material carefully.
---------------
Shares in the Funds are not deposits or obligations of, or guaranteed or
endorsed by, a bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus sets forth concisely information about the Funds that you
should know before investing. It should be read and retained for future
reference.
A Statement of Additional Information dated March 17, 1995 about the Funds has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, 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.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
<S> <C>
Transaction Data........................................................... 3
Financial Highlights....................................................... 4
The Funds.................................................................. 11
Investment Objectives and Policies......................................... 11
Risk Factors............................................................... 25
Limiting Investment Risks.................................................. 32
Purchase of Shares......................................................... 32
Exchange Privilege......................................................... 39
Dividends and Distributions................................................ 41
Tax-Sheltered Retirement Plans............................................. 41
Investment Programs........................................................ 41
Redemption of Shares....................................................... 42
Management................................................................. 44
Plan of Distribution....................................................... 54
Advertising................................................................ 56
Taxes...................................................................... 56
Description of the Trusts.................................................. 57
Additional Information..................................................... 58
</TABLE>
2
<PAGE>
TRANSACTION DATA
The following table is intended to assist an investor in understanding the
various direct and indirect costs and expenses borne by an investor in a Fund.
The sales charges are the maximum sales charges an investor would incur. Sales
charges decline depending on the amount of the purchase, the number of shares
an investor already owns or use of various investment programs. See "How to
Buy Shares of the Funds." The Adviser may from time to time waive fees and/or
reimburse certain expenses of a Fund.
<TABLE>
<CAPTION>
ASIA
ASIA ASIA GLOBAL GLOBAL INFRA- GLOBAL
GLOBAL DYNASTY DYNASTY BALANCED BALANCED STRUCTURE SMALLCAP
INCOME FUND FUND FUND FUND FUND FUND FUND
------------ WORLD TRENDS ---------- ---------- --------- --------- --------- --------
CLASS-A FUND CLASS-A CLASS-B CLASS-A CLASS-B CLASS-A CLASS-A
------------ ------------- ---------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed
on Purchases(as
a percent of
offering
price)......... 4.75% 4.75% 4.75% 0% 4.75% 0% 4.75% 4.75%
+Contingent
Deferred Sales
or Redemption
Charge......... 0% 0% 0% 6.0% 0% 5.0% 0% 0%
===== ====== ==== ==== ==== ==== ======= =======
ANNUAL FUND OPERATING
EXPENSES: (as a percent
of average net assets)
Management Fees. .75% .75% .75%++ .75%++ .75%++ .75%++ .75%++ .75%++
12b-1
Fees/Shareholder
Servicing
Fees*.......... .25% .25% .50% 1.00% .50% 1.00% .50% .50%
Administration
Fee............ 0% 0% .25% .25% .25% .25% .25% .25%
Other Expenses.. .39% .85% .35% .38% 1.09% 1.21% .56% .56%
----- ------ ---- ---- --- ---- ---- ------- -------
Transfer and
Dividend
Disbursing..... .16% .18% .16% .16% .25% .28% .15% .15%
Custodian Fees.. .05% .12% .14% .14% .27% .30% .12% .12%
Other Expenses.. .18% .55% .05% .08% .57% .63% .29% .29%
----- ----- ---- ---- --- --- ------- -------
Total Fund
Operating
Expenses....... 1.39% 1.85% 1.85% 2.38% 2.59% 3.21% 2.06% 2.06%
===== ====== ==== ==== ==== ==== ======= =======
EXAMPLE: 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
1 year......... $ 60.98 $ 65.40 $ 65.40 $ 84.11 $ 72.47 $ 82.39 $ 67.41 $ 67.41
3 years........ $ 89.41 $102.91 $102.91 $114.25 $124.22 $128.91 $109.00 $109.00
5 years+++..... $119.94 $142.81 $142.81 $147.04 $178.50 $187.84 $153.08 $153.08
10 years+++..... $206.43 $254.11 $254.11 $271.63 $326.06 $351.25 $275.12 $275.12
<CAPTION>
GLOBAL
HARD ASSETS
FUND**
-----------------
CLASS A CLASS C
-------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed
on Purchases(as
a percent of
offering
price)......... 4.75% 0%
+Contingent
Deferred Sales
or Redemption
Charge......... 0% 1.00%
======== ========
ANNUAL FUND OPERATING
EXPENSES: (as a percent
of average net assets)
Management Fees. 1.00% 1.00%
12b-1
Fees/Shareholder
Servicing
Fees*.......... .50% 1.00%
Administration
Fee............ 0% 0%
Other Expenses.. .56% .58%
-------- --------
Transfer and
Dividend
Disbursing..... .15% .17%
Custodian Fees.. .12% .12%
Other Expenses.. .29% .29%
-------- --------
Total Fund
Operating
Expenses....... 2.06% 2.58%
======== ========
EXAMPLE: 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
1 year......... $ 67.41 $36.11
3 years........ $109.00 $80.25
5 years+++..... -- --
10 years+++..... -- --
</TABLE>
- --------
* Long-term shareholders in Funds may pay more than the economic equivalent
of the maximum front-end sales charge permitted by the NASD. The
shareholder servicing fee will not exceed .25%.
** The Adviser may temporarily reimburse and or waive certain operating
expenses of the Fund including management and administrative fees. Such
temporary reimbursements/waivers will have the effect of lowering the
Fund's expense ratio.
+ The Contingent Deferred Sales Charge on Class B shares is applied to the
lesser of purchase price or net asset value at redemption. The charge
imposed on such amount is scaled down from 6% during the first year to 0%
after the sixth year for Asia Dynasty Fund and is scaled down from 5%
during the first year to 0% after the sixth year for Global Balanced Fund.
Redemption Charge on Class C shares of 1% is applied to redemptions during
the first year of purchase and is applied to the lesser of purchase price
or net asset value at redemption.
++ Inclusive of the sub-investment advisory fee paid by the Adviser.
+++ The 5 and 10 year expenses are not required of those funds in operation
for a period of less than 10 months.
Total Fund Operating Expenses are the actual operating expenses, before fee
waivers or expense reimbursements, if any, of Global Income Fund-A, World
Trends Fund, Asia Dynasty Fund and Global Balanced Fund for the period ended
December 31, 1994. The Funds' expense ratios have been annualized. Operating
expenses for Asia Infrastructure Fund, Global SmallCap Fund and Global Hard
Assets assume $30,000,000 in net assets and are estimates.
The above examples should not be considered a representation of past or future
expenses or investment return. Actual expenses may be greater or less than
those shown. Information regarding management fees and 12b-1 fees can be found
under "Management" and "Plan of Distribution."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights below give selected information for a share of each
Fund outstanding for the year or period indicated. The Financial Highlights
presented have been audited by Deloitte & Touche LLP, independent accountants,
for World Trends Fund for all years through December 31, 1991 and for Global
Income Fund for fiscal years through April 30, 1992. The Financial Highlights
presented have been audited by Coopers & Lybrand L.L.P., independent
accountants, for all other fiscal years ended December 31 whose reports thereon
appear in the Funds' Annual Reports, which are incorporated by reference into
the Statement of Additional Information. This information should be read in
conjunction with the financial statements and related notes that also appear in
the Funds' Annual Reports.
<TABLE>
<CAPTION>
GLOBAL INCOME FUND CLASS A CLASS B
----------------------------------------------------------------------------- --------------
YEAR FOR THE PERIOD
ENDED EIGHT MONTHS MAY 4, 1994(E)
DECEMBER 31, ENDED YEAR ENDED APRIL 30, TO
------------------ DECEMBER 31, -------------------------------------------- DECEMBER 31,
1994 1993 1992 1992 1991 1990 1989 1988 1994
-------- -------- ------------ -------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 8.96 $ 9.28 $ 9.91 $ 9.75 $ 9.44 $ 9.10 $ 10.09 $ 9.25 $ 8.21
-------- -------- -------- -------- ------- ------- ------- ------- ------
Income From Investment
Operations:
Net Investment
Income(d)............. 0.55+ 0.75 0.51 0.770 0.99 0.953 0.86 0.67 0.25+
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... (0.80) (0.31) (0.50) 0.460 0.51 0.347 (0.47) 0.53 --
-------- -------- -------- -------- ------- ------- ------- ------- ------
Total From Investment
Operations........... (0.25) 0.44 0.01 1.230 1.50 1.300 0.39 1.20 0.25
======== ======== ======== ======== ======= ======= ======= ======= ======
Less Distributions:
Dividends From Net
Investment Income(b).. -- (0.05) (0.47) (0.853) (0.96) (0.944) (1.11) (0.35) --
Distributions From
Capital Gains......... -- (0.01) (0.17) (0.217) (0.23) (0.016) (0.27) (0.01) --
Distributions from
Aggregate Paid in
Capital............... (0.56) (0.70) -- -- -- -- -- -- (0.36)
-------- -------- -------- -------- ------- ------- ------- ------- ------
Total Distributions... (0.56) (0.76) (0.64) (1.070) (1.19) (0.960) (1.38) (0.36) (0.36)
======== ======== ======== ======== ======= ======= ======= ======= ======
Net Asset Value, End of
Period................. $ 8.15 $ 8.96 $ 9.28 $ 9.91 $ 9.75 $ 9.44 $ 9.10 $ 10.09 $ 8.10
======== ======== ======== ======== ======= ======= ======= ======= ======
- -----------------------------------------------------------------------------------------------------------------------
Total Return(a)(c)...... (2.79%) 4.90% (0.18%) 13.19% 16.49% 15.00% 4.17% 13.30% 3.11%
- -----------------------------------------------------------------------------------------------------------------------
Ratios/Supplementary
Data
Net Assets, End of
Period (000)........... $137,242 $251,725 $290,961 $187,241 $84,016 $39,592 $36,383 $27,646 $401
Ratio of Expenses to
Average Net Assets..... 1.39% 1.27% 1.32%** 1.39% 1.61% 1.42%* 0.40%* 0.00%* 2.25%**
Ratio of Net Income to
Average Net Assets..... 6.55% 8.01% 7.58%** 7.92% 10.00% 10.27% 9.10% 9.20% 5.43%**
Portfolio Turnover Rate. 148.4% 108.6% 44.2% 108.9% 276.1% 289.7% 386.3% 306.0% 148.4%
</TABLE>
- --------
* The expense ratio would have been 1.93%, 1.56% and 1.60% for the years
ended April 30, 1988, 1989 and 1990, respectively, if expenses were not
assumed by the investment advisor.
** Annualized
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of dividends and
distributions at net asset value during the year and a redemption on the
last day of the period. A sales charge is not reflected in the calculation
of total return. Total return for periods of less than one year are not
annualized.
(b) Due to a change in the dividend declaration policy, thirteen monthly
dividends were recorded in the fiscal year ended April 30, 1992.
(c) The Adviser waived and/or reimbursed all or a portion of the Fund's fees
and expenses for fiscal years ended April 30, 1988, 1989 and 1990. If all
or a portion of fees and expenses were not waived or reimbursed, total
return would have been 11.37%, 3.01%, and 14.82%, respectively.
(d) The Adviser waived fees and assumed expenses of the Global Income Fund in
the amount of $.14, $.11 and $.016 a share for the years ended April 30,
1988, 1989 and 1990, respectively.
(e) Commencement of Operations.
+ Based on average shares outstanding.
See Notes to Financial Statements set forth in the Fund's Annual Report for
the year ended December 31, 1994.
4
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
World Trends Fund
----------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985+
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 14.57 $ 12.42 $ 14.76 $ 13.27 $ 14.83 $ 13.27 $ 13.15 $ 13.41 $ 9.70 $ 9.25
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment Income
(Loss)................. (0.07) (0.02) 0.02 0.068 0.22 0.23 0.16 0.29 0.28 0.05
Net Gains or (Losses) on
Securities (both
realized and
unrealized)............ 0.40 2.79 (1.28) 1.592 (1.38) 1.53 0.64 0.79 3.63 0.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment
Operations............. 0.33 2.77 (1.26) 1.66 (1.16) 1.76 0.80 1.08 3.91 0.45
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Less Distributions:
Dividends From Net
Investment Income...... -- -- (0.03) (0.078) (0.14) (0.20) (0.15) (0.41) (0.15) --
Distributions From
Capital Gains.......... (2.61) (0.62) (1.05) (0.092) (0.26) -- (0.53) (0.93) (0.05) --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions..... (2.61) (0.62) (1.08) (0.17) (0.40) (0.20) (0.68) (1.34) (0.20) --
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Net Asset Value, End of
Period.................. $ 12.29 $ 14.57 $ 12.42 $ 14.76 $ 13.27 $ 14.83 $ 13.27 $ 13.15 $ 13.41 $ 9.70
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------
Total Return (a)......... 2.27% 22.30% (8.54%) 12.52% (7.90%) 13.30% 6.10% 7.90% 40.54% 4.87%
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of
Period (000)............ $21,348 $28,425 $26,943 $47,878 $46,819 $61,536 $71,452 $85,581 $66,627 $12,348
Ratio of Expenses to
Average Net Assets ..... 1.85% 1.86% 1.75% 1.67% 1.71% 1.56% 1.63% 1.55% 1.46% 1.39%*
Ratio of Net Income
(Loss) to
Average Net Assets (b).. (0.32%) (0.16%) 0.12% 0.48% 1.54% 1.72% 1.17% 2.00% 2.37% 2.22%*
Portfolio Turnover Rate.. 12.31% 0.12% 0.10% 2.98% 16.62% 21.06% 81.26% 50.35% 31.60% --
</TABLE>
- --------
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of dividends and
distributions at net asset value during the year and a redemption on the
last day of the period. A sales charge is not reflected in the calculation
of total return. Total return for the period ended December 31, 1985 was
not annualized.
(b) Net investment income for World Trends Fund includes foreign taxes
withheld.
* Annualized.
+ From August 15, 1985 (commencement of operations) to December 31, 1985.
See Notes to Financial Statements set forth in the Fund's Annual Report for
the year ended December 31, 1994.
5
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
The Financial Highlights below give selected information for a share of each
Fund outstanding for the year or period indicated. The Financial Highlights
presented have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose reports thereon appear in the Funds' Annual Reports, which
are incorporated by reference into the Statement of Additional Information. This
information should be read in conjunction with the financial statements and
related notes that also appear in the Funds' Annual Reports.
<TABLE>
<CAPTION>
ASIA DYNASTY FUND
---------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------- --------------------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 22, 1993(A) SEPTEMBER 1, 1993(A)
YEAR ENDED TO YEAR ENDED TO
DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period......... $ 15.28 $ 9.525 $ 15.25 $ 11.33
------- -------- ------- -------
Income from Investment
Operations:
Net Investment Loss.... -- (0.062)+ (0.06) (0.07)+
Net Gains (Losses) on
Securities (both real-
ized and unrealized).. (2.86) 5.887 (2.86) 4.06
------- -------- ------- -------
Total from Investment
Operations............. (2.86) 5.825 (2.92) 3.99
------- -------- ------- -------
Less Distributions:
Dividends in Excess of
Net Investment Income. (0.07) -- (0.02) --
Distributions from Cap-
ital Gains............ (0.22) (0.070) (0.22) (0.07)
-------- -------
------- -------
Total Distributions..... (0.29) (0.070) (0.24) (0.07)
------- -------- ------- -------
Net Asset Value, End of
Period................. $ 12.13 $ 15.28 $ 12.09 $ 15.25
======= ======== ======= =======
Total Return (b)........ (18.72%) 61.16% ** (19.15%) 35.22%
- -----------------------------------------------------------------------------------------------------
Ratios/Supplementary
Data
Net Assets, End of Pe-
riod (000)............. $83,787 $108,661 $35,024 $26,205
Ratio of Expenses to Av-
erage Net Assets....... 1.85% 1.92%(c) * 2.38% 3.04% *
Ratio of Net Investment
Loss to Average Net As-
sets................... -- % (0.68%)* (0.50%) (2.17%)*
Portfolio Turnover Rate. 51.08% 14.63% 51.08% 14.63%
</TABLE>
- --------
(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, reinvestment of dividends and
distributions at net asset value during the year and a redemption on the
last day of the period. A sales charge is not reflected in the calculation
of total return. Total return for periods of less than one year are not
annualized.
(c) The expense ratio for Class A shares would have been 2.09% if expenses were
not assumed by the advisor.
* Annualized.
** The Adviser waived and/or reimbursed all or a portion of Asia Dynasty Fund-
A's fees and expenses for fiscal year ended December 31, 1993. If all or a
portion of fees and expenses were not waived or reimbursed, total return
would have been 61.1%.
+ Based on average shares outstanding.
See Notes to Financial Statements set forth in the Fund's Annual Report for
the year ended December 31, 1994.
6
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
GLOBAL BALANCED FUND
-----------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------- --------------------------------------
FOR THE PERIOD FOR THE PERIOD
DECEMBER 20, 1993(A) DECEMBER 20, 1993(A)
YEAR ENDED TO YEAR ENDED TO
DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period......... $ 9.53 $ 9.53 $ 9.53 $ 9.53
-------- ------- ------- -------
Income from Investment
Operations:
Net Investment Income.. 0.19 + -- 0.11 + --
Net Losses on Securi-
ties both (realized and
unrealized)........... (0.56) -- (0.57) --
-------- ------- ------- -------
Total from Investment
Operations............. (0.37) -- (0.46) --
-------- ------- ------- -------
Less Distributions:
Dividends from Net In-
vestment Income....... (0.09) -- (0.05) --
-------- ------- ------- -------
Net Asset Value, End of
Period................. $ 9.07 $ 9.53 $ 9.02 $ 9.53
======== ======= ======= =======
Total Return (b)........ (3.90%) 0% (4.84%) 0%
- -------------------------------------------------------------------------------------------------------
Ratios/Supplementary
Data
Net Assets, End of Pe-
riod (000)............. $ 13,986 $ 562 $ 5,628 $130
Ratio of Expenses to Av-
erage Net Assets (c)... 1.06% 0.25% * 1.88% 1.00% *
Ratio of Net Investment
Income (Loss) to Aver-
age Net Assets......... 1.99% (0.25%)* 1.14% (1.00%)*
Portfolio Turnover Rate. 174.76% 0% 174.76% 0%
</TABLE>
- --------
(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, reinvestment of dividends and
distribution at net asset value during the period and a redemption on the
last day of the period. A sales charge is not reflected in the
calculations of total return. Total return for a period of less than one
year is not annualized.
(c) The expense ratios for Class A shares and Class B shares would have been
2.59%, 7.76% and 3.21% and 8.51%, respectively if the expenses were not
assumed by the Advisor.
* Annualized.
+ Based on average shares outstanding.
See Notes to Financial Statements set forth in the Fund's Annual Report for
the year ended December 31, 1994.
7
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
The Financial Highlights below give selected information for a share of each
Fund outstanding for the year or period indicated. The Financial Highlights
presented have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose reports thereon appear in the Funds' Annual Reports, which
are incorporated by reference into the Statement of Additional Information. This
information should be read in conjunction with the financial statements and
related notes that also appear in the Funds' Annual Reports.
<TABLE>
<CAPTION>
GLOBAL HARD ASSETS FUND
---------------------------------------
CLASS A CLASS B
------------------- -------------------
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 2, 1994(A) NOVEMBER 2, 1994(A)
TO TO
DECEMBER 31, 1994 DECEMBER 31, 1994
------------------- -------------------
<S> <C> <C>
Net Asset Value, Beginning of Period... $ 9.53 $ 9.53
------- -------
Income from Investment Operations:
Net Investment Income................. .010 0.01
Net Losses on Investment (both real-
ized and unrealized)................. (0.115) (0.12)
------- -------
Total from Investment Operations....... (0.105) (0.11)
------- -------
Less Distributions:
Dividends from Net Investment Income.. (0.015) (.01)
------- -------
Net Asset Value, End of Period......... $ 9.41 $ 9.41
======= =======
Total Return (b)....................... (1.10%) (1.20%)
- -------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period (000)........ $ 1,419 $ 8
Ratio of Expenses to Average Net Assets
(c)................................... 0.15% * 0.56% *
Ratio of Net Investment Income to Aver-
age Net Assets........................ 0.84% * 0.53% *
Portfolio Turnover Rate................ 0% 0%
</TABLE>
- --------
(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. A sales charge is not reflected in the calculation of
total return. Total return for a period of less than one year is not
annualized.
(c) The expense ratios for Class A shares and Class C shares would have been
3.40% and 39.49%, respectively if the expenses were not assumed by the
Advisor.
* Annualized.
See Notes to Financial Statements set forth in the Fund's Annual Report for
the period ended December 31, 1994.
8
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
<TABLE>
<CAPTION>
ASIA INFRASTRUCTURE FUND
-------------------------------------
CLASS A CLASS C
----------------- -------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 3, 1994(A) OCTOBER 14, 1994(A)
TO TO
DECEMBER 31, 1994 DECEMBER 31, 1994
----------------- -------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..... $ 9.53 $ 9.53
------- -------
Income from Investment Operations:
Net Investment Income................... 0.18 + 0.06
Net Losses on Securities (both realized
and unrealized)........................ (2.50) (2.36)
------- -------
Total from Investment Operations......... (2.32) (2.30)
------- -------
Dividends from Net Investment Income..... (.17) (.19)
------- -------
Net Asset Value, End of Period........... $ 7.04 $ 7.04
======= =======
Total Return (b)......................... (24.3%) (24.1%)
- --------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period (000).......... $ 1,038 $ 12
Ratio of Expenses to Average Net Assets
(c)..................................... 0.28% * 1.02% *
Ratio of Net Investment Income to Average
Net Assets.............................. 1.78% * 4.15% *
Portfolio Turnover Rate.................. 147% 147%
</TABLE>
- --------
(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. A sales charge is not reflected in the calculation of total
return. Total return for a period of less than one year is not annualized.
(c) The expense ratios for Class A shares and Class C shares would have been
2.71% and 24.29%, respectively if the expenses were not assumed by the
Advisor.
* Annualized.
+ Based on average shares outstanding.
See Notes to Financial Statements set forth in the Fund's Annual Report for the
period ended December 31, 1994.
9
<PAGE>
FINANCIAL HIGHLIGHTS--(CONCLUDED)
The Financial Highlights below give selected information for a share of each
Fund outstanding for the year or period indicated. The Financial Highlights
presented have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose reports thereon appear in the Funds' Annual Reports, which
are incorporated by reference into the Statement of Additional Information. This
information should be read in conjunction with the financial statements and
related notes that also appear in the Funds' Annual Reports.
<TABLE>
<CAPTION>
GLOBAL SMALLCAP FUND
-------------------------------------
CLASS A CLASS C
----------------- -------------------
FOR THE PERIOD FOR THE PERIOD
AUGUST 3, 1994(A) OCTOBER 14, 1994(D)
TO TO
DECEMBER 31, 1994 DECEMBER 31, 1994
----------------- -------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..... $ 9.53 $ 9.67
------ ------
Income from Investment Operations:
Net Investment Income................... 0.021 0.01
Net Losses on Securities (both realized
and unrealized)........................ (0.746) (0.89)
------ ------
Total from Investment Operations......... (0.725) (0.88)
------ ------
Less Distribution:
Dividends from Net Investment Income.... (0.015) (0.01)
------ ------
Net Asset Value, End of Period........... $ 8.79 $ 8.78
====== ======
Total Return (b)......................... (7.6%) (9.1%)
- -------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period (000).......... $2,050 $ 10
Ratio of Expenses to Average Net Assets
(c)..................................... 0.25% * 1.00% *
Ratio of Net Investment Income to Average
Net Assets.............................. 0.77% * 0.01% *
Portfolio Turnover Rate.................. 11.07% 11.07%
</TABLE>
- --------
(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. A sales charge is not reflected in the calculation of
total return. Total return calculated for a period of less than one year
is not annualized.
(c) The expense ratios for Class A shares and Class C shares would have been
3.49% and 35.93%, respectively if the expenses were not assumed by the
Advisor.
(d) Initial offering of Class C shares.
* Annualized.
See Notes to Financial Statements set forth in the Fund's Annual Report for
the period ended December 31, 1994.
10
<PAGE>
THE FUNDS
Van Eck Global Funds refers to the series of Van Eck Funds (the "Trust") which
engage in investing in equity and/or debt securities globally. The Van Eck
Global Funds are: Global Balanced Fund (Class A and B), Global SmallCap Fund
(Class A), Asia Dynasty Fund (Class A and B), Asia Infrastructure Fund (Class
A), Global Income Fund (Class A), World Trends Fund and Global Hard Assets
Fund (Class A and C). The Funds are open-end management investment companies.
Each of the Funds is a separate series of Van Eck Funds, a business trust
organized under the laws of the Commonwealth of Massachusetts on April 3,
1985. Class A shares of Asia Dynasty Fund, Global Balanced Fund, Global
SmallCap Fund, Asia Infrastructure Fund, Global Hard Assets Fund and Global
Income Fund are denoted with the suffix -A (e.g., Global Hard Assets Fund-A),
and Class C Shares with the suffix -C (e.g., Global Hard Assets Fund-C).
Class B shares of the Asia Dynasty Fund and Global Balanced Fund are closed to
new sales.
Asia Dynasty Fund and World Trends Fund are classified as diversified. 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. Global Hard Assets Fund, Global Income Fund, Global
SmallCap Fund, Asia Infrastructure Fund and Global Balanced Fund are
classified as non-diversified. "Non-diversified" as defined in the Investment
Company Act of 1940 (the "1940 Act"), means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act. However, to meet federal tax requirements for
qualification as a regulated investment company, the Fund, in addition to
meeting other qualification requirements, must, in general, limit its
investments so that at the close of each quarter of its taxable year (i) no
more than 25% of its assets are invested in the securities of a single issuer,
(ii) with respect to 50% of the Fund's total assets, no more than 5% of its
total assets are invested in the securities of a single issuer and (iii) the
Fund will not own more than 10% of the outstanding voting securities of any
one issuer.
The Adviser to the Funds is also investment adviser to each of the following
mutual funds: International Investors Gold Fund (Class A and C),
Gold/Resources Fund (Class A), Gold Opportunity Fund (Class A and C) and U.S.
Government Money Fund. These mutual funds, together with the Funds, are
hereinafter referred to as the "Van Eck Group of Funds." AIGAM serves as sub-
investment adviser to the Asia Dynasty Fund and Asia Infrastructure Fund, FII
serves as sub-investment adviser to the Global Balanced Fund and PIML serves
as sub-investment adviser to the Global SmallCap Fund.
The Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund and
Global Balanced Fund are part of the Van Eck "Global Partnership Series." SM
In the "Global Partnership Series," SM the Adviser seeks to retain as sub-
investment adviser firms with unique knowledge of, and experience with,
particular markets or which possess a unique investment discipline or style.
INVESTMENT OBJECTIVES AND POLICIES
A description of the investment objectives and policies of each Fund is set
forth below. The investment objective of a Fund may not be changed without the
affirmative vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Fund. Investors should understand that,
despite the best efforts of the Adviser (and the Sub-Adviser), there is no
assurance that the Funds will achieve their objectives. For further
information about a Fund's investment policies, see "Investment Objectives and
Policies of the Funds" in the Statement of Additional Information.
GLOBAL HARD ASSETS FUND
OBJECTIVE:
The Fund seeks long-term capital appreciation by investing primarily in "Hard
Asset Securities." Income is a secondary consideration.
POLICIES:
The Adviser believes "Hard Asset Securities" (as defined below) offer an
opportunity to achieve long-term capital appreciation and to protect wealth
against eroding monetary values during periods of cyclical economic
expansions. Since the market action
11
<PAGE>
of Hard Asset Securities may move against or independently of the market trend
of industrial shares, the addition of such securities to an overall portfolio
may increase the return and reduce the price fluctuations of such a portfolio.
There can be no assurance that an increased rate of return or a reduction in
price fluctuations of a portfolio will be achieved. An investment in the
Fund's shares should be considered part of an overall investment program
rather than a complete investment program.
The Fund will, under normal market conditions, invest at least 65% of its
total assets in "Hard Asset Securities." Hard Asset Securities include equity
securities of "Hard Asset Companies" and securities, including structured
notes, whose value is linked to the price of a Hard Asset commodity or a
commodity index. Indexed securities and structured notes are more fully
described on p. 15 under "Risk Factors--Indexed Securities and Structured
Notes." The term "Hard Asset Companies" includes companies that are directly
or indirectly (whether through supplier relationships, servicing agreements or
otherwise) engaged to a significant extent in the exploration, development,
production or distribution of one or more of the following (together "Hard
Assets"): (i) precious metals, (ii) ferrous and non-ferrous metals, (iii) gas,
petroleum, petrochemicals or other hydrocarbons, (iv) forest products, (v)
real estate and (vi) other basic non-agricultural commodities which,
historically, have been produced and marketed profitably during periods of
significant inflation. Under normal market conditions, the Fund will invest at
least 5% of its assets in each of the first five sectors listed above.
The Fund has a fundamental policy of concentrating in such industries and up
to 50% of the Fund's assets may be invested in any one of the above sectors.
Since the Fund may so concentrate, it may be subject to greater risks and
market fluctuations than other investment companies with more diversified
portfolios. The production and marketing of Hard Assets may be affected by
actions and changes in governments. In addition, Hard Assets and securities of
Hard Asset Companies may be cyclical in nature. During periods of economic or
financial instability, the securities of some Hard Asset Companies may be
subject to broad price fluctuations, reflecting volatility of energy and basic
materials prices and possible instability of supply of various Hard Assets. In
addition, some Hard Asset Companies may also be subject to the risks generally
associated with extraction of natural resources, such as the risks of mining
and oil drilling, and the risks of the hazards associated with natural
resources, such as fire, drought, increased regulatory and environmental
costs, and others. Securities of Hard Asset Companies may also experience
greater price fluctuations than the relevant Hard Asset. In periods of rising
Hard Asset prices, such securities may rise at a faster rate, and, conversely,
in time of falling Hard Asset prices, such securities may suffer a greater
price decline.
The Adviser believes the Fund may offer a hedge against inflation,
particularly commodity price driven inflation. However, there is no assurance
that rising commodity (or other Hard Asset) prices will result in higher
earnings or share prices for the Hard Asset Companies in the Fund. Hard Asset
Companies' equities are affected by many factors, including movements in the
overall stock market, inflation may cause a decline in the overall stock
market, including the stocks of Hard Asset Companies.
The Fund seeks investment opportunities in the world's major stock, bond and
commodity markets. The Fund may invest in securities issued anywhere in the
world, including the United States. Under normal conditions, the Fund will
invest its assets in at least three countries including the United States.
There is no limitation or restriction on the amount of assets to be invested
in any one country. There is no limitation on the amount the Fund can invest
in emerging markets. The Fund may purchase securities in any foreign country,
developed or underdeveloped. Investors should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. Global investing involves economic and
political considerations not typically applicable to the U.S. markets. See
"Risk Factors--Foreign Securities" and "Risk Factors--Emerging Market
Securities" below.
The equity securities in which the Fund may invest include common stocks;
preferred stocks (either convertible or non-convertible); rights; warrants;
direct equity interests in trusts, partnerships, joint ventures and other
incorporated entities or enterprises; and 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. These securities
may be listed on the U.S. or foreign securities exchanges or traded over-the-
counter. Direct investments are generally considered illiquid and will be
aggregated with other illiquid investments for purposes of the limitation on
illiquid investments. The Fund may, as described below in "Risk Factors" on
pages 25-32, invest in derivatives. Derivatives are instruments whose value is
"derived" from an underlying asset. Derivatives in which the Fund may invest
include futures contracts, forward contracts, options, swaps and structured
notes and other similar securities as may become available in the market.
These instruments offer certain opportunities and are subject to additional
12
<PAGE>
risks that are described below. The Fund may invest up to 10% of its net
assets, taken at market value at the time of investment, in precious metals,
whether in bullion or coins. In addition, the Fund may invest in futures and
forward contracts and options on precious metals and other Hard Assets.
The Fund may invest up to 5% of its net assets in premiums for options on
equity securities and equity indexes and up to 5% of its net assets in
warrants, including options and warrants traded in over-the-counter markets.
Warrants received as dividends on securities held by the Fund and warrants
acquired in units or attached to securities are not included in this
restriction. The Fund may buy and sell financial futures contracts and options
on financial futures contracts. The Fund may purchase or sell puts and calls
on foreign currencies and securities; invest in "when issued" securities,
"partly paid" securities (securities paid for over a period of time),
securities of foreign issuers; and may lend its portfolio securities and
borrow money for investment purposes.
The Fund may invest up to 35% of its total assets in debt securities whose
value is not linked to the value of a Hard Asset of Hard Asset Companies and
other issuers and equity securities of companies which are not Hard Asset
Companies. Non-Hard Asset debt securities include high grade, liquid debt
securities of foreign companies, 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. The average maturity of the debt securities in
the Fund's portfolio will be based on the Adviser's judgment as to future
interest rate changes. Normally, the average maturity will be shorter when
interest rates are expected to rise and longer when interest rates are
expected to fall.
LOW RATED DEBT SECURITIES: The Fund may invest in lower quality, high-yielding
debt securities (commonly referred to as "junk bonds") of Hard Asset Companies
rated as low as CCC by Standard & Poor's Corporation ("S&P") or Caa by Moody's
Investors Service, Inc. ("Moody's"). These debt instruments have some "equity"
characteristics in that, while not directly linked, their value may increase
or decrease with the value of a Hard Asset, reflecting the ability of the Hard
Asset Company to make scheduled payments of interest and principal. Lower
rated debt securities are considered speculative and involve greater risk of
loss than higher rated debt securities and are more sensitive to changes in
the issuer's capacity to pay. Debt rated Caa or CCC presents a significantly
greater risk of default than do higher rated securities and, in times of poor
business or economic conditions, the Fund may lose interest and/or principal
on such securities. In addition to sensitivity to interest rates, debt
securities of Hard Asset Companies may fluctuate in price in connection with
changes in the price of the relevant Hard Asset. The Fund will not invest more
than 25% of its assets in debt securities rated below BBB by S&P or Baa by
Moody's.
The assets of the Fund invested in fixed income securities, excluding fixed
income securities whose value is linked to the value of a Hard Asset and of
Hard Asset Companies, will consist of securities which are believed by the
Adviser to be high grade, that is rated A or better by S&P or Moody's, Fitch-1
by Fitch or Duff-1 by Duff & Phelps or if unrated, to be of comparable quality
in the judgment of the Adviser subject to the supervision of the Board of
Trustees. The assets of the Fund invested in short-term instruments will
consist primarily of securities rated in the highest category (for example,
commercial paper rated ""Prime-1'' or ""A-1'' by Moody's and S&P,
respectively) or if unrated, in instruments that are determined to be of
comparable quality in the judgment of the Adviser subject to the supervision
of the Board of Trustees, or are insured by foreign or U.S. governments, their
agencies or instrumentalities as to payment of principal and interest. The
Fund may invest up to 10% of its assets in asset-backed securities such as
collateralized mortgage obligations and other mortgage and non-mortgage asset-
backed securities. Asset-backed securities backed by Hard Assets and whose
value is expected to be linked to underlying Hard Assets are excluded from the
10% limitation.
During periods when the Adviser expects adverse or unusual economic and/or
market conditions, the Fund may, for temporary defensive purposes, make
substantial investments in obligations of the U.S. Government, debt
obligations of one or more foreign governments, certificates of deposit,
bankers' acceptances, high grade commercial paper and repurchase agreements.
FACTORS AFFECTING GLOBAL HARD ASSETS FUND:
REAL ESTATE SECURITIES
Although the Fund will not invest in real estate directly, it may invest up to
50% of its assets in equity securities of real estate investment trusts
("REIT's") and other real estate industry companies or companies with
substantial real estate investments
13
<PAGE>
and 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; increase 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. In order to comply with certain securities laws of a state in
which shares of the Fund are currently sold, the Fund has undertaken not to
invest more than 15% of its assets in securities of REITs which are NOT self-
managed or self-administered. To the extent the above restriction has been
adopted to comply with state securities laws, it shall not apply to the Fund
once such laws are no longer in effect.
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 Internal Revenue Code of 1986, as amended (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).
PRECIOUS METALS
The Fund may invest in precious metal coins (including gold, silver, platinum
and palladium) which have no numismatic value. The value of such coins moves
correspondingly with the price of bullion in that the value of the coins is
based primarily on their precious metal content. Since such investments do not
generate any investment income, the sole source of return from such
investments would be from gains realized on sales of the coins or bullion, and
a negative return would be realized to the extent such coins or bullion are
sold at a loss. Although subject to substantial fluctuations in value,
management believes such investments could be beneficial to the investment
performance of the Fund and could be a potential hedge against inflation, as
well as an investment with possible growth potential. In addition, at the
appropriate time, investments in precious metal coins or bullion could help to
moderate fluctuations in the Fund's portfolio value, as at times the prices of
precious metals have tended not to fluctuate as widely as shares of issuers
engaged in the mining of such precious metals.
In view of the established world market for precious metals, the daily value
of such coins is readily ascertainable and their liquidity is assured since
they are readily saleable to dealers which maintain markets in such coins. The
Fund will maintain its precious metal coins and bullion with Wilmington Trust
Company. Precious metals incur storage costs which are higher than the custody
fees paid on financial assets.
Precious metals trading is a speculative activity. Prices of precious metals
are affected by factors such as cyclical economic conditions, political events
and monetary policies of various countries. Gold and other precious metals are
also subject to governmental action for political reasons. Markets are,
therefore, at times, volatile and there may be sharp fluctuations in prices
even during periods of rising prices. Under current U.S. tax law, the Fund may
not receive more than 10% of its yearly income from gains resulting from
selling precious metals or any other physical commodity. The Fund may be
required, therefore, to hold its precious metals or sell them at a loss, or to
sell its portfolio securities at a gain, when it would not otherwise do so for
investment reasons.
14
<PAGE>
INDEXED SECURITIES AND STRUCTURED NOTES
The Fund may invest in indexed securities whose value is linked to one or more
currencies, interest rates, commodities, or financial or commodity indices. An
indexed security enables the investor 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
instrument. Indexed securities may be more volatile than the underlying
instrument itself, and present many of the same risks as investing in futures
and options. Indexed securities are also subject to credit risks associated
with the issuer of the security with respect to both principal and interest.
Only securities linked to one or more non-agricultural commodities or
commodity indices will be considered a Hard Asset Security.
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, a type of derivative, 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. The Fund will purchase structured notes only from
counterparties rated A or better by S&P, Moody's or another nationally
recognized statistical rating organization. The Adviser will monitor the
liquidity of structured notes under the supervision of the Board of Trustees
and structured notes determined to be illiquid will be aggregated with other
illiquid securities and limited to 15% of the net assets of the Fund.
For a discussion of other investments associated with investing in the Fund,
see "Factors Affecting Asia Dynasty Fund, Asia Infrastructure Fund, Global
SmallCap Fund, Global Balanced Fund and Global Hard Assets Fund" and "Risk
Factors."
GLOBAL INCOME FUND
OBJECTIVE:
Global Income Fund seeks high total return through a flexible policy of
investing globally, primarily in debt securities.
POLICIES:
Total return is comprised of current income and capital appreciation. The Fund
emphasizes the current income component of total return and attempts to
achieve this objective by taking advantage of investment opportunities in the
United States as well as in other countries throughout the world where
opportunities may be more rewarding.
The Adviser believes that diversification of assets on an international basis
may reduce the risk that events in any one country, including the United
States, may adversely affect the entire portfolio. There can be no assurance
that diversification of assets will reduce this risk. The Adviser will
determine the amount of the Fund's assets to be invested in corporate and
government securities in the United States and the amount to be invested in
each country abroad based on its assessment of where opportunities for total
return are expected to be most attractive. When making this determination, the
Adviser will evaluate the political and economic risks of the principal
countries of the world, prospects for the relationship of their currencies to
the U.S. Dollar, the outlook for their interest rates, credit quality and
other factors. In some countries, yields of comparable quality securities
denominated in foreign currencies may be either higher than in the United
States, or may be expected to decline faster (leading to higher bond prices),
or such currencies may be expected to appreciate against the U.S. Dollar. The
long-term assets of the Fund will consist primarily of securities which are
believed by the Adviser to be high grade, that is, rated A or better by
Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's") or, if unrated, to be of comparable quality in the judgment of the
Adviser, subject to the supervision of the Board of Trustees. The assets of
the Fund invested in short-term instruments will consist primarily of
securities rated in the highest category (for example, commercial paper rated
"Prime-1" or "A-1" by Moody's and S&P, respectively) or if unrated, in
instruments that are determined to be of comparable quality or are insured by
foreign or U.S. governments, their agencies or instrumentalities as to payment
of principal and interest. Please see the Appendix to the Statement of
Additional Information for a description of ratings.
During normal market conditions, the Fund expects to invest at least 65% of
its assets in debt securities, such as obligations issued or guaranteed by a
government or any of its political subdivisions, agencies, or
instrumentalities, or by a supranational organization such as the World Bank
or European Economic Community (or other organizations which are chartered to
promote
15
<PAGE>
economic development and are supported by various governments and government
entities), bonds, debentures, notes, commercial paper, certificates of
deposit, and repurchase agreements, as well as debt obligations which may have
a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
Government and its agencies having varied maturities. Such instruments will be
obligations issued or guaranteed as to both principal and interest by the U.S.
Government or backed by the "full faith and credit" of the United States. In
addition to direct obligations of the U.S. Treasury such as Treasury bonds and
bills, these include securities issued or guaranteed by different agencies
such as: Federal Housing Administration, Government National Mortgage
Association and the Small Business Administration. The Fund may invest in
collateralized mortgage obligations and other asset-backed securities.
The average maturity of the debt securities in the Fund's portfolio will be
based on the Adviser's judgment as to future interest rate changes. Normally,
the average maturity will be shorter when interest rates are expected to rise
and longer when rates are expected to fall. The Adviser expects the average
maturity to be between three and ten years. In addition, when the Adviser
determines that a temporary defensive strategy is warranted, the Fund may
invest in securities maturing in 13 months or less, and most or all of its
investments may be in the United States or another country.
There is no limit on the amount the Fund may invest in any one country or in
securities denominated in the currency of any one country. Normally, the Fund
will invest in at least three countries besides the United States. However,
the Fund may invest solely in the securities of one country when economic
conditions warrant, such as an extreme undervaluation of a currency and
exceptionally high returns of that country's currency relative to other
currencies.
For a discussion of other investments and risks associated with investing in
the Fund, see "Risk Factors."
GLOBAL BALANCED FUND
OBJECTIVE:
Global Balanced Fund seeks long-term capital appreciation together with
current income.
Policies:
The Fund intends to achieve its investment objective by investing its assets
in the United States and other countries throughout the world, and by
allocating its assets among equity securities, fixed-income securities and
short-term instruments.
The Adviser believes that through diversification both on an international
basis and across various asset classes the Fund can attempt to take advantage
of the best investment opportunities worldwide. The Adviser believes that
allocation of assets into many countries and across asset classes can, over
the long-term, provide higher returns than portfolios invested solely in bonds
with lower risk (or volatility, as measured by standard deviation of monthly
returns) than portfolios invested entirely in stocks. Investors should note
that a balanced portfolio will generally be more volatile than a portfolio
consisting solely of bonds and may provide lower returns than a portfolio
consisting solely of stocks. Thus, the "risk-adjusted return" of a diversified
portfolio has the potential to be more attractive than some other, more
concentrated portfolios. In addition, the balanced approach reduces the risk
where events in any one country, including the United States, or affecting one
asset class may adversely affect the entire portfolio. Investors should be
aware that although the Fund diversifies across more investment types than
most mutual funds, no one mutual fund can provide a complete investment
program for all investors. There can be no assurance that allocation of assets
both globally and across asset classes will reduce these risks or that the
Fund will achieve its investment objective.
Fiduciary International, Inc. ("FII") serves as Sub-Adviser to the Fund. FII
is a wholly-owned subsidiary of Fiduciary Investment Corporation, which, in
turn, is a wholly-owned subsidiary of Fiduciary Trust Company International.
Fiduciary Trust Company International has more than 30 years of experience in
managing funds which invest in the international markets. The Adviser believes
FII has unique knowledge and experience in global investing. See "Management."
The Fund seeks investment opportunities in the world's major stock, bond and
money markets. The Fund may invest in securities issued anywhere in the world
including the United States. Under normal conditions, the Fund will invest its
assets in at least three countries including the United States. There is no
limitation or restriction on the amount of assets to be invested
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in any one asset class or country. However, at least 25% of the Fund's total
assets will always be invested in fixed-income senior securities and at least
25% of the Fund's total assets will always be invested in equities. Over the
long-term, the Fund will attempt to invest a minimum of 25% of its assets in
the United States, with the balance outside the United States and the Fund
will attempt to maintain an asset allocation of 60% in equity securities and
40% in fixed income securities and short-term instruments. Over shorter
periods, for temporary defensive purposes, the Fund can have all of its assets
invested in any one country or currency. FII will determine when geographic or
asset class reallocations should occur. These reallocations are not expected
to be sudden, rather such reallocations will be made gradually over time. The
Fund may also allocate a portion of its assets to securities whose value is
relative to the price of gold.
The Fund will not invest more than 10% of its assets in the securities of
developing countries with emerging economies or securities markets. The Fund
may invest in asset-backed securities such as collateralized mortgage
obligations and other mortgage and non-mortgage asset-backed securities.
The average maturity of the debt securities in the Fund's portfolio will be
based on FII's judgment as to future interest rate changes. Normally, the
average maturity will be shorter when interest rates are expected to rise and
longer when interest rates are expected to fall. The assets of the Fund
invested in fixed income securities will consist of securities which are
believed by FII to be high grade, that is, rated A or better by Standard &
Poor's Corporation or Moody's Investors Service, Inc., Fitch-1 by Fitch or
Duff-1 by Duff & Phelps or if unrated, to be of comparable high quality in the
judgment of FII subject to the supervision of the Adviser and the Board of
Trustees. The assets of the Fund invested in short-term instruments will
consist primarily of securities rated in the highest category (for example,
commercial paper rated "Prime-1" or "A-1" by Moody's and S&P, respectively) or
if unrated, in instruments that are determined to be of comparable quality or
are insured by foreign or U.S. governments, their agencies or
instrumentalities as to payment of principal and interest.
FII will determine the amount of the Fund's assets to be invested in domestic
and foreign securities and the allocations to each asset class abroad will be
based on its assessment of where opportunities for long-term capital
appreciation and current income are expected to be most attractive. When
making this determination, FII will evaluate the political and economic risks
of the principal countries of the world, the relationship of their currencies
to the U.S. dollar, the outlook for their interest rates, credit quality, GNP
growth, inflation trends, yield relationships between markets, sectors, and
issues, demand and supply for funds, and a variety of other factors. FII
employs a "top down" assessment approach of countries, regions and currencies
and a "bottom up" assessment approach of stocks within selected sectors. FII's
global economic analysis is conducted in over 30 markets worldwide and by
closely following approximately 1,200 stocks and visiting with over 600
companies each year.
During periods of adverse or unusual economic and/or market conditions, the
Fund may, for temporary defensive purposes, make substantial investments in
obligations of the U.S. Government, debt obligations of one or more foreign
governments, certificates of deposit, bankers' acceptances, high grade
commercial paper and repurchase agreements. FII will determine if market
conditions warrant this strategy.
For a discussion of other investments and risks associated with investing in
the Fund, see "Factors Affecting Asia Dynasty Fund, Asia Infrastructure Fund,
Global SmallCap Fund, Global Balanced Fund and Global Hard Assets Fund" and
"Risk Factors."
GLOBAL SMALLCAP FUND
OBJECTIVE:
Global SmallCap Fund seeks long-term capital appreciation by investing
globally in equity securities of companies with small market capitalizations.
POLICIES:
The Fund will select its portfolio securities primarily from issuers whose
individual market capitalizations would place them (at the time of purchase)
in the same size range as companies in approximately the lowest 20% by total
market capitalization of companies that have equities listed on a U.S.
national securities exchange or traded in the NASDAQ system. Based on recent
U.S. share prices, these companies will typically have individual market
capitalizations below $500 million (although the Fund will be allowed to
invest in larger capitalization companies that satisfy the Fund's size
standard). Because the Fund is permitted
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to apply the U.S. size standard on a global basis, it may invest in companies
that might rank above the lowest 20% by total market capitalization in local
markets and, in fact, might in some countries rank among the largest companies
in terms of capitalization.
The Adviser believes that investing globally in smaller company stocks can,
over the long-term, produce superior returns but with increased risk. Small
capitalization stocks often have sales and earnings growth rates which exceed
those of larger companies, and such growth rates may in turn result in more
rapid share price appreciation. Investors should be aware that although the
Fund diversifies across more investment types than most mutual funds, no one
mutual fund can provide a complete investment program for all investors. There
can be no assurance that the Fund will achieve its investment objective.
While the companies in which the Fund primarily invests may offer greater
opportunities for capital appreciation than larger, more established
companies, investments in smaller, emerging growth companies may involve
greater risks and may be subject to more abrupt or erratic price movements
than investments in large companies. The securities of small emerging growth
companies may also be more sensitive to market changes than the securities of
large companies.
Pictet International Management Limited ("PIML") will serve as sub-adviser to
the Fund. PIML, located in London, is registered with the SEC and is
affiliated with Pictet & Cie., Geneva ("Pictet"). Pictet is the largest
private bank in Switzerland and is principally engaged in international
investment management and related activities, with more than $40 billion under
management. Established in 1805, Pictet has approximately 200 investment
professionals and a worldwide network of affiliates, including locations in
Zurich, Luxembourg, Tokyo, Hong Kong, Nassau and Montreal. PIML, organized in
1980, is specifically structured to provide international investment services
to U.S. investors. As part of Pictet's network, PIML has access to all
Pictet's research. The Adviser believes that PIML has unique knowledge and
experience in global smallcap investing. See "Management."
Under normal market conditions, the Fund will invest at least 65% of its
assets in equity securities of smaller capitalization companies, and such
companies will be located in at least three countries including the United
States. However, for temporary defensive purposes, the Fund may have all of
its assets invested in any one country or in securities denominated in the
currency of any one country. The equity securities in which the Fund may
invest consist of common stocks, preferred stocks (either convertible or non-
convertible), rights and warrants. These securities may be listed on the U.S.
or foreign securities exchanges or traded over-the-counter.
The Fund may invest up to 35% of its total assets in equity securities which
do not meet its small company criteria and in debt securities, including high
grade, liquid debt securities of foreign companies, 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. The average maturity of the
debt securities in the Fund's portfolio will be based on PIML's judgment as to
future interest rate changes. Normally, the average maturity will be shorter
when interest rates are expected to rise and longer when interest rates are
expected to fall. The assets of the Fund invested in fixed income securities
will consist of securities which are believed by PIML to be high grade, that
is rated A or better by S&P or Moody's, Fitch-1 by Fitch or Duff-1 by Duff &
Phelps or if unrated, to be of comparable quality in the judgment of PIML
subject to the supervision of the Adviser and the Board of Trustees. The
assets of the Fund invested in short-term instruments will consist primarily
of securities rated in the highest category (for example, commercial paper
rated "Prime-1" or "A-1" by Moody's and S&P, respectively) or if unrated, in
instruments that are determined to be of comparable quality in the judgment of
PIML subject to the supervision of the Adviser and the Board of Trustees, or
are insured by foreign or U.S. governments, their agencies or
instrumentalities as to payment of principal and interest. The Fund may invest
in asset-backed securities such as collateralized mortgage obligations and
other mortgage and non-mortgage asset-backed securities.
During periods of adverse or unusual economic and/or market conditions, the
Fund may, for temporary defensive purposes, make substantial investments in
obligations of the U.S. Government, debt obligations of one or more foreign
governments, certificates of deposit, bankers' acceptances, high grade
commercial paper and repurchase agreements.
There is no limitation on the amount the Fund can invest in emerging markets.
The Fund may purchase securities in any foreign country, developed or
underdeveloped. Investors should consider carefully the substantial risks
involved in investing in securities
18
<PAGE>
issued by companies and governments of foreign nations, which are in addition
to the usual risks inherent in domestic investments. Global investing involves
economic and political considerations not typically applicable to the U.S.
markets. These considerations, which may favorably or unfavorably affect the
Fund's performance, include changes in exchange rates and exchange rate
controls (which may include suspension of the ability to transfer currency
from a given country), cost incurred in conversion between currencies, non-
negotiable brokerage commissions, default in foreign government securities,
lower trading volume and greater market volatility, the difficulty of
enforcing obligations in other countries, war, expropriation, nationalization,
confiscatory taxation, taxation of income earned in foreign nations or other
taxes imposed with respect to investments in foreign nations, political and
social instability and diplomatic developments which could affect investments
in securities of issuers in foreign nations.
In addition, there is typically less publicly available information concerning
foreign and smaller companies than for domestic and larger, more established
companies. Some small companies have limited product lines, distribution
channels and financial and managerial resources. Some of the companies in
which the Fund may invest may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel with
varying degrees of experience. Also, because smaller companies normally have
fewer shares outstanding than larger companies and trade less frequently, it
may be more difficult for the Fund to buy and sell significant amounts of such
shares without unfavorable impact on prevailing market prices. Foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards and the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts.
Further, the settlement period of securities transactions in foreign markets
may be longer than in domestic markets. In many foreign countries there is
less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the U.S. The foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than
those in the U.S.
PIML will determine the amount of the Fund's assets to be invested in domestic
and foreign securities and the allocations to each asset class abroad will be
based on its assessment of where opportunities for long-term capital
appreciation are expected to be most attractive. When making this
determination, PIML will evaluate key factors such as current liquidity,
capacity constraints, direction of interest rates and market valuations. PIML
will invest in quality, growth-oriented smaller companies while maintaining a
diversified approach to reduce stock specific risk. PIML employs a "top down"
approach in its assessment of countries, regions and currencies, but is
essentially driven by the "bottom up" approach in stock selection. Stock
selection is based on PIML's proprietary data base of over 4,000 companies
and, comprehensive universe of 10,000 companies, in over 65 different
countries, and company visits by research analysts and investment managers.
PIML utilizes a proprietary model to determine asset/country allocation which
includes variables such as macroeconomic factors and general equity and fixed
income valuation measures. In the search for high quality growth stocks that
are relatively inexpensive, the key criteria are strong balance sheets, cash
earnings, profitability ratios above market/sector average and reasonable
valuations.
For a discussion of other investments and risks associated with investing in
the Fund, see ""Factors Affecting Asia Dynasty Fund, Asia Infrastructure Fund,
Global SmallCap Fund, Global Balanced Fund and Global Hard Assets Fund" and
"Risk Factors."
ASIA DYNASTY FUND
OBJECTIVE:
Asia Dynasty Fund seeks long-term capital appreciation by investing in the
equity securities of companies that are expected to benefit from the
development and growth of the economies of the Asia region.
POLICIES:
Over the past 20 years, the major Asian economies have generally performed
better than those of Europe and the United States. The Adviser believes the
Asia region has potential for continued dramatic growth and that AIGAM, the
sub-investment adviser to the Fund, has a unique knowledge of emerging Asian
markets. See "Management." The Fund will, under normal market conditions,
invest at least 65% of its total assets in equity securities of companies
located in, or expected to benefit from the
19
<PAGE>
growth of the economies of countries located in the "Asia Region." Asia Region
countries include Burma, Cambodia, Hong Kong, India, Indonesia, Korea, Laos,
Malaysia, Pakistan, Peoples Republic of China ("China"), the Philippines,
Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam. Currently, the Fund does
not expect to invest any of its assets in companies located in and expected to
benefit from the growth of the economies of, or markets in Australia, Japan
and New Zealand and that are not "Asia Growth Companies," but the Fund may so
invest in the future. The countries constituting the Asia Region may be
changed by the Board without obtaining shareholder approval. See "Risk
Factors" below.
In the past five years, the newly emerging securities markets in the Asia
Region have had strong economic growth which has been reflected in stronger
market returns than those of Western Europe and the United States on average
and have demonstrated significant growth in market capitalization, in numbers
of listed securities and in volume of transactions. Over this same period, the
underlying economies of the region have grown against a background of high
savings rates and generally moderate inflation.
The Fund expects that substantially all of its assets will normally be
invested in equity securities, warrants and equity options of "Asia Growth
Companies." Asia Growth Companies consist of companies that (a) are located in
or whose securities are principally traded in an Asia Region country, (b)(i)
have at least 50% of their assets in one or more countries located in the Asia
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 Region or (c) have manufacturing or other operations in
China that are significant to such companies. These investments are typically
listed on stock exchanges or traded in the over-the-counter markets in Asia
Region countries, but may be traded on exchanges or in markets outside the
Asia 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 Region. The Fund initially expects to
invest more than 25% of its total assets in Hong Kong, but has not identified
any other country in which it currently intends to invest to this extent.
Equity securities, for purposes of the 65% policy, include common and
preferred stocks; direct equity interests in trusts, partnerships, joint
ventures and other unincorporated entities or enterprises; special classes of
shares available only to foreign persons in such markets that restrict the
ownership of certain classes of equity to nationals or residents of the
country; convertible preferred stocks; and convertible debt instruments. Debt
securities issued by Asia Growth Companies are typically unrated. See "Risk
Factors--Direct Investments" for a discussion of the risks associated with
direct investments.
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 Asia Growth Companies, 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 Fund. The commercial paper in which the Fund may
invest will, at the time of purchase, be rated P-1 or better by Moody's or A-1
or better by 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.
For a discussion of other investments and risks associated with investing in
the Fund, see "Factors Affecting Asia Dynasty Fund, Asia Infrastructure Fund,
Global SmallCap Fund, Global Balanced Fund and Global Hard Assets Fund" and
"Risk Factors."
ASIA INFRASTRUCTURE FUND
OBJECTIVE:
Asia Infrastructure Fund seeks long-term capital appreciation by investing in
the equity securities of infrastructure companies that are expected to benefit
from the development and growth of the economies of the Asia Region.
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POLICIES:
Over the past twenty years, the major Asian economies have generally performed
better than those of Europe and the United States. The Adviser believes the
Asia region has potential for continued dramatic growth and that AIGAM, the
sub-investment adviser to the Fund, has a unique knowledge of emerging Asian
markets. See "Management." The Fund, will, under normal market conditions,
invest at least 65% of its total assets in equity securities of "Asia Region
Infrastructure companies" (as defined below). The "Asia Region" countries, for
purposes of this Fund are Burma, Cambodia, Hong Kong, India, Indonesia, Korea,
Laos, Malaysia, Pakistan, Peoples Republic of China ("China"), the
Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam and Japan. The
countries constituting the Asia Region may be changed by the Board without
obtaining shareholder approval. See "Risk Factors" below.
The term "Asia Region infrastructure companies" includes companies that (i)
are directly or indirectly (whether through supplier relationships, servicing
agreements or otherwise) involved to a significant extent in any one or more
of the design, construction, development, manufacture, sale, leasing,
installation or operation of, or the ownership of property in connection with,
(a) electricity generation, transmission or distribution facilities, (b) gas,
petroleum, or petrochemical collection, storage, processing or distribution
facilities, (c) roads or other public works, including water storage,
treatment and distribution facilities and waste processing and disposal
facilities, (d) transportation systems and related products, technologies and
equipment, including mass transit systems and vehicles, airports, airlines,
cargo terminals, ports and shipping facilities, (e) telecommunications systems
and related facilities, products, technologies and equipment, including long
distance and local telephone services, cellular radio telephone services and
other radio common carrier communication services, paging and specialized
mobile radio systems, telecommunications cables and wires, telegraph,
satellite, cable, fiber optic, microwave and private communication networks,
electronic mail and other telecommunications technologies, (f) cement plants,
asphalt plants and other facilities for the manufacture or processing of
building products and materials, (g) property development companies and (h)
other public service activities, which, in the opinion of the Adviser, relate
to the development of the basic structure on which a portion of a given
country's economic activities relate, and (ii) that (a) are organized under
other laws of an Asia Region country, (b) have equity securities listed on a
securities exchange in the Asia region, (c) have 50% or more of their assets
in or derive 50% or more of their revenues or profits from the Asia Region, or
(d) have or are expected to have significant assets or investments committed
to the Asia Region that, in the opinion of the Sub-Adviser, are likely to
contribute significantly to the infrastructure projects and developments in
the Asia region while providing an opportunity for the Fund to benefit from
such activities. The Fund has a fundamental policy of concentrating in such
industries and up to 100% of the Fund's total assets may be invested in any
one of the above sectors. See "Risk Factors" below. The Fund may commit 25% or
more of its total assets to any one country in the Asia Region.
In the past five years, the newly emerging securities markets in the Asia
Region (with the exception of Japan) have had strong economic growth which has
been reflected in stronger market returns than those of Western Europe or the
United States on average and have demonstrated considerable growth in market
capitalization, in numbers of listed securities and in volume of transactions.
Over this same period the underlying economies of the region have grown
against a background of high savings rates and generally moderate inflation.
The infrastructure of most of the Asia Region countries, however, is currently
far less developed than in the United States and Western Europe. The Adviser
believes that future economic growth in the Asia Region will encourage, and,
to a significant extent, be dependent upon the upgrading and expansion of
infrastructure in Asia Region countries. The Adviser believes that investments
in companies that do business in the infrastructure industry, or that supply
the material or expertise required for development of infrastructure, present
significant opportunities for long-term capital appreciation.
Equity securities, for purposes of the 65% policy, include common and
preferred stocks; direct equity interests in trusts, partnerships, joint
ventures and other unincorporated entities or enterprises; special classes of
shares available only to foreign persons in such markets that restrict the
ownership of certain classes of equity to nationals or residents of the
country; convertible preferred stocks; and convertible debt instruments. Debt
securities issued by Asia Region infrastructure companies are typically
unrated. See "Risk Factors--Direct Investments" for a discussion of the risks
associated with direct investments.
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 Asia Region infrastructure companies, foreign
governments and the
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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 Fund. The commercial paper in which the Fund may
invest will, at the time of purchase, be rated P-1 or better by Moody's or A-1
or better by 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.
For a discussion of other investments and risks associated with investing in
the Fund, see "Factors Affecting Asia Dynasty Fund, Asia Infrastructure Fund,
Global SmallCap Fund, Global Balanced Fund and Global Hard Assets Fund" and
"Risk Factors."
FACTORS AFFECTING ASIA DYNASTY FUND, ASIA INFRASTRUCTURE FUND, GLOBAL SMALLCAP
FUND, GLOBAL BALANCED FUND AND GLOBAL HARD ASSETS FUND:
EMERGING MARKET SECURITIES
Investors should be aware that these Funds will invest in countries with
emerging economies or securities markets. 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 these Funds 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 and volatile 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 more 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. On the other hand, the Adviser believes the potential for gain may be
greater. In addition, infrastructure companies in the Asia Region are
undergoing significant change due to varying and evolving levels of
governmental regulation or deregulation and other factors. Competitive
pressures are intense and the securities of such companies may be subject to
increased share price volatility. Also, certain infrastructure companies are
subject to the risk that technological innovations will make their services
obsolete. In virtually every country in the Asia Region, certain industries
providing infrastructure services, including those engaged in the generation,
transmission or distribution of electricity or gas, telecommunications and
transportation, are subject to government regulation. The nature and scope of
such regulation generally is subject to political forces and market
considerations, the effect of which cannot be predicted. Certain governments
have taken measures to foster infrastructure companies because of the
importance of these companies to the development of their economies. However,
government regulation of certain infrastructure companies, such as
telecommunications companies, typically limits the rates that may be charged
or the returns that may be earned, and place limits on the providers of
services, types of services, service areas and terms for dealing with
competitors and customers. Regulation may also limit the use of new
technologies and hamper efficient deployment of existing assets. By their
nature, infrastructure services have high public visibility, and may therefore
be subject to political pressures to reduce service rates or allowed rates of
return. Government regulation can have significant effects upon the operations
of an infrastructure company. It is not possible to predict the directions,
types or effects of future regulation, any of which could have a material
adverse effect on the Fund and its investments. Each Fund is not intended to
be a complete investment program, and a prospective investor should evaluate
personal objectives and other investments when considering the purchase of
Fund shares. There is no assurance the Funds will be able to achieve their
investment objective.
Many of these emerging markets limit the percentage foreign investors, such as
the Funds, 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
22
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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
Funds were to purchase foreign shares at a time when there is a premium and
sell when there is a lower or no premium, the Funds could realize a loss on
their 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 Funds were to own local
shares and could not participate in a stock, warrant or other distribution,
the Funds could suffer material dilution of their interest in that issuer and
the value of its holdings could decline dramatically, over a very short
period, causing a loss on their investment. Generally, it is expected that the
Funds will hold foreign shares. However, because of their limited number,
foreign shares may, at times, not be available for purchase by the Funds or
the premiums may be, in the opinion of the Adviser or Sub-Adviser, unjustified
or prohibitively high. In order to participate in these markets, the Funds may
deem it advisable to purchase local shares which may expose the Funds to the
additional risks described above. The Funds 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 or Sub-adviser, the potential for gain
in these markets outweighs the risks that issuers will take corporate actions
which may result in dilution to the Funds. Where permitted by local law, the
Funds will attempt to convert local shares to foreign shares promptly. There
can be no assurance that the Adviser or Sub-Adviser will be able to assess
these risks accurately or that the Funds will be able to convert their local
shares to foreign shares or that dilution will not result.
Asia Dynasty Fund intends to invest more than 25% of its assets in Hong Kong
and Asia Infrastructure Fund and Global SmallCap Fund may invest in Hong Kong
to such an extent. China is scheduled to assume sovereignty over Hong Kong on
July 1, 1997 and British proposals to extend certain democratic reforms have
caused periodic political tensions. Although China has committed by treaty to
preserve the economic and social freedoms enjoyed by Hong Kong for fifty years
after regaining control of Hong Kong, the continuation of the current form of
the economic system in Hong Kong after reversion to Chinese control will
depend on the actions of the government of China. In addition, such reversion
has increased sensitivity in Hong Kong to political developments in China.
Business confidence in Hong Kong therefore, can be significantly affected by
such developments and statements made by Chinese officials, which in turn can
affect markets and business performance.
The securities markets in the Asia Region (with the exception of Japan with
respect to Asia Infrastructure Fund) and other emerging markets 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, a
limited number of issuers may represent a disproportionately large percentage
of market capitalization and trading value and the securities markets are
susceptible to being influenced by large investors trading significant blocks
of securities. The Funds' ability to participate fully in the markets may be
limited by their investment policy of investing not more than 15% of their net
assets in illiquid securities. In addition, limited liquidity may impair the
Funds' ability to liquidate a position at the time and price it wishes to do
so.
The Chinese, Hong Kong and Taiwanese stock 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 and laws regarding fiduciary duties of officers and directors and the
protection of shareholders are not well developed. China and certain of the
other Asia Region countries do not have a comprehensive system of laws,
although substantial changes have occurred in China in this regard in recent
years. 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. 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. 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. 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 the judgment by a court of another jurisdiction. As
changes to the Chinese legal system develop, the promulgation of new laws,
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interpretation of 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 Region
countries.
In addition, Chinese and other Asia Region 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 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 Burma, Cambodia, Laos and Vietnam are currently non-
existent. The Fund may invest in these countries once their securities markets
are opened to foreign investors.
China governmental actions can have a significant effect on the economic
conditions in the Asia Region, which could adversely affect the value and
liquidity of the Funds' investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no
assurances that it will continue to pursue such policies or, if it does, that
such policies will succeed. In addition, revocation by the United States of
China's "Most Favored Nation" trading status, which the United States
President and Congress reconsider annually, would adversely affect the trade
and economic development of China and Hong Kong.
WORLD TRENDS FUND
OBJECTIVES:
World Trends Fund seeks long-term capital appreciation by identifying new and
changing worldwide economic and investment trends and investing its assets
globally to benefit therefrom.
POLICIES:
The Fund will select equity and debt securities of companies throughout the
world, including the United States, that are expected by the Adviser to
benefit from such trends. Current income is a secondary objective. In
allocating the Fund's investments, the Adviser will continually assess major
economic and business conditions while trying to identify underlying trends.
These conditions will include economic growth rates, business prospects for
particular industries and companies, securities prices, interest rates,
currency exchange rates and trade and payments balances, as well as political
developments, including changes in government fiscal, monetary, regulatory and
labor policies, in the leading countries of the world. The Adviser will
analyze, value and select securities which it expects to profit from such
trends.
Since the Fund aims to identify major trends worldwide, its overall investment
strategy will be flexible. Thus, the percentage of Fund assets invested in
securities of companies and governments located in particular geographic
regions of the world will change from time to time depending upon the
Adviser's assessment of worldwide economic and investment conditions and
opportunities. Likewise, the ratio of Fund investments in equity, debt and
short-term securities will vary from time to time depending upon the
investment outlook for each as determined by the Adviser.
While the Fund seeks investment opportunities in the world's major stock, bond
and money markets, the Fund's policy normally is to invest in companies whose
assets, products and operations are primarily in North America, Europe and the
Pacific Basin. It may invest up to 5% of its assets in the securities of
developing countries. The Fund may invest in securities issued anywhere in the
world including the United States. There is no limit on the amount the Fund
may invest in any one country or in securities denominated in the currency of
any one country. Under normal conditions, the Fund will be invested in at
least three countries besides the United States.
For a discussion of other investments and risks associated with investing in
the Fund, see "Risk Factors."
During periods of adverse or unusual economic and/or market conditions, the
Fund may make substantial investments for temporary defensive purposes in
obligations of the U.S. Government, debt obligations of one or more foreign
governments, certificates of deposit, bankers' acceptances, high grade
commercial paper and repurchase agreements.
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RISK FACTORS
Since shares of the Funds represent an investment in securities with
fluctuating market prices, shareholders should understand that the value of
shares of the Funds will vary as the aggregate value of the Funds' portfolio
securities increases or decreases. Moreover, any dividends paid by the Funds
will increase or decrease in relation to the income received by the Funds from
their investments.
Investors should be aware that some of the securities in which the Funds may
invest, such as structured or indexed notes, swaps and foreign securities pose
additional risks. These instruments may be subject to periods of extreme
volatility, illiquidity and may be difficult to value. Despite these risks,
these instruments may offer unique investment opportunities.
The Funds may invest up to 5% of their net assets in options on equity
securities and up to 5% of their net assets in warrants, including options and
warrants traded in over-the-counter markets. With respect to Global Income
Fund and World Trends Fund, not more than 2% may be invested in warrants that
are not listed on the New York Stock Exchange or American Stock Exchange.
Warrants received as dividends on securities held by the Fund and warrants
acquired in units or attached to securities are not included in this
restriction. Global Income Fund and World Trends Fund may invest up to 5% of
their assets at the time of purchase in preferred stocks and preferred stocks
which may be convertible into common stock. Each Fund may buy and sell
financial futures contracts and options on financial futures contracts. The
Funds may purchase or sell puts and calls on foreign currencies and
securities, and invest in "when issued" securities, "partly paid" securities
(securities paid for over a period of time), and securities of foreign
issuers; and Global Balanced Fund, Global SmallCap Fund, Global Hard Assets
Fund, Asia Infrastructure Fund, Asia Dynasty Fund and Global Income Fund may
lend their portfolio securities and borrow money for investment purposes. The
risks associated with investing in equity securities and fixed-income
securities are that stock values tend to fluctuate with general market and
economic conditions and fixed-income and short-term instrument values tend to
fluctuate with interest rates and the credit rating of the issuer.
FOREIGN SECURITIES
The Funds may purchase securities of foreign issuers, including foreign
investment companies. Investments in foreign securities may involve a greater
degree of risk than investments in domestic securities due to the possibility
of exchange controls, less publicly available information, and the possibility
of expropriation, confiscatory taxation or political, economic or social
instability. In addition, some foreign companies are not generally subject to
the same uniform accounting, auditing and financial reporting standards as are
American companies, and there may be less government supervision and
regulation of foreign stock exchanges, brokers and companies.
Foreign securities may be subject to foreign taxes, higher custodian fees,
higher brokerage commissions and higher dividend collection fees which could
reduce the yield or return on such securities, although a shareholder of a
Fund may, subject to certain limitations, be entitled to claim a credit or
deduction for United States federal income tax purposes for his proportionate
share of such foreign taxes paid by a Fund. In addition, some foreign
securities in which a Fund may invest may be denominated in foreign
currencies, and since a Fund may temporarily hold funds in foreign currencies,
the value of the assets of a Fund (and thus its net asset value) will be
affected by changes in currency exchange rates. See "Foreign Currency and
Foreign Currency Transactions" below. Transactions in the securities of
foreign issuers may be subject to settlement delays. See "Taxes" in the
Prospectus and "Risks in Investing in Foreign Securities" in the Statement of
Additional Information.
The Funds may invest in American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), American Depositary Shares (ADSs), Global
Depositary Shares (GDSs) and securities of foreign investment funds or trusts
(including passive foreign investment companies--see "Investment Restrictions"
in the Statement of Additional Information).
ADR's are certificates that are issued by a United States bank or trust
company representing the right to receive securities of a foreign issuer
deposited in a foreign subsidiary, branch or correspondent of that bank or
trust company. Generally, ADR's, in registered form, are designed for use in
United States securities markets.
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FOREIGN CURRENCY AND FOREIGN CURRENCY TRANSACTIONS
Since some foreign securities in which the Funds may invest may be denominated
in foreign currencies, and since the Funds may temporarily hold foreign
currencies, the value of the assets of these Funds (and thus their net asset
values) may be affected by changes in currency exchange rates. A Fund's
performance will be less favorable if foreign currency exchange rates move
adversely, relative to the U.S. Dollar. Foreign exchange rates are affected by
actual and anticipated Balance of Payments accounts, central bank policy,
political concerns and changes in interest rates, to name a few factors. There
can be no assurance that the Adviser (or Sub-Adviser) will be able to
anticipate currency fluctuations in exchange rates accurately. The Funds may
invest in a variety of derivatives. The Funds may purchase and sell put and
call options on, or enter into futures contracts or forward contracts to
purchase or sell, foreign currencies. The Funds may use forward currency
contracts to hedge the U.S. Dollar value of a security which they already own.
A forward currency contract may thus help reduce the Funds' losses on a
security when a foreign currency's value changes. The Funds will enter into
forward contracts to duplicate a cash market transaction and the Asia Dynasty
Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global Balanced Fund and
Global Hard Assets Fund may enter into currency swaps. The Funds enter into
hedging transactions to attempt to moderate currency fluctuations. However,
the Funds will invest in securities, including short-term obligations,
denominated in a range of foreign currencies and the value of the Funds will
be affected by changes in currency exchange rates. See "Currency Swaps",
"Futures Contracts", "Options" and "Hedging and Other Investment Techniques
and Strategies" below and "Foreign Currency Transactions" and "Futures and
Options Transactions" in the Statement of Additional Information.
SWAPS
Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global
Balanced Fund and Global Hard Assets Fund may enter into currency swaps solely
for hedging purposes. Global Hard Assets Fund may also enter into asset swaps.
Currency swaps involve the exchange of rights to make or receive payments in
specified currencies. Since currency swaps are individually negotiated a Fund
may expect to achieve an acceptable degree of correlation between its
portfolio investments and its currency swap positions. 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. Asset swaps are
similar to currency swaps in that the performance of a Hard Asset (e.g., gold)
may be "swapped" for another (e.g. energy).
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
transactions. If PIML, AIGAM or FII is incorrect in its forecasts of market
values and currency exchange rates, the investment performance of the
respective 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 purposes of the
limitation on illiquid investments.
FUTURES CONTRACTS
Global Income Fund and World Trends Fund may buy and sell financial futures
contracts which may include security and interest-rate futures, stock and bond
index futures contracts and foreign currency futures contracts for hedging
purposes. Global SmallCap Fund, Asia Infrastructure Fund, Asia Dynasty Fund
and Global Hard Assets Fund may also buy and sell financial futures contracts
which may include security and interest-rate futures, stock and bond index
futures contracts and foreign currency futures contracts for hedging and other
purposes. In addition, Global Hard Assets Fund may buy and sell commodity
futures contracts including futures contracts on commodity indices for hedging
and other purposes, such as creating "synthetic" positions. The Funds will
segregate with the custodian, among other things, cash and/or other liquid
securities so that the Funds are not leveraged in excess of applicable limits.
See "Borrowing" below.
A security or interest-rate futures contract is an agreement to buy or sell a
specified security at a set price on a future date. An index futures 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 futures contract is an agreement to
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buy or sell a specified amount of a currency for a set price on a future date.
A commodity futures contract is an agreement to take or make delivery of a
specified amount of a commodity, such as gold, at a set price on a future
date.
When a 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, commodity 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. None of the Funds will commit more than 5% of its
total assets to initial margin deposits on futures contracts and premiums on
options on securities and futures contracts except that with respect to Global
Hard Assets, Global SmallCap Fund, Asia Infrastructure Fund, Asia Dynasty Fund
and Global Balanced Fund margin deposits for futures positions entered into
for BONA FIDE hedging purposes are excluded from the 5% limitation.
In establishing a position in a futures contract, which may be a long or short
position, appropriate high grade, liquid assets, such as U.S. Government
securities or cash will be segregated with the Custodian, as may be required,
to ensure that the position is not leveraged above applicable limits. This
segregated account will be marked-to-market daily to reflect changes in the
value of the underlying futures contract. Certain exchanges do not permit
trading in particular commodities at prices in excess of daily price
fluctuation limits set by the exchange. Trading in futures contracts traded on
foreign commodity exchanges may be subject to the same or similar risks as
trading in foreign securities. See "Risk Factors--Foreign Securities".
OPTIONS
For hedging and other purposes (such as creating synthetic positions), the
Funds may invest up to 5% of their 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, financial
futures contracts and commodity futures contracts. This policy may be changed
without shareholder approval.
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. 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 they have purchased, sell them, exercise them or permit them to
expire.
The Funds 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 written put option) the
underlying instrument at the exercise price. The Fund may write only covered
put and call options. A covered call option, which is a call option with
respect to which the Fund owns the underlying instrument, 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 instrument or to
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 Funds may invest in options which are either listed on a domestic
securities exchange or traded on a recognized foreign exchange. In addition,
the Funds may purchase or sell over-the-counter options to hedge securities or
currencies from dealers or banks approved by the Board of Trustees. 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,
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are generally considered illiquid, and will be aggregated with other illiquid
positions for purposes of the limitation on illiquid investments.
HEDGING AND OTHER INVESTMENT TECHNIQUES AND STRATEGIES
To protect against anticipated declines in the value of the Funds' investment
holdings, the Funds may use, options, forward and futures contracts,
structured notes (Global Hard Assets Fund only), swaps and similar investments
(commonly referred to as derivatives) as a defensive technique to protect the
value of an asset the Adviser deems desirable to hold for tax or other
considerations. One defensive technique involves selling a futures or forward
contract, purchasing a put option 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 futures contract or put option. The premium
paid for the put option would reduce any capital gain otherwise available for
distribution when the asset is eventually sold.
The Funds may hedge against changes in the value of the U.S. Dollar in
relation to a foreign currency in which portfolio securities may be
denominated. A Fund may employ hedging strategies with options and futures
contracts on foreign currencies before the Fund purchases a foreign security,
during the period the Fund holds the foreign security, or between the date the
foreign security is purchased or sold and the date on which payment therefore
is made or received. Hedging against a change in the value of a foreign
currency in the foregoing manner does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. Furthermore, such hedging transactions reduce or preclude the
opportunity for gain if the value of the hedged currency should change
relative to the U.S. Dollar. Last, where a Fund uses options and futures in
anticipation of the purchase of a portfolio security to hedge against adverse
movements in the security's underlying currency, but where the purchase of
such security is subsequently deemed undesirable, the Fund may incur a gain or
loss on the option or futures contract.
The Funds may use options and futures contracts, forward contracts and swaps
as part of various investment techniques and strategies. The Funds may use
futures contracts and options, forward contracts and currency swaps for
investment purposes, such as creating non-speculative "synthetic" positions or
implementing "cross-hedging" strategies. A synthetic position is not deemed to
be speculative if the position is covered by segregation of short-term liquid
assets. However, since the financial markets in the developing countries are
not as developed as in the United States, these financial investments may not
be available to the Funds and the Funds may be unable to hedge certain risks
or enter into certain transactions. A "synthetic position" is the duplication
of a cash market transaction when deemed advantageous by the Adviser (or Sub-
Adviser) for cost, liquidity 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, each of the Funds experience 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 a security, such as a Deutschemark bond or on a securities
index gaining investment exposure to the relevant market while incurring lower
overall transaction costs. The Fund would enter into such transactions if the
markets for these instruments were sufficiently liquid and there was an
acceptable degree of correlation to the cash market. 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
securities.
The Funds may invest in options and futures contracts and options on futures
contracts on foreign currencies for the purpose of hedging against a decline
in the value of certain U.S. Dollar denominated securities and other "cross-
hedging" strategies. Cross-hedging involves the use of one currency to hedge
against the decline in value of another currency. For example, a Fund could
hedge against a currency-related decline in the value of a security
denominated in deutschemarks by taking a short position in the Swiss franc.
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
security 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 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 being
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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.
Over-the-counter options, together with repurchase agreements maturing in more
than seven days and other investments which do not have readily available
market quotations are, because of liquidity considerations, limited to 15% of
net assets for Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap
Fund, Global Hard Assets Fund and Global Balanced Fund and will be limited to
10% for the other Funds, except that for Global Income Fund short-term money
market instruments, such as repurchase agreements and time deposits which are
considered illiquid, are limited to an additional 5%. Over-the-counter options
are deemed by the Securities and Exchange Commission to be illiquid. The Funds
do not write naked options.
Global Income Fund, Global SmallCap Fund, Global Hard Assets Fund and Global
Balanced Fund may invest in commercial paper which is indexed to certain
specific foreign currency exchange rates. The terms of such commercial paper
provide that its principal amount is adjusted upwards or downwards (but not
below zero) at maturity to reflect changes in the exchange rate between two
currencies while the obligation is outstanding. Each will purchase such
commercial paper with the currency in which it is denominated and, at
maturity, will receive interest and principal payments thereon in that
currency, but the amount or principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the
two specified currencies between the date the instrument is issued and the
date the instrument matures. While such commercial paper entails the risk of
loss of principal, the potential for realizing gains as a result of changes in
foreign currency exchange rates enables Global Income Fund Global Balanced
Fund and Global SmallCap Fund to hedge or cross-hedge against a decline in the
U.S. Dollar value of investments denominated in foreign currencies while
providing an attractive money market rate of return. The Fund will purchase
such commercial paper for hedging purposes only, not for speculation. The
staff of the Securities and Exchange Commission is currently considering
whether the purchase of this type of commercial paper would result in the
issuance of a "senior security" within the meaning of the 1940 Act. Global
Income Fund, Global Balanced Fund, Global Hard Assets Fund and Global SmallCap
Fund believe that such investments do not involve the creation of such a
senior security, but nevertheless will establish a segregated account with
respect to its investments in this type of commercial paper and to maintain in
such account cash not available for investment or U.S. Government securities
or other liquid high quality debt securities having a value equal to the
aggregate principal amount of outstanding commercial paper of this type.
See "Futures and Options Transactions" in the Statement of Additional
Information for further information about futures contracts and options,
including tax effects and risks to the Funds.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreement transactions. Under the
terms of a typical repurchase agreement, a Fund acquires an underlying debt
obligation 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 obligation at an agreed upon price and time, thereby determining the yield
during the holding period. The agreement results in a fixed rate of return
that is not subject to market fluctuations during the holding period. A Fund
will enter into repurchase agreements with respect to securities in which it
may invest with member banks of the Federal Reserve System or certain non-bank
dealers. Under each repurchase agreement the selling institution will be
required to maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Repurchase agreements could
involve certain risks in the event of default or insolvency of the other
party, including possible delays or restrictions upon a Fund's ability to
dispose of the underlying securities. The Adviser (or Sub-Adviser), acting
under the supervision of the Board of Trustees, reviews the creditworthiness
of those non-bank dealers with which the Funds enter into repurchase
agreements to evaluate these risks. See "Repurchase Agreements" in the
Statement of Additional Information.
DEBT SECURITIES
The Funds 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
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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. High grade means a rating
of A or better by Moody's or S&P, or of comparable quality in the judgment of
the Adviser (or Sub-Adviser) if no rating has been given by either service.
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 (or Sub-Adviser).
New issues of certain debt securities are often offered on a when-issued
basis, that is, the payment obligation and the interest rate are fixed at the
time the buyer enters into the commitment, but delivery and payment for the
securities normally take place after the date of the commitment to purchase.
The value of when-issued securities may vary prior to and after delivery
depending on market conditions and changes in interest rate levels. However,
the Funds do not accrue any income on these securities prior to delivery. The
Funds will maintain in a segregated account with their Custodian an amount of
cash or high quality debt securities equal (on a daily marked-to-market basis)
to the amount of its commitment to purchase the when-issued securities.
ASSET-BACKED SECURITIES
The World Trends Fund, Global Balanced Fund, Global SmallCap Fund, Global Hard
Assets Fund, Asia Infrastructure Fund and Global Income Fund may invest in
asset-backed securities. Asset-backed securities represent interests in pools
of consumer loans (generally unrelated to mortgage loans) and most often are
structured as pass-through securities. Interest and principal payments
ultimately depend on payment of the underlying loans by individuals, although
the securities may be supported by letters of credit or other credit
enhancements. The value of asset-backed securities may also depend on the
creditworthiness of the servicing agent for the loan pool, the originator of
the loans, or the financial institution providing the credit enhancement. The
issuer of asset-backed securities may not, in certain instances, be able to
perfect its security interest in the underlying collateral.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The World Trends Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global
Balanced Fund, Global Hard Assets Fund and Global Income Fund may invest in
CMOs. CMOs are fixed-income securities which are collateralized by pools of
mortgage loans created by commercial banks, savings and loan institutions,
private mortgage insurance companies and mortgage bankers. In effect, CMOs
"pass through" the monthly payments made by individual borrowers on their
mortgage loans. Timely payment of interest and principal (but not the market
value) of these pools is supported by various forms of insurance or guarantees
issued by U.S. Government agencies, private issuers and the mortgage poolers.
These Funds may buy CMOs without insurance or guarantees if, in the opinion of
the Adviser or Sub-Adviser, the pooler is creditworthy or if rated A or better
by S&P or Moody's. S&P and Moody's assign the same rating classifications to
CMOs as they do to bonds. Prepayments of the mortgages included in the
mortgage pool may influence the yield of the CMO. In addition, prepayments
usually increase when interest rates are decreasing, thereby decreasing the
life of the pool. As a result, reinvestment of prepayments may be at a lower
rate than that on the original CMO. In the event that any CMOs are determined
to be investment companies, the Funds will be subject to certain limitations
under the 1940 Act.
LOANS OF PORTFOLIO SECURITIES
The Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global
Balanced Fund, Global Hard Assets Fund and Global Income Fund may lend to
broker-dealers portfolio securities with an aggregate market value of up to
one-third of their 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 marked-
to-market basis) to the current market value of the securities loaned. Each
Fund may terminate the loans at any time and obtain the return of the
securities loaned within one
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business day. Each 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. Each might experience risk of loss if the broker-
dealer with which it has engaged in a portfolio loan transaction breaches its
agreement.
BORROWING
Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global
Balanced Fund, Global Hard Assets Fund and Global Income Fund may borrow up to
30% of the value of their net assets to increase their holdings of portfolio
securities. Under the 1940 Act, the Funds are 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 income received 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.
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.
DIRECT INVESTMENTS
Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global
Balanced Fund, Global Hard Assets Fund and World Trends Fund may invest up to
10% of their 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 a 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 (or Sub-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 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 Funds' direct investments, particularly the Asia Dynasty Fund's
and Asia Infrastructure Fund's investments in China, 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 Funds do 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. With respect to the Asia Dynasty Fund and Asia
Infrastructure Fund such direct investments may be made in entities that are
reasonably expected in the foreseeable future to become Asia Growth Companies
or Asia Region infrastructure companies, respectively, either by expanding
current operations or establishing significant operations in the Asia 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, a Fund may take longer to liquidate
these positions than would be
31
<PAGE>
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, a Fund may
be required to bear the expenses of registration. In addition, in the event a
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 shall be valued at fair value as determined in good faith by the
Board of Trustees. The pricing of direct investments may not be reflective of
the price at which these assets could be liquidated.
LIMITING INVESTMENT RISKS
While an investment in any of the Funds is not without risk, the Funds follow
certain policies in managing their investments which may help to reduce risk.
Certain of these policies are deemed fundamental and may be changed as to a
Fund only with the approval of the holders of a majority of outstanding
shares. Such majority is defined 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 outstanding shares are present in person or by proxy, or (ii) more than
50% of outstanding shares. Certain of the more significant investment
restrictions applicable to the Funds are set forth below. Additional
restrictions are described in the Statement of Additional Information.
1. Global Income Fund and World Trends Fund will not invest more than 10%
and Global SmallCap Fund, Global Hard Assets Fund, Asia Infrastructure
Fund, Asia Dynasty Fund and Global Balanced Fund will not invest more
than 15% of the value of their total assets in securities which are not
readily marketable (including repurchase agreements which mature in more
than seven days and over-the-counter options and over-the-counter
foreign currency options), except that World Income Fund may invest an
additional 5% of the value of its total assets in short-term money
market instruments, such as repurchase agreements or time deposits
maturing in more than seven days, which are considered illiquid by the
staff of the Securities and Exchange Commission.
2. The Funds will not purchase more than 10% of any class of securities of
a company, including more than 10% of its outstanding voting securities
except the Global SmallCap Fund, Global Hard Assets Fund, Asia
Infrastructure Fund, Asia Dynasty Fund and Global Balanced Fund may
purchase more than 10% of any non-voting class of securities; and Global
Balanced Fund, Asia Dynasty Fund, Global Income Fund and World Trends
Fund will not invest more than 25% of the value of their total assets in
securities of any one industry.
3. The Funds will not invest more than 10% of their total assets in
securities of other investment companies.
4. World Trends Fund may borrow money for temporary or emergency purposes
in amounts not exceeding 10% of the value of its total assets valued at
cost. The Fund will not purchase securities for investment while
borrowings equaling 5% or more of its total assets are outstanding.
Further information regarding these and other of the Funds' investment
policies and restrictions is provided in the Statement of Additional
Information.
PURCHASE OF SHARES
Shares of the Funds may be purchased either by (1) ordering the shares through
a selected broker-dealer or bank, and forwarding a completed Application or
brokerage firm settlement instructions with payment;* or (2) completing an
Application and mailing it with payment to the Funds' Transfer Agent and
Dividend Paying Agent, DST Systems, Inc., ("DST"). Payment must be made 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. Each Fund
reserves the right to reject any purchase order. CLASS B SHARES OF ASIA
DYNASTY FUND AND GLOBAL BALANCED FUND MAY ONLY BE PURCHASED BY EXCHANGE.
- --------
* Except for Investors Fiduciary Trust Company (not affiliated with FII)
fiduciary retirement accounts.
32
<PAGE>
Orders respecting shares of any of the Van Eck Global Funds that are mailed to
DST will be processed as of the day of receipt at DST, provided the order is
in proper form and is received at DST prior to 4:00 p.m. Eastern Time. Orders
mailed to DST, addressed to P.O. Box 418407, Kansas City, Missouri, 64141,
must be deposited in the DST P.O. Box prior to 11:30 a.m. Eastern Time in
order to receive the price computed that day. If a shareholder desires to
guarantee a price based on a given date of receipt, the order should be mailed
by overnight courier to DST at 1004 Baltimore, 4th Fl., Kansas City, Missouri,
64105, and must be received by DST on the date desired before 4:00 p.m.
Eastern Time. Orders received by DST after the above times will be processed
on the next business day. Do not send mail to DST marked personal and/or
confidential as this may delay the processing of the order.
An investor who wishes to purchase shares of more than one Fund must complete
separate Applications for each Fund and remit separate checks to each Fund. An
investor may request additional Applications from the Funds or photocopy the
blank Application included with this Prospectus and complete it for each Fund.
If an investor fails to indicate the Fund to be purchased, the check will be
applied to a purchase of the U.S. Government Money Fund, a series of Van Eck
Funds, and notification and a prospectus will be sent to the investor. The
investor may then exchange at current price into the desired Fund. Initial
purchases must be in the amount of $1,000 or more per account. Subsequent
purchases must be in the amount of $100 or more, and may be made through
selected dealers or banks or by forwarding payment to DST. Either minimum may
be waived by the Funds for pension or retirement plans, for investment plans
calling for periodic investments in shares of the Funds, for sponsored payroll
deduction plans, for split funding or other insurance purchase plans or in
other appropriate circumstances.
Van Eck Securities Corporation (the "Distributor"), 99 Park Avenue, New York,
New York 10016, a wholly-owned subsidiary of the Adviser, has entered into a
Distribution Agreement with the Trusts in which the Distributor has indicated
that it will exercise its best efforts to solicit sales of the Funds' shares.
The Distributor has entered into Selling Group Agreements with selected
broker-dealers which have agreed to solicit purchasers for shares of the Funds
("Brokers") and into Selling Agency Agreements with banks or their
subsidiaries which have agreed to act as agent for their customers in the
purchase of shares of the Funds ("Agents"). A bank may be required to register
as a broker-dealer pursuant to state law.
ALTERNATIVE PURCHASE ARRANGEMENTS
Asia Dynasty Fund (Class A and B), Global Balanced Fund (Class A and B),
Global Income Fund, Asia Infrastructure Fund and Global SmallCap Fund (Class
A); Global Hard Assets Fund (Class A and C)
With respect to the Class C shares of Global Hard Assets Fund, the Fund will
waive the 12b-1 fee until May 1, 1996 and the redemption charge on purchases
until May 1, 1996. Brokers or Agents will be paid a commission by the
Distributor in the thirteenth month equal to 1% of the purchase price of
shares held in the Fund for one year or more. Prior to May 1, 1996, purchases
of the Class C shares of Global Hard Assets Fund will be more advantageous.
However, shareholders should be aware that Class A shares have a broader
exchange privilege and offer a means of compensating investment professionals
for the services they provide. The following discussion applies to shares of
Global Hard Asset Fund-C purchases after May 1, 1996.
Shares of the Asia Dynasty Fund (Class A), Asia Infrastructure Fund (Class A),
Global Hard Assets (Class A and C), Global SmallCap Fund (Class A), Global
Balanced Fund (Class A) and Global Income Fund (Class A) may be purchased
under any one of the following arrangements: (i) with an initial sales charge
imposed at the time of purchase ("Class A shares"), or (ii) with a redemption
charge imposed at the time of redemption if such redemption is within 12
months of the initial purchase ("Class C shares"). Asia Dynasty Fund-B and
Global Balanced Fund-B can be purchased only by exchange from Global Balanced
Fund-B and Asia Dynasty Fund-B, respectively. With respect to each class of
shares, an ongoing asset-based fee for distribution and services (12b-1 fee)
is charged. The distribution services fee applicable to Class C shares will be
higher than that applicable to Class A shares.
The alternative purchase arrangements permit an investor to choose the method
of purchasing shares that is more beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life
of their investment in the Fund, the accumulated distribution services fee or
33
<PAGE>
redemption charge on Class C shares prior to conversion would be less than the
initial sales charge and accumulated distribution services fee on Class A
shares. To assist investors in making this determination, the table under the
caption "Transaction Data" on page 3 sets forth examples of the charges
applicable to each class of shares. In this regard, Class A shares will
normally be more beneficial to the investor who qualifies for a reduced
initial sales charge. It is the sole responsibility of the investor, and his
or her Broker or Agent, to determine which sales charge alternative is most
advantageous.
An investor who elects the initial sales charge alternative acquires Class A
shares. Class A shares incur an initial sales charge when they are purchased
and enjoy the benefit of not being subject to any sales or redemption charge
when they are redeemed. Class A shares are subject to an ongoing distribution
and services fee at an annual rate of up to .50% of the Fund's aggregate daily
net assets attributable to the Class A shares (See "Plan of Distribution").
Certain purchases of Class A shares qualify for reduced initial sales charges.
It may be more advantageous to purchase Class A shares than Class C shares
when the purchase amount is $100,000 or more or when a lesser purchase amount
would qualify for a quantity discount or reduced sales charge at that
breakpoint in the Class A shares.
An investor who elects the redemption charge acquires Class C shares. Class C
shares do not incur a sales charge when they are purchased, but they are
subject to a redemption charge if they are redeemed within one year of
purchase. Class C shares are subject to an ongoing distribution and services
fee at an annual rate of up to 1% of the Fund's average daily net assets
attributable to the Class C shares (See "Plan of Distribution"). Class C
shares enjoy the benefit of permitting all of an investor's dollars to work
from the time the investment is made. Class C shares convert to Class A shares
eight years after the end of the month in which the shareholder's purchase
order was accepted. The higher ongoing distribution and services fees paid by
the Class C shares will cause such shares to have a higher expense ratio, pay
lower dividends and have a lower return than those of Class A shares.
Class A shares acquired under the initial sales charge alternative are subject
to a lower distribution and services fee and, accordingly, pay correspondingly
higher dividends per share and can be expected to have a higher return per
share than Class C shares. However, because initial sales charges are deducted
at the time of purchase, such investors would not have all their money
invested initially and, therefore, would initially own fewer shares. Investors
not qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated distribution charges on Class C shares may
exceed the initial sales charge on Class A shares during the life of the
investment. Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charge, not all their
money will be invested initially. However, other investors might determine
that it would be more advantageous to purchase Class C shares to have all
their money invested initially, although remaining subject to higher
distribution charges and, for a one-year period with respect to Class C shares
being subject to a redemption charge.
The distribution expenses incurred by the Fund or its Distributor in
connection with the sale of the shares will be paid, in the case of Class B
and Class C shares, from the proceeds of the ongoing distribution and services
fee and the contingent deferred sales or redemption charge incurred upon
redemption within applicable time. (See redemption charts on pages 36 and 37).
Sales personnel of Brokers and Agents distributing the Fund's shares may
receive differing compensation from selling Class A, Class B or Class C
shares. Investors should understand that the purpose and function of the
contingent deferred sales charge or redemption charge and ongoing distribution
and services fees with respect to the Class B and Class C shares are the same
as those of the initial sales charge and ongoing distribution and services fee
with respect to the Class A shares.
Dividends paid by a Fund with respect to Class A, Class B and Class C shares
will be calculated in the same manner, at the same time and on the same day
and will be in the same amount, except that the higher distribution services
fee and any incremental transfer agency costs relating to Class B or Class C
shares will be borne exclusively by that Class. See "Dividends and
Distributions." Class A, Class B and Class C shareholders of a Fund may
exchange their shares for shares of the same class of other of the funds in
the Van Eck Group of Funds in accordance with the exchange privilege (see
"Exchange Privilege").
The Trustees have determined that currently no conflict of interest exists
between the Class A and Class B shares or Class A and Class C shares. On an
ongoing basis, the Board of Trustees, pursuant to their fiduciary duties under
the 1940 Act and state laws, will seek to ensure that no such conflict arises.
34
<PAGE>
Conversion Feature. Class B and Class C shares include all shares purchased
pursuant to the contingent deferred sales charge or redemption charge
alternative which have been outstanding for less than the period ending eight
years after the end of the month in which the shareholder's order to purchase
was accepted. At the end of this period, Class B and Class C shares will
automatically convert to Class A shares and will no longer be subject to the
higher distribution and services fees. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of
any sales load, fee or other charge. The purpose of the conversion feature is
to relieve the holder of Class B and Class C shares from most of the burden of
distribution-related expenses for shares that have been outstanding for a
period of time sufficient for the Fund or its Distributor to have been
compensated for such expenses.
For purposes of conversion to Class A shares, shares purchased through the
reinvestment of dividends and distributions paid in respect to Class B or
Class C shares in a shareholder's Fund account will convert in a proportionate
amount to the non-reinvestment shares converted.
It is not recommended that certificates be requested for Class B or Class C
shares, since the return and deposit for such certificated shares may delay
the conversion to Class A shares.
The conversion of Class B or Class C shares to Class A shares is subject to
the continuing availability of an opinion of counsel to the effect that (i)
the assessment of the higher distribution services fee and transfer agency
costs with respect to Class B or Class C shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the
conversion of shares does not constitute a taxable event under federal income
tax law. The conversion of Class B or Class C shares to Class A shares may be
suspended if such an opinion is no longer available. In that event, no further
conversions of Class B or Class C shares would occur, and shares might
continue to be subject to the higher distribution services fee for an
indefinite period which may extend beyond the period ending eight years after
the end of the month in which the shareholder's order to purchase was
accepted.
There is no initial sales charge on purchases of Class B or Class C Shares.
However, each class pays the Distributor an annual 12b-1 fee for promotion and
distribution services not to exceed 1% of average daily net assets (see "Plan
of Distribution"). Global Hard Assets Fund-C will waive the 12b-1 fee until
May 1, 1996.
In determining whether a contingent deferred sales charge is applicable to a
redemption of Class B shares or a redemption charge is applicable to Class C
shares, the calculation will be determined in the manner that results in the
lowest possible rate being charged. Therefore, it will be assumed that the
redemption is first of any Class A shares in the shareholder's Fund account
(unless a specific request is made to redeem a specific class of shares),
second of Class B shares held for over six years, Class C shares held for over
one year, shares attributable to appreciation or shares acquired pursuant to
reinvestment, and third of any Class C shares or Class B held longest during
the applicable period.
To provide an example, assume an investor purchased 100 shares of Global Hard
Assets Fund-C at $10 per share (at a cost of $1,000) and with the first year
after purchase, the net asset value per share is $12 and, during such time,
the investor has acquired 10 additional shares upon dividend reinvestment. If
at such time the investor makes his first redemption of 50 shares (proceeds
$600), 10 shares or $120 will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is not
applied to the $80 attributable to appreciation but is applied only to the
original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 1%.
The contingent deferred sales charge on Class B and the redemption charge on
Class C is waived on redemptions of shares following the death or disability
of a Class B or Class C shareholder. An individual will be considered disabled
for this purpose if he or she meets the definition thereof in Section 72(m)(7)
of the Code. The Distributor will require satisfactory proof of death or
disability. The charge may be waived where the decedent or disabled person is
either an individual shareholder or owns the shares with his or her spouse as
a joint tenant with right of survivorship, and where the redemption is made
within one year of the death or initial determination of disability. The
waiver of the charge applies to a total or partial redemption but only to
redemptions of shares held at the time of the death or initial determination
of disability. Additionally, the charge may be waived
35
<PAGE>
when a total or partial redemption is made in connection with certain
distributions from Retirement Plans. The charge may be waived for any redemption
in connection with a lump-sum or other distribution following retirement or, in
the case of an IRA or Keogh Plan or custodial account pursuant to Section 403(b)
of the Code after attaining age 70 1/2 or, in the case of a qualified pension or
profit-sharing plan, after termination of employment after age 55. The charge
also may be waived on any redemption which results from the tax-free return of
an excess contribution pursuant to Section 408(d)(4) or (5) of the Code, the
return of excess deferral amounts pursuant to Sections 401(k)(8) or 402(g) of
the Code, or from the death or disability of the employee. The charge is not
waived from any distributions from IRAs or other qualified retirement plans not
specifically described above. A shareholder, or the Broker or Agent, must notify
DST at the time the redemption instructions are provided whenever a waiver of
the contingent deferred sales charge or redemption charge applies.
SALES CHARGES, DISTRIBUTION AND SERVICE FEES
Sales charges on purchases of shares of each of the Funds are set forth in the
table below. Each Fund imposes a 12b-1 distribution and services fee. Global
Income Fund-A and World Trends Fund each have 12b-1 fees of .25% of average
daily net assets per annum. Asia Dynasty Fund-A, Asia Infrastructure Fund-A,
Global SmallCap Fund-A, Global Hard Assets Fund-A and Global Balanced Fund-A
each have a 12b-1 fee of .50%. All or a portion of these fees are paid to banks,
brokers and dealers for their shareholder servicing, promotion or distribution
activities. The portion paid to banks, brokers and dealers is determined from
time-to-time by the Funds. Shareholders in Class B and Class C Funds should be
aware that dividends reinvested in new shares of the Fund will continue to be
assessed the full 12b-1 fee, including that portion which is retained by the
Distributor. Asia Dynasty Fund-B, Global Balanced Fund-B and Global Hard Assets
Fund-C each impose a 12b-1 fee of 1% of average daily net assets. This fee is
being waived by Global Hard Assets Fund-C until May 1, 1996, thereafter during
the first year following the purchase of Global Hard Assets Fund-C shares, the
fee is retained by the Fund as compensation for advanced distribution and
services fees paid to brokers or agents. Following the first year and after the
time of purchase of Asia Dynasty Fund-B and Global Balanced Fund-B, of the 1%
paid by the Fund, a portion will be retained by the Distributor and up to .75%
of 1% may be paid to Brokers and Agents for distribution and up to .25 of 1% is
for servicing. The portion retained by the Distributor is in payment for
distribution expenses. The Distributor may vary the portion retained by it from
time to time, but the amount payable by the Fund will not exceed 1%. The
Distributor will monitor payments under the Plans and will reduce such payments
or take such other steps as may be necessary, including payments from its own
resources, to assure that Plan payments will be consistent with the applicable
rules of the National Association of Securities Dealers, Inc. See "Plan of
Distribution".
GLOBAL INCOME FUND (CLASS A), ASIA DYNASTY FUND (CLASS A), ASIA INFRASTRUCTURE
FUND (CLASS A), GLOBAL SMALLCAP FUND (CLASS A), GLOBAL HARD ASSETS FUND
(CLASS A), GLOBAL BALANCED FUND (CLASS A) AND WORLD TRENDS FUND
<TABLE>
<CAPTION>
SALES CHARGE AS A DISCOUNT TO
PERCENTAGE OF BROKERS OR AGENTS
-------------------- AS A PERCENTAGE
OFFERING NET AMOUNT OF THE
DOLLAR AMOUNT OF PURCHASE PRICE INVESTED OFFERING PRICE*
- ------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $100,000....................... 4.75% 5.0% 4.00%
$100,000 to less than $250,000........... 3.75% 3.9% 3.15%
$250,000 to less than $500,000........... 2.50% 2.6% 2.00%
$500,000 to less than $1,000,000......... 2.00% 2.0% 1.65%
$1,000,000 and over...................... None***
</TABLE>
ASIA DYNASTY FUND (CLASS B)-ONLY BY EXCHANGE FROM GLOBAL BALANCED FUND
(CLASS B)
<TABLE>
<CAPTION>
SHAREHOLDER'S TIME OF REDEMPTION CONTINGENT DEFERRED SALES CHARGE
- -------------------------------- --------------------------------
<S> <C>
During Year One.................... 6.0% of the lesser of NAV or purchase price
During Year Two.................... 5.0% of the lesser of NAV or purchase price
During Year Three.................. 4.0% of the lesser of NAV or purchase price
During Year Four................... 3.0% of the lesser of NAV or purchase price
During Year Five................... 2.0% of the lesser of NAV or purchase price
During Year Six.................... 1.0% of the lesser of NAV or purchase price
Thereafter......................... None
</TABLE>
36
<PAGE>
GLOBAL BALANCED FUND (CLASS B)-ONLY BY EXCHANGE FROM ASIA DYNASTY FUND
(CLASS B)
<TABLE>
<CAPTION>
SHAREHOLDER'S TIME OF REDEMPTION CONTINGENT DEFERRED SALES CHARGE
- -------------------------------- --------------------------------
<S> <C>
During Year One.................... 5.0% of the lesser of NAV or purchase price
During Year Two.................... 4.0% of the lesser of NAV or purchase price
During Year Three.................. 3.0% of the lesser of NAV or purchase price
During Year Four................... 3.0% of the lesser of NAV or purchase price
During Year Five................... 2.0% of the lesser of NAV or purchase price
During Year Six.................... 1.0% of the lesser of NAV or purchase price
Thereafter......................... None
</TABLE>
GLOBAL HARD ASSETS FUND (CLASS C)** GLOBAL HARD ASSETS FUND (CLASS C) WILL
WAIVE THE 1% CONTINGENT DEFERRED REDEMPTION CHARGE ON PURCHASES UNTIL MAY 1,
1996.
<TABLE>
<CAPTION>
SHAREHOLDER'S TIME OF REDEMPTION CONTINGENT DEFERRED REDEMPTION CHARGE
- -------------------------------- -------------------------------------
<S> <C>
During Year One.................... 1.0% of the lesser of NAV or purchase price
Thereafter......................... None
</TABLE>
- --------
* Brokers or Agents who receive substantially all of the sales charge for
shares they sell may be deemed to be statutory underwriters.
** For the period March 17, 1995 to May 1, 1996, Global Hard Assets Fund-C has
suspended payment under its 12b-1 Plan. Brokers or Agents who sell Class C
shares of Global Hard Assets Fund will not receive the 1% 12b-1 fee for
distribution and servicing on eligible purchases prior to May 1, 1996 but
will receive 1% of the purchase price as a commission after the thirteenth
month on assets remaining in the Fund for twelve months.
*** For any sale of $1,000,000 or more of each of Global Income Fund-A, World
Trends Fund, Asia Dynasty Fund-A, Asia Infrastructure Fund-A, Global
SmallCap Fund-A, Global Hard Assets Fund-A or Global Balanced Fund-A, the
Distributor may pay a finder's fee to parties eligible to receive such a
fee. The fee will be paid during the first two years after any such sale
and is calculated as a quarterly payment equal to 0.0625% (.25% on an
annual basis) of the average daily net asset value of the shares sold that
remain outstanding throughout such months. An eligible sale is a single
sale for a single client (sales for other clients cannot be aggregated for
purposes of qualification for the finder's fee). Eligible sales registered
to a street or nominee name account must provide appropriate verification
of eligibility and average daily net assets upon which payment is to be
made. Sales made through a Bank Trust Department or Advisory Firm which
purchases shares at net asset value do not qualify for the finder's fee.
The finder's fee will be credited to the dealer of record on the record
date (currently, the last calendar day of February, May, August and
November) and will be generally paid on the 20th day of the following
month. Please contact the Distributor to determine eligibility to receive
such fee.
- --------
- --------
Brokers and Agents may receive different compensation for selling Class A,
Class B or Class C shares.
The Class A initial sales charges vary depending on the amount of the purchase,
the number of shares of the Van Eck Group of Funds which are eligible for the
Right of Accumulation that an investor already owns, a Letter of Intent to
purchase additional shares during a 13-month period, or other special purchase
programs. See "Group Purchases," "Combined Purchases," "Letter of Intent" and
"Right of Accumulation" below. These Funds also pay the Distributor a fee for
promotional and distribution services (see "Plan of Distribution"). Shares of
the Funds may be purchased without a sales charge by Trustees, officers and
full-time employees (and their parents, spouses and children) and agents of the
Trust, the Adviser, Sub-Adviser or the Distributor and their affiliates and
agents and by employees of Brokers or Agents (and their spouses and children
under the age of 21) or in connection with a merger or other business
combination, or by the Adviser for the benefit of certain discretionary advisory
accounts it manages meeting minimum asset requirements. Shares may be purchased
at net asset value (a) (i) through an investment adviser who makes such
purchases through a broker/dealer, bank or trust company (each of which may
impose transaction fees on the purchase), (ii) by an investment adviser for its
own account or for a bona fide advisory account over which the investment
adviser has investment discretion or (iii) through a financial planner who
charges a fee and makes such purchases through a financial institution which
maintains a net asset value purchase program that enables the Distributor to
realize certain economies of scale or (b) through bank trust departments or
trust company on behalf of bona fide trust or fiduciary accounts by notifying
the Distributor in advance of purchase. A bona fide advisory, trust or fiduciary
account is one which is charged an asset-based fee and whose purpose is other
than purchase of Fund shares at net asset value. Shares of the Funds which are
sold with a sales charge may be purchased by a foreign bank or other foreign
fiduciary account for the benefit of foreign investors at the sales charge
applicable to the Funds' $500,000 breakpoint level, in lieu of the sales charges
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in the above scale. The Distributor has entered into arrangements with foreign
financial institutions pursuant to which such institutions may be compensated
by the Distributor from its own resources for assistance in distributing Fund
shares. Clients of Netherlands' insurance companies who are not U.S. citizens
or residents may purchase shares without a sales charge. Shares may be
purchased at net asset value on behalf of retirement and deferred compensation
plans and trusts funding such plans (excluding Individual Retirement Accounts
("IRAs") and SEP-IRAs unless they qualify for such purchase under one of the
prior exceptions) including, but not limited to, plans and trusts defined in
Sections 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts"
which participate in a program for the purchase of shares at net asset value
offered by a financial institution and which institution maintains an omnibus
account with the Fund. Brokers may charge a transaction fee for effecting
purchases at net asset value or redemptions. See "Availability of Discounts."
The term "purchase" refers to a single purchase by an individual, to the
aggregate of concurrent purchases by an individual, his spouse and children
under the age of 21, or to a purchase by a corporation, a partnership or a
trustee or other fiduciary for a single trust, estate or fiduciary account.
Shares of the Funds are sold at the public offering price next computed after
receipt of a purchase order by the Broker, Agent or DST, provided that the
Broker or Agent receives the purchase order before the close of trading on the
New York Stock Exchange and transmits it to the Distributor by 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. If a Broker or Agent receives
an investor's order before the close of trading on the New York Stock Exchange
and fails to transmit it to the Distributor by the above times, any resulting
loss will be borne by the Broker or Agent.
The public offering price is computed once daily on each business day and is
the net asset value plus any applicable sales charge. The net asset value for
each Fund is computed as of the close of business on the New York Stock
Exchange which is normally at 4:00 P.M. Eastern Time, Monday through Friday,
exclusive of national business holidays. The assets of the Funds are valued at
market or, if market value is not ascertainable, at fair value as determined
in good faith by the Board of Trustees. The Funds may invest in securities or
futures contracts listed or traded on foreign exchanges which trade on
Saturdays or other customary United States national business holidays (i.e.,
days on which the Funds are not open for business), and consequently, the net
asset values of shares of the Funds may be significantly affected on days when
an investor has no access to the Funds.
Certificates for shares of the Funds are issued only upon specific request to
DST. Due to the conversion feature, certificates are not recommended for Class
B or Class C shareholders.
In addition to the discounts allowed to Brokers and Agents, the Distributor
will, at its own expense, subject to applicable state laws, provide additional
promotional incentives or payments in the form of merchandise (including
luxury merchandise) or trips (including trips to luxury resorts at exotic
locations or attendance at seminars/conferences at luxury resorts) to Brokers
or Agents that sell shares of the Funds. In some instances, these incentives
or payments will be offered only to certain Brokers or Agents who have sold or
may sell significant amounts of shares. Brokers and Agents who receive
additional concessions may be deemed to be underwriters as that term is
defined in the Securities Act of 1933.
GROUP PURCHASES
An individual who is a member of a qualified group may purchase shares of the
Funds at the reduced commission applicable to the group taken as a whole. The
commission is based upon the aggregate dollar value, at the current offering
price, of shares owned by the group, plus the securities currently being
purchased. For example, if members of the group held $80,000, calculated at
current offering price, of Global Income Fund-A's shares and now were
investing $25,000, the sales charge would be 3.75%. Information concerning the
current sales charge applicable to a group may be obtained by contacting the
Distributor.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring a Fund's shares at a discount
and (iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing shares. A qualified group must
have more than 10 members, must be available to arrange for group meetings
between representatives of the Distributor and the members of the group, must
agree to include sales and other materials related to the Funds in its
publications and mailings to members at reduced or no cost to the Distributor,
and must seek to arrange the use of the Automatic Investment Plan. See
"Investment Programs" for information concerning the Automatic Investment
Plan.
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COMBINED PURCHASES
Shares of Funds in the Van Eck Group of Funds (except U.S. Government Money
Fund ) may be purchased at the initial sales charge applicable to the quantity
purchase levels shown above by combining concurrent purchases.
LETTER OF INTENT
Purchasers who anticipate that they will invest $100,000 or more (other than
through exchanges) in the Van Eck Group of Funds, except for U.S. Government
Money Fund, (or $25,000 or more in International Investors, Gold Opportunity
Fund and Gold/Resources Fund), within thirteen months may execute a Letter of
Intent on the form in the Application. The execution of a Letter of Intent
will result in the purchaser paying a lower initial sales charge, at the
appropriate quantity purchase level shown above on all purchases during a
thirteen month period. Purchases of other Funds in the Van Eck Group of Funds,
except for the U.S. Government Money Fund, may be included to fulfill the
Letter of Intent. A purchase not originally made pursuant to a Letter of
Intent may be included under a backdated Letter of Intent executed within 90
days after such purchase. For further details, including escrow provisions,
see the Letter of Intent provisions in the Instructions to the Application.
RIGHT OF ACCUMULATION
The above scale of initial sales charges also applies to current purchases of
shares of the Van Eck Group of Funds (except for U.S. Government Money Fund)
by any of the persons enumerated above, where the aggregate quantity of shares
of these Funds previously purchased, and then owned, determined at the current
offering price, plus the shares being purchased amount to more than $100,000
(or more than $25,000 for International Investors, Gold Opportunity Fund and
Gold/Resources Fund), provided the Distributor or DST is notified by such
person or the Broker or Agent each time a purchase is made which would so
qualify. See "Investment Programs" in the Statement of Additional Information.
AVAILABILITY OF DISCOUNTS
An investor or the Broker or Agent must notify DST or the Distributor at the
time of purchase whenever a quantity discount or reduced sales charge is
applicable to his purchase. Quantity discounts described above may be modified
or terminated at any time without prior notice.
EXCHANGE PRIVILEGE
The Adviser discourages trading in response to short-term market fluctuations.
Such activity may hinder the Adviser's or Sub-Adviser's ability to invest the
Funds' assets in accordance with their respective investment objectives and
policies, cause a Fund to incur additional brokerage, registration and other
expenses, and may be disadvantageous to other shareholders in either the Fund
being exchanged from or into or both. Effective May 1, 1995, Shareholders will
be limited to six exchanges per calendar year; however, exchanges from
International Investors Gold Fund (Class A) may be excluded from this
limitation, if the Fund or Adviser believes that exclusion will not be
materially disadvantageous to other shareholders. Active shareholders should
consult the Fund as to current policy. For purposes of determining the number
of exchanges made per calendar year, Fund accounts having the same beneficial
owner or under common control will be aggregated. This exchange limitation
does not apply to the U.S. Government Money Fund.
Each Fund reserves the right to modify or terminate the Exchange Privilege of
any shareholder or to limit or reject any exchange. Although each Fund will
attempt to give shareholders prior notice whenever it is reasonable to do so,
it may impose these restrictions at any time when it deems it to be within the
best interest of remaining shareholders. If the exchange is rejected,
shareholders will nevertheless be able to redeem their shares.
Each Fund has the ability to redeem its shares in kind. Each Fund will 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 Fund
at the beginning of such period. See "Exchange Privilege" and "Redemption in
Kind" in the Statement of Additional Information. In addition, the Funds have
reserved the right to refuse any purchase order.
The Van Eck Group of Funds consists of Asia Dynasty Fund (Class A and B), Asia
Infrastructure (Class A), Global SmallCap Fund (Class A), Global Balanced Fund
(Class A and B), Global Hard Assets Fund (Class A and C), International
Investors Gold Fund
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(Class A and C), Gold/Resources Fund (Class A), Gold Opportunity Fund (Class A
and C), U.S. Government Money Fund, Global Income Fund (Class A) and World
Trends Fund. Shareholders of these Funds, may exchange shares for shares of
the same class of any of the other Funds (the "Exchange Privilege"). Class B
shareholders of Asia Dynasty Fund and Global Balanced Fund may only exchange
between those two Funds. Class C shareholders of Global Hard Assets Fund and
Gold Opportunity Fund may only exchange between those two Funds. Shares of the
U.S. Government Money Fund acquired other than pursuant to the Exchange
Privilege, may only be exchanged into the other Class A Funds included in the
Exchange Privilege subject to payment of the applicable sales charge. For
federal income tax purposes, any exchange pursuant to the Exchange Privilege,
other than exchanges in retirement plans offered by the Funds, will be
regarded as a sale of shares, and any gain or loss must generally be
recognized by the shareholder.
Class B or C shares exchanged for Class B or C shares of another fund with a
different contingent deferred sales charge or redemption charge schedule will
be subject to the contingent deferred sales charge or redemption charge
applicable to those shares at the time of original purchase.
The Exchange Privilege may be modified or terminated at any time. See
"Exchange Privilege" in the Statement of Additional Information.
WRITTEN EXCHANGE
Shareholders wishing to exchange shares may do so by sending to DST a written
request in proper form signed by all registered owners exactly as the account
is registered, specifying the number of shares or amount of investment to be
exchanged (or that
all shares credited to a fund account be exchanged). Exchanges are only
available in states where exchanges may legally be made, along with
appropriate documentation, if necessary. A person(s) authorized to sign on
behalf of joint owners, corporations, trusts, custodians, or other
organizations must supply appropriate evidence of the authority of each
signatory with each written request. Accounts not eligible for the telephone
exchange privilege may make a written exchange request. Written exchange
requests will be executed on the first business day of receipt in proper
order. Written exchange requests may be sent by regular mail to: Van Eck
Funds, c/o DST, P.O. Box 418407, Kansas City, MO 64141, or by overnight
courier to 1004 Baltimore, Kansas City, MO 64105.
TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGE
Completion of the Application (or the application for an IRA/SPIRA, Qualified
Pension Plan, 403(b)(7) Plan or SEP for telephone exchange only) or receipt of
settlement instructions from a Broker or Agent for an eligible account shall
constitute an election by the investor to have available the Telephone
Exchange Privilege and Telephone Redemption Privilege, unless otherwise
indicated. By electing the Privileges the investor is authorizing each Fund,
its agents and affiliates to act on any instructions they believe to be
genuine. Such persons will employ reasonable procedures to confirm the
authenticity of these communications and cannot be responsible for the
authenticity of any telephone instructions nor will they be liable for any
loss of expenses resulting from acting on any instructions, including those
which are fraudulent and those not authorized by the investor unless such
persons fail to employ such procedures. Those shareholders that elected NOT to
establish the Telephone Exchange Privilege or the Telephone Redemption
Privilege on their accounts may later establish the privilege by written
request, signed by all registered owners on the account and with appropriate
documentation, as necessary.
The Telephone Exchange Privilege may not be available to accounts held by a
brokerage firm in street name and participants in retirement plans sponsored
by organizations other than the Trust, and participants in such plans should
consult with their sponsors to determine the availability of the Telephone
Exchange Privilege prior to exercising the Telephone Exchange Privilege.
The Telephone Redemption Privilege is not available to accounts registered in
"street name", nominee or corporate name and custodial accounts held by a
financial institution including Investors Fiduciary Trust Company retirement
accounts.
After acceptance by DST of an Application, a telephone exchange or telephone
redemption may be effected by contacting DST at 1-800-345-8506. Telephone
calls are recorded. Telephone instructions for exchanging or redeeming shares
on deposit with DST may be given by anyone claiming to be the shareholder, the
Broker or Agent of record, or an authorized representative of any of the
foregoing [the caller must identify his/her name and relationship to the
account] and will be executed only if they
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include the correct social security number, tax identification number or
account number. Telephone instructions accepted after the close of business on
the New York Stock Exchange will not be effected until the following business
day (see "Purchase of Shares"). In the case of joint or multiple owners, one
owner's call may effect the telephone exchange or redemption. Because of
unusual market conditions it may be difficult and/or impossible to contact DST
to effect the exchange or redemption. Shareholders should continue to try to
contact DST by telephone at the above telephone number or may deliver written
instructions by post or courier. The Funds reserve the right to refuse a
request for the Telephone Redemption Privilege without prior notice either
during or after the call. The Funds reserve the right to modify or terminate
the Exchange Privilege at any time. See "Exchange Privilege" in the Statement
of Additional Information.
If the exchanging shareholder does not have an account in the Fund into which
he/she is exchanging, a new account will be established with the same
registration, dividend and capital gain options, and dealer of record
specified in the shareholder's account in the existing Fund. In order to
establish an Automatic Withdrawal or Automatic Investment Plan or other
options for the new account, an exchanging shareholder must make the request
at the time of exchange and may be required to file an application which can
be obtained from DST or the Fund.
For accounts with the Telephone Redemption Privilege, telephone redemption
requests will only be accepted on shares held on deposit for amounts of
$50,000 or less per day if the check is payable to the shareholder(s) and sent
to the address of record. A telephone redemption will not be accepted if a
change to the registered address has been effected within one month of such
request.
DIVIDENDS AND DISTRIBUTIONS
Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund, Global Hard
Assets Fund and World Trends Fund intend to make distributions from net
investment income in August and January and distribute any net realized
capital gains resulting from the Funds' investment activity annually in
January. The Global Balanced Fund intends to make distributions from net
investment income on a quarterly basis in January, May, August and November
and distribute any net realized capital gains resulting from investment
activity annually in January. The Global Income Fund intends to declare and
pay dividends monthly and net realized capital gains resulting from investment
activity annually in January. Dividends or distributions declared in December
but paid in January will be includible in a shareholder's income as of the
record date (usually in December) of such dividends or distributions. Short-
term capital gains, if declared, are treated the same as dividend income. The
fiscal year of each of the Funds ends on December 31.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Funds are available for purchase in connection with the
following tax-sheltered retirement plans:
INDIVIDUAL RETIREMENT ACCOUNT AND SPOUSAL INDIVIDUAL RETIREMENT ACCOUNT
("IRA/SPIRA")--available to anyone who has earned income (investments may also
be made in the name of a spouse, if the spouse is treated as having no earned
income).
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP")--available to employers, including
self-employed individuals seeking to provide retirement income to employees
through employer contributions or salary reduction contributions to employee
individual retirement accounts.
QUALIFIED PENSION PLAN--available to self-employed individuals, partnerships,
corporations and their employees.
403(B)(7) PROGRAM--available to employees of certain tax exempt organizations
and schools. See "Tax Sheltered Retirement Plans" in the Statement of
Additional Information. In addition, information concerning these plans is
available from the Funds. This information should be read carefully and
consultation with an attorney or tax adviser is advisable.
INVESTMENT PROGRAMS
DIVIDEND REINVESTMENT PLAN
Unless a shareholder has given notice directly, or through his Broker or
Agent, to DST (the Funds' dividend paying agent) that he elects to receive
dividends and capital gains distributions in cash, dividends and distributions
of a Fund will be reinvested in shares of that Fund at net asset value without
a sales charge. Reinvestments of dividends and distributions on shares of the
Funds will occur on a date selected by the respective Board of Trustees.
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In addition, dividends and capital gains distributions paid by the Funds
(except Class B and C shareholders) in cash may be automatically invested at
net asset value on the payable date in Class A shares of any series of the Van
Eck Group of Funds. A shareholder wishing to exercise this option should
contact DST for instructions.
AUTOMATIC INVESTMENT PLAN
The Funds offer to investors a program for regularly investing specified
dollar amounts in a Fund. In establishing the Automatic Investment Plan, an
investor authorizes DST to collect a specified amount from his checking
account and use the proceeds to purchase shares of a Fund for the investor's
account. Further details of the Automatic Investment Plan are given in an
application which is available from DST or the Distributor. See "Investment
Programs" in the Statement of Additional Information.
AUTOMATIC EXCHANGE PLAN
The Funds offer a program for regularly exchanging specified dollar amounts
into a Fund from an exchange of shares from one of the other series of the Van
Eck Group of Funds (except Class B and C shares). In establishing the
Automatic Exchange Plan, an investor authorizes DST to regularly exchange a
specified amount from any series of the Van Eck Funds and purchase shares of a
Fund for the investor's account. Further details of the Automatic Exchange
Plan are given in an application which is available from DST or the Fund. See
"Investment Programs" in the Statement of Additional Information.
AUTOMATIC WITHDRAWAL PLAN
Any shareholder who owns shares of a Fund valued at $10,000 or more at current
offering price may establish an Automatic Withdrawal Plan under which he will
receive a monthly or quarterly check in a stated amount, not less than $50.
The Plan is not available to Class B and C shareholders. Further details on
the Automatic Withdrawal Plan are contained in the Statement of Additional
Information.
REDEMPTION OF SHARES
WRITTEN REDEMPTION
A shareholder wishing to redeem shares of any of the Funds may do so by
sending to DST, P.O. Box 418407, Kansas City, Missouri 64141 (for additional
mailing instructions to DST and times of processing see "Purchase of Shares"):
(1) a written request for redemption in proper form signed by all registered
owners exactly as the account is registered, specifying the number of shares
or amount of investment to be redeemed (or that all shares credited to a Fund
account be redeemed); (2) if the amount redeemed is $50,000 or more, or if the
proceeds of redemption are paid to other than the registered owner of the
shares at the address on record at DST, a guarantee of the signature of each
registered owner by an eligible guarantor institution (a notarization by a
notary public is not acceptable); and (3) any additional documents concerning
authority and related matters in the case 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. If the shares to be redeemed were issued in certificate
form, the certificates must be endorsed for transfer (or be accompanied by an
endorsement) and must be submitted with the written request for redemption.
The requirement for a signature guarantee is waived for redemptions of $50,000
or less if the redemption is a transfer of assets from an IFTC held retirement
plan in one of the Funds in the Van Eck Group of Funds to a retirement plan
held by another recognized custodian/trustee.
TELEPHONE REDEMPTION (SEE "TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGE" ON
PAGE 40)
BROKER/AGENT CONFIRMED REDEMPTION
For the convenience of shareholders, the Funds have authorized the Distributor
as agent to accept confirmed orders only from Brokers and Agents for the
repurchase of shares of the Funds. If a shareholder uses the services of a
Broker or Agent in effecting repurchases of shares, the Broker or Agent may
charge a fee for its services. The repurchase price is the net asset value per
share next determined after the repurchase order is received by the Broker or
Agent prior to the close of business on the New York Stock Exchange on the day
received. Brokers and Agents have the responsibility of submitting such
repurchase orders, to the Distributor 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, on such day in order to obtain that
day's applicable redemption price. Settlement of confirmed orders from
accounts will not be effected until receipt of instructions in proper form as
described above
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or an indemnity from the Broker or Agent of record on the account and any
shares held in certificated form. Some Brokers or Agents may have self-imposed
restrictions regarding the submission of confirmed redemption orders on behalf
of shareholders.
The redemption price will be the net asset value per share next determined
after the receipt of a request in proper form as described above. See
"Purchase of Shares" for DST processing receipt of mail. The market value of
the securities in the portfolio of each Fund is subject to daily fluctuations
and the net asset value of these Funds' shares will fluctuate accordingly.
Therefore, the redemption value may be more or less than the shareholder's
cost.
Except as noted, payment will normally be made within seven days (or three
business days effective June 1, 1995) after delivery of a proper redemption
request except for such delays as may be permitted under applicable law or
rule. If shares of any Fund to be redeemed were purchased by check, the Trust
reserves the right to honor such redemption request only after it has assured
itself that a shareholder's check has been cleared for payment, which may take
as long as 15 days. The right of redemption may be suspended and payment
postponed for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings) or trading on that
Exchange is restricted as determined by the applicable rules and regulations
of the Securities and Exchange Commission; or during an emergency, as
determined by the Securities and Exchange Commission, as a result of which it
is not reasonably practical for the Funds to dispose of the securities owned
by them or to determine fairly their net asset values; or for any period that
the Securities and Exchange Commission may by order permit for the protection
of shareholders of the Funds.
The Funds reserve the right to redeem shares of a Fund and mail the proceeds
to a shareholder if, at any time, the number of shares in a shareholder's
account falls, subsequent to satisfying the initial investment requirement,
below a specified amount, currently 50 shares. Shareholders will be notified
and will have 30 days to bring the number of shares owned by them up to the
required amount before any redemption is made by that Fund.
Any shareholder who redeems his shares of the Asia Dynasty Fund-A, Asia
Infrastructure Fund-A, Global Hard Assets Fund-A, Global SmallCap Fund-A,
Global Balanced Fund-A, World Trends Fund, or Global Income Fund-A has a one-
time right to reinvest in shares of these Funds at net asset value without the
payment of a sales charge. Such reinvestment must be made within 30 days after
the redemption of shares of these Funds and is limited to no more than the
amount of the redemption proceeds. The shareholder must inform the Fund or DST
that he is exercising his onetime right to reinvest at NAV. Although
redemption of shares is normally a taxable event and a gain or a loss must be
recognized, subsequent reinvestment within such thirty-day period in the same
Fund is considered a "wash sale" under the federal income tax law and no loss
on such redemption may be recognized for federal income tax purposes.
REDEMPTION BY CHECK
Shareholders of the Global Income Fund-A and Global Balanced Fund-A may, upon
completion of the "Redemption by Check" portion of the Application, elect to
redeem by check shares of the Fund which are on deposit with DST. These
checks, which are drawn on The United Missouri Bank of Kansas City (the
"Bank") may be made payable to the order of any person and may not be drawn
for less than $500 or more than $5,000,000. The amount of the check may not be
in excess of 90% of the net asset value of the shares in the shareholder's
account (excluding for this purpose the current month's accumulated dividends
and shares for which certificates have been issued). When such a check is
presented to the Bank for payment, the Bank as the shareholders' agent acting
under the authority of the Redemption by Check procedure will cause the Fund
to redeem a sufficient number of full and fractional shares to cover the
amount of the check. A shareholder may not write a check to close his account
but should follow the appropriate procedure set forth above. Retirement plan
accounts and accounts held on behalf of minors are not eligible for Redemption
by check. For further information concerning Redemption by Check, shareholders
should contact DST.
TRANSFER OF OWNERSHIP
To transfer ownership (re-register) all or a portion of shares held in a
shareholder's account, the shareholder must provide a written request with any
certificated shares and any documents concerning authority and related matters
as described above (See "Redemption of Shares") in proper form. Also, the
shareholder should provide a properly certified social security number,
taxpayer identification number, or certification of non-resident alien status
of the new owner at the time of transfer.
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MANAGEMENT
TRUSTEES
The management of the business and affairs of each Fund is the responsibility
of the Board of Trustees. For information on the Trustees and officers of the
Funds see "Trustees and Officers" in the Statement of Additional Information.
INVESTMENT ADVISER, MANAGER AND ADMINISTRATOR
Van Eck Associates Corporation, 99 Park Avenue, New York, NY 10016, serves as
the investment adviser and manager pursuant to Advisory Agreements with the
Trust. The Adviser manages the investment operations of the Funds and
furnishes the Funds with a continuous investment program which includes
determining which securities should be bought, sold or held. The World Trends
Fund and Global Income Fund each pay the Adviser a monthly fee at the annual
rate of .75 of 1% of the first $500 million of the average daily net assets of
the Fund, .65 of 1% of the next $250 million of the average daily net assets
and .50 of 1% of the average daily net assets in excess of $750 million. The
Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund and Global
Balanced Fund each pays the Adviser a monthly fee at the annual rate of .75%
of average daily net assets. Global Hard Assets Fund pays the Adviser a
monthly fee at the annual rate of 1.00% of average daily net assets, a portion
of which is paid to the Adviser for accounting and administrative services it
provides to the Fund. The advisory fees paid to the Adviser with respect to
these Funds are higher than the fees paid by most investment companies because
of the complexities of managing these types of funds (such as following
trends, industries and companies in many different countries and stock markets
throughout the world).
Van Eck Associates Corporation also performs accounting and administrative
services for Asia Dynasty Fund, Asia Infrastructure Fund, Global SmallCap Fund
and Global Balanced Fund and is paid a fee at an annual rate of .25% of each
of the Fund's average daily net assets.
The Adviser acts as investment adviser or sub-investment adviser to other
mutual funds registered with the Securities and Exchange Commission under the
1940 Act and manages or advises managers of portfolios of pension plans and
others. Total aggregate assets under management of Van Eck Associates
Corporation at December 31, 1994 were approximately $1.8 billion. John C. van
Eck, Chairman and President of the Trust, and members of his immediate family
own 100% of the voting stock of Van Eck Associates Corporation.
AIGAM, 70 Pine Street, New York, NY 10270 serves as sub-investment adviser to
the Asia Dynasty Fund and Asia Infrastructure Fund pursuant to a Sub-
Investment Advisory Agreement with the Adviser. AIGAM manages the investment
operations of the Asia Dynasty Fund and furnishes the Funds with a continuous
investment program which includes determining which securities should be
bought, sold or held. The Adviser manages and administers the business and
affairs of the Fund. As compensation for its services, AIGAM is paid a monthly
fee at an annual rate of .50% of average daily net assets by the Adviser from
the advisory fees it receives from the Fund.
AIGAM is a second-tier subsidiary of American International Group, Inc.
("American International"). American International is an international
insurance organization whose member companies write insurance in approximately
130 countries and jurisdictions and are engaged in a network of financial
services businesses. American International traces its Asian roots back to
Shanghai, China in 1919.
AIGAM is a wholly owned subsidiary of AIG Investment Corporation ("AIGIC").
AIGIC and its affiliates currently have more than 40 investment professionals
throughout Southeast Asia. In providing sub-advisory services to the Asia
Dynasty Fund and Asia Infrastructure Fund, AIGAM utilizes the services of AIG
Investment Corp. (Asia) ("AIGIC (Asia)"), one of AIGIC's affiliates. AIGIC
(Asia) currently has seven investment professionals based in Hong Kong and
generally has access to the resources of AIGIC and its local affiliates
throughout Southeast Asia. As of December 31, 1994, total assets under
management by AIGIC and its affiliates on behalf of all clients amounted to
approximately $26 billion. AIGAM serves as an investment adviser to another
registered investment company.
FII, Two World Trade Center, New York, New York 10048, serves as sub-
investment adviser to the Global Balanced Fund pursuant to a Sub-Investment
Advisory Agreement with the Trust. FII manages the investment operations of
the Global Balanced
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Fund and furnishes the Fund with a continuous investment program that includes
which securities should be bought, sold or held. The Adviser manages and
administers the business and affairs of the Fund. As compensation for its
services, FII is paid a monthly fee at an annual rate of .50% of average daily
net assets by the Adviser from the advisory fee it receives from the Fund. FII
serves as an investment adviser to other registered investment companies.
FII is an indirect subsidiary of Fiduciary Trust Company International
("FTCI"). FTCI is a New York State chartered bank specializing in investment
and administration of assets for pensions and other institutional accounts
including individuals and families. FII has access to all of FTCI's investment
infrastructure. FTCI began investing globally in the 1960's and serves its
worldwide investment management and custody clients from offices in New York,
Los Angeles, Miami, Washington, D.C., London, Geneva and Hong Kong. FTCI has
over 60 investment professionals. FTCI has over 30 years of experience in
global management with over $13 billion managed under the global balanced
discipline. As of December 31, 1994, total assets under management by FII and
its parent organization FTCI, on behalf of all clients, amounted to over $27
billion.
PIML, Cutlers Gardens, 5 Devonshire Square, London, United Kingdom EC2M 4LD,
serves as sub-investment adviser to the Global SmallCap Fund pursuant to a
Sub-Investment Advisory Agreement with the Adviser. PIML manages the
investment operations of the Global SmallCap Fund and furnishes the Fund with
a continuous investment program that includes which securities should be
bought, sold or held. The Adviser manages and administers the business and
affairs of the Fund. As compensation for its services, PIML is paid a monthly
fee at an annual rate of .50% of average daily net assets by the Adviser from
the advisory fee it receives from the Fund. PIML does not serve as an
investment adviser to other registered investment companies with similar
investment mandates as that of the Global SmallCap Fund.
PIML is an operating company of Pictet (London) Limited, an affiliate of
Pictet & Cie ("Pictet"). Pictet was founded in 1805 and is the leading private
bank in Switzerland. Pictet is the largest specialist investment bank
domiciled in Europe. Pictet has a worldwide network of offices employing over
200 investment professionals in Geneva, London, Zurich, Luxembourg, Hong Kong,
Tokyo, Montreal and Nassau. PIML has access to all of Pictet's investment
infrastructure. As of December 31, 1994, total assets under management by
Pictet and its affiliates, including PIML, on behalf of all clients, amounted
to approximately $40 billion.
Madis Senner--Portfolio Manager of Global Income Fund is responsible for
managing the Fund's portfolio of investments. Before joining Van Eck, Mr.
Senner was a global bond manager with Chase Manhattan Private Bank. Prior to
that, he was President of Sunray Securities, Inc., an investment management
firm that he founded, and, before that, was a global fixed income manager with
Clemente Capital, Inc. in New York City. Mr. Senner has 12 years experience in
the investment business.
Derek S. van Eck--Co-Portfolio Manager of the World Trends Fund. He has co-
responsibility for managing the Fund's portfolio of investments. He is
Director of Global Investments and Executive Vice President of the Adviser and
an officer of other mutual funds advised by the Adviser.
David R. Kenerson, Jr.--Co-Portfolio Manager of World Trends Fund. He has co-
responsibility for managing the Fund's portfolio of investments. He is
Director of Global Research of the Adviser and an officer of other mutual
funds advised by the Adviser.
Global Hard Assets Fund is managed by an asset allocation committee which is
chaired by Mr. John van Eck. The members of the asset allocation committee for
the Fund are listed below:
John C. van Eck--Co-Portfolio Manager of the Fund and Chairman of the Fund's
asset allocation committee, is responsible for managing the Fund's portfolio
of investments. He is Chairman of the Adviser and previously served as the
portfolio manager of International Investors Gold Fund. Mr. van Eck has over
45 years of investment experience.
Derek S. van Eck--Co-Portfolio Manager and a member of the asset allocation
committee for the Fund. He is Director of Global Investments and Executive
Vice President of the Adviser and an officer and portfolio manager of other
mutual funds advised by the Adviser.
William Trebilcock--Serves as an analyst and a member of the asset allocation
committee for the Global Hard Assets Fund. Mr. Trebilcock serves as Director
of Mining Research for the Adviser. Mr. Trebilcock has 28 years of experience
in his field.
45
<PAGE>
Madis Senner--Serves as an analyst and a member of the asset allocation
committee for the Fund. Before joining Van Eck, Mr. Senner was a global bond
manager with Chase Manhattan Private Bank. Mr. Senner is Director, Global
Fixed Income of the Adviser and also serves as portfolio manager for other
funds advised by the Adviser. Mr. Senner has 12 years of experience in the
investment business.
Lucille Palermo--Serves as an analyst and a member of the asset allocation
committee for the Fund. She is Associate Director, Mining Research of the
Adviser and an officer and portfolio manager of other mutual funds advised by
the Adviser. Ms. Palermo has 20 years of experience in the investment
business.
Peter Soo, Investment Officer of AIGAM is responsible for managing the Asia
Dynasty Fund's and Asia Infrastructure Fund's portfolio of investments and has
been serving in such capacity since the Funds commenced operations. He is also
Vice President of AIG Investment Corporation (Asia), an indirect subsidiary of
American International along with AIG Asset Management Corporation, which
serves as Sub-Investment Adviser to the Funds.
FII assigns a team of managers led by a global strategist, which includes a
global equity manager and a global fixed-income manager, to manage the Fund's
portfolio of investments. The team consults with the FTCI research department,
which includes international analysts who specialize in the equity markets of
Japan, Europe, the Pacific Basin and Latin America, when making investment
decisions. The three primary portfolio managers for the Global Balanced Fund
(the "Fund") are listed below:
Anne M. Tatlock--Global Strategist of the Fund has been serving in such
capacity since the Fund commenced operations. Ms. Tatlock joined FTCI in 1984
and is currently President of the company where she is responsible for
managing institutional investment management. Ms. Tatlock is head of the
Institutional Investment Department and a member of the Board of Directors,
the International Investment Committee and the Investment Policy Committee at
FTCI.
Brian Hopkinson--FII's Portfolio Manager of the Fund has been serving in such
capacity since the Fund commenced operations. Mr. Hopkinson joined FTCI in
1986 after 12 years with Legal Assurance Society, Ltd. and C.S. Investments.
He is a Senior Vice President and Senior Global Equity Manager of FTCI as well
as a member of the International Investment Committee at FTCI.
Cheng-Hock Lau--FII's Portfolio Manager of the Fund has been serving in such
capacity since the Fund commenced operations. Mr. Lau joined FTCI in 1990
after six years as a global bond manager at Glaxo Enterprises, Inc. He left
for Bankers Trust in 1991 but rejoined FTCI in 1993 and is currently a Vice
President of FTCI where he is responsible for managing institutional global
fixed-income portfolios.
PIML assigns a team of managers led by a Chief Investment Officer. The primary
portfolio managers for the Global SmallCap Fund are listed below:
Fabien Pictet--Investment Director of the Fund has been serving in such
capacity since the Fund commenced operations. Mr. Pictet, a Director of PIML,
joined PIML in 1986 and has been responsible for establishing PIML's
international small companies and emerging market programs. Prior to joining
PIML, Mr. Pictet spent three years as an Assistant Vice President with Merrill
Lynch in New York, working in international institutional sales.
Nicholas Johnson--PIML's Chief Investment Officer and Chief Investment Officer
of the Fund has been serving in such capacity since the Fund commenced
operations. Mr. Johnson is responsible for all aspects of the investment
process including global asset allocation. Prior to joining PIML in 1993, Mr.
Johnson specialized in Japanese and Asian investments at Invesco MIM, where he
had been head of international investment responsible for investment
operations outside of North America.
Jonathan Neill--Senior Investment Manager of the Fund has been serving in such
capacity since the Fund commenced operations. Mr. Neill is jointly responsible
for worldwide small companies and emerging markets. Prior to joining PIML in
1990, Mr. Neill worked for two years with Mercury Asset Management as an
investment manager responsible for specialist international funds.
Douglas Polunin--Senior Investment Manager of the Fund has been serving in
such capacity since the Fund commenced operations. Mr. Polunin joined PIML in
1989 and is jointly responsible for worldwide small companies and emerging
markets. Prior to joining PIML, Mr. Polunin spent two and a half years with
the Union Bank of Switzerland in London where he was in charge of the
Discretionary Portfolio Management section. Before that, he spent four years
as an equity analyst with UBS in Switzerland.
46
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
GLOBAL INCOME FUND
The sharp rise in interest rates in the beginning of February hurt the Fund as
the price of bonds fell. Although a declining dollar helped alleviate some of
the pain from falling bond prices, the Fund did have currency exposure in high
deficit countries such as Spain, which saw limited appreciation against the
dollar.
For the first six months of the year, the Fund had a negative return of 6-7%.
In July, a new portfolio manager, Madis Senner, took over the management of
the Fund. The portfolio was restructured with greater emphasis on the core
countries of Germany, Japan and Switzerland. The Mexican, Swedish and Canadian
currency exposure was totally eliminated and Spanish currency exposure was
substantially reduced. The bond exposure was also reduced.
In the September/October period the bond exposure was increased and the
currency exposure reduced on expectations of a bear market rally. These
positions began to be reduced in late December on expectations that the trend
for a lower dollar and higher interest rates were about to resume.
Global Income Fund (Class A) vs. Salomon World Gov't Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Salomon World
Global Income Fund-A Government Bond Index
-------------------- ---------------------
<S> <C> <C>
4/30/87 9,526 10,000
Jun-87 9,547 9,822
Dec-87 10,192 10,937
Jun-88 11,018 10,769
Dec-88 11,338 11,416
Jun-89 11,357 11,230
Dec-89 12,634 11,911
Jun-90 13,498 12,020
Dec-90 14,746 13,337
Jun-91 14,828 13,225
Dec-91 17,632 15,447
Jun-92 18,121 15,931
Dec-92 17,018 16,302
Jun-93 17,381 17,672
Dec-93 17,852 18,464
Jun-94 16,751 18,587
Dec-94 17,370 18,895
</TABLE>
47
<PAGE>
Global Income Fund (Class B) vs. Salomon Brothers World Gov't Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Salomon Brothers
World Government
Global Income-B Bond Index
--------------- ----------
<S> <C> <C>
5/4/94 10,000 10,000
May-94 9,957 9,912
Jun-94 10,000 10,005
Jul-94 10,043 10,135
Aug-94 10,034 10,100
Sep-94 10,165 10,172
Oct-94 10,409 10,335
Nov-94 10,352 10,194
Dec-94 9,821 10,222
</TABLE>
48
<PAGE>
WORLD TRENDS FUND
The World Trends Fund achieved a total return of 2.3% for the 12 months ended
December 31, 1994.
Higher than expected economic growth and fears of resurgent inflation prompted
the United States Federal Reserve Board to raise short-term interest rates
substantially during the year, from 3% in January to 5.5% by December 31.
Interest rates throughout much of Europe also reversed course, creeping
upward. These rate hikes, on the tail of unusually strong 1993 performance
that left many world markets overvalued, pushed many markets into decline
despite strong corporate earnings and economic growth throughout much of the
world. Certain markets and selective stocks, however, still provided moderate
value.
The relative success of your Fund in 1994 resulted from a portfolio emphasis
on both Japan and Germany, which accounted for approximately 20% and 15% of
total investments respectively, during the year.
Over the course of the year, we hedged approximately 20% of our position in
the U.S. stock market, which accounted for about 30% of total investments.
Although the market was virtually flat, our emphasis in the U.S. has been on
the pharmaceutical sector and the technology sector. Avoidance of the volatile
emerging markets, some of which witnessed declines of over 30%, also proved
beneficial.
World Trend Fund vs. S&P 500
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
World Trends Fund S&P 500 MSCI World Index
----------------- ------- ----------------
<S> <C> <C> <C>
Sep-85 9,526 10,000 10,000
Dec-85 9,990 11,714 12,058
Jun-86 12,461 14,143 15,582
Dec-86 14,039 13,895 17,110
Jun-87 16,328 17,699 22,191
Dec-87 15,146 14,614 23,540
Jun-88 15,457 16,469 22,177
Dec-88 16,071 17,025 22,459
Jun-89 15,502 19,836 25,550
Dec-89 18,214 22,404 28,112
Jun-90 18,300 23,087 24,967
Dec-90 16,775 21,706 22,053
Jun-91 16,965 24,793 26,558
Dec-91 18,876 28,290 27,461
Jun-92 18,416 28,104 26,269
Dec-92 17,264 30,443 27,183
Jun-93 18,265 31,919 29,436
Dec-93 21,114 33,497 32,687
Jun-94 20,969 32,376 33,416
Dec-94 21,592 33,952 35,155
</TABLE>
49
<PAGE>
ASIA DYNASTY FUND
Although the economic miracles in Asia may be slowing, its economies, however,
are set to grow at more than double the rate of the rest of the industrialized
world according to the latest forecast released by the OECD. Despite this, the
Asian stock markets were particularly hard hit in 1994 and hence performed
generally worse than other regions. Some of the factors that contributed to
such sharp drops were the unsustainable liquidity-driven rallies over the last
quarter of 1993, six successive interest rate hikes in the U.S., and increased
speculative activities by hedge funds.
At year-end, the Fund was fully invested with approximately 81% of its net
assets in the equity markets of the Big Four Asian tigers, namely Hong Kong,
Thailand, Malaysia, and Singapore. The balance of the assets were invested in
smaller markets such as China, India, Indonesia, Korea, and the Philippines.
The Fund returned 16.4% since it commenced operations in March 1993, although
1994's performance was a rather disappointing -18.7%.
ASIA DYNASTY FUND (CLASS A) vs. S&P 500**
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Asia Dynasty Fund S&P 500
----------------- -------
<S> <C> <C>
Mar-93 9,520 10,000
Apr-93 10,140 9,746
May-93 10,649 9,967
Jun-93 10,490 10,047
Jul-93 10,629 9,994
Aug-93 11,239 10,338
Sep-93 11,568 10,306
Oct-93 13,047 10,506
Nov-93 13,147 10,370
Dec-93 15,335 10,544
Jan-94 14,492 10,887
Feb-94 13,990 10,560
Mar-94 12,515 10,148
Apr-94 12,926 10,265
May-94 13,247 10,392
Jun-94 12,555 10,191
Jul-94 13,237 10,512
Aug-94 14,080 10,907
Sep-94 13,849 10,689
Oct-94 14,191 10,913
Nov-94 12,826 10,481
Dec-94 12,464 10,687
</TABLE>
50
<PAGE>
ASIA DYNASTY FUND
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Asia Dynasty Fund (Class B) vs. S&P 500**
Asia Dynasty Fund-B S&P 500
------------------- -------
<S> <C> <C>
9/1/93 10,000 10,000
Sep-93 10,221 9,969
Oct-93 11,527 10,162
Nov-93 11,598 10,031
Dec-93 13,522 10,200
Jan-94 12,759 10,531
Feb-94 12,316 10,215
Mar-94 10,012 9,816
Apr-94 11,385 9,929
May-94 11,660 10,052
Jun-94 11,039 9,858
Jul-94 11,633 10,169
Aug-94 12,369 10,551
Sep-94 12,165 10,340
Oct-94 12,458 10,556
Nov-94 11,261 10,139
Dec-94 10,277 10,338
</TABLE>
** The S&P 500, which is comprised of U.S. stocks, is not representative of
those securities held by the Asia Dynasty Fund.
51
<PAGE>
GLOBAL BALANCED FUND
The year started with much promise since the US and UK economies were well
into their recovery phases. Continental Europe and Japan were just showing
signs of recovery following recessions which had been amongst the most severe
since the oil shocks of the mid-1970's. However, the Fed became concerned that
the strong economy would be inflationary and so they began a series of
interest rate hikes in early February. The effect of this was to reduce
liquidity flowing into both the domestic bond and equity markets which caused
the worst performance in the US bond market since 1969 and a 1.5% fall in the
US equity market.
The global bull market was fueled by US liquidity and so the Fed tightening
cut cash flows into the Asian markets, resulting in sharp falls which were
further exacerbated by the over-heating in the Chinese economy. Subsequently,
the worst performing markets in 1994 included Hong Kong, Malaysia, Singapore
and Thailand which had performed particularly well in 1993.
The final quarter of 1994 saw the collapse of the Mexican economy, following
the realization that the foreign debt level was unsustainably high, and the
subsequent rush to sell Mexican Pesos resulted in a 45% devaluation against
the dollar in December alone and a 42% fall in dollar terms in the Mexican
Bolsa index for the year overall. The Argentinean market was dragged down with
Mexico, falling 21% in 1994.
Not everything was negative. The underlying weakness of the US dollar against
the main European currencies and Japanese yen meant that these markets were up
in dollar terms. In addition, the Japanese market responded to the improved
economy and subsequent profits recovered by rising 13%, although this was all
in the first half of the year when this portfolio was still being funded.
Overall, therefore, 1994 was a very disappointing year for both bonds and
equities. Investors, including US mutual funds, slowed their investing mainly
for fear that they would experience redemptions. The subsequent flow of funds
caused the smaller markets in particular to underperform.
Global Balanced Fund (Class A) vs. 60% MSCI
World Equities/40% Salomon Brothers World Bond
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
60% MSCI World Equities/40%
Global Balanced-A Salomon Brothers World Bond
----------------- ---------------------------
<S> <C> <C>
Dec-93 9,520 10,000
Jan-94 9,700 10,429
Feb-94 9,540 10,322
Mar-94 9,201 10,050
Apr-94 9,281 10,242
May-94 9,341 10,223
Jun-94 9,171 10,266
Jul-94 9,361 10,416
Aug-94 9,511 10,591
Sep-94 9,451 10,456
Oct-94 9,651 10,703
Nov-94 9,179 10,367
Dec-94 9,149 10,439
</TABLE>
52
<PAGE>
Global Balanced Fund (Class B) vs. 60%
MSCI World Equities/40% Salomon Brothers World Bond
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
60% MSCI World Equities/40%
Global Balanced Fund-B Salomon Brothers World Bond
---------------------- ---------------------------
<S> <C> <C>
Dec-93 10,000 10,000
Jan-94 10,189 10,429
Feb-94 10,010 10,322
Mar-94 9,654 10,050
Apr-94 9,727 10,242
May-94 9,780 10,223
Jun-94 9,591 10,266
Jul-94 9,790 10,416
Aug-94 9,937 10,591
Sep-94 9,864 10,456
Oct-94 10,037 10,703
Nov-94 9,579 10,367
Dec-94 9,041 10,439
</TABLE>
53
<PAGE>
EXPENSES
The total expense ratio for the fiscal year ended December 31, 1994 of World
Trends Fund, Asia Dynasty Fund-A, Asia Dynasty Fund-B, Global Balanced Fund-A,
Global Balanced Fund-B, Global Income Fund-A, Global Income Fund-B, Global
SmallCap Fund-A, Global SmallCap Fund-C, Global Hard Assets Fund-A, Global
Hard Assets Fund-C, Asia Infrastructure Fund-A and Asia Infrastructure Fund-C
were 1.85%, 1.85%, 2.38%, 1.06%, 1.88%, 1.39%, 2.25%*, 0.25%*, 1.00%*, 0.15%*,
0.56%*, 0.28%* and 1.02%*.
Each Fund bears all expenses of its operation other than those incurred by the
Adviser under its Advisory Agreement with the Trust and those incurred by the
Sub-Adviser, if any, under its Sub-Investment Advisory Agreement. In
particular, the Funds pay: investment advisory fees, custodian fees and
expenses, legal, accounting and auditing fees and expenses, brokerage fees,
taxes, expenses of preparing prospectuses and shareholder reports for existing
shareholders, registration fees and expenses (including compensation of the
Adviser's employees in relation to the time spent on such matters), Rule 12b-1
distribution expenses, expenses of the transfer and dividend disbursing agent,
the compensation and expenses of Trustees who are not otherwise affiliated
with the Trust, the Adviser or Sub-Adviser or any of their affiliates, and any
extraordinary expenses. Expenses incurred jointly by the Funds are allocated
among the Funds in a manner determined by the Trustees to be fair and
equitable. Under the Advisory Agreement, the Adviser provides the Funds with
office space, facilities and simple business equipment and provides the
services of executive and clerical personnel for administering the affairs of
the Funds. The Adviser or Sub-Adviser compensates Trustees of the Trust if
such persons are employees or affiliates of the Adviser or Sub-Adviser or its
affiliates. The Funds reimburse the Adviser for its costs in servicing
shareholder accounts and maintaining books and records of each Fund, including
general ledger and daily net asset value accounting.
PLAN OF DISTRIBUTION
Each of the Van Eck Global Funds has adopted a Plan of Distribution pursuant
to Rule 12b-1 (the "Plans") under the 1940 Act. The Plans may be terminated at
any time by a vote of a majority of the Trustees, or by a vote of a majority
of the outstanding voting securities of the respective Fund. These Plans fall
into two broad categories: reimbursement plans and compensation plans. The
fees under all Plans will be paid quarterly. The National Association of
Securities Dealers, Inc. rules may limit the amount payable under the Plans.
Under a reimbursement type plan, the fees, or a percentage thereof, are used
for payments to Agents and Brokers who service shareholder accounts of a Fund
and the remainder is used for other actual promotional and distribution
expenses incurred by the Distributor. A Plan's fees accrued by a Fund in
excess of payments to Brokers and Agents and reimbursement to the Distributor
for its actual expenses will be retained by the Fund. A reimbursement type
plan may provide for the payment of interest as a distribution expense.
Under a compensation type plan, the fees under the Plan are not directly tied
to expenses and payments by the Fund and may be more or less than actual
expenses incurred under the Plan. The excess of fees received over
expenditures may constitute a "profit" to the Distributor.
Both reimbursement and compensation type plans may have a "carry-forward"
provision. A Plan with such a provision provides that any reimbursable or
payable amount under the Plan attributable to a fiscal year of the Fund may be
paid by the Fund in a subsequent fiscal year, including after the termination
of a Plan. Amounts payable or reimbursable to the Distributor under the Plan
that are not paid because they exceed the annual limitations (carry-forward
amounts) shall be carried forward by the Funds to subsequent years and shall
be paid within the annual limitation in accordance with the Plans.
Consequently, shareholders may pay distribution expenses incurred by a Fund
prior to becoming a shareholder. Under a Plan without a carry-forward
provision, fees paid by a Fund will be paid or used to reimburse the
Distributor for servicing, promotional and distribution expenses incurred only
during the applicable fiscal year.
In the event a Plan with a carry-forward provision is terminated, the
Distributor shall not be entitled to reimbursement in respect of costs
incurred in, or payment for, performing distribution activities which occur
after termination of a Plan. However, the
- --------
* annualized
54
<PAGE>
Distributor shall be entitled to reimbursement of all carry-forward amounts
and other costs properly incurred in respect of shares distributed prior to
termination of the Plan. The Fund shall continue to make payments to the
Distributor subject to the annual limitation until such time as all such
amounts have been reimbursed.
Global Income Fund-A, World Trends Fund, and Asia Dynasty Fund-A are all
reimbursement type plans. The 12b-1 fees are accrued daily at an annual rate
of .25% of the average daily net assets for each of Global Income Fund-A and
World Trends Fund and at an annual rate of .50% of average daily net assets
for Asia Dynasty Fund-A. With respect to these Funds, only Asia Dynasty Fund-A
has a carry-forward provision.
Asia Dynasty Fund-B, Asia Infrastructure Fund-A, Global SmallCap Fund-A,
Global Income Fund-B, Global Balanced Fund-A and Global Balanced Fund-B are
compensation type plans. The 12b-1 fees are accrued daily at an annual rate of
.50% of average daily net assets for Global Balanced Fund-A, Asia
Infrastructure Fund-A and Global Smallcap Fund-A and at an annual rate of
1.00% of average daily net assets for Asia Dynasty Fund-B, Global Balanced
Fund-B and Global Income Fund-B. While the Plans in effect for Asia Dynasty
Fund-B, Global Income Fund-B, Global Balanced Fund-A, Global Balanced Fund-B,
Global SmallCap Fund-A, Global Hard Assets Fund-A and Asia Infrastructure
Fund-A Plans are compensation type Plans, they have a carry-forward provision
which provides that the Distributor, in the event of termination of the Plans,
will recoup amounts expended under the Plan, subject to the annual limitation.
For the periods prior to April 30, 1995, the Distributor has agreed, with
respect to Plans with a carry-forward provision, notwithstanding anything to
the contrary in the Plan, to waive its right to reimbursement of carry-forward
amounts in the event the Plan is terminated unless the Board of Trustees has
determined that reimbursement of such carry-forward amounts is appropriate.
Asia Infrastructure Fund-C, Global SmallCap Fund-C and Global Hard Assets
Fund-C are compensation type plans, they have a carry-forward provision which
provides that the Distributor, in the event of termination of the Plans, will
recoup amounts expended under the Plans, subject to the annual limitation. For
the periods prior to April 30, 1995, the Distributor has agreed with respect
to Plans with a carry-forward provision, notwithstanding anything to the
contrary in the Plan, to waive its right to reimbursement of carry-forward
amounts in the event the Plan is terminated unless the Board of Trustees has
determined that reimbursement of such carry-forward amounts is appropriate.
Each Fund pays dealers, through the Distributor, (i) a service fee and a
distribution fee, at the time the shares are sold, not to exceed .25% and
.75%, respectively, of the net asset value of such shares (excluding shares
issued for reinvested dividends and distributions) and (ii) after the first
anniversary of the sale of shares, fees for services and distribution at
annual rates not to exceed an annual rate of .25% and .75%, respectively, of
the average daily net assets (including shares issued for reinvested dividends
and distributions). The Distributor may retain from the distribution fee, for
the payment of distribution expenses, an amount not to exceed an annual rate
of .25% of the average daily net assets. No dealer shall receive more than
.25% of average daily net assets for servicing. The Distributor will monitor
payments under the Plans and will reduce such payments or take such other
steps as may be necessary, including payments from its own resources, to
assure that Plan payments will be consistent with the applicable rules of the
National Association of Securities Dealers, Inc. For the period March 17, 1995
to May 1, 1996, Global Hard Assets Fund-C has suspended payment under its 12b-
1 Plan. Brokers or Agents who sell Class C shares of Global Hard Assets will
not receive the 1% 12b-1 fee for distribution and servicing on eligible
purchases prior to May 1, 1996 but will receive 1% of the purchase price as a
commission after the thirteenth month on assets remaining in the Fund for
twelve months.
Holders of Class C shares on which service and distribution fees were paid at
the time of sale will be required to pay to the Fund a contingent deferred
redemption charge of 1% of the lower of cost or the then net asset value of
the shares redeemed from that Fund before the first anniversary of their
purchase. If the shares are exchanged into another Fund offering Class C
shares and subsequently redeemed before the first anniversary of their
original purchase, the charge will be collected by the other Fund for the
first Fund. For the period to May 1, 1996, Global Hard Assets Fund-C will
waive the 1% Contingent Deferred Redemption Charge.
Of the amounts expended under the Plan for the fiscal year ended December 31,
1994 for Global Income Fund, World Trends Fund, Global Balanced Fund and Asia
Dynasty Fund approximately 75% was paid to Brokers and Agents who sold shares
and/or service shareholder accounts of the Funds. The remaining 25% was
retained by the Distributor as reimbursement for expenses such as printing and
mailing prospectuses and sales material to other than current Fund
shareholders. Global SmallCap Fund, Asia Infrastructure Fund and Global Hard
Assets Fund were not in existence for a full fiscal year during this period.
55
<PAGE>
The Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being compensated for shareholder servicing. If, because of changes
in law or regulation, or because of new interpretations of existing law, a
bank or the Funds were prevented from continuing these arrangements, it is
expected that the Board would make other arrangements for these services and
that shareholders would not suffer adverse financial consequences.
ADVERTISING
From time to time the Funds may use various media to advertise performance.
Past performance is not necessarily indicative of future performance.
Global Income Fund may advertise performance in terms of 30-day yield, which
is computed by dividing the net investment income per share earned during the
30 days by the maximum offering price per share on the last day of the period.
Yield of the Fund is a function of the kind and quality of the instruments in
the Fund's portfolio, portfolio maturity, operating expenses and market
conditions.
All Funds may advertise performance in terms of average annual total return,
which is computed by finding the average annual compounded rates of return
over a period that would equate the initial amount invested to the ending
redeemable value. The calculation assumes the maximum sales charge is deducted
from the initial $1,000 payment and assumes all dividends and distributions by
the Funds are reinvested on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts. In
addition, these Funds may advertise aggregate total return for a specified
period of time which is determined by ascertaining the percentage change in
the net asset value of shares of a Fund initially purchased assuming
reinvestment of dividends and capital gains distributions on such shares
without giving effect to the length of time of the investment. Sales loads and
other non-recurring expenses may be excluded from the calculation of rates of
return with the result that such rates may be higher than if such expenses and
sales loads were included. All other fees will be included in the calculation
of rates of return. Performance of Funds with Class A and Class C Shares are
computed separately for each class.
The Funds may quote performance results from recognized services and
publications which monitor the performance of mutual funds and the Funds may
compare their performance to various published historical indices. These
include market, economical and performance data and indices. For example, the
Funds may quote market performance of the S&P 500, Europe Australia Far East
Index, etc.; performance of various economies or economic indicators; or
compilations of historical performance data from rating agencies. Micropal,
Ltd., a worldwide mutual fund performance evaluation service, is one such
rating agency. Lipper Analytical Services is another such rating agency. The
Lipper performance analysis assumes reinvestment of capital gains and
distributions, but does not give effect to sales charges or taxes. World
Trends Fund is rated in the Global Funds category; Global Hard Assets is
expected to be rated in the Natural Resources Funds category; Global Balanced
Fund is rated in the Balanced Funds category and Global Income Fund in the
World Income Funds category. The Morgan Stanley Capital International Equity
and Salomon Brothers World Bond Indices, among others, are indices to which
the World Trends Fund, Global Balanced Fund and Global Income Fund may be
compared. Global Income Fund may be compared against certain indices or
services which monitor or publish certificate of deposit or other money market
rates or yields, such as the Federal Reserve Bulletin. Asia Dynasty Fund is
rated in the Asia/Pacific Basin Funds category and may be compared to a Morgan
Stanley Capital International Index, an Asia (Ex-Japan) Index or another
appropriate index. (See the Appendix in the Statement of Additional
Information).
TAXES
Each Fund has qualified and intends to continue to qualify as a "regulated
investment company" under the Code and will not pay income or excise taxes to
the extent that it distributes its net taxable investment income and capital
gains. See "Taxes" in the Statement of Additional Information.
Notice as to the tax status of a shareholder's dividends and distributions
will be mailed to shareholders 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.
56
<PAGE>
Dividends or distributions declared in October, November or December of any
calendar year but paid during January of the following year are treated as
received by a shareholder on December 31 of the calendar year. Only a portion
of the dividends paid by the Funds is likely to qualify for the 70% dividends
received deduction allowable to corporations. If the Funds fulfill certain
requirements, shareholders of these Funds may be able to claim a foreign tax
credit or deduction with respect to certain foreign withholding or other taxes
paid to foreign governments during the year.
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 Funds are not required to withhold tax from long-term capital
gains distributions paid to non-resident aliens.
The foregoing discussion relates only to generally applicable federal income
tax provisions. Shareholders should consult their own tax advisers regarding
taxes, including state and local taxes, applicable to dividends, distributions
and redemptions.
DESCRIPTION OF THE TRUSTS
Van Eck Funds is an open-end management investment company organized as a
"business trust" under the laws of the Commonwealth of Massachusetts.
The Trustees have authority to issue an unlimited number of shares of
beneficial interest of separate series (funds), $.001 par value. To date, ten
series of the Van Eck Funds have been authorized, which shares constitute the
interests in the Asia Dynasty Fund (Class A and B), Asia Infrastructure Fund
(Class A), Global SmallCap Fund (Class A), Global Balanced Fund (Class A and
B), World Trends Fund, International Investors Gold Fund (Class A and C),
Gold/Resources Fund (Class A), Global Income Fund (Class A), Global Hard
Assets Fund (Class A and C), Gold Opportunity Fund (Class A and C) and U.S.
Government Money Fund. A "series" is a separate pool of assets which is
separately managed and which may have different investment objectives from
those of another series. The Trustees have the authority, without the
necessity of a shareholder vote, to create any number of new series.
Each share of a Fund has equal dividend, redemption and liquidation rights,
and, when issued, is fully paid and non-assessable by the Trust, except that
expenses related to the distribution of shares of the separate classes, if
any, would be borne by the respective classes as appropriate, and could have
differing voting rights regarding, for example, the Plans of Distribution.
Under the Master Trust Agreement, no annual or regular meeting of shareholders
is required. Thus, there will ordinarily be no shareholder meetings unless
required by the 1940 Act. The Boards of Trustees are self-perpetuating bodies
until fewer than 50% of the Trustees serving as such are Trustees who were
elected by shareholders. At that time another meeting of shareholders will be
called to elect Trustees. On any matter submitted to the shareholders, the
holder of each Trust share is entitled to one vote per share (with
proportionate voting for fractional shares). Under the Master Trust Agreement,
any Trustee may be removed by vote of two thirds of the outstanding Trust
shares; and holders of ten percent or more of the outstanding shares of the
Trust can require Trustees to call a meeting of shareholders for purposes of
voting on the removal of one or more Trustees. Shareholders of all Funds are
entitled to vote on matters affecting all of the Funds (such as the elections
of Trustees and ratification of the selection of the Trust's independent
accountants). On matters affecting an individual Fund a separate vote of that
Fund is required. Shareholders of a Fund are not entitled to vote on any
matter not affecting that Fund and requiring a separate vote of one of the
other Funds.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement of the Trust disclaims shareholder
liability for acts or obligations of the Trust and require that notice of such
disclaimer be given in each agreement, obligation or instrument entered into
or executed by the Trust or the Trustees. The Master Trust Agreement provides
for indemnification out of the Trust's property for all losses and expenses of
any shareholder held personally liable for the obligations of the respective
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trusts
themselves would be unable to meet their respective obligations. The Adviser
believes that, in view of the above, the risk of personal liability to
shareholders is remote.
57
<PAGE>
ADDITIONAL INFORMATION
QUESTIONS ABOUT THE FUNDS
For further information about the Funds, please call your financial advisor or
the Funds toll free at (800) 544-4653 or write the Funds at the cover page
address.
CUSTODIAN
The Custodian of the assets of the Trust (except the Asia Infrastructure Fund
series) is Bankers Trust Company, New York, New York.
The custodian of the assets of the Asia Infrastructure Fund series of the
Trust is State Street Bank & Trust Company.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., New York, New York provides audit services,
consultation and advice with respect to financial information in the Trust
filings with the Securities and Exchange Commission, consults with the Trust
on accounting and financial reporting matters and prepares the Trust tax
returns.
COUNSEL
Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109.
58
<PAGE>
---------------------------------
VAN ECK FUNDS
---------------------------------
Asia Dynasty Fund-A
Asia Infrastructure Fund-A
Global Hard Assets Fund (A&C)
Global SmallCap Fund-A
Global Balanced Fund-A
Global Income Fund-A
World Trends Fund
Gold Opportunity Fund (A&C)
International Investors
Gold Fund (A&C)
Gold/Resources Fund-A
U.S. Government Money Fund
Your Investment Dealer is:
---------------------------------
Transfer Agent and Shareholder Service Representative:
DST Systems, Inc.
P.O. Box 418407
Kansas City, Missouri 64141
(800) 544-4653
[LOGO OF VAN ECK GLOBAL APPEARS HERE]
This prospectus is good until 4/30/96 unless superceded.
---------------------------------
March 17, 1995
Van Eck
Global
Funds
Prospectus
Global Hard Assets Fund
Global Balanced Fund
Global SmallCap Fund
Asia Dynasty Fund
Asia Infrastructure Fund
Global Income Fund
World Trends Fund
---------------------------------
[LOGO OF VAN ECK GLOBAL APPEARS HERE]
<PAGE>
VAN ECK FUNDS
(THE "TRUST")
VAN ECK GLOBAL FUNDS
VAN ECK GOLD AND MONEY FUNDS
99 PARK AVENUE, NEW YORK, N.Y. 10016
SHAREHOLDER SERVICES: TOLL FREE (800) 544-4653
Van Eck Funds is a mutual fund consisting of eleven separate series: Global
Balanced Fund (Class A and B), Global SmallCap Fund (Class A), Asia Dynasty Fund
(Class A and B), Asia Infrastructure Fund (Class A), International Investors
Gold Fund (Class A and C), World Trends Fund, Gold/Resources Fund (Class A),
Global Income Fund (Class A), Gold Opportunity Fund (Class A and C), Global Hard
Assets Fund (Class A and C) and U.S. Government Money Fund (the "Funds").
Class B Shares of Global Balanced Fund and Asia Dynasty Fund are closed to new
sales.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
----
<S> <C>
General Information ..................................................... 2
Investment Objectives and Policies of the Funds ......................... 2
Risk Factors - Investing in Foreign Securities .......................... 8
Foreign Currency Transactions .......................................... 11
Futures and Options .................................................... 12
Repurchase Agreements .................................................. 13
Rule 144A Securities ................................................... 13
Investment Restrictions ................................................ 14
Investment Advisory Services ........................................... 19
The Distributor ........................................................ 21
Portfolio Transactions and Brokerage ................................... 23
Trustees and Officers .................................................. 26
Valuation of Shares .................................................... 30
Exchange Privilege ..................................................... 32
Tax-Sheltered Retirement Plans ......................................... 32
Investment Programs .................................................... 34
Taxes .................................................................. 36
Redemptions in Kind .................................................... 39
Performance ............................................................ 39
Additional Information ................................................. 42
Financial Statements ................................................... 42
Appendix ............................................................... 43
Performance Charts ..................................................... 47
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE FUNDS' CURRENT PROSPECTUSES, DATED MARCH 17, 1995 (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 - MARCH 17, 1995
<PAGE>
GENERAL INFORMATION
-------------------
Van Eck Funds (the "Trust") is an open-end management investment company
organized as a "business trust" under the laws of The Commonwealth of
Massachusetts on April 3, 1985. The Board of Trustees has authority to create
additional series or funds, each of which may issue a separate class of shares.
There are currently eleven series of Van Eck Funds: Global Balanced Fund (Class
A and B), Global SmallCap Fund (Class A), Asia Dynasty Fund (Class A and B),
Asia Infrastructure Fund (Class A), International Investors Gold Fund (Class A
and C), World Trends Fund, Gold/Resources Fund (Class A), Global Income Fund
(Class A), Gold Opportunity Fund (Class A and C), Global Hard Assets Fund (Class
A and C) and U.S. Government Money Fund, each of which commenced operations as a
series of Van Eck Funds.
The Global Balanced Fund (Class A and B), Global SmallCap Fund (Class A), Asia
Dynasty Fund (Class A and B), Asia Infrastructure Fund (Class A), Global Income
Fund (Class A), Global Hard Assets Fund (Class A and C) and World Trends Fund
are referred to as the Van Eck Global Funds. International Investors Gold Fund
(Class A and C), Gold/Resources Fund (Class A) and Gold Opportunity Fund (Class
A and C) are referred to as the Van Eck Gold Funds.
International Investors Gold Fund was formerly a mutual fund incorporated under
the laws of the state of Delaware under the name of International Investors
Incorporated. International Investors Incorporated was reorganized as a series
of the Trust on April 30, 1991. International Investors Incorporated had been in
continuous existence since 1955, and had been concentrating in gold mining
shares since 1968.
Each series of the Trust, other than the Global Income Fund, Global Balanced
Fund, Asia Infrastructure Fund, Global SmallCap Fund, Gold Opportunity Fund and
Global Hard Assets Fund are classified as a diversified fund under the 1940 Act.
Van Eck Associates Corporation (the "Adviser") serves as investment adviser to
the Funds. AIG Asset Management, Inc. ("AIGAM") serves as sub-investment
adviser to Asia Dynasty Fund and Asia Infrastructure Fund, Fiduciary
International, Inc. ("FII") serves as sub-investment adviser to the Global
Balanced Fund and Pictet International Management Limited ("PIML") serves as
sub-investment adviser to the Global SmallCap Fund.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
-----------------------------------------------
International Investors Gold Fund
- ---------------------------------
The Fund's primary objective is long-term capital appreciation, while retaining
freedom to take current income into consideration in selecting investments. The
Fund's present policy is to concentrate its investments in common stocks of gold
mining companies. It may invest in that industry up to 100% of the value of its
assets. In some future period or periods, due to adverse conditions in that
industry, the Fund may for temporary defensive purposes have less than 25% of
the value of its assets invested in that industry, however, under normal
circumstances the Fund will have at least 65% of its total assets invested in
that industry.
The Fund's policy is to invest primarily in securities of companies, wherever
organized, whose properties, products or services are international in scope or
substantially in countries outside the United States, of foreign governments,
and in United States Treasury securities.
2
<PAGE>
Gold/Resources Fund
- -------------------
Gold/Resources Fund may invest in debt and equity securities of companies
engaged in the exploration, development and production of gold and other natural
resources. Gold, other precious metals and natural resources securities are at
times volatile and there may be sharp fluctuations in prices even during periods
of rising prices.
The Fund may invest in any type of security including, but not limited to,
common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may purchase and sell financial and
commodity futures contracts and options on financial futures and commodity
futures contracts and may also write, purchase or sell put or call options on
securities, foreign currencies, commodities and commodity indices.
Gold Opportunity Fund
- ---------------------
The Fund will, under normal market conditions, invest at least 65% of its total
assets in debt and equity securities of companies engaged in the exploration,
development, production and distribution of gold and other precious metal and in
other investments whose value is related to the value of precious metals
("Precious Metals Securities"). Precious Metals Securities include debt and
equity securities; preferred stock; convertible debt and equity securities;
warrants; options, futures and forward contracts on precious metals; structured
notes; and precious metals bullion and coins. The Fund will normally invest a
substantial portion of its assets in the securities of smaller companies engaged
in the precious metals industry ("Emerging Producers") and anticipates that its
portfolio turnover rate will be higher than other funds with similar investment
objectives but will not exceed 200% annually. Precious metal and natural
resource securities are at times volatile and there may be sharp fluctuations in
prices even during periods of rising prices.
The Fund may invest in equity securities. Equity securities include common and
preferred stocks; equity and equity index swap agreements; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; special classes of shares available only to foreign
persons in such markets that restrict the ownership of certain classes of equity
to nationals or residents of the country; convertible preferred stocks and
convertible debt instruments. The Fund may also invest in fixed-income
securities which include obligations issued or guaranteed by a government or any
of its political subdivisions, agencies, instrumentalities, or by a
supranational organization such as the World Bank or European Economic Community
(or other organizations which are chartered to promote economic development and
are supported by various governments and government entities), adjustable-rate
preferred stock, interest rate swaps, corporate bonds, debentures, notes,
commercial paper, certificates of deposit, time deposits, repurchase agreements,
and debt obligations which may have a call on a common stock or commodity by
means of a conversion privilege or attached warrants. The Fund may invest in
debt instruments of the U.S. government and its agencies having varied
maturities.
The Fund may purchase securities, including structured notes, whose value is
linked to the price of a commodity or a commodity index. The Fund may purchase
and sell financial and commodity futures contracts and options on financial
futures and commodity futures contracts and may also write, purchase or sell put
or call options on securities, foreign currencies, commodities and commodity
indices. The preceding securities are all commonly referred to as derivatives.
The Fund may invest in non-mortgage asset-backed securities. The Fund may also
lend its portfolio securities and borrow money for investment purposes (i.e.
leverage its portfolio).
3
<PAGE>
The Fund may also invest in "when issued" securities and "partly paid"
securities. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's Investors Service and
Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
Global Hard Assets Fund
- -----------------------
The Fund will, under normal market conditions, invest at least 65% of its total
assets in "Hard Asset Securities." Hard Asset Securities include equity
securities of "Hard Asset Companies" and securities, including structured notes,
whose value is linked to the price of a commodity or a commodity index. The
term "Hard Asset Companies" includes companies that are directly or indirectly
(whether through supplier relationships, servicing agreements or otherwise)
engaged to a significant extent in the exploration, development, production or
distribution of one or more of the following: (i) precious metals, (ii) ferrous
and non-ferrous metals, (iii) gas, petroleum, petrochemicals or other
hydrocarbons, (iv) forest products, (v) real estate and (vi) other basic non-
agricultural commodities which, historically, have been produced and marketed
profitably during periods of significant inflation. Under normal market
conditions, the Fund will invest at least 5% of its assets in each of the first
five sectors listed above. The Fund has a fundamental policy of concentrating
in such industries and up to 50% of the Fund's assets may be invested in any one
of the above sectors. Precious metal and natural resource securities are at
times volatile and there may be sharp fluctuations in prices even during periods
of rising prices.
The Fund may invest in equity securities. Equity securities include common and
preferred stocks; equity and equity index swap agreements; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; special classes of shares available only to foreign
persons in such markets that restrict the ownership of certain classes of equity
to nationals or residents of the country; convertible preferred stocks and
convertible debt instruments. The Fund may also invest in fixed-income
securities which include obligations issued or guaranteed by a government or any
of its political subdivisions, agencies, instrumentalities, or by a
supranational organization such as the World Bank or European Economic Community
(or other organizations which are chartered to promote economic development and
are supported by various governments and government entities), adjustable-rate
preferred stock, interest rate swaps, corporate bonds, debentures, notes,
commercial paper, certificates of deposit, time deposits, repurchase agreements,
and debt obligations which may have a call on a common stock or commodity by
means of a conversion privilege or attached warrants. The Fund may invest in
debt instruments of the U.S. government and its agencies having varied
maturities.
The Fund may purchase securities, including structured notes, whose value is
linked to the price of a commodity or a commodity index. The Fund may purchase
and sell financial and commodity futures contracts and options on financial
futures and commodity futures contracts and may also write, purchase or sell put
or call options on securities, foreign currencies, commodities and commodity
indices. The Fund may invest in asset-backed securities such as collateralized
mortgage obligations and other mortgage and non-mortgage asset-backed
securities. The Fund may also lend its portfolio securities and borrow money
for investment purposes (i.e. leverage its portfolio).
The Fund may also invest in "when issued" securities and "partly paid"
securities. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's Investors Service and
Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
4
<PAGE>
Global Balanced Fund
- --------------------
Global Balanced Fund may invest in equity securities. Equity securities include
common and preferred stocks; equity and equity index swap agreements; direct
equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; special classes of shares available only
to foreign persons in such markets that restrict the ownership of certain
classes of equity to nationals or residents of the country; convertible
preferred stocks and convertible debt instruments; financial futures contracts
and options on financial futures contracts; forward currency contracts and put
and call options on securities, securities indices and foreign currencies and
foreign currency swaps.
The Fund may also invest in fixed-income securities which include obligations
issued or guaranteed by a government or any of its political subdivisions,
agencies, instrumentalities, or by a supranational organization such as the
World Bank or European Economic Community (or other organizations which are
chartered to promote economic development and are supported by various
governments and government entities), adjustable-rate preferred stock, interest
rate swaps, corporate bonds, debentures, notes, commercial paper, certificates
of deposit, time deposits, repurchase agreements, and debt obligations which may
have a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
government and its agencies having varied maturities. The Fund may invest in
asset-backed securities such as collateralized mortgage obligations and other
mortgage and non-mortgage asset-backed securities. The Fund may also lend its
portfolio securities and borrow money for investment purposes (i.e. leverage its
portfolio).
Global SmallCap Fund
- --------------------
Global SmallCap Fund will invest in equity securities of smaller capitalization
companies. Equity securities include common and preferred stocks; equity and
equity index swap agreements; direct equity interests in trusts, partnerships,
joint ventures and other unincorporated entities or enterprises; special classes
of shares available only to foreign persons in markets that restrict the
ownership of certain classes of equity to nationals or residents of the country;
convertible preferred stocks and convertible debt instruments; financial futures
contracts and options on financial futures contracts; forward currency contracts
and put and call options on securities, securities indices and foreign
currencies and foreign currency swaps.
The Fund may also invest in fixed-income securities which include obligations
issued or guaranteed by a government or any of its political subdivisions,
agencies, instrumentalities, or by a supranational organization such as the
World Bank or European Economic Community (or other organizations which are
chartered to promote economic development and are supported by various
governments and government entities), adjustable-rate preferred stock, interest
rate swaps, corporate bonds, debentures, notes, commercial paper, certificates
of deposit, time deposits, repurchase agreements, and debt obligations which may
have a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
government and its agencies having varied maturities. The Fund may invest in
asset-backed securities such as collateralized mortgage obligations and other
mortgage and non-mortgage asset-backed securities. The Fund may also lend its
portfolio securities and borrow money for investment purposes (i.e. leverage its
portfolio).
Asia Dynasty Fund
- -----------------
Asia Dynasty Fund may invest in equity securities, warrants and equity options
of companies located in, or expected to benefit from the developmental growth of
the economies of countries located in the Asia region ("Asia Growth Companies").
These countries include Burma, Peoples Republic of China ("China"), Cambodia,
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Pakistan, the Philippines,
Singapore, Sri
5
<PAGE>
Lanka, Taiwan, Thailand and Vietnam and, when the Fund is in a defensive
posture, Australia, Japan and New Zealand. Equity securities include common and
preferred stocks, 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 and foreign currency swaps. The Fund
may also lend its portfolio securities and borrow money for investment purposes
(i.e. leverage its portfolio).
Asia Infrastructure Fund
- ------------------------
Asia Infrastructure Fund may invest in equity securities, warrants and equity
options of infrastructure companies located in, or expected to benefit from the
developmental growth of the economies of countries located in the Asia region.
These countries include Burma, Peoples Republic of China ("China"), Cambodia,
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Pakistan, the Philippines,
Singapore, Sri Lanka, Taiwan, Thailand and Vietnam and Japan. Equity securities
include common and preferred stocks, 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 and foreign currency
swaps. The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e. leverage its portfolio).
The term "Asia Region infrastructure companies" includes companies that (i) that
are directly or indirectly (whether through supplier relationships, servicing
agreements or otherwise) involved to a significant extent in any one or more of
the design, construction, development, manufacture, sale, leasing, installation
or operation of, or the ownership of property in connection with, (a)
electricity generation, transmission or distribution facilities, (b) gas,
petroleum, or petrochemical collection, storage, processing or distribution
facilities, (c) roads or other public works, including water storage, treatment
and distribution facilities and waste processing and disposal facilities, (d)
transportation systems and related products, technologies and equipment,
including mass transit systems and vehicles, airports, airlines, cargo
terminals, ports and shipping facilities, (e) telecommunications systems and
related facilities, products, technologies and equipment, including long
distance and local telephone services, cellular radio telephone services and
other radio common carrier communication services, paging and specialized mobile
radio systems, telecommunication cables and wires, telegraph, satellite, cable,
fiber optic, microwave and private communication networks, electronic mail and
other telecommunications technologies, (f) cement plants, asphalt plants and
other facilities for the manufacture or processing of building products and
materials, (g) property development companies and (h) other public service
activities, which, in the opinion of the Adviser, relate to the development of
the basic structure on which a portion of a given country's economic activities
relate, and (ii) that (a) are organized under the laws of an Asia Region
country, (b) have equity securities listed on a securities exchange in the Asia
Region, (c) have 50% or more of their assets in or derive 50% or more of their
revenues or profits from the Asia Region, or (d) have or are expected to have
significant assets or investments committed to the Asia Region and that, in the
opinion of the Adviser, are likely to contribute significantly to the
infrastructure projects and developments in the Asia Region while providing an
opportunity for the Fund to benefit from such activities.
6
<PAGE>
World Trends Fund
- -----------------
The World Trends Fund may invest in any type of security including, but not
limited to, common stocks and equivalents (such as convertible debt securities
and warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may buy and sell financial futures
contracts and options on financial futures contracts, which may include bond and
stock index futures contracts and foreign currency futures contracts. The Fund
may write, purchase or sell put or call options on securities and foreign
currencies.
Global Income Fund
- ------------------
Global Income Fund may invest in any type of security including, but not limited
to, common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may buy and sell financial futures
contracts and options on financial futures contracts, which may include bond and
stock index futures contracts and foreign currency futures contracts. The Fund
may write, purchase or sell put or call options on securities and foreign
currencies. In addition, the Fund may lend its portfolio securities and borrow
money for investment purposes (i.e. leverage its portfolio).
- --------------------------------------------------------------------------------
CERTAIN POLICIES APPLICABLE TO GLOBAL BALANCED FUND, GLOBAL SMALLCAP FUND,
GLOBAL HARD ASSETS FUND, ASIA DYNASTY FUND, ASIA INFRASTRUCTURE FUND, GOLD
OPPORTUNITY FUND, INTERNATIONAL INVESTORS GOLD FUND, GLOBAL INCOME FUND,
GOLD/RESOURCES FUND AND WORLD TRENDS FUND
- --------------------------------------------------------------------------------
The above Funds may invest in "when issued" securities and "partly paid"
securities. Additionally, Global Balanced Fund, Global SmallCap Fund, Global
Hard Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Asia Infrastructure
Fund, Global Income Fund and World Trends 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 Investors Service
and Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
U.S. Government Money Fund
- --------------------------
U.S. Government Money Fund seeks safety of principal, daily liquidity and
current income through investments in short-term U.S. Treasury securities and
other securities carrying the "full faith and credit" guarantee of the U.S.
Government. The Fund invests in U.S. Treasury bills, notes, and bonds and other
obligations guaranteed by the full faith and credit of the U.S. Government and
repurchase agreements collateralized by such obligations (at least 80% of its
assets will be so invested). All securities mature within thirteen months from
the date of purchase, although repurchase agreements may be collateralized by
securities maturing in more than one year.
Direct obligations issued by the U.S. Treasury include bills, notes and bonds
which differ from each other only in interest rates, maturities and times of
issuance: Treasury bills have maturities of thirteen months or less, Treasury
notes have maturities of one to ten years and Treasury bonds generally have
maturities of greater than ten years. Securities guaranteed by the U.S.
Government include such obligations as securities issued by the General Services
Administration and the Small Business Administration.
7
<PAGE>
U.S. Government Money Fund may also invest in other short-term instruments (up
to 20% of its assets), in all cases subject to the credit quality requirements
of the 1940 Act, including commercial paper, banker's acceptances, and
certificates of deposit. Commercial paper consists of short-term, unsecured
promissory notes issued principally by banks and corporations to finance short-
term credit needs. The commercial paper purchased by the Fund will consist only
of direct obligations of the issuer. Banker's acceptances are drafts or bills of
exchange that have been guaranteed as to payment by a bank or trust company.
Banker's acceptances are used to effect payment of merchandise sold in import-
export transactions, and are backed by the credit strength of the bank which
assumes the obligation. Time deposits are credit instruments evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specific period of time.
Gold/Resources Fund and U.S. Government Money Fund, as a fundamental investment
policy, may not invest in securities of South African issuers; Global Balanced
Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
International Investors Gold Fund, Global Income Fund and World Trends Fund are
not so restricted by their fundamental investment policies.
RISK FACTORS - INVESTING IN FOREIGN SECURITIES
----------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND, GLOBAL SMALLCAP FUND, GLOBAL HARD ASSETS FUND, ASIA
DYNASTY FUND, ASIA INFRASTRUCTURE FUND, INTERNATIONAL INVESTORS GOLD FUND, GOLD
OPPORTUNITY FUND, WORLD TRENDS FUND, GOLD/RESOURCES FUND AND GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
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 above Funds
may hold securities and funds in foreign currencies, these Funds 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 activity, have less volume than the New York Stock Exchange, 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 markets are less 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, although these Funds endeavor to achieve most
favorable net results on their portfolio transactions. 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, there is the possibility of exchange
control restrictions, expropriation or confiscatory taxation, political,
economic or social instability, which could affect investments in those
countries. Foreign securities such as those purchased by these Funds may be
subject to foreign government taxes, higher custodian fees and dividend
collection fees which could reduce the yield on such securities.
Investments may be made from time to time by Global Balanced Fund, Global
SmallCap Fund, Global Hard Assets Fund, Gold Opportunity Fund, Asia Dynasty
Fund, Asia Infrastructure Fund and World Trends Fund in companies in developing
countries as well as in developed countries. Asia Dynasty Fund, Asia
Infrastructure Fund, Global Hard Assets Fund, Gold Opportunity Fund and Global
SmallCap Fund may have a substantial portion of their assets in developing
countries. Although there is no universally accepted definition, a developing
country is generally considered by the Adviser to be a country which is in the
initial
8
<PAGE>
stages of industrialization. Shareholders should be aware that investing in the
equity and fixed income markets of developing countries 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
developing 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.
Since the Asia Dynasty Fund and Asia Infrastructure Fund invest at least 65% of
their total assets in Asia Region investments, their investment performance will
be especially affected by events affecting Asia Region companies. The value and
liquidity of Asia Region investments may be affected favorably or unfavorably
by political, economic, fiscal, regulatory or other developments in the Asia
Region or neighboring regions. The extent of economic development, political
stability and market depth of different countries in the Asia Region varies
widely. Certain countries in the Asia Region, including Cambodia, China, Laos,
Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are either
comparatively underdeveloped or are in the process of becoming developed.
Investments typically involve greater potential for gain or loss than
investments in securities of issuers in developed countries. Given the Funds'
investments, the Funds 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.
The Asia Infrastructure Fund will invest at least 65% of its assets in Asia
Region infrastructure companies. Investing in infrastructure and related
companies involves certain special considerations. Infrastructure companies in
the Asia Region are undergoing significant change due to varying and evolving
levels of government regulation or deregulation and other factors. Competitive
pressures are intense and the securities of such companies may be subject to
increased share price volatility. In addition, certain infrastructure companies
are subject to the risk that technological innovations will make their services
obsolete.
The securities markets in the Asia 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 portfolio. Similarly, volume and liquidity in
the bond markets in the Asia Region are less than in the United States and, at
times, price volatility can be greater than in the United States. A limited
number of issuers in the Asia Region securities markets may represent a
disproportionately large percentage of market capitalization and trading value.
The limited liquidity of securities markets in the Asia Region may also affect
the Fund's ability to acquire or dispose of securities at the price and time it
wishes to do so. Accordingly, during periods of rising securities prices in the
more illiquid Asia Region 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, Asia Region
securities markets are susceptible to being influenced by large investors
trading significant blocks of securities.
The Chinese, Hong Kong and Taiwanese stock 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 Funds may acquire investments may be affected by trading
by persons with material non-public information and by securities transactions
by brokers in anticipation of
9
<PAGE>
transactions by the Funds in particular securities. The securities markets in
Cambodia, Laos and Vietnam are currently non-existent.
Asia Dynasty Fund and Asia Infrastructure Fund will invest and Global SmallCap
Fund may invest in Asia Region countries with emerging economies or securities
markets. Political and economic structures in many of such countries may be
undergoing significant evolution and rapid development, and such countries may
lack the social, political and economic stability characteristic of the United
States. Certain of such countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated the assets of
private companies. As a result, the risks described above, including the risks
of nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the value of the
Funds' investments in those countries and the availability to the Funds of
additional investments in those countries.
Economies of countries in the Asia 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 Region are affected by developments in the
economies of their principal trading partners. Revocation by the United States
of China's "Most Favored Nation" trading status, which the United States
President and Congress reconsider annually, would adversely affect the trade and
economic development of China and Hong Kong. Hong Kong, Japan 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.
China governmental actions can have a significant effect on the economic
conditions in the Asia 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 assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain of the other Asia Region countries 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
introduced only 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 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 the judgement 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 Funds, would
be able to realize the value of the assets of the enterprise or receive payment
in convertible currency. As the changes to the Chinese legal system develop,
the promulgation of new laws, existing laws and the preemption of local laws by
national laws may adversely affect foreign investors, including the Funds. 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 Region
countries.
10
<PAGE>
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
-----------------------------
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND, GLOBAL SMALLCAP FUND, GLOBAL HARD ASSETS FUND, ASIA
DYNASTY FUND, ASIA INFRASTRUCTURE FUND, INTERNATIONAL INVESTORS GOLD FUND, GOLD
OPPORTUNITY FUND, WORLD TRENDS FUND, GOLD/RESOURCES FUND AND GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the long-term investment decisions made for the
above Funds with regard to overall diversification strategies. Although the
Funds value their assets daily in terms of U.S. Dollars, they do not intend
physically to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. The Funds 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 Funds at one rate, while offering a lesser rate of exchange should the
Funds desire to resell that currency to the dealer. The Funds will use forward
contracts, along with futures contracts, foreign exchange swaps (Global Hard
Assets Fund, Gold Opportunity Fund, Global Balanced Fund, Global SmallCap Fund,
Asia Dynasty Fund and Asia Infrastructure Fund only) 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 their overall hedging strategy. The Funds will
conduct their foreign currency exchange transactions, either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through purchasing put and call options on, or entering into futures
contracts or forward contracts to purchase or sell foreign currencies. See
"Futures and Options Transactions."
A forward foreign currency contract, like a futures contract, involves an
obligation to purchase or sell a specific amount of currency 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 foreign
currency futures contracts which are standardized exchange-traded contracts,
forward currency contracts are usually traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.
The Funds' custodian will place cash or U.S. government securities or debt
securities into a segregated account of the Fund in an amount equal to the value
of the Fund's total assets committed to the consummation of forward foreign
currency contracts. 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 a Fund's
commitments with respect to such contracts. At the maturity of a forward
contract, a 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 contract. Accordingly, if a decision is made to sell
the security and make delivery of the foreign currency it may be
11
<PAGE>
necessary for a Fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency that a Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Additionally, although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
FUTURES AND OPTIONS TRANSACTIONS
--------------------------------
Global Balanced Fund, Global SmallCap Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources
Fund, Global Income Fund and World Trends 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
Funds because the maximum exposure is the amount of the premiums paid for the
options. Futures contracts and options thereon are both types of derivatives.
The use of financial futures contracts and commodity futures contracts, options
on such futures contracts and commodities (Gold/Resources Fund, Global Hard
Assets Fund, Gold Opportunity Fund, and International Investors Gold Fund), may
reduce a Fund's exposure to fluctuations in the prices of portfolio securities
and may prevent losses if the prices of such securities decline. Similarly,
such investments may protect a Fund against fluctuation in the value of
securities in which a Fund is about to invest. Because the financial markets in
the Asia Region countries and other developing countries are not as developed as
in the United States these financial investments may not be available to the
Funds and the Funds may be unable to hedge certain risks.
The use of financial futures and commodity futures contracts and options on such
futures contracts and commodities (Gold/Resources Fund, Global Hard Assets Fund,
Gold Opportunity Fund and International Investors Gold Fund) as hedging
instruments involves several risks. First, there can be no assurance that the
prices of the futures contracts or options and the hedged security or the cash
market position will move as anticipated. If prices do not move as anticipated,
a Fund may incur a loss on its investment, may not achieve the hedging
protection anticipated and/or incur a loss greater than if it had entered into a
cash market position. Second, investments in options, futures contracts and
options on futures contracts may reduce the gains which would otherwise be
realized from the sale of the underlying securities or assets which are being
hedged. Third, positions in futures contracts and options can be closed out
only on an exchange that provides a market for those instruments. There can be
no assurances that such a market will exist for a particular futures contract or
option. If a Fund cannot close out an exchange traded futures contract or
option which it holds, it would have to perform its contractual obligation or
exercise its option to realize any profit and would incur transaction costs on
the sale of the underlying assets.
It is the policy of each of the Funds 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 Funds and their
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./1/
_____________________________
/1/ From time to time, legislation has been proposed in Congress which, if
enacted, will repeal this requirement.
12
<PAGE>
Another test requires that at least 90% of a Fund's gross income be derived from
dividends, interest, payment with respect to securities loans and gains from the
sale or other disposition of stocks or other securities. Gains from commodity
futures contracts do not currently qualify as income for purposes of the 90%
test. The extent to which the Funds may engage in options and futures contract
transactions may be materially limited by these tests.
REPURCHASE AGREEMENTS
---------------------
None of the Funds will enter into a repurchase agreement with a maturity of more
than seven business days if, as a result, more than 10% of the value of a Fund's
total assets would then be invested in such repurchase agreements and other
illiquid securities (except that Global Income Fund may invest no more than 15%
of its assets in such repurchase agreements and other money market instruments
and Global Balanced Fund, Global SmallCap Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund and Asia Infrastructure Fund may invest no
more than 15% of their total assets in illiquid securities). A Fund will only
enter into a repurchase agreement where (i) the underlying securities are 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.
RULE 144A SECURITIES and
SECTION 4(2) COMMERCIAL PAPER
------------------------------
The Securities and Exchange Commission adopted Rule 144A which allows a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act of 1933 of resales of certain
securities to qualified institutional buyers. The Adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this new regulation and the development of an
automated system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers.
The Adviser will monitor the liquidity of restricted securities in the Funds'
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 the nature 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
Securities Act of 1933. 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 Securities
Act of 1933. 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 Securities Act of
1933 and commercial paper issued in reliance on the Section 4(2) exemption under
the Act may be determined to be liquid in
13
<PAGE>
accordance with guidelines established by the Board of Trustees for purposes of
complying with investment restrictions applicable to investments by the Funds
(except the U.S. Government Money Fund) in illiquid securities.
INVESTMENT RESTRICTIONS
-----------------------
The following investment restrictions are in addition to those described in the
Prospectus. Policies that are identified as fundamental may be changed with
respect to a Fund only with the approval of the holders of a majority of the
Fund's outstanding shares. Such majority is defined 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 a Fund's outstanding shares are present in person or
by proxy, or (ii) more than 50% of a 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.
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND, GLOBAL SMALLCAP FUND, GLOBAL HARD ASSETS FUND, GOLD
OPPORTUNITY FUND, ASIA DYNASTY FUND, ASIA INFRASTRUCTURE FUND, GOLD/RESOURCES
FUND, WORLD TRENDS FUND, GLOBAL INCOME FUND AND U.S. GOVERNMENT MONEY FUND.
- --------------------------------------------------------------------------------
With respect to Gold/Resources Fund, World Trends Fund and U.S. Government Money
Fund, all of the following restrictions are fundamental policies except
restriction 21, unless otherwise indicated. With respect to Global Income Fund,
restrictions 1, 3, 7, 10, 15 and 21 are not fundamental. With respect to Global
Balanced Fund, Global SmallCap Fund, Global Hard Assets Fund, Gold Opportunity
Fund, Asia Dynasty Fund and Asia Infrastructure Fund restrictions 1, 3, 4, 6, 7,
10, 12, 13, 16, 17, 18, 19 and 20, are not fundamental, unless otherwise
provided for by applicable federal or state law.
The Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global
SmallCap Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources Fund,
World Trends Fund, Global Income Fund and U.S. Government Money Fund may not:
1. Invest in securities which (i) with respect to Gold/Resources Fund, Global
Income Fund, World Trends Fund, and U.S. Government Money Fund, 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 10% of a Fund's net assets would
be invested in such securities, and (ii) with respect to Global Balanced
Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global SmallCap Fund,
Asia Dynasty Fund and Asia Infrastructure Fund, are "illiquid" securities,
including repurchase agreements maturing in more than 7 days and options
traded over-the-counter if the result is that more than 15% of Global
Balanced Fund's, Global Hard Assets Fund's, Gold Opportunity Fund's, Global
SmallCap Fund's, Asia Dynasty Fund's or Asia Infrastructure Fund's net
assets would be invested in such securities, except that Global Income Fund
may invest an additional 5% of its net assets in short term money market
investments, such as repurchase agreements and time deposits maturing in
more than seven days.
2. Purchase or sell real estate, although the Global Balanced Fund, Gold
Opportunity Fund, Global Hard Assets Fund, Global SmallCap Fund, Asia
Dynasty Fund, Asia Infrastructure Fund, World Trends Fund, Gold/Resources
Fund and Global Income Fund may purchase securities of companies which deal
in real estate, including securities of real estate investment trusts, and
may
14
<PAGE>
purchase securities which are collateralized by interests in real
estate.
3. Purchase or sell commodities (non-Hard Asset commodities with respect to
Global Hard Assets) or commodity futures contracts (for the purpose of this
restriction, forward foreign exchange contracts are not deemed to be a
commodity or commodity contract) except that Gold/Resources Fund, Asia
Dynasty Fund, Asia Infrastructure Fund, Global Balanced Fund, Global Hard
Assets Fund, Gold Opportunity Fund, Global SmallCap Fund, Global Income
Fund and World Trends Fund may, for hedging purposes, buy and sell
financial futures contracts which may include stock and bond index futures
contracts and foreign currency futures contracts and Gold/Resources Fund
may, for hedging purposes only, buy and sell commodity futures contracts on
gold and other natural resources or on an index thereon. A Fund may not
commit more than 5% of its total assets to initial margin deposits on
futures contracts. In addition, Gold/Resources Fund, International
Investors Gold Fund, Global Hard Assets Fund and Gold Opportunity Fund may
invest in gold bullion and coins. Asia Dynasty Fund, Asia Infrastructure
Fund, Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund
and Global SmallCap Fund may not commit more than 5% of their total assets
to initial margin deposits on futures contracts not used for hedging
purposes.
4. Exclusive of the Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Global SmallCap Fund, Asia Dynasty Fund and Asia
Infrastructure Fund, purchase securities of other open-end investment
companies except as part of a merger, consolidation, reorganization or
acquisition of assets; Asia Dynasty Fund, Asia Infrastructure Fund, Global
Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global
SmallCap Fund, World Trends Fund, Gold/Resources Fund or Global Income Fund
may not purchase more than 3% of the total outstanding voting stock of any
closed-end investment company if more than 5% of any of these Funds' total
assets would be invested in securities of any closed-end investment
company, or more than 10% of such value in closed-end investment companies
in general. In addition, Global Balanced Fund, Global Hard Assets Fund,
Gold Opportunity Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, World Trends Fund, Gold/Resources Fund or Global
Income Fund may not invest in the securities of closed-end investment
companies, except by purchase in the open market involving only customary
broker's commissions.
5. Make loans, except by (i) purchase of marketable bonds, debentures,
commercial paper and similar marketable evidences of indebtedness and (ii)
repurchase agreements. Global Balanced Fund, Global SmallCap Fund, Global
Hard Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Asia
Infrastructure Fund and Global Income Fund may lend to broker-dealers
portfolio securities with an aggregate market value up to one-third of its
total assets.
6. As to 75% of the total assets of each of the Asia Dynasty Fund, World
Trends Fund, Gold/Resources Fund, International Investors Gold Fund and
U.S. Government Money Fund, purchase securities of any issuer, if
immediately thereafter (i) more than 5% of a 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 securities of any class of such issuer
would be held by a Fund (provided that these limitations do not apply to
obligations of the United States Government, its agencies or
instrumentalities). This limitation does not apply to the Global Income
Fund, Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund,
Global SmallCap Fund or Asia Infrastructure Fund.
7. Invest more than 5 percent of the value of its total assets in securities
of companies having, together with their predecessors, a record of less
than three years of continuous operation. This
15
<PAGE>
restriction does not apply to Global Balanced Fund, Global Hard Assets
Fund, Gold Opportunity Fund, Global SmallCap Fund, Asia Dynasty Fund or
Asia Infrastructure Fund.
8. Underwrite any issue of securities (except to the extent that a Fund may be
deemed to be an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities).
9. Borrow money, except that each of the World Trends Fund, Gold/Resources
Fund and U.S. Government Money Fund may borrow up to 10% of its total
assets valued at cost for temporary or emergency purposes. These Funds
will not purchase securities for investment while borrowings equaling 5% or
more of their total assets are outstanding. In addition, Global Balanced
Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global SmallCap Fund,
Asia Dynasty Fund, Asia Infrastructure Fund and Global Income Fund may
borrow up to 30% of the value of their respective net assets to increase
their holdings of portfolio securities.
10. Mortgage, pledge or otherwise encumber its assets except to secure
borrowing effected within the limitations set forth in restriction (9).
11. Issue senior securities except insofar as a Fund may be deemed to have
issued a senior security by reason of (i) borrowing money in accordance
with restrictions described above; (ii) entering into forward foreign
currency contracts (Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, World Trends Fund, Gold/Resources Fund and Global
Income Fund); (iii) financial futures contracts purchased on margin (Global
Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global
SmallCap Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources
Funds, Global Income Fund and World Trends Fund), (iv) commodity futures
contracts purchased on margin (Gold/Resources Fund, Global Hard Assets
Fund, Gold Opportunity Fund); (v) foreign currency swaps (Global Balanced
Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global SmallCap Fund,
Asia Dynasty Fund and Asia Infrastructure Fund); and (vi) issuing two
classes of shares (Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia
Infrastructure Fund and Global Income Fund).
12. Except for Gold Opportunity Fund, make short sales of securities, except
that Global Balanced Fund, Global Hard Assets Fund, Global SmallCap Fund,
Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources Fund, Global
Income Fund and World Trends Fund may engage in the transactions specified
in restrictions (3) and (14).
13. Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions and, with
respect to Global Balanced Fund, Global SmallCap Fund, Global Hard Assets
Fund, Gold Oportunity Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
Gold/Resources Fund, Global Income Fund and World Trends Fund, may make
initial or maintenance margin payments in connections with options and
futures contracts and related options and borrowing effected within the
limitations set forth in restriction (9).
14. Write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except that Global Balanced Fund, Global SmallCap Fund, Global
Hard Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, Gold/Resources Fund, World Trends Fund and Global
Income Fund may purchase or sell puts and calls on foreign currencies and
on securities described under "Options Transactions" herein and in the
Prospectus and that Global Balanced Fund, Global SmallCap Fund, Global Hard
Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Asia Infrastructure
Fund, Gold/Resources Fund, Global Income Fund and World Trends Fund may
write, purchase or sell put and call options on financial futures
contracts, which
16
<PAGE>
include bond and stock index futures contracts and Gold/Resources Fund may
write, purchase, or sell put and call options on gold or other natural
resources or an index thereon and on commodity futures contracts on gold or
other natural resources or an index thereon.
15. Make investments for the purpose of exercising control or management.
16. Invest more than 25 percent of the value of a Fund's total assets in the
securities of issuers having their principal business activities in the
same industry, except the Gold/Resources Fund, and provided that this
limitation does not apply to obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities.
17. Participate on a joint or joint and several basis in any trading account in
securities, although transactions for the Funds and any other account under
common or affiliated management may be combined or allocated between the
Funds and such account.
18. Purchase participations or other interests (other than equity stock
interests in the case of the Global Balanced Fund, Global Hard Assets Fund,
Gold Opportunity Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, World Trends Fund, Gold/Resources Fund and Global
Income Fund) in oil, gas or other mineral exploration or development
programs.
19. Invest more than 5% of its total assets in warrants, whether or not the
warrants are listed on the New York or American Stock Exchanges, or more
than 2% of the value of the assets of a Fund (except Global Balanced Fund,
Global Hard Assets Fund, Gold Opportunity Fund, Global SmallCap Fund, Asia
Dynasty Fund and Asia Infrastructure Fund) in warrants which are not listed
on those exchanges. Warrants acquired in units or attached to securities
or received as dividends are not included in this restriction. The U.S.
Government Money Fund will not invest in warrants.
20. Purchase or retain a security of any issuer if any of the officers,
directors or Trustees of a Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer, or if such persons
taken together own more than 5% of the securities of such issuer.
21. Invest in real estate limited partnerships or in oil, gas or other mineral
leases.
With respect to restriction 16, companies in different geographical locations
will not be deemed to be in the same industry if the investment risks associated
with the securities of such companies are substantially different. For example,
although generally considered to be "interest rate sensitive," investing in
banking institutions in different countries is generally dependent upon
substantially different risk factors, such as the condition and prospects of the
economy in a particular country and in particular industries, and political
conditions.
In order to comply with certain securities laws of a state in which shares of
the Funds are currently sold, the Funds have undertaken with respect to
investment restriction number 1, not to invest more than 10% of their assets in
"restricted securities." To the extent the above restriction has been adopted
to comply with state securities laws, it shall not apply to the Funds once such
laws are no longer in effect.
In order to comply with certain securities laws of a state in which shares of
the Funds are currently sold, the Funds have undertaken with respect to
investment restriction number 7, not to invest more than 5% of their assets in
securities of unseasoned issuers. To the extent the above restriction has been
adopted to comply with state securities laws, it shall not apply to the Funds
once such laws are no longer in effect.
17
<PAGE>
International Investors Gold Fund
- ---------------------------------
Restrictions 1 through 8 are fundamental policies of International Investors
Gold Fund and may not be changed without shareholder approval. Restrictions 9
through 15 are not fundamental policies and may be changed without shareholder
approval.
International Investors Gold Fund may not:
1. Underwrite securities of other issuers.
2. Invest in real estate, commodity contracts or commodities (except that,
subject to applicable state laws, the Fund may invest up to 12.5% of the
value of its total assets as of the date of investment in gold and silver
coins which are legal tender in the country of issue and gold and silver
bullion).
3. Make loans to other persons, except through repurchase agreements or the
purchase of publicly distributed bonds, debentures and other debt
securities.
4. Purchase securities on margin or make short sales.
5. Purchase or retain a security of any issuer if any of the officers or
directors of the Company or its investment adviser own beneficially as much
as 1/2 of 1%, or if such persons taken together own over 5%, of the
issuer's securities.
6. Lend its funds or assets, except through the purchase of securities the
Fund would otherwise be authorized to purchase.
7. Mortgage, pledge or hypothecate more than 15% of the Company's total
assets, taken at cost.
8. Purchase any restricted securities which may not be sold to the public
without registration under the Securities Act of 1933, if by reason of such
purchase the value of the Company's aggregate holdings in all such
securities would exceed 10% of total assets.
9. Invest in interests (other than equity stock interests) in oil, gas or
other mineral exploration or development programs or in oil, gas or other
mineral leases.
10. Invest in real estate limited partnerships.
11. Make short sales of foreign currencies.
12. Seek short-term trading profits.
13. Make investments in companies for the purpose of exercising control or
management.
14. Invest more than 10% of its assets in repurchase agreements having
maturities of greater than seven days or in a combination of such
agreements together with restricted securities and securities for which
market quotations are not readily available.
15. Purchase securities for investment while borrowings equal to 5% or more of
the Fund's assets are outstanding.
18
<PAGE>
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of net assets will not be considered a violation
of any of the foregoing restrictions.
INVESTMENT ADVISORY SERVICES
----------------------------
The investment adviser and manager of the Funds is Van Eck Associates
Corporation (the "Adviser"), a Delaware corporation, pursuant to an Advisory
Agreement with the Trust dated as of July 30, 1985, as amended. The Adviser
furnishes an investment program for the Funds and determines, subject to the
overall supervision and review of the Board of Trustees, what investments should
be purchased, sold and held. The Adviser is currently the oldest and largest
gold manager investing in gold mining shares. The Adviser's team of gold
managers and analysts average over 25 years of experience.
AIG Asset Management, Inc. ("AIGAM"), a Delaware Corporation, is sub-adviser to
the Asia Dynasty Fund and Asia Infrastructure Fund pursuant to Sub-Investment
Advisory Agreements dated March 1, 1993 and May 31, 1994, respectively.
Fiduciary International, Inc. ("FII"), a New York Corporation, is sub-adviser to
the Global Balanced Fund pursuant to a Sub-Investment Advisory Agreement dated
October 30, 1993. Pictet International Management Limited ("PIML"), a United
Kingdom corporation, is sub-adviser to the Global SmallCap Fund pursuant to a
Sub-Investment Advisory Agreement dated May 31, 1994.
The Adviser (and Sub-Adviser) provides the Funds with office space, facilities
and simple business equipment and provides the services of consultants,
executive and clerical personnel for administering their affairs. The Adviser
(and Sub-Adviser) compensates all executive and clerical personnel and Trustees
of the Trust if such persons are employees or affiliates of the Adviser, Sub-
Adviser, or its affiliates. The Advisory fee is computed daily and paid monthly
at the following annual rates: International Investors Gold Fund, Global Income
Fund, World Trends Fund and Gold/Resources Fund pay a fee equal to .75 of 1% of
the first $500 million of average daily net assets, .65 of 1% of the next $250
million of average daily net assets and .50 of 1% of the average daily net
assets in excess of $750 million. Asia Dynasty Fund, Asia Infrastructure Fund,
Global Balanced Fund and Global SmallCap Fund pay the Adviser a fee of .75 of 1%
of average daily net assets. From this fee the Adviser pays the Sub-Adviser a
fee of .50 of 1% of average daily net assets. Gold Opportunity Fund and Global
Hard Assets each pay the Adviser 1% of average daily net assets. The U.S.
Government Money Fund pays a monthly fee at the annual rate of .50 of 1% for the
first $500 million of average daily net assets, .40 of 1% on the next $250
million of average daily net assets, and .375 of 1% of the average daily net
assets in excess of $750 million.
The Adviser also performs accounting and administrative services for Global
Balanced Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia Infrastructure
Fund, Gold/Resources Fund and International Investors Gold Fund pursuant to a
written agreement. For these accounting and administrative services, Asia
Dynasty Fund, Asia Infrastructure Fund, Global Balanced Fund and Global SmallCap
Fund each pays .25 of 1% of its respective average daily net assets.
Gold/Resources Fund and International Investors Gold Fund pay an annual rate of
.25 of 1% of the first $750 million of their respective average daily net assets
and .20 of 1% of their respective average daily net assets in excess of $750
million.
The net assets of the Funds at December 31, 1994, 1993, and 1992 were
approximately: International Investors Gold Fund (Class A) - $634,808,000,
$706,171,000 and $360,177,000, respectively; International Investors Gold Fund
(Class C) at 12/31 - $430,000; World Trends Fund - $21,348,000, $28,425,000 and
$26,943,000, respectively; Gold/Resources Fund (Class A) - $186,091,000,
$211,450,000 and
19
<PAGE>
$114,257,000, respectively; Gold/Resources Fund (Class C) at 12/31 - $27,000;
U.S. Government Money Fund - $47,078,000, $31,109,000 and $24,853,000,
respectively; Global Income Fund (Class A) - $137,242,000, $251,725,000 and
$290,961,000, respectively; Global Income Fund (Class B) at 12/31 - $401,000;
The net assets of Asia Dynasty Fund (Class A) at 12/31/94 and 12/31/93 -
$83,787,000 and $108,661,000, respectively; Asia Dynasty Fund (Class B) at
12/31/94 and 12/31/93 - $35,024,000 and $26,205,000, respectively; Global
Balanced Fund (Class A) at 12/31/94 and 12/31/93 - $13,986,000 and $562,000,
respectively; Global Balanced Fund (Class B) at 12/31/94 and 12/31/93 -
$5,628,000 and $130,000, respectively; Global SmallCap Fund (Class A) at
12/31/94 - $2,050,000; Global SmallCap Fund (Class C) at 12/31/94 - $10,000;
Asia Infrastructure Fund (Class A) at 12/31/94 - $1,038,000; Asia Infrastructure
Fund (Class C) at 12/31/94 - $12,000; and Global Hard Assets Fund (Class A) at
12/31/94 - $1,419,000; Global Hard Assets Fund (Class C) at 12/31/94 - $8,000.
Gold Opportunity Fund was not in operation in 1994.
In 1994, 1993 and 1992, the aggregate remuneration received by the Adviser from
International Investors Gold Fund was $4,792,990, $4,056,306 and $3,543,972,
respectively; from World Trends Fund was $206,804, $218,048 and $274,924,
respectively; from Gold/Resources Fund was 1,569,404, $1,237,378 and $931,100,
respectively; from U.S. Government Money Fund was $316,603, $164,283 and
$145,719, respectively; from Global Income Fund was $1,312,169, $2,167,616 and
$1,289,207, respectively. In 1994 and 1993, the aggregate remuneration received
by the Adviser from Asia Dynasty Fund was $1,011,806 and $243,120, respectively.
In 1994, the aggregate remuneration received by the Adviser from Global Balanced
Fund, Global Hard Assets Fund, Global SmallCap Fund and Asia Infrastructure Fund
were $127,782, $1,893, $4,829 and $12,806, respectively.
The expenses borne by each of the Funds include: all the charges and expenses of
the transfer and dividend disbursing agent, custodian fees and expenses, legal,
auditors' and accountants' fees and expenses, brokerage commissions for
portfolio transactions, taxes, if any, the advisory fee (and accounting and
administrative services fees, if any), extraordinary expenses (as determined by
the Trustees of the Trust), expenses of shareholders' and Trustees' meetings,
and of preparing, printing and mailing proxy statements, reports and other
communications to shareholders, expenses of preparing and setting in type
prospectuses and periodic reports and expenses of mailing them to current
shareholders, legal and accounting expenses and expenses of registering and
qualifying shares for sale (including compensation of the Adviser's employees in
relation to the time spent on such matters), expenses relating to the Plan of
Distribution (Rule 12b-1 Plan) exclusive of International Investors Gold Fund,
fees of Trustees who are not "interested persons" of the Adviser (or Sub-
Adviser), membership dues of the Investment Company Institute, fidelity bond and
errors and omissions insurance premiums, cost of maintaining the books and
records of each Fund, and any other charges and fees not specifically enumerated
as an obligation of the Distributor or Adviser or Sub-Adviser.
The Advisory Agreement with respect to Gold Opportunity Fund was approved at a
meeting of the Board of Trustees held on December 13, 1994. The Advisory
Agreement with respect to Global Hard Assets Fund was approved at a meeting of
the Board of Trustees held on October 18, 1994. The Advisory Agreement and Sub-
Advisory Agreements provide that the Adviser and Sub-Adviser shall reimburse the
Trust for expenses of the Trust in excess of certain expense limitations
required by state regulation unless the Trust has obtained an appropriate waiver
of such expense limitations or expense items from a particular state authority.
Under the Advisory Agreement and Sub-Advisory Agreement, the maximum annual
expenses which the Trust may be required to bear, inclusive of the advisory fee
(from which the Adviser pays the Sub-Adviser its fee) but exclusive of interest,
taxes, brokerage fees, Rule 12b-1 Plan distribution payments and extraordinary
items, may not exceed the lowest expense limitation imposed by any state in
which the Funds are registered. Currently, only one state imposes such an
expense limitation on the Funds. For the purposes of the expense limitations
imposed on the Funds by this state, expenses may not exceed:
20
<PAGE>
(i) 2.5% of the first $30,000,000 of average net assets, 2.0% of the next
$70,000,000 of average net assets and 1.5% of the remaining average net assets.
The amount of the advisory fee to be paid to the Adviser each month will be
reduced by the amount, if any, by which the annualized expenses of the Funds for
that month exceed the foregoing limitations. At the end of the fiscal year, if
the aggregate annual expenses of the Funds exceed the amount permissible under
the foregoing limitations, then the Adviser and/or Sub-Adviser will be required
promptly to reimburse the Funds for the total amount by which expenses exceed
the amount of the limitations, not limited (with respect to the Adviser only) to
the amount of the fees paid. If aggregate annual expenses are within the
limitations, however, any excess amount previously withheld will be paid to the
Adviser and/or Sub-Adviser.
The Advisory Agreement and Sub-Advisory Agreement with respect to Global
Balanced Fund were approved at a meeting of the Board of Trustees held on
October 12, 1993. The Sub-Advisory Agreement with respect to Asia Dynasty Fund
was reapproved at a meeting of the Board of Trustees of the Trust held on July
12, 1994. The Advisory Agreement with respect to Gold/Resources Fund and
International Investors Gold Fund was approved at a meeting of the Board of
Trustees held on May 24, 1994. The Advisory Agreements and Sub-Advisory
Agreements for Global SmallCap Fund and Asia Infrastructure Fund were approved
and the Advisory Agreements for the other Funds were reapproved by the Board of
Trustees of the Trust, including a majority of the Trustees who are not parties
to such Agreements or interested persons of any such party at a meeting held on
April 19, 1994. The Advisory Agreement was approved by shareholders of the World
Trends Fund on April 8, 1986; U.S. Government Money Fund on January 23, 1987;
Global Income Fund on April 12, 1988; and Gold/Resources Fund and International
Investors Gold Fund on July 25, 1994. The Advisory Agreements and Sub-
Investment Advisory Agreements were approved by shareholders of Global Balanced
Fund on December 17, 1993 and Asia Dynasty Fund on July 25, 1994. The Advisory
Agreement and Sub-Advisory Agreement provide that they shall continue in effect
from year to year with respect to a Fund 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 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 Agreements
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 Act.
Mr. John C. van Eck is Chairman of the Board of Directors of the Adviser as well
as President and Trustee of the Trust. Mr. Van Eck offered the first global
mutual fund to U.S. investors in 1955 and offered the first gold fund to U.S.
investors in 1968.
THE DISTRIBUTOR
---------------
Shares of the Funds are offered on a continuous basis and are distributed
through Van Eck Securities Corporation, 99 Park Avenue, New York, New York (the
"Distributor"), a wholly-owned subsidiary of Van Eck Associates Corporation. The
Trustees of the Trusts have approved a Distribution Agreement appointing the
Distributor as distributor of shares of the Funds. The Distribution Agreement
with respect to Gold Opportunity Fund was approved by action of the Board of
Trustees on December 13, 1994. The Distribution Agreement with respect to Global
Hard Assets Fund was approved by action of the Board of Trustees on October 18,
1994. The Distribution Agreement was reapproved for the other Funds by the
action of the Trustees on April 19, 1994.
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 Funds and
21
<PAGE>
preparing, printing and distributing advertising or promotional materials. The
Funds will pay all fees and expenses in connection with registering and
qualifying their shares under federal and state securities laws.
Van Eck Securities Corporation retained distributing commissions on sales of
shares of the Funds for the following fiscal years ended December 31 (except as
noted) after reallowance to dealers as follows:
<TABLE>
<CAPTION>
Van Eck
Securities Reallowance to
Corporation Dealers
----------- -------
<S> <C> <C> <C>
1994 $423,706 $1,665,173
International 1993 485,198 1,851,096
Investors Gold Fund 1992 279,185 1,153,020
1994 $ 3,209 $ 9,625
World Trends Fund 1993 2,797 13,507
1992 9,391 24,535
1994 $286,592 $1,117,992
Gold/Resources Fund 1993 342,459 1,290,246
1992 84,735 285,783
1994 $ 33,396 $ 136,949
Global Income Fund 1993 337,156 1,517,371
1992 863,445 4,011,234
1994 $236,565 $1,181,535
Asia Dynasty 3/22/93-12/31/93 211,110 2,409,342
Fund
Global Balanced 1994 $ 19,768 $ 308,987
Fund 12/20/93-12/31/93 51 5,368
Asia Infra-
structure 8/3/94-12/31/94 $ 1,142 $ 36,798
Fund
Global SmallCap
Fund 8/3/94-12/31/94 $ 42 $ 20,564
Global Hard
Assets Fund 11/2/94-12/31/94 $ 64 $ 16,554
</TABLE>
To compensate the Distributor for the services it provides and for the expenses
it bears under the Distribution Agreement, each of World Trends Fund,
Gold/Resources Fund (Class A), Global Income Fund (Class A), and U.S. Government
Money Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 (the
"Plan") under the Act. Fees paid by the Funds under the Plan will be used for
servicing and/or distribution expenses incurred only during the applicable year.
Additionally, Global Balanced Fund (Class A and B), Global SmallCap Fund (Class
A and C), Asia Dynasty Fund (Class A and B), Asia Infrastructure Fund (Class A
and C), Gold/Resources Fund (Class C), International Investors Gold Fund (Class
C), Gold
22
<PAGE>
Opportunity Fund (Class A and C) and Global Hard Assets Fund (Class A and C)
have also adopted a Plan which provides for the compensation of brokers and
dealers who sell shares of these Funds or provide servicing. The Plan for Asia
Dynasty Fund (Class A) is a reimbursement type plan and provides for the payment
of carry-over expenses to the Distributor, incurred in one year but payable in a
subsequent year(s), up to the maximum for the Fund in any given year. Global
Balanced Fund (Class A and Class B), Global SmallCap Fund (Class A and Class C),
Asia Dynasty Fund (Class B), Asia Infrastructure Fund (Class A and Class C),
Global Income Fund (Class B), Gold/Resources Fund (Class C), International
Investors Gold Fund (Class C), Gold Opportunity Fund (Class A and C) and Global
Hard Assets Fund (Class A and C) Plans are compensation type plans with a carry-
forward provision which provides that the Distributor recoup distribution
expenses in the event the Plan is terminated. For the periods prior to April 30,
1995, the Distributor has agreed with respect to Plans with a carry-forward
provision, notwithstanding anything to the contrary in the Plan, to waive its
right to reimbursement of carry-forward amounts in the event the Plan is
terminated unless the Board of Trustees has determined that reimbursement of
such carry-forward amounts is appropriate. Pursuant to the Plans, the
Distributor provides the Funds at least quarterly with a written report of the
amounts expended under the Plans and the purpose for which such expenditures
were made. The Trustees review such reports on a quarterly basis.
The Plan was approved with respect to Gold Opportunity Fund by the Trustees of
the Trust on December 13, 1994. The Plan was approved with respect to Global
Hard Assets Fund by the Trustees of the Trust on October 18, 1994. The Plans
were approved, in the case of Asia Infrastructure (Class A and C), Global
SmallCap Fund (Class A and C), International Investors Gold Fund (Class C) and
Gold/Resources Fund (Class C) by the Trustees of the Trust on October 18, 1994.
The Plans were approved, in the case of Global SmallCap Fund and Asia
Infrastructure Fund, and reapproved, in the case of the other Funds, by the
Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" of the Funds and who have no direct or indirect financial
interest in the operation of the Plan, cast in person at a meeting called for
the purpose of voting on each such Plan on April 19, 1994. The Plan was approved
by shareholders of the World Trends Fund on April 8, 1986; Gold/Resources Fund
(Class A) and U.S. Government Money Fund on January 23, 1987; Global Income Fund
on April 12, 1988; Asia Dynasty Fund (Class B) on August 31, 1993; Global
Balanced Fund (Class A and B) on December 17, 1993; Gold/Resources Fund (Class
C), International Investors Gold Fund (Class C) and Asia Dynasty Fund (Class A)
on July 25, 1994. A Plan shall continue in effect as to each Fund, provided such
continuance is approved annually by a vote of the Trustees in accordance with
the Act. A Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
Funds, and all material amendments to the Plan must also be approved by the
Trustees in the manner described above. A Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Trustees who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of the Plan, or by a vote of a majority of
the outstanding voting securities of the Fund (as defined in the Act) on written
notice to any other party to the Plan. A Plan will automatically terminate in
the event of its assignment (as defined in the Act). So long as the Plan is in
effect, the election and nomination of Trustees who are not "interested persons"
of the Trust shall be committed to the discretion of the Trustees who are not
"interested persons." The Trustees have determined that, in their judgment,
there is a reasonable likelihood that the Plan will benefit the Funds and their
shareholders. The Funds will preserve copies of the Plan and any agreement or
report made pursuant to Rule 12b-1 under the Act, for a period of not less than
six years from the date of the Plan or such agreement or report, the first two
years in an easily accessible place. For additional information regarding the
Plans, see the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
The Adviser or the Sub-Adviser is responsible for decisions to buy and sell
securities and other investments
23
<PAGE>
for the Funds, 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. Most obligations in which the U.S. Government
Money Fund invests are normally traded on a "principal" rather than agency
basis. This may be done through a dealer (e.g. securities firm or bank) who buys
or sells for its own account rather than as an agent for another client, or
directly with the issuer. A dealer's profit, if any, is the difference, or
spread, between the dealer's purchase and sale price for the obligation.
In purchasing and selling the Funds' portfolio investments, it is the Adviser's
or Sub-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's firm; the broker-
dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
The Adviser or Sub-Adviser may cause the Funds 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 as defined in Section
28(e) of the Securities Exchange Act of 1934 which have been provided. 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 and Sub-Adviser are considered to be in addition to and not in
lieu of services required to be performed by the Adviser and Sub-Adviser under
the Advisory Agreement and Sub-Advisory Agreements with the Trust. The research
services provided by broker-dealers can be useful to the Adviser and Sub-Adviser
in serving its other clients or clients of the Adviser's or Sub-Adviser's
affiliates.
The table below shows the commissions paid on purchases and sales of portfolio
securities by each Fund during its respective fiscal year, and the percentages
of such amounts paid to brokers or dealers which furnished daily quotations to
the Funds for the purpose of calculating daily per share net asset value and to
brokers and dealers which sold shares of the Funds. The U.S. Government Money
Fund did not pay brokerage commissions.
<TABLE>
<CAPTION>
Fund (fiscal year end) 1994
% Daily
Commissions Quotations %Fund Sales
<S> <C> <C> <C>
International Investors Gold Fund (Class A and C) (12/31) $ 403,615.77 30.92% 15.24%
Gold/Resources Fund (Class A and C) (12/31) $ 199,612.85 2.74% 8.75%
Global Income Fund (Class A and B) (12/31) $ 40,339.75 78.09% -0-
World Trends Fund (12/31) $ 180,050.09 86.37% 3.09%
Asia Dynasty Fund (Class A and B) (12/31) $1,011,934.02 2.36% 2.36%
Global Balanced Fund (Class A and B) (12/31) $ 65,743.63 10.32% 1.28%
Asia Infrastructure Fund (Class A and C) (12/31) $ 57,894.03 4.75% 3.64%
Global SmallCap Fund (Class A and C) (12/31) $ 14,198.16 -0- -0-
Global Hard Assets Fund (Class A and C) (12/31) $ 2,686.74 78.75% 32.04%
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Fund (fiscal year end) 1993
% Daily
Commissions Quotations %Fund Sales
<S> <C> <C> <C>
International Investors Gold Fund (12/31) $285,945.52 11.49% 13.89%
Gold/Resources Fund (12/31) 100,986.32 -0- -0-
Global Income Fund (12/31) 32,000.00 -0- -0-
World Trends Fund (12/31) 13,785.62 -0- -0-
Asia Dynasty Fund (Class A and B) (12/31) 518,223.23 22.80% 0.10%
Global Balanced Fund (Class A and B) (12/31) -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
Fund (fiscal year end) 1992
% Daily
Commissions Quotations %Fund Sales
<S> <C> <C> <C>
International Investors Gold Fund (12/31) 161,207 - 0 - 9.2%
Gold/Resources Fund (12/31) 86,863 1.8% 18.3%
Global Income Fund (5/1-12/31) - 0 - - 0 - - 0 -
World Trends Fund (12/31) 46,963 1.6% 42.1%
</TABLE>
The Trustees periodically review the Adviser's and Sub-Adviser's performance of
its responsibilities in connection with the placement of portfolio transactions
on behalf of the Funds and review the commissions paid by the Funds over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Funds.
Investment decisions for the Funds are made independently from those of the
other investment accounts managed by the Adviser, Sub-Adviser or 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 and
Sub-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 and Sub-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 then
availability in the particular account of funds for investment. Portfolio
securities held by one client of the Adviser or Sub-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.
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 or Sub-Adviser may consider sales of shares of the Funds as a factor in
the selection of broker-dealers to execute portfolio transactions for the Funds.
While it is the policy of the Funds generally not to engage in trading for
short-term gains, the Funds will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser or Sub-Adviser such
transactions are advisable in light of a change in circumstances of a particular
company, within a particular industry or country, or in general market, economic
or political conditions. The Global Balanced Fund, Global SmallCap Fund, Global
Hard Assets Fund, Asia Dynasty Fund, Asia Infrastructure
25
<PAGE>
Fund, World Trends Fund and Gold/Resources Fund anticipate that their annual
portfolio turnover rates will not exceed 100%.
The annual portfolio turnover rate of the Global Income Fund and Gold
Opportunity Fund may exceed 100%. Due to the high rate of turnover the Funds may
pay a greater amount in brokerage commissions than a similar size fund with a
lower turnover rate. The portfolio turnover rates of all Funds may vary greatly
from year to year. In addition, since the Funds may have a high rate of
portfolio turnover, the Funds may realize capital gains or losses. Capital gains
will be distributed annually to the shareholders. Capital losses cannot be
distributed to shareholders but may be used to offset capital gains at the Fund
level. See "Taxes" in the Prospectus and the Statement of Additional
Information.
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 seven 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 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 Van Eck Funds, their addresses, positions with
the Trust and principal occupations during the past five years are set forth
below.
Trustees of Van Eck Funds:
*oJOHN C. van ECK, C.F.A. -
- ------------------------
270 River Road, Briarcliff Manor, New York; Chairman of the Board and
President of other affiliated investment companies advised by the Adviser,
Van Eck Associates Corporation (investment adviser); Chairman and
President, Van Eck Securities Corporation (broker-dealer); Director,
Eclipse Financial Asset Trust (mutual fund), Abex Inc. (aerospace), Former
Director (1983-1986), The Signal Companies, Inc. (high technology and
engineering); Former Director (1982-1984), Pullman Transportation Co., Inc.
(transportation equipment). Former Director (1986-1992) The Henley Group,
Inc. (technology and health).
o#+JEREMY H. BIGGS - Trustee
- ------------------
1220 Park Avenue, New York, NY 10128; Trustee of other affiliated
investment companies advised by the Adviser; Vice Chairman, Director and
Chief Investment Officer, Fiduciary Trust Company International (investment
manager), parent company of Fiduciary International, Inc., which serves as
sub-advisor to the Global Balanced Fund); Consultant, Ventures Advisers
Group (mutual fund management company); Former Director, International
Investors Incorporated (1990-1991).
#+RICHARD C. COWELL - Trustee
- -------------------
121 El Bravo Way, Palm Beach, Florida; Trustee of other affiliated
investment companies advised by the Adviser; Private Investor; Director,
West Indies & Caribbean Development Ltd. (real estate);
26
<PAGE>
Director, Compo Industries, Inc. (machinery manufacturer); Former Director,
International Investors Incorporated (1957-1991); Former Director (1978-
1981), American Eagle Petroleums, Ltd. (oil and gas exploration); Former
President and Director (1968-1976), Minerals and Industries, Inc.
(petroleum products); Former Director (1978-1983) Duncan Gold Resources,
Inc. (oil exploration and gold mining); Former Director (1981-1984),
Crested Butte Silver Mining Co.; Former Chairman and Member of Executive
Committee (1974-1981), Allerton Resources, Inc. (oil and gas exploration);
Former Director (1976-1982), Western World Insurance Co.
oRODGER A. LAWSON - Trustee
- -----------------
330 East 38th Street, New York, New York 10016; Trustee of other affiliated
investment companies advised by the adviser; President and Chief Executive
Officer of the Adviser and Van Eck Securities Corporation; Former Managing
Director and Head of Global Private banking and Mutual Funds, Bankers Trust
Company (1992-1994); Former Managing Director, Member of the Management
Committee, and President/CEO of Fidelity Investments Retail Group, FMR
Corp. (1985-1991); Former Corporate Officer, Member of the Management
Committee, and Head of Retail and Institutional Businesses, Dreyfus
Corporation (1982-1985).
#+WESLEY G. McCAIN - Trustee
- ------------------
144 East 30th Street, New York, New York; Chairman, Towneley Capital
Management, Inc., (investment adviser); Chairman, Eclipse Financial Asset
Trust (mutual fund); Trustee of other affiliated investment companies
advised by the Adviser; General Partner, Pharoah Partners, L.P.; President,
Millbrook Associates, Inc.; Trustee, Libre Group Trust; Chairman, Eclipse
Financial Services, Inc.; Former Director, International Investors
Incorporated; and Former Secretary and Treasurer, Millbrook Advisers, Inc.
(investment adviser) Former Chairman, Finacor, Inc. (financial services).
DAVID J. OLDERMAN - Trustee
- -----------------
560 Lexington Avenue, New York, New York 10022; Chairman of the Board,
Chief Executive Officer and Owner, Carret & Company, Inc. (since 1988);
Chairman of the Board, American Copy Equipment Co. (1991-present);
Principal, Olderman & Raborn, Inc., (investment advisers-1984-1988);
Chairman of the Board, Railoc, Inc., (farm equipment manufacturing-1979-
1984); Head of Corporate Finance, Halsey Stuart (investment Banking-1974-
1975); Vice Chairman of the Board, Stone and Webster Securities Corp.
(investment banking, retail sales and investment advisory divisions-1964 to
1974).
*#RALPH F. PETERS - Trustee
- -----------------
55 Strimples Mill Road, Stockton, New Jersey; Trustee of other affiliated
investment companies advised by the Adviser; Former Chairman of the Board
and Chief Executive Officer of Discount Corporation of New York (dealer in
U.S. Treasury and Federal Agency Securities) (1981-1988); Director, Sun
Life Insurance and Annuity Company of New York; Director, U.S. Life Income
Fund, Inc., New York.
RICHARD STAMBERGER - Trustee
- ------------------
888 17th Street, N.W., Washington, D.C. 20006; Principal, National
Strategies, Inc., a public policy firm in Washington, D.C.; 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).
27
<PAGE>
**oFRED M. van ECK - Trustee
- ------------------
99 Park Avenue, New York, New York; Private Investor; Trustee of other
affiliated investment companies advised by the Adviser; Director, Van Eck
Associates Corporation; Director, Van Eck Securities Corporation; Former
General Partner (1950-1976) J. H. Whitney & Co. (venture capital).
Officers of the Trust:
HENRY J. BINGHAM - Executive Vice President
- ----------------
99 Park Avenue, New York, New York; President, International Investors Gold
Fund series of Van Eck Funds; Executive Vice President of other affiliated
investment companies advised by the Adviser; Executive Managing Director of
the Adviser; Director and Vice President (1978-1983), United Services Gold
Shares, Inc., United Services Group of Funds, Inc. and The Good and Bad
Times Fund, Inc. (mutual funds) and Growth Research and Management, Inc.
(investment adviser). Formerly General Partner and Director of Spencer
Trask & Co.
DAVID R. KENERSON, Jr. - Executive Vice President
- ----------------------
99 Park Avenue, New York, New York; President of the World Trends Fund
series of Van Eck Funds; Director, Global Research of Van Eck Associates
Corporation; President, International Growth Trust; Director and President
of Kenerson & Co. (investment adviser).
LUCILLE PALERMO - Executive Vice President
- ---------------
99 Park Avenue, New York, New York; President, Gold/Resources Fund and Gold
Opportunity Fund series of Van Eck Funds; Associate Director, Mining
Research of the Adviser; Investment Strategist and Analyst with Drexel
Burnham Lambert (1979-1989).
MADIS SENNER - Executive Vice President
- ------------
99 Park Avenue, New York, New York; President of Global Income Fund series
of Van Eck Funds; Director, Global Fixed Income of the Adviser; Executive
Vice President of other affiliated investment companies advised by the
Adviser; President of Global Bond Fund series of Van Eck Investment Trust;
Former Global Bond Manager, Chase Manhattan Private Bank (1992-1994);
Former President and Founder, Sunray Securities, Inc. (1989-1992).
***oDEREK van ECK, C.F.A. -
- -------------------------
99 Park Avenue, New York, New York; Vice President of World Trends Fund,
Global Balanced Fund, Global SmallCap Fund, Gold Opportunity Fund, Global
Hard Assets Fund and Asia Infrastructure Fund series of Van Eck Funds;
Executive Vice President, Director, Global Investments and Director of Van
Eck Associates Corporation; Director, Van Eck Securities Corporation.
MICHAEL G. DOORLEY - Vice President
- ------------------
99 Park Avenue, New York, New York; Senior Vice President, and Chief
Financial Officer of Van Eck Associates Corporation and Van Eck Securities
Corporation, Vice President of other affiliated investment companies
advised by the Adviser.
BRUCE J. SMITH - Vice President and Treasurer
- --------------
99 Park Avenue, New York, New York; Senior Managing Director, Portfolio
Accounting of Van Eck Associates Corporation and Senior Managing Director
of Van Eck Securities Corporation; Vice President and Treasurer of other
affiliated investment companies advised by the Adviser.
28
<PAGE>
JOSEPH P. DiMAGGIO - Controller
- ------------------
99 Park Avenue, New York, New York; Director of Portfolio Accounting of Van
Eck Associates Corporation (since 1993); Accounting Manager, Alliance
Capital Management (1985-1993); Controller of other affiliated investment
companies advised by the Adviser.
WILLIAM A. TREBILCOCK - Vice President
- ---------------------
99 Park Avenue, New York, New York; Director, Mining Research of Van Eck
Associates Corporation; Former Director, Corner Bay Explorations Ltd.;
Former Director, Precambrian Explorations Inc. (mining exploration); Former
Director and Secretary (1981-1984) of Tioga Land Company, Inc. (oil
exploration); Former Director (1984-1987), Lacana Gold Inc. (mining
company); Former Director, Royex Gold Mining Corporation (mining company);
Former Director, Pez Corona Gold Corporation (a wholly-owned subsidiary of
Royex Gold Mining Corporation); Former Director, International Corona
Corporation.
THADDEUS M. LESZCZYNSKI - Vice President and Secretary
- -----------------------
99 Park Avenue, New York, New York; Vice President and Secretary of other
affiliated investment companies advised by the Adviser; Vice President and
General Counsel of Van Eck Associates Corporation and Van Eck Securities
Corporation.
SUSAN C. LASHLEY - Vice President
- ----------------
99 Park Avenue, New York, New York; Managing Director, Mutual Fund
Operations of Van Eck Securities Corporation.
PAUL A. DiPERNA - Assistant Vice President
- ---------------
99 Park Avenue, New York, New York; Associate Manager, Trading, of Van Eck
Associates Corporation; Portfolio Manager of U.S. Government Money Fund
series of Van Eck Funds.
_________________
o An "interested person" as defined in the Act.
* Member of Executive Committee - exercises general powers of Board of
Trustees between meetings of the Board.
** Brother of Mr. John C. van Eck.
*** Son of John C. van Eck and nephew of Fred M. van Eck.
# Member of Nominating Committee.
+ Member of Audit Committee - reviews fees, services, procedures, conclusions
and recommendations of independent auditors.
As of March 10, 1995, all officers and Trustees as a group owned the number of
shares indicated of each Fund: 154,866 of International Investors Gold Fund,
equal to less than 1% of shares outstanding; 36,073 shares of World Trends Fund,
equal to approximately 1.8% of shares outstanding; 38,230 shares of
Gold/Resources Fund, equal to less than 1% of shares outstanding; 745,652 shares
of U.S. Government Money Fund, equal to approximately 1.5% of shares
outstanding; 29,531 shares of Global Income Fund, equal to less than 1% of
shares outstanding; 29,984 shares of Asia Dynasty Fund, equal to less than 1% of
shares outstanding; 27,255 shares of Global Balanced Fund, equal to
approximately 1.9% of shares
29
<PAGE>
outstanding; 4,136 shares of Asia Infrastructure Fund, equal to approximately
2.5% of shares outstanding; 29,527 shares of Global SmallCap Fund, equal to
approximately 12.76% of shares outstanding; and 16,890 shares of Global Hard
Assets Fund, equal to approximately 10.5% of shares outstanding.
At March 10, 1995, Mr. John C. van Eck and members of his family owned 670,440
shares of the U.S. Government Money Fund, which represented approximately 1.4%
of the Fund. Mr. van Eck has agreed to vote his shares in the same proportion
as the votes cast by other shareholders of the Fund.
VALUATION OF SHARES
-------------------
The net asset value per share of each of the Funds is computed by dividing the
value of all of a 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 New York Stock Exchange, Monday through
Friday, exclusive of national business holidays. The Funds will be closed on
the following national business holidays: New Years Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas.
Shares of International Investors Gold Fund-A, Global Income Fund-A, World
Trends Fund, Gold/Resources Fund, Global Hard Assets Fund-A, Gold Opportunity
Fund-A, Asia Dynasty Fund-A, Asia Infrastructure Fund-A, Global Balanced Fund-A
and Global SmallCap Fund-A are sold at the public offering price which is
determined once each day the Funds are open for business and is the net asset
value per share plus a sales charge in accordance with the schedule set forth in
the Prospectus. Shares of the U.S. Government Money Fund are sold without a
sales charge. Shares of International Investors Gold Fund-C, Global Hard Assets
Fund-C and Gold Opportunity Fund-C are sold with a redemption fee. Set forth
below is an example of the computation of the public offering price for shares
of the Global Income Fund-A, International Investors Gold Fund-A, World Trends
Fund, Gold/Resources Fund-A, Asia Dynasty Fund-A, Asia Infrastructure Fund-A,
Global SmallCap Fund-A, Global Hard Assets Fund-A and Global Balanced Fund-A on
December 31, 1994 under the then-current maximum sales charge:
<TABLE>
<CAPTION>
World Gold/ Global Global International Asia Asia
Trends Resources Hard Income Investors Dynasty Infrastruc-
Fund Fund-A Assets Fund-A Gold Fund-A Fund-A ture
Fund-A Fund-A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value and repurchase $12.29 $5.35 $9.41 $8.15 $15.21 $12.13 $7.04
price per share on $.001 par
value capital shares
outstanding
Maximum sales charge (as .61 .33 .47 .41 .93 .60 .35
described in the Prospectus)
Maximum offering price per share 12.90 5.68 9.88 8.56 16.14 12.73 7.39
<CAPTION>
Global Global
Balanced SmallCap
Fund-A Fund-A
<S> <C> <C>
Net asset value and repurchase $9.07 $8.79
price per share on $.001 par
value capital shares
outstanding
Maximum sales charge (as .45 .44
described in the Prospectus)
Maximum offering price per share 9.52 9.23
</TABLE>
The net asset values need not be computed on a day in which no orders to
purchase, sell or redeem shares of the Funds 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 particular commodity.
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 New York
30
<PAGE>
Stock Exchange (the "Exchange"). In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Board of Trustees as the primary market. 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
Trustees. 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, United States government securities and money market
instruments, is substantially completed each day at various times prior to the
close of the Exchange. The values of such securities used in determining the net
asset value of the shares of the Funds may be computed as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of such securities and such
exchange rates may occur between such times and the close of the Exchange 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.
U.S. Government Money Fund
- --------------------------
It is the policy of the U.S. Government Money Fund to use its best efforts to
maintain a constant per share price equal to $1.00.
The portfolio instruments of the U.S. Government Money Fund are valued on the
basis of amortized cost. This involves valuing an instrument at its cost
initially and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which the value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument.
The valuation of the Fund's portfolio instruments based upon their amortized
cost and simultaneous maintenance of the Fund's per share net asset value at
$1.00 are permitted by a rule adopted by the Securities and Exchange Commission.
Under this rule, the Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having remaining
maturities of thirteen months or less, and invest only in securities determined
by the Trustees to be of high quality with minimal credit risks. In accordance
with the rule, the Trustees have established procedures designed to stabilize,
to the extent reasonably practicable, the Fund's price per share as computed for
the purpose of sales and redemptions at $1.00. Such procedures include review
of the Fund's portfolio holdings by the Trustees, at such intervals as they may
deem appropriate, to determine whether the net asset value of the Fund
calculated by using available market quotations or market equivalents deviates
from $1.00 per share based on amortized cost. The rule also provides that the
extent of any deviation between the Fund's net asset value based upon available
market quotations or market equivalents and $1.00 per share net asset value
based on amortized cost must be examined by the Trustees. In the event the
Trustees determine that a deviation exists which may result in material dilution
or is otherwise unfair to investors or existing shareholders, they must cause
the Fund to take such corrective action as they regard as necessary and
appropriate, including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital gains;
redeeming shares in kind; or establishing a net asset value per share by using
available market quotations.
31
<PAGE>
EXCHANGE PRIVILEGE
------------------
The Exchange Privilege will not be available if the proceeds from a redemption
of shares of a Fund whose shares qualify are paid directly to the shareholder.
The Exchange Privilege is not available for shares which are not on deposit with
DST or Investors Fiduciary Trust Company ("IFTC"), or shares which are held in
escrow pursuant to a Letter of Intent. If certificates representing shares of a
Fund accompany a written exchange request, such shares will be deposited into an
account with the same registration as the certificates upon receipt by DST.
The Funds each reserve the right to (i) charge a fee of not more than $5.00 per
exchange payable to a Fund or charge a fee reasonably intended to cover the
costs incurred in connection with the exchange; (ii) establish a limit on the
number and amount of exchanges made pursuant to the Exchange Privilege and (iii)
terminate the Exchange Privilege without written notice. In the event of such
termination, shareholders who have acquired their shares pursuant to the
Exchange Privilege will be afforded the opportunity to re-exchange such shares
for shares of the Fund originally purchased without sales charge, for a period
of not less than three (3) months.
By exercising the Exchange Privilege each shareholder whose shares are subject
to the Exchange Privilege will be deemed to have agreed to indemnify and hold
harmless the Trust and each of its series, their investment adviser, sub-
investment adviser (if any), distributor, transfer agent, IFTC and the officers,
directors, employees and agents thereof against any liability, damage, claim or
loss, including reasonable costs and attorneys' fees, resulting from acceptance
of, or acting or failure to act upon, or acceptance of unauthorized instructions
or non-authentic telephone instructions given in connection with, the Exchange
Privilege, so long as reasonable procedures are employed to confirm the
authenticity of such communications. (For more information on the Exchange
Privilege, see the Prospectuses.
TAX-SHELTERED RETIREMENT PLANS
------------------------------
The Trust offers several prototype tax-sheltered retirement plans through which
shares of a Fund may be purchased. These plans are more fully described below.
IFTC, P.O. Box 418407, Kansas City, Missouri acts as the trustee and/or
custodian (the "Trustee") under the retirement plans offered by the Trusts.
Persons who wish to establish a tax-sheltered retirement plan should consult
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 Trusts are 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 Funds.
Individual Retirement Account and Spousal Individual Retirement Account. The
- -----------------------------------------------------------------------
IRA is available to all individuals, including self-employed individuals, who
receive compensation for services rendered and wish to purchase shares of a
Fund. An IRA may also be established pursuant to a SEP. Spousal Individual
Retirement Accounts ("SPIRA") are available to individuals who are otherwise
eligible to establish an IRA for themselves and whose spouses are treated as
having no compensation of their own.
In general, the maximum deductible contribution to an IRA which may be made for
any one year is $2,000 or 100% of annual compensation includible in gross
income, whichever is less. If an individual establishes a SPIRA, the maximum
deductible amount that the individual may contribute annually is the lesser of
$2,250 or 100% of such individual's compensation includible in his gross income
for such year; provided, however, that no more than $2,000 per year for either
individual may be contributed to either the IRA or SPIRA. Contributions to a SEP
are excluded from an employee's gross income and are subject to different
32
<PAGE>
limitations.
In the case of a taxpayer who is deemed to be an active participant in an
employer-sponsored retirement plan, no deduction is available for contributions
to an IRA or SPIRA if his adjusted gross income exceeds the following levels:
$35,000 for a single taxpayer, $50,000 for married taxpayers who file joint
returns, and $10,000 for married taxpayers who file separate tax returns.
(Married taxpayers who file joint tax returns will generally be deemed to be
active participants if either spouse is an active participant under an employer-
sponsored retirement plan.) All taxpayers, including those who are active
participants in employer-sponsored retirement plans, will be able to make fully
deductible IRA contributions at the same levels discussed above, if their
adjusted gross income is less than the following levels: $25,000 for single
taxpayers and $40,000 for married taxpayers who file joint returns.
In the case of taxpayers who are active participants in employer-sponsored
retirement plans and who have adjusted gross income which exceeds these
specified levels, deductible IRA contributions will be phased out on the basis
of adjusted gross income between $25,000 and $35,000 for single taxpayers,
adjusted gross income of $10,000 and under for married taxpayers who file
separate returns, and combined adjusted gross income between $40,000 and $50,000
for married taxpayers who file joint returns. The $2,000 IRA deduction is
reduced by $200 for each $1,000 of adjusted gross income in excess of the
following levels: $25,000 for single taxpayers, $40,000 for married taxpayers
who file joint returns, and $0 for married taxpayers who file separate returns.
In the case of a taxpayer who contributes to an IRA and a SPIRA, the $2,250 IRA
deduction is reduced by $225 for each $1,000 of adjusted gross income in excess
of $40,000.
Individuals who are ineligible to make fully deductible contributions may make
nondeductible contributions up to an aggregate of $2,000 in the case of
contributions (deductible and nondeductible) to an IRA and up to an aggregate of
$2,250 in the case of contributions (deductible and nondeductible) to an IRA and
SPIRA and the income upon all such contributions will accumulate tax free until
distribution.
In addition, a separate IRA may be established by a "rollover" contribution,
which may permit the tax-free transfer of assets from qualified retirement plans
under specified circumstances. A "rollover contribution" includes a lump sum
distribution received by an individual, because of severance of employment, from
a qualified plan and paid into an individual retirement account within 60 days
after receipt.
Dividends and capital gains earned on amounts invested in either an IRA or SPIRA
are automatically reinvested by the Trustee in shares of a Fund and accumulate
tax-free until distribution. Distributions from either an IRA or SPIRA prior to
age 59-1/2, unless made as a result of disability or death, may result in
adverse tax consequences and penalties. In addition, there is a penalty on
contributions in excess of the contribution limits and other penalties are
imposed on insufficient payouts after age 70-1/2.
Simplified Employee Pension Plan. A SEP may be utilized by employers to provide
- --------------------------------
retirement income to employees by making contributions to employee SEP IRAs.
Owners and partners may qualify as employees. The employee is always 100%
vested in contributions made under a SEP. The maximum contribution to a SEP-IRA
(an IRA established to receive SEP contributions) is the lesser of $30,000 or
15% of compensation, excluding contributions made pursuant to a salary reduction
arrangement. Subject to certain limitations, an employer may also make
contributions to a SEP-IRA under a salary reduction arrangement by which the
employee elects contributions to a SEP-IRA in lieu of immediate cash
compensation. The maximum amount which may be contributed to a SEP-IRA (for
1993) under a salary reduction agreement is the lesser of $8,994 (as adjusted
for cost of living increases) or 15% of compensation.
33
<PAGE>
Contributions by employers under a SEP arrangement up to the maximum permissible
amounts are deductible for federal income tax purposes. Contributions up to the
maximum permissible amounts are not includible in the gross income of the
employee. Dividends and capital gains on amounts invested in SEP-IRAs are
automatically reinvested by the Trustee in shares of the mutual fund that paid
such amounts and accumulate tax-free until distribution. Contributions in
excess of the maximum permissible amounts may be withdrawn by the employee from
the SEP-IRA no later than April 15 of the calendar year following the year in
which the contribution is made without tax penalties. Such amounts will,
however, be included in the employee's gross income. Withdrawals of such
amounts after April 15 of the year next following the year in which the excess
contributions is made and withdrawals of any other amounts prior to age 59 1/2,
unless made as a result of disability or death, may result in adverse tax
consequences.
Qualified Pension Plans. The Qualified Pension Plan can be utilized by self-
- ------------------------
employed individuals, partnerships and corporations (for this purpose called
"Employers") and their employees who wish to purchase shares of a Fund under a
retirement program.
The maximum contribution which may be made to a Qualified Pension Plan in any
one year on behalf of a participant is, depending on the benefit formula
selected by the Employer, up to the lesser of $30,000 or 25 percent of
compensation (net earned income in the case of a self-employed individual).
Contributions by Employers to Qualified Pension Plans up to the maximum
permissible amounts are deductible for Federal income tax purposes.
Contributions in excess of permissible amounts will result in adverse tax
consequences and penalties to the Employer. Dividends and capital gains earned
on amounts invested in Qualified Pension Plans are automatically reinvested by
the Trustee in shares of a Fund and accumulate tax-free until distribution.
Withdrawals of contributions prior to age 59-1/2, unless made as a result of
disability, death or early retirement, may result in adverse tax consequences
and penalties.
403(b)(7) Program. The Tax-Deferred Annuity Program and Custodial Account
- -----------------
offered by the Fund (the "403(b)(7) Program") allows employees of certain tax
exempt organizations and schools to have a portion of their compensation set
aside for their retirement years in shares held in an investment company
custodial account.
In general, the maximum limit on annual contributions for each employee is the
lesser of $30,000 per year (as adjusted by the IRS for cost-of-living
increases), 25% of the employee's compensation or the employee's exclusion
allowance specified in Section 403(b) of the Code. However, an employee's
salary reduction contributions to a 403(b)(7) Program may not exceed $9,500 a
year (as adjusted for cost of living expenses). Contributions in excess of
permissible amounts may result in adverse tax consequences and penalties.
Dividends and capital gains on amounts invested in the 403(b)(7) Program are
automatically reinvested in shares of a Fund. It is intended that dividends and
capital gains on amounts invested in the 403(b)(7) Program will accumulate tax-
free until distribution.
Employees will receive distributions from their accounts under the 403(b)(7)
Program following termination of employment by retirement or at such other time
as the employer shall designate, but in no case later than an employee's
reaching age 65. Withdrawals of contributions prior to age 59-1/2, unless made
as a result of disability, death or early retirement, may result in adverse tax
consequences and penalties. Employees will also receive distributions from their
accounts under the 403(b)(7) Program in the event they become disabled.
INVESTMENT PROGRAMS
-------------------
Dividend Reinvestment Plan. Reinvestments of dividends of the Funds, except for
- --------------------------
U.S. Government Money Fund, will occur on a date selected by the Board of
Trustees. Reinvestment of U.S. Government Money
34
<PAGE>
Fund will occur on the last day of the month.
Automatic Exchange Plan. Investors may arrange under the Exchange Plan to have
- -----------------------
DST collect a specified amount once a month or quarter from the investor's
account in one of the Funds and purchase full and fractional shares of another
Fund at the public offering price next computed after receipt of the proceeds.
Further details of the Automatic Exchange Plan are given in the application
which is available from DST or the Funds. This does not apply to Class B or
Class C shares.
An investor should realize that he is investing his funds in securities subject
to market fluctuations, and accordingly the Automatic Exchange Plan does not
assure a profit or protect against depreciation in declining markets. The
Automatic Exchange Plan contemplates the systematic purchase of securities at
regular intervals regardless of price levels.
The expenses of the Automatic Exchange Plan are general expenses of a Fund and
will not involve any direct charge to the participating shareholder. The
Automatic Exchange Plan is completely voluntary and may be terminated on thirty
days notice to DST.
Automatic Investment Plan. Investors may arrange under the Automatic Investment
- -------------------------
Plan to have DST collect a specified amount once a month or quarter from the
investor's checking account and purchase full and fractional shares of a Fund at
the public offering price next computed after receipt of the proceeds. Further
details of the Automatic Investment Plan are given in the application which is
available from DST or the Funds.
An investor should realize that he is investing his funds in securities subject
to market fluctuations, and accordingly the Automatic Investment Plan does not
assure a profit or protect against depreciation in declining markets. The
Automatic Investment Plan contemplates the systematic purchase of securities at
regular intervals regardless of price levels.
The expenses of the Automatic Investment Plan are general expenses of a Fund and
will not involve any direct charge to the participating shareholder. The
Automatic Investment Plan is completely voluntary. The Automatic Investment
Plan may be terminated on thirty days notice to DST.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan is designed to provide
- -------------------------
a convenient method of receiving fixed redemption proceeds at regular intervals
from shares of a Fund deposited by the investor under this Plan. This Plan is
not available to Class B or Class C shareholders.
In order to open an Automatic Withdrawal Plan, the investor must complete the
Application and deposit, or purchase for deposit, with DST, agent for the
Automatic Withdrawal Plan, shares of a Fund having a total value of not less
than $10,000 based on the offering price on the date the Application is
accepted.
Income dividends and capital gains distributions on shares under an Automatic
Withdrawal Plan will be credited to the investor's Automatic Withdrawal Plan
account in full and fractional shares at the net asset value in effect on the
reinvestment date.
Periodic checks of not less than $50 will be sent to the investor, or any person
designated by him, monthly or quarterly (January, April, July and October). A
Fund will bear the cost of administering the Automatic Withdrawal Plan.
Redemption of shares of a Fund deposited under the Automatic Withdrawal Plan may
deplete or possibly use up the initial investment plus income dividends and
distributions reinvested, particularly in the event
35
<PAGE>
of a market decline. In addition, the amounts received by an investor cannot be
considered as an actual yield or income on his investment since part of such
payments may be a return of his capital. The redemption of shares under the
Automatic Withdrawal Plan may give rise to a taxable event.
The maintenance of an Automatic Withdrawal Plan concurrently with purchases of
additional shares of a Fund would be disadvantageous because of the sales charge
payable with respect to such purchases. An investor may not have an Automatic
Withdrawal Plan in effect and at the same time have in effect an Automatic
Investment Plan or an Automatic Exchange Plan. If an investor has an Automatic
Investment Plan or an Automatic Exchange Plan, such service must be terminated
before an Automatic Withdrawal Plan may take effect.
The Automatic Withdrawal Plan may be terminated at any time (1) on 30 days
notice to DST or from DST to the investor, (2) upon receipt by DST of
appropriate evidence of the investor's death or (3) when all shares under the
Automatic Withdrawal Plan have been redeemed. Upon termination, unless
otherwise requested, certificates representing remaining full shares, if any,
will be delivered to the investor or his duly appointed legal representatives.
TAXES
-----
Taxation of the Funds -- In General
- -----------------------------------
Each Fund has qualified and 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, a 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, a 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 a 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.
Each 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 the tax, during each calendar year a 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. Each Fund intends to make sufficient distributions
to avoid this 4% excise tax.
36
<PAGE>
Taxation of the Funds' Investments
- ----------------------------------
Original issue discount. For federal income tax purposes, debt securities
- -----------------------
purchased by a 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 a 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 a 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 a 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
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. A 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 the it makes the election to include market discount currently.
Because a 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 Funds' investments may be
- --------------------------------
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Funds' 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 generally apply to options and futures contracts. The
extent to which the Funds make 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.
A 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, a 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 a 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
37
<PAGE>
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 a 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 case,
participating shareholders will have a basis for federal income tax purposes in
each share received from a Fund equal to the fair market value of such share on
the payment date.
Except in the case of the U.S. Government Money Fund, distributions by a 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.
If a shareholder (i) incurs a sales load in acquiring shares in a Fund, and (ii)
by reason of incurring such charge or making such acquisition acquires the right
to acquire shares of one or more regulated investment companies without the
payment of a load or with the payment of a reduced load ("reinvestment right"),
and (iii) disposes of the shares before the 91st day after the date on which the
shares were acquired, and (iv) subsequently acquires shares in that regulated
investment company or in another regulated investment company and the otherwise
applicable load charge is reduced pursuant to the reinvestment right, then the
load charge will not be taken into account for purposes of determining the
shareholder's gain or loss. To the extent such charge is not taken into account
in determining the amount of gain or loss, the charge will be treated as
incurred in connection with the subsequently acquired shares and will have a
corresponding effect on the shareholder's basis in such shares.
Income received by a Fund may give rise to withholding and other taxes imposed
by foreign countries. If more than 50% of the value of a 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 that Fund, subject
to limitations contained in the Code. When any of Global Balanced Fund, Gold
Opportunity Fund, Global Hard Assets Fund, Global SmallCap Fund, Asia Dynasty
Fund, Asia Infrastructure Fund, International Investors Gold Fund, World Trends
Fund, Gold/Resources Fund or Global Income 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 Funds cannot assure investors that they will be eligible for the foreign tax
credit. The Funds will advise shareholders annually of your share of any
creditable foreign taxes paid by the Funds.
A 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 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
38
<PAGE>
the Funds and investors in the 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,
including state and local tax consequences, to them of investment in the Fund.
REDEMPTIONS IN KIND
-------------------
Each Fund elects 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
-----------
U.S. Government Money Fund
- --------------------------
The U.S. Government Money Fund may advertise performance in terms of yield based
on a seven day yield or an effective yield.
Seven-day yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one percent.
Effective yield quotation is based on the seven days ended on the date of the
calculation and is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula: EFFECTIVE YIELD = [(BASE PERIOD RETURN +
1)365/7]-1 with the resulting yield figure carried to at least the nearest
hundredth of one percent.
In calculating yield or effective yield quotations, the net change in an account
value includes: (a) the value of additional shares purchased with dividends
from the original share and dividends declared on both the original share and
any such additional shares; (b) all fees, other than nonrecurring account or
sales charges, that are charged to all shareholder accounts in proportion to the
length of the base period. The calculation excludes realized gains and losses
from the sale of securities and unrealized appreciation and depreciation.
The seven day yield and seven day effective yield for the U.S. Government Money
Fund at March 10, 1995 were 3.5% and 3.63%, respectively.
________________________________________________________________________________
GLOBAL BALANCED FUND, GOLD OPPORTUNITY FUND, GLOBAL HARD ASSETS FUND, GLOBAL
SMALLCAP FUND, ASIA DYNASTY FUND, ASIA INFRASTRUCTURE FUND, GOLD/RESOURCES FUND,
INTERNATIONAL INVESTORS GOLD FUND, WORLD TRENDS FUND AND GLOBAL INCOME FUND
39
<PAGE>
________________________________________________________________________________
The above Funds may advertise performance in terms of average annual total
return for 1, 5 and 10 year periods, or for such lesser periods as any of such
Funds have 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:
- --------------------------------------------------------------------------------
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 the maximum sales load (or other charges deducted from
payments) is deducted from the initial $1,000 payment and 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.
Average Annual Total Return for the Period ended December 31, 1994 (after
maximum sales charge).
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life
<S> <C> <C> <C> <C>
International Investors
Gold Fund (Class A) (6.7)% 1.1% 8.2% 12.3%
International Investors
Gold Fund (Class C) - - - (10.8)%
Gold/Resources Fund (Class A) (20.5)% (0.9)% - 5.9%
Gold/Resources Fund (Class C) - - - (13.4)%
Global Income Fund (Class A) (7.3)% 5.5% - 7.5%
Global Income Fund (Class B) - - - (2.0)%
World Trends Fund (2.6)% 2.5% - 8.7%
Asia Dynasty Fund (Class A) (22.5)% - - 13.3%
Asia Dynasty Fund (Class B) (23.9)% - - 3.2%
Global Balanced Fund (Class A) (8.5)% - - (8.2)%
Global Balanced Fund (Class B) (9.6)% - - (8.3)%
Asia Infrastructure Fund (Class A) - - - (28.0)%
Asia Infrastructure Fund (Class C) - - - (24.9)%
Global SmallCap Fund (Class A) - - - (12.0)%
Global SmallCap Fund (Class C) - - - (10.0)%
Global Hard Assets Fund (Class A) - - - (5.7)%
Global Hard Assets Fund (Class C) - - - (2.0)%
</TABLE>
The Global Balanced Fund, Global SmallCap Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, Gold/Resources Fund, World Trends Fund, Global Income Fund,
Gold Opportunity Fund, Global Hard Assets Fund and International Investors Gold
Fund may advertise performance in terms of a 30-day yield quotation. The 30-day
yield quotation is computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last day
of the period, according to the following formula:
40
<PAGE>
================================================================================
YIELD = 2[(A-B/CD + 1)/6/-1]
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during the
period that were entitled to receive dividends
D = the maximum offering price per share on the last day of the
period after adjustment for payment of dividends within 30
days thereafter
================================================================================
The 30-day yield for the 30-days ended February 28, 1995 for the Global Income
Fund was 5.38% for Class A shares and 4.90% for Class B shares.
The Global Balanced Fund, Gold Opportunity Fund, Global Hard Assets Fund, Global
SmallCap Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources Fund,
World Trends Fund, Global Income Fund and International Investors Gold 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)/A](100)=ATR
Where: A = initial investment
B = value at end of period
ATR = aggregate total return
==================================================
The calculation assumes the maximum sales charge is deducted from the initial
payment and assumes all distributions by the Funds 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.
Aggregate Total Return for the period ended December 31, 1994 (after maximum
sales charge).
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life
<S> <C> <C> <C> <C>
International Investors
Gold Fund (Class A) -6.73% 5.65% 120.37% 8,975.94%
International Investors
Gold Fund (Class C) -10.8% -10.8%
Gold/Resources Fund (Class A) -20.5% -4.54% 66.36%
Gold/Resources Fund (Class C) -13.4% -13.4%
Global Income Fund (Class A) -7.35% 30.90% 73.70%
Global Income Fund (Class B) -1.8% -1.8%
World Trends Fund -2.62% 12.91% 115.92%
Global Balanced Fund (Class A) -8.51% -8.51%
Global Balanced Fund (Class B) -9.57% -8.53%
Asia Dynasty Fund (A) -22.57% 24.77%
Asia Dynasty Fund (B) -23.90% 3.33%
Asia Infrastructure Fund (Class A) -28.0% -28.0%
</TABLE>
41
<PAGE>
<TABLE>
<S> <C> <C>
Asia Infrastructure Fund (Class C) -24.9% -24.9%
Global SmallCap Fund (Class A) -12.0% -12.0%
Global SmallCap Fund (Class C) -10.0% -10.0%
Global Hard Assets Fund (Class A) -5.7% -5.7%
Global Hard Assets Fund (ClassC) -2.0% -2.0%
</TABLE>
Advertising Performance
- -----------------------
As discussed in the Funds' Prospectus, the Funds may quote performance results
from recognized publications which monitor the performance of mutual funds, and
the Funds may compare their performance to various published historical indices.
These publications are listed in Part B of the Appendix. In addition, the Funds
may quote and compare their 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. Bankers Trust Company, New York, New York is the custodian of the
- ---------
Trust's (except for the Asia Infrastructure Fund series) portfolio securities,
cash, coins and bullion. State Street Bank and Trust Co., Boston,
Massachusetts, is the custodian of the Asia Infrastructure Fund series'
portfolio securities and cash. 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 a 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.
Independent Accountants. Coopers & Lybrand L.L.P., 1301 Avenue of the Americas,
- -----------------------
New York, New York 10019, serve as the independent accountants for the Trust.
Counsel. Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109
- -------
FINANCIAL STATEMENTS
--------------------
The financial statements of Asia Dynasty Fund, Asia Infrastructure Fund, Global
SmallCap Fund, Global Hard Assets Fund, Global Balanced Fund, International
Investors Gold Fund, World Trends Fund, Global Income Fund, Gold/Resources Fund
and U.S. Government Money Fund for the fiscal year ended December 31, 1994, are
hereby incorporated by reference from the Funds' Annual Reports to Shareholders,
which have been delivered with this Statement of Additional Information and are
available at no charge upon written or telephone request to the Trust at the
address or telephone numbers set forth on the first page of this Statement of
Additional Information.
42
<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 grade 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 of 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 given 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 a 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.
BBB -- Bonds rated BBB are regarding 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.
43
<PAGE>
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 every 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 Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
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 play
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
44
<PAGE>
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. BB 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 may 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 be 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 deb 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.
Description of Standard & Poor'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.
45
<PAGE>
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 Funds 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, New York Post, Investment Company Institute
publications, The New York Times, Barron's, Forbes magazine, Research magazine,
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 Magazine,
Life magazine, 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 Mining Journal, Weekly Stock Charts-Canadian
Resources, Jeweler's Circular Keystone, 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.
46
<PAGE>
PERFORMANCE CHARTS
BEST PERFORMING WORLD BOND MARKETS*
1984 THROUGH DECEMBER, 1994
<TABLE>
<S> <C> <C>
1984 U.S. GOVERNMENTS 14.3%
1985 FRENCH FRANC GOVERNMENTS 50.5%
1986 JAPANESE YEN GOVERNMENTS 40.1%
1987 U.K. GOVERNMENTS 46.6%
1988 AUSTRALIAN GOVERNMENTS 28.8%
1989 CANADIAN GOVERNMENTS 16.2%
1990 U.K. GOVERNMENTS 30.9%
1991 AUSTRALIAN GOVERNMENTS 23.5%
1992 JAPANESE YEN GOVERNMENTS 10.8%
1993 JAPANESE YEN GOVERNMENTS 29.1%**
1994 BELGIAN GOVERNMENTS 12.22
</TABLE>
*IN U.S. DOLLAR TERMS **(YEAR-TO-DATE THROUGH NOVEMBER)
Source: 1984: Salomon Brothers World Bond Index (Government sectors
only), a sample weighted, total return index (Salomon
Brothers World Government Bond Index unavailable until 1985)
of developed world bond markets with remaining maturities of
five years or more.
1985-1994: Salomon Brothers World Government Bond Index, a
market capitalization weighted total return index of
developed world government bonds with remaining maturities
of one year or more.
_________________________
ANNUAL REAL (INFLATION-ADJUSTED) GDP GROWTH
(IN LOCAL CURRENCY TERMS)
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
HONG KONG 7.5% 2.5% 2.3% 4.0% 5.2% N/A
SINGAPORE 11.0% 9.2% 8.3% 6.5% 5.4% 12.55%
THAILAND 11.0% 11.0% 12.2% 7.5% 7.5% N/A
MALAYSIA 8.1% 8.5% 8.5% 8.9% 7.7% 12.23%
INDONESIA 5.7% 6.2% 6.5% 6.4% 5.8% 14.28%
PHILIPPINES 6.4% 5.8% 5.7% -1.0% -.04% 8.49%
TAIWAN 7.1% 7.3% 5.2% 7.2% 6.1% N/A
SOUTH KOREA 12.2% 6.5% 8.6% 8.3% 5.1% 10.46%
PEOPLE'S REPUBLIC 11.0% 3.9% 4.5% 7.0% 12.8%* 30.64%
OF CHINA
</TABLE>
Source: International Financial Statistics (International Monetary Fund) -
3/95
GROSS DOMESTIC PRODUCT: The market value of all final goods and
services produced by labor and property supplied by residents of the
applicable country in a given period of time, usually one year. Gross
Domestic Product comprises (1) purchases of persons (2) purchases of
governments (Federal, State & Local) (3) gross private domestic
investment (includes change in business inventories) and (4)
international trade balance from exports.
*AIG Investment Corporation (GNP
figure)
47
<PAGE>
ASIAN STOCK MARKET TOTAL RETURNS***
The chart below provides returns for the key developing Asian stock markets for
the given periods. While these markets can be volatile, the long-term returns
may be greater than those achieved by more mature equity markets.
<TABLE>
<CAPTION>
5 YR. COMPOUNDED 7 YR. COMPOUNDED
AVG. ANNUAL RETURN AVG. ANNUAL RETUTRN
1988 1989 1990 1991 1992 1993 1994 12/31/92 12/31/94
----- ----- ----- ----- ----- ----- ----- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HONG KONG 22.7% 3.4% 3.7% 42.8% 27.4% 109.9% -31.0% 22.3% 19.4%
INDONESIA 227.8% 77.1% 5.2% -46.4% -2.1% 102.2% -27.0% -4.0% 24.9%
MALAYSIA 23.9% 52.6% -9.9% 3.1% 15.7% 107.3% -20.7% 12.1% 18.8%
PHILIPPINES 0.0% 62.9% -47.7% 83.5% 37.1% 121.4% -8.3% 21.7% 29.5%
SINGAPORE 30.8% 36.1% -14.3% 33.8% -0.8% 71.4% -4.7% 15.4% 20.2%
SO. KOREA 94.0% 0.4% -28.5% -17.1% 0.0% 29.1% 22.1% -1.3% 9.0%
TAIWAN 117.3% 83.5% -55.4% 11.8% -24.6% 82.3% 19.7% -3.9% 18.4%
THAILAND 41.6% 106.1% -29.7% 18.1% 30.4% 97.8% -11.1% 13.7% 27.7%
</TABLE>
Source: Morgan Stanley & Co. Incorporated
Performance provided in U.S. dollar terms and does not include reinvestment of
dividends. Past performance is not necessarily indicative of future results.
***These are unmanaged indices and are not the investment results of the Fund
nor are they the results the Fund would have obtained, which may vary from
returns of these markets. Value of shares of the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
____________________________
MORGAN STANLEY CAPITAL INTERNATIONAL STOCK MARKET INFORMATION
(IN US CURRENCY WITH NET DIVIDENDS REINVESTED)
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AUSTRALIA 5.4% 35.2% -10.82% 33.64% -17.54% 9.30% 36.40% 9.25% 42.28% 19.56%
AUSTRIA -6.3% 28.1% -10.65% -12.63% 6.33% 103.91% 0.57% 2.23% 34.74% 176.26%
BELGIUM 8.2% 23.5% -1.47% 13.77% -10.98% 17.29% 53.63% 7.88% 78.37% 76.61%
CANADA -3.0% 17.6% -12.15% 13.08% -13.00% 24.30% 17.07% 13.91% 9.94% 15.05%
DENMARK 3.8% 32.8% -28.25% 16.56% -0.91% 43.94% 52.67% 13.23% 1.24% 60.29%
FINLAND 52.2% 82.7% -12.96% -18.07% -31.66% -9.63% 13.72% N/A N/A N/A
FRANCE -5.2% 20.9% 2.81% 17.83% -13.83% 36.15% 37.87% -13.81% 78.35% 82.01%
GERMANY 4.7% 35.6% -10.27% 8.16% -9.36% 46.26% 20.60% -24.75% 35.29% 135.19%
HONG KONG -28.9% 116.7% 32.29% 49.52% 9.17% 8.39% 28.12% -4.11% 56.11% 51.69%
IRELAND 14.5% 42.4% 12.18% -16.73% 41.16% 25.09% N/A N/A N/A N/A
ITALY 11.6% 28.5% -22.22% -1.82% -19.19% 19.42% 11.46% -21.30% 108.28% 131.74%
JAPAN 21.4% 25.5% -21.45% 8.92% -36.10% 1.71% 35.39% 43.03% 99.41% 43.07%
MALAYSIA -19.9% 110.0% 17.76% 4.95% -7.91% 55.76% 26.54% N/A N/A N/A
NETHERLANDS 11.7% 35.3% 2.30% 17.80% -3.19% 35.79% 14.19% 7.07% 40.74% 59.62%
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----- ----- ------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEW ZEALAND 8.9% 67.7% -1.43% 18.26% -37.67% 11.44% -13.75% N/A N/A N/A
NORWAY 23.6% 42.0% -22.69% -15.50% 0.65% 45.53% 42.40% 5.67% -2.52% 68.60%
SINGAPORE 6.7% 68.0% 6.28% 24.96% -11.66% 42.26% 33.32% 2.28% 45.17% -22.19%
SPAIN -4.8% 29.8% -21.87% 15.63% -13.65% 9.76% 13.53% 36.91% 121.24% 54.75%
SWEDEN 18.3% 37.0% -14.41% 14.42% -20.99% 31.79% 48.33% 1.99% 65.59% 56.96%
SWITZERLAND 3.5% 45.8% 17.23% 15.77% -6.23% 26.21% 6.18% -9.45% 33.37% 105.72%
UNITED KINGDOM -1.6% 24.4% -3.65% 16.02% 10.29% 21.87% 5.95% 35.09% 26.95% 53.02%
USA 1.1% 9.1% 6.39% 30.07% -3.15% 30.01% 14.61% 2.91% 16.28% 31.08%
</TABLE>
MORGAN STANLEY CAPITAL INTERNATIONAL INDEX
(IN US CURRENCY WITH NET DIVIDENDS REINVESTED)
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
10 YEAR ANNUAL TOTAL RETURN
---------------------------
<S> <C>
AUSTRALIA 13.9%
AUSTRIA 23.6%
BELGIUM 22.4%
CANADA 7.7%
DENMARK 16.1%
FINLAND N/A
FRANCE 20.08%
GERMANY 17.6%
HONG KONG 31.0%
IRELAND N/A
ITALY 14.9%
JAPAN 14.5%
MALAYSIA N/A
NETHERLANDS 19.4%
NEW ZEALAND N/A
NORWAY 12.9%
SINGAPORE 15.8%
SPAIN 19.5%
SWEDEN 18.6%
SWITZERLAND 20.0%
UNITED KINGDOM 17.9%
USA 13.1%
</TABLE>
49
<PAGE>
MARKET INDEX DESCRIPTIONS
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 Free, Singapore Free 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, Y2.5 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 the United States in a
given period of time, usually one year. Gross Domestic Product comprises (1)
purchases of persons (2) purchases of governments (Federal, State & Local) (3)
gross private domestic investment (includes change in business inventories) and
(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.
50
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. Indemnification
---------------
Reference is made to Article VI of the Master Trust Agreement of the
Registrant, as amended, previously filed as Exhibit (1) to the Registration
Statement.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to trustees, officers,
underwriters and controlling persons of the Registrant, pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification is against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 16. Exhibits
--------
(1) Master Trust Agreement (incorporated by reference from Registration
Statement No. 2-97596); Form of First Amendment to Master Trust Agreement
(incorporated by reference from Registration Statement No. 2-97596); Form
of Second Amendment to Master Trust Agreement (incorporated by reference
from Pre-Effective Amendment No. 1); Form of Third Amendment to Master
Trust Agreement (incorporated by reference from Post-Effective Amendment
No. 1); Form of Fourth Amendment to Master Trust Agreement (incorporated
by reference from Post-Effective Amendment No. 3); Form of Sixth Amendment
to the Master Trust Agreement, adding International Investors as a series
of the Trust and establishing investment limitations therefore,
respectively (incorporated by reference from Post Effective Amendment No.
17); Form of Seventh Amendment to Master Trust Agreement, adding Short-Term
World Income Fund and International Equities Fund as series of the Trust
(Incorporated by reference from Post-Effective Amendment No. 19).
(1)(a) Form of Amended and Restated Master Trust Agreement (Incorporated by
reference from Post-Effective Amendment No. 20); Form of Amendment to the
Master Trust Agreement changing the name of Short-Term World Income Fund to
Short-Term World Income Fund-C, and changing the name of International
Equities Fund to International Growth Fund (Incorporated by reference from
Post-Effective Amendment No. 20); Form of second Amendment to the Amended
and Restated Master Trust Agreement adding Asia Dynasty Fund as a series of
the Trust (Incorporated by reference from Post-effective Amendment No. 23);
Third Amendment to the Amended and Restated Master Trust Agreement adding
Global Balanced Fund as a series of the Trust and changing the name of
International Investors to International Investors Gold Fund (incorporated
by reference from Post-Effective Amendment No. 28); Fourth Amendment to the
Amended and Restated Master Trust Agreement adding Global SmallCap Fund and
Asia Infrastructure Fund as series of the Trust (incorporated by reference
from Post-effective Amendment No. 30); Form of Fifth Amendment to the
Amended and Restated Master Trust
<PAGE>
Agreement (incorporated by reference from Post-effective Amendment No. 35);
Form of Sixth Amendment to Amended and Restated Master Trust Agreement
(incorporated by reference from Post-effective Amendment No. 35); Seventh
Amendment to Amended and Restated Master Trust Agreement adding Global Hard
Assets Fund as series of the Trust (incorporated by reference from Post-
effective Amendment No. 36); Eighth Amendment to Amended and Restate Master
Trust Agreement adding Aggressive Gold Opportunity Fund as series of the
Trust (incorporated by reference from Post-effective Amendment No. 37).
(2) By-laws of Registrant (incorporated by reference from Registration
Statement No. 2-97596).
(3) Not Applicable.
* (4) Form of Plan of Reorganization and Liquidation between Asia
Infrastructure Fund and Asia Dynasty Fund (See Exhibit A to Part A of
this filing).
(5)(a) Form of certificate of shares of beneficial interest of the World
Trends Fund (incorporated by reference from Pre-Effective Amendment No.
1); Forms of certificates of shares of beneficial interest of the
Gold/Resources Fund and U.S. Government Money Fund (incorporated by
reference from Post-Effective Amendment No. 1); Form of certificate of
shares of beneficial interest of the World Income Fund (incorporated by
reference from Post-Effective Amendment No. 6). Forms of certificates of
shares of beneficial interest of Short-Term World Income Fund-C and
International Growth Fund (Incorporated by reference from Post-effective
Amendment No. 23); Form of certificate of shares of beneficial interest of
Asia Dynasty Fund (incorporated by reference from Post-effective Amendment
No. 23); Form of certificate of Class B shares of beneficial interest of
Asia Dynasty Fund (incorporated by reference from Post-Effective Amendment
No. 26); Form of certificate of Class A and Class B shares of beneficial
interest of Global Balanced Fund (incorporated by reference from Post-
Effective Amendment No. 26); Form of certificate of Class B shares of
beneficial interest of World Income Fund (incorporated by reference from
Post-effective Amendment No. 29); Certificate of Class A shares of
beneficial interest of World Income Fund; Form of Certificate of Class A
and Class B shares of beneficial interest of Global SmallCap Fund and Asia
Infrastructure Fund (incorporated by reference from Post-Effective
Amendment No. 30) and Form of Certificate of Class A and Class C shares of
beneficial interest of Global Hard Assets Fund (incorporated by reference
from Post-Effective Amendment No. 33); Form of Certificate of Class A and
Class C shares of beneficial interest of Aggressive Gold Opportunity Fund
(incorporated by reference from Post-effective Amendment No. 35).
(5)(b) Instruments defining rights of security holders (See Exhibit (1)
above).
(6)(a) Advisory Agreement (incorporated by reference from Post-Effective
Amendment No. 1).
(6)(b) Letter Agreement to add Gold/Resources Fund and U.S. Government
Money Fund (incorporated by reference from Post-Effective Amendment No. 1);
Letter Agreement to add World Income Fund (incorporated by reference from
Post-Effective Amendment No. 6).
(6)(c) Form of Advisory Agreement between Van Eck Associates Corporation
and Van Eck Funds with respect to Asia Dynasty Fund (Incorporated by
reference from Post-effective Amendment No. 23).
(6)(d) Advisory Agreement between Van Eck Associates Corporation and Van
Eck Funds with respect to Global Balanced Fund (incorporated by reference
from Post-effective Amendment No. 31).
(6)(e) Letter Agreement to add Global SmallCap Fund and Asia Infrastructure
Fund (incorporated
<PAGE>
by reference from Post-effective Amendment No. 31) and Letter Agreement to
add Gold/Resources Fund and International Investors Gold Fund (incorporated
by reference from Post-effective Amendment No. 34).
(6)(f) Advisory Agreement between Van Eck Associates Corporation and Global
Hard Assets Fund (incorporated by reference from Post-effective Amendment
No. 36).
(6)(g) Form of Letter Agreement to add Gold Opportunity Fund (incorporated
by reference from Post-effective Amendment No. 37).
(6)(h) Sub-Advisory Agreement among AIG Asset Management, Inc., Van Eck
Associates Corporation and Van Eck Funds with respect to Asia Dynasty Fund
(Incorporated by reference from Post-effective Amendment No. 24); Sub-
Advisory Agreement among Fiduciary International, Inc., Van Eck Associates
Corporation and Van Eck Funds with respect to Global Balanced Fund
(incorporated by reference from Post-effective Amendment No. 27); and Sub-
Advisory Agreement among AIG Asset Management, Inc., Van Eck Associates
Corporation and Van Eck Funds with respect to Asia Infrastructure Fund and
Form of Sub-Advisory Agreement among Pictet International Management
Limited, Van Eck Associates Corporation and Van Eck Funds with respect to
Global SmallCap Fund (incorporated by reference from Post-Effective
Amendment No. 30).
(7)(a) Distribution Agreement (incorporated by reference from Post-
Effective Amendment No. 1).
(7)(b) Letter Agreement to add Gold/Resources Fund and U.S. Government
Money Fund (incorporated by reference from Post-Effective Amendment No. 1);
Letter Agreement to add World Income Fund (incorporated by reference from
Post-Effective Amendment No. 9); Letter Agreement to add Asia Dynasty Fund
(Incorporated by reference from Post-effective Amendment No.23).
(7)(c) Letter Agreement to add Global SmallCap Fund and Asia Infrastructure
Fund (incorporated by reference from Post-effective Amendment No. 31);
Letter Agreement to add Gold/Resources Fund-C, International Investors Gold
Fund-C, Global SmallCap Fund-C and Asia Infrastructure Fund-C (incorporated
by reference from Post-effective Amendment No. 34) and Letter Agreement to
add Global Hard Assets Fund (incorporated by reference from Post-effective
Amendment No. 36). Form of Letter Agreement to add Gold Opportunity Fund
(incorporated by reference from Post-effective Amendment No. 37).
(7)(d) Amendment to Form of Selling Group Agreement (incorporated by
reference from Post-Effective Amendment No. 9).
(7)(e) Selling Agency Agreement (incorporated by reference from Post-
Effective Amendment No. 12).
(8) Not Applicable.
(9)(a) Custodian Agreement (incorporated by reference from Post-Effective
Amendment No. 1).
(9)(a)(1) Form of Custody Agreement between the Van Eck Funds and Bankers
Trust Company (Incorporated by reference from Post-Effective Amendment No.
20).
(9)(b) Letter Agreement to add Gold/Resources Fund and U.S. Government
Money Fund (incorporated by reference from Post-Effective Amendment No. 1);
Letter Agreement to add World Income Fund (incorporated by reference from
Post-Effective Amendment No. 6).
<PAGE>
(10) Plan of Distribution with respect to International Growth Fund and
Asia Dynasty Fund Incorporated by reference form Post-effective Amendment
No. 23). Form of Plan of Distribution with respect to Class B shares of
Asia Dynasty Fund (Incorporated by reference from Post- effective Amendment
No. 25). Form of Plan of Distribution with respect to Global Balanced Fund
(Class A and B) and World Income Fund (Class B) (incorporated by reference
from Post-Effective Amendment No. 26). Form of Plan of Distribution with
respect to Gold/Resources Fund (Class C), International Investors Gold Fund
(Class C), Global SmallCap Fund (Class C) and Asia Infrastructure Fund
(Class C) (incorporated by reference from Post-effective Amendment No. 34).
(10)(a) Letter Agreement to add Global SmallCap Fund (Class A) and Asia
Infrastructure Fund (Class A) (incorporated by reference from Post-
effective Amendment No. 31) and Letter Agreement to add Global Hard Assets
Fund (Class A) (incorporated by reference from Post-effective Amendment No.
36). Form of Letter Agreement to add Gold Opportunity Fund (Class A)
(incorporated by reference from Post-effective Amendment No. 37). Letter
Agreement to add Global Hard Assets Fund (Class C) (incorporated by
reference from Post-effective Amendment No. 37). Form of Letter Agreement
to add Gold Opportunity Fund (Class C) (incorporated by reference from
Post-effective Amendment No. 37).
* (10)(b) Plan of Distribution with respect to Asia Dynasty Fund.
* (10)(c) Plan of Distribution with respect to Asia Infrastructure Fund.
* (11) Opinion of Goodwin, Procter & Hoar, including consent, with regard to
World Trends Fund (incorporated by reference from Pre-Effective Amendment
No. 1); Opinion Of Goodwin, Procter & Hoar with regard to Gold/Resources
Fund and U.S. Government Money Fund (incorporated by reference from Post-
Effective Amendment No. 1); Opinion of Goodwin, Procter & Hoar with regard
to World Income Fund (incorporated by reference from Post-Effective
Amendment No. 7); Opinion of Goodwin, Procter & Hoar and consent with
regard to International Investors (incorporated by reference from Post-
Effective Amendment No. 17); Opinion of Goodwin, Procter and Hoar with
regard to Asia Dynasty Fund (incorporated by reference from Post-effective
Amendment No. 24); Opinion of Goodwin, Procter & Hoar with respect to the
issuance of Class B shares of Asia Dynasty Fund and with respect to the
issuance of Class A and Class B shares of Global Balanced Fund
(incorporated by reference from Post-effective Amendment No. 27); Opinion
of Goodwin, Procter & Hoar with respect to the issuance of Class A and
Class B shares of Asia Infrastructure Fund and Global SmallCap Fund
(incorporated by reference from Post- effective Amendment No. 31) and
Opinion of Goodwin, Procter & Hoar, including consent, with regard to the
issuance of Class A and Class C shares of Global Hard Assets Fund
(incorporated by reference from Post-effective Amendment No. 36). Opinion
of Goodwin, Procter & Hoar, including consent, with regard to the issuance
of Class A and Class C shares of Gold Opportunity Fund (incorporated by
reference from Post-effective Amendment No. 37).
* (12) Opinion of Goodwin, Proctor & Hoar as to tax consequences (including
consent of such firm)
(13)(a) Forms of Procedural Agreement, Customer Agreement and Safekeeping
Agreement with Merrill Lynch Futures Inc. utilized by World Income Fund,
and Forms of Procedural Agreement, Customer Agreement and Safe Keeping
Agreement with Morgan Stanley & Co. utilized by World Income Fund
(incorporated by reference from Post-Effective Amendment No. 9).
(13)(b) Commodity Customer's Agreement between World Income Fund and Morgan
Stanley & Co. (incorporated by reference from Post Effective Amendment No.
10).
(13)(c) Agreement and Plan of Redomicile and Reorganization between the
Trust and International Investors Incorporated respecting the
reorganization of International Investors Incorporated into the Trust as
its fifth series, International Investors. (incorporated by reference
<PAGE>
from Post-Effective Amendment No. 17).
(13)(d) Form of Accounting and Administrative Services Agreement with
respect to Asia Dynasty Fund (Incorporated by reference from Post-effective
Amendment No. 23).
(13)(e) Accounting and Administrative Services Agreement with respect to
Global Balanced Fund (incorporated by reference from Post-effective
Amendment No. 31).
(13)(f) Letter Agreement to add Global SmallCap Fund and Asia
Infrastructure Fund (incorporated by reference from Post-effective
Amendment No. 31) and Letter Agreement to add Gold/Resources Fund and
International Investors Gold Fund (incorporated by reference from Post-
effective Amendment no. 34). Letter Agreement to add Global Hard Assets
Fund (incorporated by reference from Post-effective Amendment No. 36).
Letter Agreement to add Gold Opportunity Fund (incorprated by reference
from Post-effective Amendment No. 37).
* (14) Consent of Coopers & Lybrand L.L.P.
(15) Not Applicable.
(16) Power of Attorney (incorporated by reference from Post-Effective
Amendment No. 5).
(17) Not Applicable.
_______________
* Enclosed herewith.
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining liability under the Securities Act of
1933, as amended, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933, this registration Statement on
Form N-14 has been signed on behalf of the Registrant by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on
the 18th day of July, 1995.
Van Eck Funds
By:
-----------------------------------
John C. van Eck, President and CEO
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in
the capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
----------------------- President, Chairman 07/18/95
John C. van Eck and Chief Exec. Officer
----------------------- Principal Accounting 07/18/95
Bruce J. Smith Officer, Controller
/s/ Jeremy Biggs*
----------------------- Trustee / /
Jeremy Biggs
/s/ Richard Cowell*
----------------------- Trustee / /
Richard Cowell
/s/ Wesley G. McCain*
----------------------- Trustee / /
Wesley G. McCain
/s/ Rodger A. Lawson*
----------------------- Trustee / /
Rodger A. Lawson
/s/ Ralph F. Peters*
----------------------- Trustee / /
Ralph F. Peters
/s/ David J. Olderman*
----------------------- Trustee / /
David J. Olderman
/s/ Richard Stamberger*
----------------------- Trustee / /
Richard Stamberger
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Fred M. van Eck*
--------------------- Trustee / /
Fred M. van Eck
</TABLE>
_____________________________
*Executed on behalf of Trustee by John C. van Eck, attorney-in-fact.
<PAGE>
[LETTERHEAD OF GOODWIN, PROCTER & HOAR APPEARS HERE]
August 1, 1995
Van Eck Funds
99 Park Avenue
New York, New York 10016
Ladies and Gentlemen:
We have acted as counsel to Van Eck Funds (the "Trust") in connection with
the acquisition of the assets of a series of the Trust by another series of the
Trust pursuant to the Agreement and Plan of Reorganization and Liquidation (the
"Plan") described in the prospectus and proxy statement relating to the Plan
included as part of the Registration Statement on Form N-14 of the Trust (the
"Registration Statement") to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. You have requested our
opinion as to certain federal income tax consequences of the transactions
contemplated by the Plan.
In rendering this opinion, we have reviewed such documents and materials as
we have considered necessary for the purpose of rendering this opinion. In our
examination of the foregoing, we have assumed that such documents as yet
unexecuted will, when executed, conform to the proposed forms of such documents
that we have examined. We have made inquiry as to the underlying facts which we
considered to be relevant to the conclusions set forth in this letter. The
opinions expressed in this letter are based upon certain factual statements
relating to the Trust set forth in the Registration Statement and certain
assumptions set forth below. We expect that such assumptions will be confirmed
to us in representation letters from the Trust dated as of the Closing Date, and
the opinions set forth herein are expressly conditioned on the receipt of such
representation letters from the Trust. Capitalized terms used herein and not
otherwise defined shall have the meanings given them in the Plan.
The discussion and conclusions set forth below are based upon the Internal
Revenue Code of 1986, as amended (the "Code"),/1/ the Treasury Regulations and
existing administrative and judicial interpretations thereof, all of which are
subject to change. No assurance can therefore be given that the federal income
tax consequences described below will not be
- ----------------------
/1/ All section references contained herein are to the Code.
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 2
altered in the future, and we do not assume responsibility to provide notice or
advice to any person or entity regarding any such changes or altered tax
consequences.
I. Background and Facts.
--------------------
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"). The Trust consists of a
number of separate portfolios of securities, two of which are the subject of the
Plan: Asia Dynasty Fund (the "Acquiring Fund") and Asia Infrastructure Fund (the
"Acquired Fund"). The Trust is organized as a Massachusetts business trust.
The Trust operates as a series company pursuant to Rule 18f-2 under the Act.
The Acquired Fund owns securities which are of the character in which the
Acquiring Fund is permitted to invest. The investment objectives of the
Acquired Fund and the Acquiring Fund are generally the same.
II. The Plan of Reorganization.
--------------------------
Subject to the requisite approval of the shareholders of the Acquired Fund
and to the other terms and conditions set forth in the Plan, the Acquired Fund
shall transfer to the Acquiring Fund, and the Acquiring Fund shall acquire from
the Acquired Fund, at the Closing Date, all of the Assets of the Acquired Fund
in exchange for that number of Class A shares of the Acquiring Fund determined
in accordance with Section 2 of the Plan ("Acquiring Fund Shares") and the
assumption by Acquiring Fund of the Assumed Liabilities of the Acquired Fund.
There are no dissenters' rights in any of the foregoing transactions, and
no cash will be exchanged for shares of beneficial interest of the Acquired Fund
in lieu of fractional Acquiring Fund Shares.
As soon after the Closing Date as is conveniently practicable, the Trust
will effect the liquidation and termination of the Acquired Fund in the manner
provided in its Master Trust Agreement and in accordance with applicable law,
and on and after the Closing Date it shall not conduct any business on behalf of
the Acquired Fund except in connection with its liquidation and termination.
The Acquired Fund shall distribute pro rata to its shareholders of record
determined as of the close of business on the Valuation Date (the "Acquired
Fund's Shareholders") the Acquiring Fund Shares received by the Acquired Fund
pursuant to Section 1 of the Plan. Such liquidation and distribution will be
accomplished by the transfer of
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 3
the Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the name of the Acquired Fund's Shareholders and representing
the respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Acquired Fund will
simultaneously be cancelled on the books of the Acquired Fund, and as of the
Closing each outstanding certificate which prior to the Closing represented
shares of the Acquired Fund will be deemed for all purposes to evidence
ownership of the number of Acquiring Fund Shares issuable with respect thereto
pursuant to the Reorganization.
The board of trustees of the Trust has concluded that the Reorganization is
in the best interests of the shareholders of the Acquired Fund and will not
result in the dilution of the interests of the existing shareholders of the
Acquired Fund. In making this determination, the Trustees considered a number
of factors, including the efficiencies resulting from combining the operations
of two separate funds with the same investment manager, same sales load
structure and similar investment objectives and policies.
III. Assumptions.
-----------
We have made the following assumptions with respect to the Reorganization:
(a) As of the Closing Date, the fair market value of the Acquiring Fund
Shares to which each shareholder of the Acquired Fund is entitled will
approximately equal the fair market value of the shares of the Acquired Fund
such shareholder will surrender.
(b) As of the Closing Date, there is no plan or intention by the
shareholders of the Acquired Fund who own five percent (5%) or more of its
stock, if any, and, to the best of the knowledge of the trustees of the Trust
there is no plan or intention on the part of the other shareholders of the
Acquired Fund, to sell, exchange or otherwise dispose of a number of Acquiring
Fund Shares received in the Reorganization that would reduce the Acquired Fund's
Shareholders' ownership of the Acquiring Fund Shares to a number of shares
having a value, as of the Closing Date, of less than fifty percent (50%) of the
value of all of the formerly outstanding shares of the Acquired Fund as of the
Closing Date. For purposes of this representation, shares of the Acquired Fund
exchanged for cash or other property, if any, will be treated as outstanding
shares of the Acquired Fund on the Closing Date. There are no dissenters'
rights, and the Acquiring Fund will not pay cash in lieu of fractional Acquiring
Fund Shares in connection with the Reorganization. Moreover, shares of the
Acquired Fund that are sold, redeemed or disposed of prior to the Reorganization
will be taken into account for purposes of this representation if such shares
are sold, redeemed or disposed of in
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 4
anticipation of the Reorganization. Acquiring Fund Shares acquired by the
Acquired Fund's Shareholders that are sold, redeemed or disposed of after the
Reorganization but pursuant to a pre-arranged plan also will be taken into
account.
(c) The Acquiring Fund will acquire at least ninety percent (90%) of the
fair market value of the net assets and at least seventy percent (70%) of the
fair market value of the gross assets held by the Acquired Fund immediately
prior to the Reorganization. For purposes of this representation, amounts, if
any, paid by or on behalf of the Acquired Fund for reorganization expenses,
amounts, if any, paid by the Acquired Fund to shareholders who receive cash or
other property and all redemptions and distributions made by the Acquired Fund
immediately preceding or in contemplation of the transfer will be included as
assets of the Acquired Fund immediately prior to the Reorganization. However,
(i) regular distributions and redemptions occurring in the ordinary course of
the Acquired Fund's business as an open-end management investment company and
(ii) distributions made to shareholders of the Acquired Fund prior to the
Reorganization in order to pay out all of the Acquired Fund's (a) investment
company taxable income (before the deduction for dividends paid under section
852(b)(2)(D)) and (b) net capital gain (after reduction for any capital loss
carryover) will be excluded.
(d) As of the Closing Date, the Acquiring Fund has no plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued in the
Reorganization except as required by the Act.
(e) As of the Closing Date, the Acquiring Fund has no plan or intention to
sell or otherwise dispose of any of the Assets of the Acquired Fund acquired in
the Reorganization, except for dispositions made in the ordinary course of
business or to maintain its qualification as a regulated investment company
under section 851.
(f) As soon as practicable after the Closing Date, the Acquired Fund will,
in pursuance of the Plan, distribute the Acquiring Fund Shares it receives in
the Reorganization and its other properties, if any, and thereupon will cancel
all of its issued and outstanding shares.
(g) In no event will the Acquiring Fund dispose of assets that in the
aggregate will result in less than fifty percent (50%) of the historic business
assets of the Acquired Fund being used in the business of the Acquiring Fund.
For purposes of this representation, assets disposed of by the Acquired Fund
prior to and in anticipation of the Reorganization will be treated as part of
the historic business assets of the Acquired Fund.
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 5
(h) As of the Closing Date, there is no intercorporate indebtedness
existing between the Acquiring Fund and the Acquired Fund.
(i) Each of the Acquired Fund and the Acquiring Fund has qualified as a
separate association taxable as a corporation for federal income tax purposes
under section 851(h) in each taxable year and will qualify as such as of the
Closing Date.
(j) The Acquiring Fund has elected to be treated as a regulated investment
company under section 851, has qualified as such for each taxable year and will
qualify as such as of the Closing Date. The Acquired Fund has elected to be
treated as a regulated investment company under section 851, has qualified as
such for each taxable year and will qualify as such as of the Closing Date. In
order (i) to ensure continued qualification of the Acquired Fund as a regulated
investment company for federal income tax purposes and (ii) to eliminate any tax
liability of the Acquired Fund arising by reason of undistributed investment
company taxable income or net capital gain, the Acquired Fund has declared or
will declare and will pay to its shareholders of record on or prior to the
Closing Date a dividend or dividends that, together with all previous such
dividends, shall have the effect of distributing (i) all of its investment
company taxable income for the last full taxable year of the Acquired Fund and
any subsequent short taxable year ending on the Closing Date (computed without
regard to any deduction for dividends paid) and (ii) all of its net capital gain
realized in the final full taxable year of the Acquired Fund and any subsequent
short taxable year ending on the Closing Date (after reduction for any capital
loss carryover).
(k) The Acquiring Fund will assume the liability for and pay all expenses
incurred in connection with the Reorganization that are identifiable as a
liability or expense of the Acquiring Fund. The Acquired Fund will assume the
liability for and pay all expenses incurred in connection with the
Reorganization that are identifiable as a liability or expense of the Acquired
Fund. All other liabilities and expenses incurred in connection with the
Reorganization that are not so identified will be assumed and paid by each of
the Acquiring Fund and the Acquired Fund in proportion to their relative net
assets. All such expenses will be solely and directly related to the
Reorganization. No cash will be transferred from the Acquiring Fund to the
Acquired Fund for the purposes of paying any reorganization expenses of the
Acquired Fund. The shareholders of the Acquired Fund and the Acquiring Fund
will pay their own expenses, if any, incurred in connection with the
Reorganization.
(l) As of the Closing Date, the Acquiring Fund does not own, directly or
indirectly, nor has it owned during the past five years, directly or indirectly,
any shares of the Acquired Fund.
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 6
(m) The liabilities of the Acquired Fund to be assumed by the Acquiring
Fund and the liabilities to which the transferred assets of the Acquired Fund
will be subject, if any, have been incurred by the Acquired Fund in the ordinary
course of its business.
(n) The fair market value of the assets of the Acquired Fund to be
transferred to the Acquiring Fund equals or exceeds the sum of the liabilities
to be assumed by the Acquiring Fund plus the amount of liabilities, if any, to
which the transferred assets will be subject.
(o) As of the Closing Date, neither the Acquiring Fund nor the Acquired
Fund is under the jurisdiction of a court in a Title 11 or a similar case within
the meaning of section 368(a)(3)(A).
(p) The Acquired Fund has not distributed and will not distribute to its
shareholders in pursuance of the Plan any "appreciated property" within the
meaning of section 361(c)(2).
(q) Shareholders of the Acquired Fund will not be in control (within the
meaning of section 368(a)(2)(H) and section 304(c)) of the Acquiring Fund after
the Reorganization.
IV. Opinion.
-------
Based upon the foregoing, it is our opinion with respect to the
Reorganization that:
(i) The transfer of all or substantially all of the Acquired Fund's Assets
solely in exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of the Assumed Liabilities of the Acquired Fund, and the
distribution of such Shares to the shareholders of the Acquired Fund, will
constitute a "reorganization" within the meaning of section 368(a)(1)(C). The
Acquiring Fund and the Acquired Fund are each a "party to a reorganization"
within the meaning of section 368(b).
(ii) No gain or loss will be recognized by the Acquired Fund on the
transfer of the Acquired Fund's Assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the Assumed
Liabilities of the Acquired Fund or upon the distribution of the Acquiring Fund
Shares to the Acquired Fund's Shareholders in exchange for their shares of the
Acquired Fund.
(iii) The tax basis of the Acquired Fund's Assets acquired by the
Acquiring Fund will be the same to the Acquiring Fund as the tax basis of such
Assets to the Acquired Fund immediately prior to the Reorganization, and the
holding period of the Assets of the Acquired
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 7
Fund in the hands of the Acquiring Fund will include the period during which
those Assets were held by the Acquired Fund.
(iv) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the Assets of the Acquired Fund solely in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of the Assumed Liabilities
of the Acquired Fund.
(v) No gain or loss will be recognized by shareholders of the Acquired Fund
upon the receipt of the Acquiring Fund Shares by such shareholders, provided
such shareholders receive solely Acquiring Fund Shares (including fractional
shares) in exchange for their Acquired Fund's Shares.
(vi) The aggregate tax basis of the Acquiring Fund Shares, including any
fractional shares, received by each shareholder of the Acquired Fund pursuant to
the Reorganization will be the same as the aggregate tax basis of the Acquired
Fund's Shares held by such shareholder immediately prior to the Reorganization,
and the holding period of the Acquiring Fund Shares, including fractional
shares, to be received by each shareholder of the Acquired Fund will include the
period during which the Acquired Fund's Shares exchanged therefor were held by
such shareholder (provided that the Acquired Fund's Shares were held as a
capital asset on the date of the Reorganization).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our firm
in the Registration Statement or in the prospectus and proxy statement
constituting a part thereof.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
<PAGE>
[LETTERHEAD OF GOODWIN, PROCTER & HOAR APPEARS HERE]
August 1, 1995
Van Eck Funds
99 Park Avenue
New York, New York 10016
Re:Acquisition by Asia Dynasty Fund, a series of Van Eck Funds, of Assets of
Asia Infrastructure Fund, another series of Van Eck Funds
-------------------------------------------------------------------------
Ladies and Gentlemen:
You have requested our opinion as counsel to Van Eck Funds (the "Trust"), a
business trust organized under the laws of the Commonwealth of Massachusetts, in
connection with the transfer of all of the assets of Asia Infrastructure Fund
(the "Acquired Fund"), a series of the Trust, to the Asia Dynasty Fund (the
"Acquiring Fund"), another series of the Trust, in exchange for shares of
beneficial interest of the Acquiring Fund (the "Shares") and the assumption by
the Acquiring Fund of certain liabilities of the Acquired Fund, pursuant to an
Agreement and Plan of Reorganization and Liquidation (the "Agreement"), dated as
of August 1, 1995 by the Trust, on behalf of the Acquiring Fund and the Acquired
Fund.
In connection with this opinion, we have examined:
1. the Agreement;
2. the Amended and Restated Master Trust Agreement of the Trust, dated as
of February 6, 1992, as amended to date, certified by the Secretary of
the Trust (the "Declaration of Trust");
3. the By-laws of the Trust, as amended to date, certified by the
Secretary of the Trust;
4. a certificate as of a recent date of the Secretary of State of the
Commonwealth of Massachusetts as to the good standing of the Trust and
the authority of the Trust to exercise in the Commonwealth all of the
powers recited in the Declaration of Trust and to transact business in
the Commonwealth; and
5. a certificate of the Secretary of the Trust as to, among other things,
actions of the trustees of the Trust relating to the adoption and
approval of the Agreement.
<PAGE>
GOODWIN, PROCTER & HOAR
Van Eck Funds
August 1, 1995
Page 2
As to matters of fact underlying the opinions expressed herein, we have
relied exclusively upon certificates of certain public officials and officers of
the Trust and upon the representations and warranties of the Trust contained in
the Agreement. We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of
natural persons and the conformity to the originals of all documents submitted
to us as copies.
We have made such examination of Massachusetts law as in our judgment is
necessary and appropriate for the purposes of this opinion. We do not purport
to be experts in the laws of any jurisdiction other than the laws of the
Commonwealth of Massachusetts and our opinions expressed herein are limited
solely to the laws of the Commonwealth of Massachusetts.
Anything in this opinion to the contrary notwithstanding, we render or
imply no opinion with respect to compliance with any applicable securities or
anti-fraud statutes, rules, regulations or other similar laws of any state
(including Massachusetts) or the United States of America. In rendering the
opinions herein, we assume that there will be no material changes in the facts
and conditions on which we base such opinions between the date hereof and the
time of issuance of the Shares pursuant to the Agreement.
Based upon and subject to the foregoing, we are of the opinion that all
necessary Trust action precedent to the issuance of the Shares pursuant to the
Agreement has been duly taken. We are further of the opinion that the Shares
when issued in accordance with the terms of the Agreement will be validly
issued, fully paid and nonassessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement of the Trust on Form N-14 pursuant to which the Shares
are to be registered under the Securities Act of 1933, as amended. This opinion
is issued to, and may be relied upon only by, you in connection with the
registration of the Shares and this opinion may not be used by any other person
or for any other purpose without our prior written consent.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR
GOODWIN, PROCTER & HOAR
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE]
CONSENT OF INDEPENDENT ACCOUNTANTS
_______________________________
We consent to the incorporation by reference in the Registration Statement of
Van Eck Funds on Form N-14 and the Statement of Additional Information of Van
Eck Funds dated March 17, 1995 (the "SAI") which has been incorporated by
reference in the Form N-14 of our reports dated February 24, 1995 and February
17, 1995 for the Asia Dynasty Fund and Asia Infrastructure Fund, respectively,
on our audits of the financial statements and financial highlights of the Asia
Dynasty Fund and the Asia Infrastructure Fund which reports are included in
their respective Annual Reports to Shareholders which are also incorporated by
reference in the Registration Statement and SAI.
We also consent to the references to our Firm in the Prospectus under the
caption "Financial Highlights" and in the SAI under the caption "Independent
Accountants".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
August 1, 1995
