<PAGE>
1933 ACT REGISTRATION NO. 2-97596
1940 ACT REGISTRATION NO. 811-4297
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 41
-AND-
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 42
VAN ECK FUNDS
(EXACT NAME AND TITLE OF REGISTRANT)
99 PARK AVENUE, NEW YORK, NEW YORK 10016
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
212-687-5200
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
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 NEWMAN, ESQ., GOODWIN PROCTER & HOAR
EXCHANGE PLACE, BOSTON, MA. 02109
__________________________________________________________________
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
[_] TO PARAGRAPH (B), OR [_] PARAGRAPH (B), OR
IMMEDIATELY UPON FILING PURSUANT ON _____PURSUANT TO
[_] 60 DAYS AFTER FILING PURSUANT TO [_] ON _____ PURSUANT TO
PARAGRAPH (A)(1), OR PARAGRAPH (A)(1) OF RULE 485
[X] 75 DAYS AFTER FILING PURSUANT TO [_] ON _____ PURSUANT TO
PARAGRAPH (A)(2), OR PARAGRAPH (A)(2) OF RULE 485
______________________________________
Registrant has heretofore declared its intention to register an indefinite
number of shares of beneficial interest, $.001 par value, of the Gold/Resources
Fund, U.S. Government Money Fund, International Investors Gold Fund, Global
Income Fund, Asia Dynasty Fund, Global Balanced Fund, Asia Infrastructure Fund,
Global Hard Assets Fund and Gold Opportunity 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 16, 1996 for all series.
<PAGE>
VAN ECK FINDS
CROSS REFERENCE PAGE
PURSUANT TO RULE 501(B) OF REGULATION S-K
UNDER THE SECURITIES ACT OF 1933
FORM N-1A
PART A
ITEM NO. LOCATION IN PROSPECTUS
- -------- ----------------------
1 COVER PAGE
2 N/A
3 FINANCIAL HIGHLIGHTS
4 INVESTMENT OBJECTIVES, POLICIES AND RISKS; FUND
DETAILS RISK FACTORS; ADVERTISING
5 MANAGEMENT
6 FUND DETAILS; TAXES; DIVIDENDS AND DISTRIBUTIONS
7 HOW TO BUY SHARES; PLAN OF DISTRIBUTION
8 HOW TO SELL SHARES
9 N/A
PART B LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
- ------ -----------------------------------------------
10 COVER PAGE
11 TABLE OF CONTENTS
12 N/A
13 INVESTMENT OBJECTIVES, POLICIES AND RISKS; FOREIGN
CURRENCY TRANSACTIONS; OPTIONS TRANSACTIONS;
INVESTMENT RESTRICTIONS; RISK FACTORS - FOREIGN
SECURITIES; REPURCHASE AGREEMENTS
14 TRUSTEES AND OFFICERS
15 N/A
<PAGE>
16 INVESTMENT ADVISORY SERVICES; THE
DISTRIBUTOR; ADDITIONAL INFORMATION
17 PORTFOLIO TRANSACTIONS AND BROKERAGE
18 GENERAL INFORMATION
19 VALUATION OF SHARES; TAX-SHELTERED RETIREMENT
PLANS; INVESTMENT PROGRAMS
20 TAXES
21 THE DISTRIBUTOR
22 YIELD ND PERFORMANCE
23 FINANCIAL STATEMENTS
<PAGE>
VAN ECK FUNDS ASIA SECTOR PORTFOLIO
ASIA SELECT FINANCIAL SERVICES PORTFOLIO
ASIA SELECT PROPERTY PORTFOLIO
ASIA SELECT UTILITIES PORTFOLIO
July___, 1996
________________________________________________________________________________
99 Park Avenue, New York, New York 10016
Shareholder Services: (800) 544-4653
________________________________________________________________________________
The Asia Sector Portfoios (the "Portfolio") currently consist of three separate
mutual funds each of which concentrates its assets in a particular industry in
Asia. Shares of the Funds are offered in three Classes: Class A shares, Class B
shares and Class D shares. Class D share are availiable for purchase only by
qualified retirement plan and other institutional investors.
The Asia Select Financial Services Portfolio (the "Financial Services
Portfolio") seeks long-term capital appreciation by investing in the securities
of companies that are in the financial services business in Asia.
The Asia Select Property Portfolio (the "Property Portfolio") seeks long-term
capital appreciation by investing in the securities of real estate companies
including real estate investment trusts and other companies with substantial
real estate investments in Asia.
The Asia Select Utilities Portfolio (the "Utilities Portfolio") seeks long-term
capital gain by investing in the securities of utilities companies in Asia.
The Funds will invest in those companies and issuers that are expected to
benefit from the development and growth of the Asian economies. Van Eck
Associates Corporation ("Van Eck") serves as investment adviser to the Funds.
Shares in the Funds are not deposits or obligations of, or guaranteed or
endorsed by, a bank. The shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
governmental agency, and are subject to investment risk, including possible loss
of principal.
This Prospectus sets forth concisely information about the Funds that you should
know before investing. It should be read and retained for future reference.
A Statement of Additional Information ("SAI") dated July__, 1996 which further
discusses the Funds has been filed with the Securities and Exchange Commission
("SEC") and is incorporated herein by reference. For a free copy of the SAI,
write to the above address or call the telephone number listed above.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----
<S> <C>
Shareholder Transaction Data...............................................
Fund Summary...............................................................
Fund Details...............................................................
Funds' Investment Objectives, Policies and Risks...........................
Buying and Selling Fund Shares.............................................
Exchange Privilege.........................................................
Dividends and Distributions................................................
Tax-Sheltered Retirement Plans.............................................
Plan of Distribution.......................................................
Facts About Your Account...................................................
Management.................................................................
Advertising................................................................
Taxes......................................................................
Additional Information.....................................................
</TABLE>
2
<PAGE>
SHAREHOLDER TRANSACTION DATA
The following table is intended to assist you in understanding the various
direct and indirect costs and expenses you will bear when you invest in the
Funds. All of the Annual Fund Operating Expenses are paid out of Fund assets.
The Funds' adviser, Van Eck, may from time to time waive fees and/or reimburse
certain operating expenses of a Fund.
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
<CAPTION>
FINANCIAL SERVICES PROPERTY UTILITIES
PORTFOLIO PORTFOLIO PORTFOLIO
Class A Class B Class D Class A Class B Class D Class A Class B Class D
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a per cent of offering
price ) 4 3/4% 0 0 4 3/4% 0 0 4 3/4% 0 0
------ ------ ------ ------ ------ ------ ------ ------- ------
Contingent Deferred Sales
Charge (as percent of the
lesser of purchase price or
NAV at redemption) 0 6% 0 0 6% 0 0 6% 0
------ ------ ------ ------ ------ ------ ------ ------- ------
ANNUAL FUND OPERATING
EXPENSES:
(as a percent of average
net assets)
Management Fees........ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
------ ------ ------ ------ ------ ------ ------ ------- ------
Rule 12b-1 fees 0.50% 1.00% 0 % 0.50% 1.00% 0% 1.00% 0.50% 0 %
------ ------ ------ ------ ------ ------ ------ ------- ------
Other Expenses......... 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
------ ------ ------ ------ ------ ------ ------ ------- ------
Fees................... 0.29% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29%
------ ------ ------ ------ ------ ------ ------ ------- ------
Other Expenses......... 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.51%
------ ------ ------ ------ ------ ------ ------ ------- ------
Total Fund Operating
Expenses............... 2.30% 2.80% 1.80% 2.30% 2.80% 1.80% 2.30% 2.80% 1.80%
------ ------ ------ ------ ------ ------ ------ ------- ------
EXAMPLE
You would bear the 1 year ______ ______ ______ ______ ______ ______ _______ ______
following expenses on
a $1,000 investment
assuming (1) 5% annual
return and (2) redemp-
tion at the end of each 3 years______ ______ ______ ______ ______ ______ _______ ______
time periods:
</TABLE>
THE ABOVE EXAMPLE IS MEANT TO ILLUSTRATE THE EFFECT OF EXPENSES ON RETURN AND
SHOULD NOT BE CONSIDERED TO REPRESENT PAST OR FUTURE RETURNS OR EXPENSES, WHICH
MAY BE GREATER OR LESS THAN THOSE SHOWN. For more information see "Management."
3
<PAGE>
*Other Expenses are estimates which assume $30 million in average daily net
assets. Actual "Other Expenses" may vary.
Van Eck has voluntarily agreed to waive management fees and/or assume Operating
Expenses (excluding interest, taxes, brokerage commissions and extraordinary
expenses) to limit Total Fund Operating Expenses to an annual rate of 2.00% of
the Fund's average daily net assets until the earlier of December 31, 1996 or
until total asset reach $30 million.
FUND SUMMARY
[WHO SHOULD CONSIDER INVESTING IN THE FUND]
Investors who are interested in investing in particular industry sectors of the
economies of Asia and are willing to assume the risks associated with these
investments should consider the Funds. The Funds can allow investors to focus
their investment in certain industries or sectors of the Asian markets that they
expect to provide the best return. The Funds offer investors a way to
participate in the growth opportunities available in Asia. See "Buying and
Selling Shares."
The value of the Funds' investments will vary from day to day, and generally
reflect market, economic and political conditions (in general, and as they
affect particular industries), interest rates and company, political or economic
news. In the short-term, stock prices can fluctuate dramatically in response to
these factors. Over time, however, stocks have shown greater growth potential
than other types of securities, such as bonds. Bonds fluctuate in response to
interest rates and the credit rating of the issuer, generally declining in value
when interest rates rise or the credit rating of the issuer declines. See
"Funds' Investment Objective, Policies and Risks."
[RISK PROFILE]
The value of the Funds' shares can be expected to fluctuate more and to be more
volatile than funds investing in a more diversified portfolio of Asian
securities. The Funds can also be expected to be more volatile than funds
investing only in securities of large U.S. companies or more developed
countries or bond funds. Each Fund's share value will fluctuate in response to
factors affecting the region and the industry in which it concentrates. Neither
the Fund alone nor the Funds in combination are meant to be a complete or
balanced investment program and are intended for those investors who can assume
greater risk with respect to a portion of their investment portfolio.
The Funds' risks include share price and currency fluctuations, confiscatory
taxation, expropriation, nationalization, inefficient securities markets and
settlement practices and lack of developed legal systems. The Funds employ
certain techniques and strategies that could result in additional risk to the
Funds and may be deemed speculative. See "Fund's Investment Objective, Policies
and Risks - Risk Factors."
4
<PAGE>
[INVESTMENT ADVISER As investment adviser, Van Eck manages the
AND DISTRIBUTOR] investments of each Fund and handles the other business
affairs of each Fund under supervision of the Board of
Trustees. Van Eck acts as investment adviser to other
investment companies registered with the SEC. As of
June 30, 1996 Van Eck managed assets totaling
approximately $2 billion. See "Management".
Van Eck Securities Corporation ("Distributor"), a
Delaware corporation, is a wholly-owned subsidiary of
Van Eck, and serves as the Funds' distributor and
markets the Funds' shares.
FUND DETAILS
[ORGANIZATION OF Each Fund is a separate series of Van Eck Funds
THE FUND] (the "Trust"), and is an open-end investment company.
The Trust was organized as a Massachusetts business
trust on April 3, 1985. Each Fund is a diversified fund
as that term is used in the Investment Company Act of
1940, as amended (the "1940 Act"). With respect to 75%
of a Fund's assets, no more than 5% of its assets may
be invested in the securities of any one issuer and not
more than 10% of the outstanding voting securities of
an issuer may be owned.
[BOARD OF TRUSTEES] The Trust is governed by a Board of Trustees,
which is responsible for protecting the interests of
shareholders. The Trustees are experienced executives
who meet throughout the year to oversee each Fund's
activities, review contractual arrangements with
companies that provide services to the Funds and review
performance. The majority of Trustees are not otherwise
affiliated with Van Eck.
[SHAREHOLDER The Fund may hold special shareholder meetings and
MEETINGS] mail proxy materials. These meetings may be called to
elect or remove Trustees, change the fundamental
investment objective and policies, approve an
investment advisory contract or for other purposes. You
are entitled to one vote for each share you own. If you
cannot attend a shareholder meeting you may vote by
proxy.
[FUND PORTFOLIO Van Eck may utilize its broker-dealer and other
TRANSACTIONS] affiliated broker-dealers and other firms that sell
Fund shares to purchase and sell the Funds' portfolio
securities and other assets, provided that their
services and commissions are comparable to those of
other firms.
[PORTFOLIO A Portfolio Manager is responsible for the
MANAGEMENT] day-to-day management of each Fund. Kevin Reid is
Portfolio Manager of the Property Portfolio. ___is
Portfolio Manager of the Financial Services and
Utilities Portfolios.
Other investment professionals at Van Eck who are
expected to have significant input in determining each
Funds', investments include:
5
<PAGE>
Van Eck, its investment personnel and its affiliated companies may
invest for their own accounts in securities which a Fund may own
or purchase pursuant to a code of ethics and other established
procedures for personal investing which restrict certain
activities.
FUNDS INVESTMENT OBJECTIVE, POLICIES AND RISKS
[OBJECTIVE] The Funds' investment objective is to achieve long-term capital
appreciation by investing in the securities of companies in selected industries
that are expected to benefit from the development and growth of the markets or
economies in Asia.
The Funds consider "Asia" to include Bangladesh, Brunei, Cambodia, Hong Kong,
India, Indonesia, Republic of Korea, Laos, Malaysia, Myanmar (formerly, Burma),
Nepal, Pakistan, Papua New Guinea, the People's Republic of China ("China"), the
Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam. Other
countries may be included in the future. Each Fund will normally invest in at
least three countries in Asia. The Financial Services and Utilities Portfolios
do not expect to invest in Japan.The Property Portfolio may invest in Japan.
The Financial Services Portfolio seeks long-term capital appreciation by
investing in the securities of companies that are in the financial services
industry in Asia. These companies include issuers that are directly or
indirectly involved in (a) savings, commercial or industrial banking, (b)
investment banking, (c) securities brokerage, (d) leasing or (e) consumer or
industrial financing.
The Property Portfolio seeks long-term capital appreciation by investing in the
securities of real estate companies in Asia, including conglomerates with
substantial real estate investments. These include among others, office,
warehouse and industrial facilities, hotels and resort facilities, single and
multi-family residential properties and land for development and car parks.
A real estate company is one that is directly or indirectly involved in (a) the
construction, ownership, development, financing, leasing, management or sale of
commercial, industrial or residential real estate or (b) products or services
related to the real estate industry such as building supplies or mortgage
servicing.
The Utilities Portfolio seeks long-term capital gain by investing in the
securities of utilities companies in Asia. A utility company is one that is
directly or indirectly involved in the generation, transmission or
transportation of (a) electricity (b) telecommunications (c) natural gas or
petroleum products or (d) water.
[FUNDS BENEFITS AND RISKS]
[BENEFITS] Van Eck believes Asia has potential and for dramatic economic
growth. The Funds offer investors who believe that Asia has strong long-term
growth potential the ability to concentrate an investment in select industries
in Asia. The Funds' performance is closely tied to economic and political
conditions within Asia and factors affecting the industries in which the Funds
invest. The Funds may not be suitable for all investors and are intended for
investors more actively involved in selecting investments, who are willing to
assume greater risk, and as a complement to a broader investment plan. Neither
the Funds as a group, nor any individual Fund is intended as a complete
investment program.
6
<PAGE>
When you sell your Fund shares they may be worth more or less than you paid for
them. Their value will depend upon the value of the Fund's investments, which
varies in response to many factors. Stock values fluctuate in response to the
activities of individual companies and of the industries in which the Funds
invest, and general market, economic and political conditions. The securities
of smaller, less well-known companies may be particularly volatile. Bond values
fluctuate based on changes in interest rates and in the credit quality of the
issuer. In addition, some of a Fund's investments will be denominated in
foreign currencies which fluctuate in response to global economic, market and
political factors. Van Eck will select investments for each Fund that it
believes offer the greatest opportunity for long-term capital appreciation.
There can be no assurance that Van Eck will be successful.
Van Eck normally invests a Fund's assets according to its investment objective
and policies. Van Eck determines whether an issuer or its principal business is
in the financial services, real estate or utilities industry and whether it is
located in Asia by looking at such factors as its country of organization, the
primary trading market for its securities, and the location of its assets,
personnel, sales, and earnings. When allocating a Fund's investments among
countries, Van Eck considers such factors as the potential for economic growth,
political developments, expected levels of inflation, governmental policies and
the outlook for currency relationships. There can be no assurance that the Fund
will achieve its investment objective.
RISK
INDUSTRY RISK
In addition to the risks generally associated with investing in international
securities and emerging markets, each of the industries in which the Funds
invest have their own special risks. In addition, because the Funds concentrate
investments in a single industry, the share values can be expected to be more
volatile than those of funds that invest in many industries.
Financial Services Industry
The value of companies in this industry are closely related to the level of
interest rates, their value declining sharply as interest rates rise and
increasing as rates fall. They are also closely tied to general economic
conditions, and as economic conditions deteriorate or are believed to be
deteriorating the value of these companies will decline. In addition, the
financial services industry is relatively new to Asia and is not as developed as
in the United State or Europe.
Real Estate Industry
Companies in this industry are subject to risks similar to those involved with
owning real estate. Real estate values may fluctuate as a result of general and
local economic conditions, increased building and increased competition,
increases in property taxes and operating expenses, changes in zoning and other
laws, casualty and condemnation losses, limitations on rents, governmental
actions, the ability of borrowers and tenants, to make loan payments and rents,
and increases in interest rates.
7
<PAGE>
Utilities Industry
The value of companies will fluctuate as a result of factors which affect the
demand for utilities, such as economic growth and stability, interest rates,
increases in labor and production costs, governmental regulation of rates and
profit, disruption of supplies and catastrophes such as earthquakes and floods.
[EMERGING MARKET RISKS]
Investors should expect volatility in the value of each Fund's shares. Emerging
markets are characterized by wide fluctuations in securities prices. Countries
in Asia are in various stages of economic development. Each has its own risks.
Most countries in Asia are considered emerging markets, which generally have
low-to-middle-income economies. Most countries in this region are heavily
dependent on international trade. Some have prosperous economies but are
sensitive to world commodity prices. Others are especially vulnerable to
recessions and economic factors in other countries. Some countries in the
region have experienced rapid growth recently, and many suffer from obsolete
financial systems, economic problems, or less developed legal systems. Many are
experiencing political and social uncertainty. In addition, the return of Hong
Kong to Chinese control may affect the entire region known as "Greater China".
The securities markets in Asia may be subject to emergencies caused by
governmental actions and political and economic factors. In the event an
emergency exists, a Fund may, with the approval of the SEC, suspend your right
to redeem your Fund shares during the emergency.
[INTERNATIONAL INVESTING RISKS]
The Funds' policy of investing in non-U.S. markets and, in particular, emerging
markets, involves increased or additional economic and political risks from
those mentioned above as compared to investing in the U.S. or other developed
markets. The Funds' share price will be affected by events and factors in the
various world markets.
The markets in Asia have generally less stringent investor protection rules and
enforcement, disclosure standards and governmental regulation. In addition,
some foreign companies are not subject to the same financial accounting,
auditing and reporting standards that are required of U.S. companies. Compared
to U.S. markets, foreign markets are less developed and less liquid, have fewer
issuers, may be more subject to influence by large investors and more
susceptible to manipulation. Some have unstable governments. In addition to
the political and economic factors that can affect the value of foreign
securities, a governmental or quasi-governmental issuer may be unwilling to
repay principal and interest when due and may require that the conditions for
payment be renegotiated. Investing in countries with emerging economies or
securities markets is subject to the additional risks associated with political
and economic structures undergoing rapid change; economies heavily dependent
upon international trade and extremely sensitive to commodity prices and to
economic factors in other countries; the lack of developed securities markets
and effective regulations; less developed legal and economic sectors,
restrictions on foreign ownership of securities; and governments that in the
past have failed to recognize private ownership, have nationalized or
expropriated private property, imposed currency exchange controls, levied
confiscatory taxes and limited the removal of funds or other assets.
8
<PAGE>
[OTHER RISKS]
In addition, because the Funds may invest in a wide variety of investments and
use various investment techniques, the Funds may be riskier and more volatile
than funds whose investments and investment techniques are less varied. Some of
the more common risks associated with the investments and investment techniques
available to the Funds and not discussed here are summarized below in "Fund's
Investments and Techniques." See also "Risk Factors" in the SAI.
[INVESTMENT POLICIES] In pursuing its goals, each Fund will focus on equity
securities but may also invest in other types of financial instruments,
including debt securities of any quality. Each Fund may invest in the securities
of any issuer within its industry, including companies and other business
organizations, as well as governments and governmental and quasi-governmental
agencies. Each Fund, however, will tend to focus on the equity securities of
both large and small companies in its industry that are located in Asia. Except
in unusual circumstances, at least 65%, and at times nearly all, of a Fund's
total assets will normally be invested in securities of issuers in its industry
that are expected to benefit from the development and growth of the economies of
Asia. Each Fund will normally invest in at least three countries in Asia.
Within its industry, each Fund may invest all of its assets in a particular
segment of the industry.
Van Eck may use different investment techniques to attempt to achieve a Fund's
investment objective or to hedge the Fund's risks, but there is no guarantee
that these strategies will work as Van Eck intends. Also, as a mutual fund, the
Fund seeks to spread investment risks by diversifying its holdings among many
companies and countries. Of course, diversification does not eliminate risk and
when you sell your Fund shares, they may be worth more or less than you paid for
them. Unlike many other Funds, the Funds do not diversify among industries and
the value of its shares will reflect events affecting the industry.
A Fund may, in seeking to avoid foreign taxes or comply with foreign investment
restrictions, invest in certain countries in Asia through wholly-owned entities
organized in another country.
Each Fund's investments will normally be denominated in a foreign currency. To
attempt to protect against uncertainties in the markets or in anticipation of
the need for cash to meet redemption requests or settlement of portfolio
transactions, a Fund may, for temporary defensive purposes, invest in short-term
debt securities and money market instruments in excess of 35% of its total
assets. There is no limit on the amount of foreign currencies or short-term
instruments denominated in a foreign currency a Fund may hold.
Each Fund may invest in a variety of instruments that are or may become
available in the market, and Van Eck may use a number of investment techniques
and strategies to achieve the Fund's objective. There are a number of risks and
restrictions associated with these instrument types and investment practices
that should be considered by investors. The investment types and investment
practices that will be used most often are listed below under "Funds,
Investments and Techniques." (A complete listing of each Fund's policies and
limitations and more detailed information about each Fund's investments and
strategies is contained in the Funds' SAI.) Policies and limitations are
considered at the time of purchase; the sale of instruments is not required in
the event of a subsequent change in circumstances.
9
<PAGE>
Van Eck may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help a Fund
achieve its goals. Current holdings and recent investment strategies are
described in a Fund's financial reports which are sent to shareholders twice a
year. For a free SAI or annual or semi-annual report, call (800) 544-4653 or
write to a Fund at the address on the cover. The Funds commenced operations on
____, 1996 the first semi-annual report for the period ended December 31, 1996
will be available on or about March 1, 1997.
[FUND'S INVESTMENTS AND TECHNIQUES]
EQUITY SECURITIES. Equity securities may include common stocks, preferred
stocks, direct equity interests in unincorporated entities or enterprises,
convertible securities, and warrants. Common stocks, the most familiar type of
equity security, represent an equity (ownership) interest in a corporation.
Although equity securities have a history of long-term growth in value, their
prices fluctuate based on changes in a company's financial condition and on
overall market, economic and political conditions. Smaller companies and
companies concentrated in a particular industry are especially sensitive to
these factors. Equity swaps, indexed securities and similar instruments whose
values are tied to one or more equity securities are considered to be equity
securities.
DIVERSIFICATION. Diversification of a Fund's investment portfolio can reduce
the risks of investing. This may include limiting the amount of money invested
in any one issuer.
RESTRICTIONS: With respect to 75% of total assets, a Fund may not invest more
than 5% of its total assets in securities (including debt securities) of any one
issuer. These limitations do not apply to U.S. government securities. Except
for temporary defensive purposes, each Fund will invest more than 25% of its
total assets in the industry in which it concentrates.
REAL ESTATE INVESTMENTS. Real Estate Investments include debt and equity
securities of companies engaged in the real estate business, REIT, real estate
mortgage investment companies and similar securities.
REITS
A REITs assets generally consist mostly of interest in real estate and real
estate loans. REITs can be calssified as equity, mortgage or hybrids. An equity
REIT owns property and realizes income from rents and gain or loss from the sale
of real estate interests. A mortgage REIT invests in real estate mortgage loans
and realizes income from interest payments on the loans. A hybrid REIT combines
both. An equity REIT maybe an operating or financing company. An operating
company provides operational and management expertise to and exercises control
over, many if not most operational aspects of the property.
RESTRICTIONS: The Propety Portfolio currently will not invest more than 15% of
its assets in REITs which are not self-managed or self-administered.
DEBT SECURITIES. Bond and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. In general, bond prices rise when interest
rates fall,
10
<PAGE>
and vice versa. Debt securities have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are speculative
and involve greater risk of default or price fluctuations due to changes in the
issuer's creditworthiness, or the reality that the issuer may already be in
default. The market prices of these securities may fluctuate more than higher-
quality securities and may decline significantly in periods of general economic
difficulty or downturns in a particular industry.
RESTRICTIONS: Each Fund currently intends to limit its investments in debt
securities rated lower than Baa by Moody's Investors Services ("Moody's") to
25% of its total assets. Purchase of a debt security is consistent with a
Fund's debt quality policy if it is rated at or above the stated level by
Moody's or rated in the equivalent categories by Standard & Poor's Corporation
("S&P"), or other rating agency or is unrated but judged to be of equivalent
rating quality by Van Eck. The ratings of ratings agencies represent their
respective opinions as to the quality of the obligations they undertake to rate.
Ratings, however, are general and are not absolute standards of quality.
The SAI provides an explanation of the ratings assigned to debt holdings (not
including money market instruments).
FOREIGN AND EMERGING MARKETS SECURITIES. Each Fund will normally invest a
significant portion of its assets in securities of issuers located outside the
U.S. and traded outside the U.S. These securities will usually be non-U.S.
dollar denominated, but also may be dollar denominated (such as ADRs). Changes
in the value of foreign currencies can significantly affect the value of a
Fund's investments and share price. Van Eck may use a variety of techniques to
either increase or decrease a Fund's exposure to any currency.
ADJUSTING INVESTMENT EXPOSURE. Each Fund may use various techniques to increase
or decrease its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect security values.
These techniques may involve derivative transactions such as buying and selling
options, futures and forward contracts, entering into currency exchange
contracts, swap agreements, purchasing indexed securities, and selling
securities short.
Van Eck may use these practices to adjust the risk and return characteristics of
the Fund's portfolio of investments. If Van Eck judges market conditions
incorrectly or employs a strategy that does not correlate well with a Fund
investment, these techniques could result in a loss to the Funds, regardless of
whether the intent was to reduce risk or increase return. These techniques may
increase the volatility of a Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. In addition, these techniques
could result in a loss to the Fund if the counterparty to the transaction does
not perform as promised.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund buys a security at one
price and simultaneously agrees to sell it back at a higher price. The
difference between the sale and repurchase prices represents interest earned by
a Fund. Delays or losses to a Fund could result if the other party to the
agreement defaults or becomes insolvent.
11
<PAGE>
FOREIGN REPURCHASE AGREEMENTS. Repurchase agreements with foreign dealers may
be less well-secured than U.S. repurchase agreements, and may be denominated in
foreign currencies. They also may involve greater risk of loss or counterparty
default. Some counterparties in these transactions may be less creditworthy and
subject to less regulation than those in U.S. markets.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by Van
Eck, under the supervision of the Board of Trustees, to be illiquid, which means
that they may be difficult to sell promptly at an acceptable price. Securities
subject to legal or contractual restrictions and repurchase agreements maturing
in more than seven days are considered illiquid. Difficulty in selling these
securities may result in a loss or may be costly to the Fund.
RESTRICTIONS: A Fund may not enter into a repurchase agreement maturing in more
than seven days if, as a result, more than 15% of the Fund's net assets would be
invested in these repurchase agreements and other illiquid securities.
SHORT SELLING. Short selling involves selling a security that a Fund does not
own and has borrowed from a broker. When the Fund purchases the security to
replace the borrowed security, if the value of the security declines as
anticipated, the Fund will profit to the extent of the difference between the
purchase price and the sale price. If the price of the security increases, the
Fund will suffer a loss.
RESTRICTIONS: The value of securities of any one issuer sold short will
constitute no more than 2% of a Fund's net assets or no more than 2% of the
issuer's outstanding class of securities. Only liquid securities will be sold
short. The value of the securities sold short will constitute no more than 25%
of the Fund's net assets.
DIRECT INVESTMENTS A direct investment generally illiquid and is the purchase
of an equity (ownership) interest in a private transaction, and generally
involved entering into a shareholder or similar agreement and appointment of a
Fund representative to the enterprises board of directors or similar body. The
representative is not appointed to exercise management or control but to protect
the Fund's rights and to facilitate eventual disposition of the equity interest.
RESTRICTION: No more than 10% of a Funds net assets will be committed to
direct investments.
OTHER INSTRUMENTS. Other securities in which the Funds may invest include
rights and securities of investment companies.
LEVERAGE. Each Fund may use leverage by borrowing from banks, or through reverse
repurchase agreements, futures, options and similar transactions. Leverage will
subject the Fund's share price to greater fluctuation.
RESTRICTIONS: A Fund may not borrow in an amount exceeding 33-1/3% of its total
assets.
LENDING OF PORTFOLIO SECURITIES. Securities may be lent to broker-dealers and
institutions, including affiliates of Van Eck. Lending is a means for a Fund to
earn income. This practice could result in a loss or a delay in recovering a
Fund's securities.
12
<PAGE>
RESTRICTIONS: Loans of a Fund's securities, in the aggregate, may not exceed
33-1/3% of the Fund's total assets.
FUNDAMENTAL POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, which are subject to change only with shareholder approval, and are
all listed below. All policies stated throughout this Prospectus, other than
those identified in this section as fundamental, can be changed without
shareholder approval.
The Financial Services Portfolio's investment objective is to seek long-term
capital appreciation by investing in the securities of companies that are in the
financial services industry in Asia. The Property Portfolio's objective is
long-term capital appreciation by investing in the securities of real estate
companies in Asia including REITs. The Utilities Portfolio's objective is long-
term capital appreciation by investing in securities of utilities companies in
Asia. A Funds' objective can be changed only with shareholder approval.
Each Fund, with respect to 75% of total assets, may not invest more than 5% of
its total assets in the securities (including debt securities) of any one
issuer, and may not own more than 10% of the outstanding voting securities of a
single issuer, excluding entities of which it is the sole owner. Each Fund will
invest at least 25% of its total assets in its industry. The Fund may borrow in
an amount not exceeding 33-1/3% of its total assets. Loans of each Fund's
securities, in the aggregate, may not exceed 33-1/3% of its total assets.
BUYING AND SELLING FUND SHARES
You may purchase shares of the Funds on any day the New York Stock Exchange
("NYSE") is open for business at the net asset value plus any applicable sales
charge. If you wish to purchase shares of more than one Fund, separate
applications and separate checks must be sent to each Fund. The application
included with this prospectus may be photocopied. If the application does not
indicate which Fund is to be purchased, shares of the Van Eck Funds/U.S.
Government Money Fund will be purchased and the investor notified. Shares of
the U.S. Government Money Fund may then be exchanged for shares of the desired
Fund. Shares will be purchased or redeemed at the next share price calculated
after the investment or request for redemption is received and accepted. The
share price is calculated at the close of trading on the NYSE currently 4:00
P.M., Eastern Time, on each day the NYSE is open for business. Purchases and
sales will be made in U.S. Dollars. The Fund may, without notice, suspend the
offering of shares or reject any purchase order. You may purchase or sell full
and fractional shares.
[HOW TO BUY SHARES]
[THROUGH A FINANCIAL INSTITUTION OR DST]
Fund shares may be purchased either by (1) ordering the shares through a
financial institution and forwarding a completed Application or investment firm
settlement instructions with payment; or (2) completing an Application and
mailing it with payment to the Fund's Transfer Agent and Dividend Paying Agent,
DST Systems, Inc., c/o Van Eck Funds, P.O. Box 418707, Kansas City, Missouri
64141.
13
<PAGE>
[BROKERS, BANKS AND FINANCIAL PROFESSIONALS]
You may purchase or sell your shares through a broker, a bank or investment
professional. These financial institutions may charge a fee for their services.
Your financial institution has the responsibility of submitting orders it
receives from you prior to the close of trading on the NYSE 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, to receive
that day's price.
Certain financial institutions may enter into sales agreements with the
Distributor and may place confirmed purchase orders on behalf of their
customers, with payment to follow within three business days. If payment is not
received by the Fund, the financial institution will be held liable for any fees
or losses the Fund or the Distributor may incur.
Some unaffiliated financial institutions have entered into agreements with the
Fund, the Distributor and/or Van Eck to provide services to shareholders. If
such financial institutions provide assistance in marketing the Fund, the
financial institutions will be compensated by Van Eck from its own resources.
[PAYMENT] Payment for shares 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. Double endorsed checks will not be accepted.
[MINIMUM PURCHASES] Initial purchases for the Class A or Class B shares must be
in the amount of $1,000 or more per account. Subsequent purchases must be in the
amount of $100 or more. Purchases may be made through selected dealers or banks
or investment professionals or by forwarding payment to DST Systems, Inc.
("DST"). Either minimum may be waived by a Fund in special circumstances deemed
to be appropriate by the Fund. The minium initial investment for the Class D
shares is $100,000 and subsequent purchases must be at least $1,000.
[ALTERNATIVE PURCHASE ARRANGEMENTS] Shares of each Fund may be purchased under
alternative purchase arrangements: Class A shares, Class B shares or Class D
shares. When you purchase Class A shares you will pay an initial sales charge
at the time of purchase. If you purchase Class B shares you will not pay a
sales charge at the time of purchase, but will be subject to a contingent
deferred sales charge that will be deducted from your redemption proceeds if you
redeem at any time within six years of purchase. Class D shares are available
for purchase only by qualified retirement plans and other institutional
investors and are sold without in sale charge.
The alternative purchase arrangements permit you to choose the method of
purchasing shares that is most advantageous given the amount of the purchase,
the length of time you expect to hold the shares and other circumstances. It is
your responsibility and that of your Broker or Agent to determine which sales
charge alternative is most advantageous. Class A shares will normally be more
advantageous if you qualify for a reduced initial sales charge or you expect to
hold shares for a long period of time. To assist you in determining which
alternative purchase arrangement is suitable for you the table under Transaction
Data on page 3 sets forth examples of the charges that apply to each class.
Class D shares are most advantageous for qulified retirement plans and
institutional investors able to meet the minium investment.
14
<PAGE>
The purpose and function of the initial sales charge and the contingent deferred
sales charge and ongoing distribution and services fees on the Class A and Class
B shares are to compensate Brokers and Agents for the services they provide to
investors.
CLASS A SHARES When you purchase Class A shares you will pay an initial sales
charge at that time and will not be subject to any sales or redemption charge
when you sell your shares. Class A shares are subject to an ongoing
distribution and services fee (Rule 12b-1 fee) at a lower rate than the
distribution and services fee for the Class B shares. Because Class A shares
are subject to a lower distribution and services fee they will normally pay
higher dividends per share and can be expected to have a higher return per share
than the class B shares. The higher dividends and return may or may not offset
the deduction of a sales charge at the time of purchase.
CLASS B SHARES When you purchase Class B shares you will not pay a sales charge
at the time of purchase but will be subject to a contingent deferred sales
charge ("CDSC") if you sell your shares within six years of purchase. The CDSC
is reduced each full year that the shares are held. Class B shares will convert
to Class A shares eight years after the end of the month in which your shares
were purchased. Class B shares are subject to an ongoing distribution and
services fee at a higher rate than the Class A shares. Class B shares will have
a higher expense ratio and normally pay lower dividends and have a lower return
than the Class A shares. Class B shares, however, permit all of your investment
dollars to work from the time you make an investment. This may or may not be
offset by the higher fees.
CLASS D SHARES Qualified retirement plans and institutional investors
purchasing Class D shares do not pay an initial sales charge or a CDSC and are
not subject to a distribution or service fee.
CONVERSION FEATURE. Class B shares held for eight years after the end of the
month in which they were purchased and dividends and distributions paid on those
shares will convert automatically to Class A shares and will no longer be
subject to the higher distribution and services fees. No sales charges or other
fee will be imposed on the conversion. If you request certificates for Class B
shares the return and deposit of these certificated shares may delay the
conversion to Class A shares. Further, the conversion of Class B shares to
Class A shares is subject to the continuing availability of an opinion of
counsel that the conversion will not result in an adverse tax consequence to the
investor, such as being considered a taxable event under the Federal Income Tax
law. In the event of an adverse tax consequences, the conversion may be
suspended and shares might be subject to the higher distribution services fee
for an indefinite period that extends beyond the eight year period.
CALCULATING THE CONTINGENT DEFERRED SALES CHARGE.
The amount of the contingent deferred sales charge applicable to a redemption of
Class B shares will be calculated in a manner that results in the lowest
possible charge. Unless you instruct otherwise, Class A shares will be redeemed
first then Class B shares held for the longest period and then shares
attributable to appreciation and those acquired by reinvestment of dividends.
The contingent deferred sales charge will be waived in the event of death or
disability of a class B shareholder or, if the account is a joint account with
right of survivorship of his or her spouse. A person will be considered disabled
if he or she meets the definition in section 72(m) of the Tax Code.
Satisfactory proof of death or disability will be required. The redemption must
be made within one year of death or initial determination of disability, and
applies only to shares held at the time of death or
15
<PAGE>
initial determination of disability. The sales charge may be waived for
redemptions resulting from a lump sum or other distribution after retirement or
in the case of an IRA or SEP-IRA plan or 403(b) custodial account after you have
attained the age of 70 1/2, or, in the case of a qualified pension or profit
sharing plan, if your employment has terminated after you are 55 or older. The
sales charge may also be waived on redemptions of excess deferral amounts or
excess contributions. The charge is not waived from any distribution from IRAs
or other qualified retirement plans that were not specifically described above.
You or your broker or agent must notify DST at the time you redeem your shares
whenever the waiver of the contingent deferred sales charge applies.
[SALES CHARGES] The sales charge on Class A shares vary depending on the amount
of purchase and eligibility to participate in special purchase programs. See
"Group Purchases," "Combined Purchases," "Letter of Intent," and "Right of
Accumulation," below. The Funds also pay the Distributor for promotional and
distribution services (see "Plan of Distribution").
Class A Shares
- --------------
<TABLE>
<CAPTION>
Sales Charge as a Percentage of
-------------------------------
Dollar Amount of Purchase Offering Price Net Amount Discount to
- ------------------------- -------------- ---------- -----------
Invested Brokers or Agent
-------- -----------------
as a % of the 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 $1000,000 2.00% 2.0% 1.65%
$1,000,000 and over None*
</TABLE>
*For any sale of $1,000,000 or more of the Class A Funds 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 the sale and is calculated as a quarterly
payment equal to 0.0625% (.25% on annual basis) of the average daily net asset
value of those shares in the account throughout the period. An eligible sale is
a single sale for a single client (sales for other clients cannot be combined
for purposes of qualification for the finder's fee). Eligible sales registered
to a street name or nominee 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. Please contact
the Distributor to determine eligibility to receive such fee and additional
information.
Class B Shares
- --------------
<TABLE>
<CAPTION>
Shareholder's Time of Redemption Contingent Deferred Sales Charge
- -------------------------------- --------------------------------
as a percentage of the lesser of NAV or
----------------------------------------
purchase price
--------------
<S> <C>
During Year One..... 6.0%
During Year Two.... 5.0%
During Year Three.... 4.0%
During Year Four.... 3.0%
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
During Year Five..... 2.0%
During Year Six.... 1.0%
After Year Six None
</TABLE>
The Distributor will pay the Broker or Agent from its resources a commission of
4% of the amount of the purchase at the time of sale.
Broker and Agents may receive different compensation for selling Class A or
Class B shares.
Fund shares may be purchased without a sales charge by trustees, officers and
full time employees and affiliates of the Funds, Van Eck or the Distributor and
by employees of Brokers or Agents and each of their respective spouses and
children under age of 21 or in connection with a merger or other business
combination. Van Eck may purchase shares without a sales charge for the benefit
of certain discretionary advisory accounts it manages meeting minimum asset
requirements. Shares may also be purchased at net asset value (a) (i) through an
investment advisor purchasing through another financial institution (which may
impose a transaction fee on the purchase), (ii) by an investment advisor for its
own account or for a bona fide advisory account over which it has investment
discretion or (iii) through a financial planner who charges a fee for its
services and makes 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 companies 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 which has a purpose other than purchase
of Fund shares at net asset value. Foreign banks and other foreign fiduciary
accounts may purchase shares for the benefit of foreign investors. Clients of
Netherlands insurance companies who are not U.S. citizens or residents may
purchase shares without a sales charge. Retirement and deferred compensations
plans and trusts funding these plans, including "rabbi trusts" (excluding IRAs
and SEP-IRAS, unless they qualify for purchase under one of the other
exceptions) that participate in a net asset value share purchase program offered
by a financial institution which maintains an omnibus account with a Fund may
purchase shares without a sales charge. Brokers may charge a transaction fee for
effecting purchasers at net asset value or redemptions.
To the extent legally permitted the Distributor will, at its own expense,
provide additional promotional incentives or payments to Brokers and Agents in
the form of merchandise (including luxury merchandise including trips to luxury
resorts at exotic locations or attendance at seminars/conferences at luxury
resorts) to Brokers and agents that sell shares of the Funds. In some
instances, these incentives or payments will be offered only to certain Brokers
or Agents who may sell significant amounts of Fund shares. Brokers and Agents
who receive additional concessions or substantially all of the sales charge may
be deemed to be underwriters as that term is used in the federal securities
laws.
SPECIAL PURCHASE PROGRAMS
AVAILABILITY OF DISCOUNTS
You or your Broker or Agent must notify DST or the Distributor that you qualify
for a quantity or reduced sales charge on the purchase. The quantity discounts
described above may be modified or terminated at any time without prior notice.
17
<PAGE>
The term "purchase" as used below includes purchases by an individual and any
concurrent purchases by the individual's spouse and children under age 21 and
certain corporate, partnership, trust and estate accounts.
Group Purchases
- ---------------
Individual members of a qualified group may purchase Fund shares at the reduced
Class A sales charge applicable to the combined value of the shares owned by the
entire group and shares being purchased.
A "qualified group" is one (i) which has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount,
(iii) satisfies uniform criteria which enables the Distributor to realize
savings in its cost of distributing shares (iv) has more than ten members.
Qualified groups should contact the Distributor for additional requirements.
Combined Purchases
- ------------------
Purchases of shares of the Funds and other funds in the Van Eck Group of Funds
(except the US Government Money Fund) may be combined to qualify by a reduced
sales charge in Class A Funds.
Letter Of Intent.
- -----------------
By signing a Letter of Intent ("LOI"), and agreeing to purchase shares in the
Funds or other funds in the Van Eck Group of Funds, except for the US Government
Money Fund, investors may qualify for a reduced sales charge in Class A Funds.
The total purchases made under the Letter within a thirteen month period must
equal or exceed the appropriate reduced sales charge level ("breakpoint").
Purchases of any of the funds in the Van Eck Group of Funds, except for the US
Government Money Fund, during the thirteen month period may be counted toward
the Letter of Intent. A Letter of Intent may be back-dated to include purchases
made within the prior ninety days. If you do not purchase the amount agreed to
in the Letter, the sales charge will be adjusted and deducted from your account
to reflect what would have been due at the breakpoint on the total purchase
amount during the 13 months. For further details including escrow provisions,
see the "Letter or Intent" in the instructions to the Application.
Right of Accumulation
- ---------------------
In determining the applicable sales charge for Class A Funds, the current value
of the shares that you own in any of the Van Eck Group of Funds (except for the
US Government Money Fund) will be added to the amount you are currently
purchasing. This may qualify the current purchase for a reduced sales charge.
[HOW TO SELL SHARES]
You may sell your shares on any business day by writing to or calling DST or
your financial institution. If you purchased shares through an investment
professional you may be required to sell your shares through that investment
professional if your shares are held in "street name". The redemption price will
be the net asset value per share next determined after the receipt of a request
in proper form as described herein. Sales proceeds check are mailed to your
address on record or, if you specifically request, wired to your account of
record. When sales on proceeds checks are wired to your bank account this is
called an Expedited Redemption and must be elected on the Application.
Currently, the Funds do not impose a fee for redemption checks or wires, but may
do so at a later date. ["Street name" shares are registered in a financial
institution's name, such as a broker/dealer or bank.]
18
<PAGE>
[IN WRITING]
To sell shares you may write to DST, c/o Van Eck Funds, P.O. Box 418707 Kansas
City, Missouri 64141. Your redemption request must (1) be signed by all owners
exactly as their names appear on the account registration (2) specify the number
of shares or amount of investment to be redeemed or that all shares be redeemed
(3) contain a signature guarantee of each owner's signature by an eligible
guarantor institution (notarization by a notary public is not acceptable) for
redemption's of $50,000 or more, or if the redemption check is to be made
payable to other than the owners or is to be sent to an address other than the
registered address or the registered address has been changed within the past 30
days and (4) provide any additional documents regarding accounts of estates,
trusts, guardianships, custodianships, partnerships and corporations (e.g.,
appointments as executor or administrator, trust instruments or certificates of
corporate authority) requested by DST. Banks, trust companies, savings
institutions and broker/dealers are eligible to guarantee your signature.
[SELLING OR EXCHANGING BY TELEPHONE]
If you have elected the Telephone Redemption or Exchange Privilege, you may sell
or exchange your shares by telephone by calling either (1) your financial
institution (which may charge a transaction fee) or (2) DST at 1-800-345-8506,
if the shares are not held in "street name". Estates, trusts, guardianships,
custodianships, partnerships, corporations and certain retirement plans may not
call DST to exchange their shares. Telephone calls to DST are recorded. Shares
will be redeemed or exchanged by telephone if you provide the correct social
security number, tax identification number or account number. To protect
against fraud or losses DST may require additional information. The Fund
reserves the right to refuse a request for the telephone redemption or exchange
privilege without prior notice, either before, during or after the call.
Telephone instructions accepted after the close of business on the NYSE will not
be processed until the following business day. In the case of joint or multiple
owners, one owner's call may effect the telephone redemption or exchange.
Because of unusual market conditions it may be difficult and/or impossible to
contact DST or your broker, bank or investment professional to redeem or
exchange your shares. You should continue to try contacting them by telephone
at their telephone number or written instructions may be sent by post or
courier. Telefaxed instructions will not be accepted.
You may request Telephone Redemption of $50,000 or less per day if the proceeds
check is to be payable to you and sent to the address we have on our records or
the proceeds are to be wired to the bank account of record. To protect you and
the Funds from fraud, a telephone redemption request will not be accepted if you
changed the registered address within one month of the request.
[UNAUTHORIZED TELEPHONE EXCHANGES OR REDEMPTIONS] Like most mutual funds, the
Funds and DST may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify the
caller's identity. Telephone calls may be recorded and account number and other
information may be requested. If you do not want the ability to redeem or
exchange by telephone, check the appropriate box on the Application or call DST
for instructions.
[PAYMENT OF SALES PROCEEDS] Payment for shares sold will normally be made
within seven days after a proper redemption request is received, except for
delays which may be permitted under applicable law or rule. If Fund shares to
be redeemed were purchased by check, to protect the Fund from losses, the
19
<PAGE>
Fund will pay the proceeds only after it is satisfied that your check has been
cleared for payment. This may take as long as 15 days. Payment will generally be
made by check unless you request a wire transfer to your designated account at a
domestic commercial bank. Checks will be made payable to record owners at the
address of record. Each Fund may meet redemption and exchange redemption
requests by distributing portfolio securities. Nevertheless, each Fund will pay
in cash redemption proceeds with to each shareholder in any 90 day period equal
to the lesser of $250,000 or 1% of the Fund's value at the beginning of the
period.
[Exchange Privilege]
The Van Eck Group of Funds consists of a number of mutual funds with different
investment objectives and policies. When your investment objective or
investment outlook changes you may exchange shares of the Funds for shares of
any of the funds in the Van Eck Group of Funds without paying a sales charge or
incurring a contingent deferred sales charge. Class A shares maybe exchanged
only for other Class A shares, and similarly, Class B shares may only be
exchanged for Class B Shares of other Funds. Currently there are no charges or
fees on exchanges. Short-term trading by some investors results in a Fund
incurring additional expenses, may impair the Fund's investment program or
result in other disadvantages to the Fund and its shareholders. To discourage
short-term trading, the Fund has limited exchanges to six per calendar year.
This exchange limitation does not apply to the US Government Money Fund or to
International Investors Gold Fund (Class A), if the Fund or the Advisor believes
that permitting unlimited exchanges will not be disadvantageous to other
shareholders. This limitation applies in aggregate to Fund accounts having the
same beneficial owner or under common control. Each Fund may modify or
terminate the exchange privilege of any shareholder or limit or reject any
exchange at any time with or without prior notice, if it considers it to be in
the best interest of the remaining shareholders. If an exchange is rejected, a
shareholder will still be able to redeem the shares. For federal income tax
purposes, an exchange is considered a sale of shares and gains or losses must
generally be recognized.
Written Exchange
- ----------------
Shares may be exchanged by sending to DST a written request in proper form
signed by all registered owners exactly as their names appear on the account
registration, showing the names of the Fund to and from which the exchange is to
be made, and the number of shares or the amount to be exchanged, or that all
shares are to be exchanged. DST may request additional documents regarding
certain accounts to assure itself that the exchange request is genuine. Written
exchange requests may be sent by regular mail to Van Eck Funds, c/o DST, PO Box
418407, Kansas City, MO 64141, or by overnight courier to 1004 Baltimore, Kansas
City, MO 64105.
If you do not already have an account in the Fund into which you are exchanging
a new account will be established. The registered owners on the new account and
the dividend and other options will be the same. However, if you would like the
new account to participate in the Automatic Withdrawal, Automatic Exchange or
Automatic Investment plan you must request it at the time of the exchange and
may have to file an Application.
DIVIDENDS AND DISTRIBUTIONS
Each Fund will distribute its net investment income and net capital gains
annually, generally in December. Dividends or distributions declared in
December but paid in the following January will be
20
<PAGE>
includible in your income as of the record date (usually in December) of such
dividends or distributions. The fiscal year of the Funds ends on December 31.
DIVIDEND REINVESTMENT PLAN
[DIVIDEND REINVESTMENT]
Dividends and distributions will be automatically reinvested in Fund shares at
net asset value unless you or your financial institution notifies DST in writing
that dividends and distributions are to be paid in cash. In addition, dividend
and distributions on Class A shares may be automatically invested in any other
Class A shares of the Van Eck Funds without paying a sales charge. Shareholders
may contact DST for more details.
INVESTMENT PROGRAMS
The Funds offer several investment programs. An application for these programs
may be obtained from DST or the Distributor. More details about each program
may be found in the SAI under "Investment Programs."
Automatic Investment Plan
- -------------------------
This plan permits you to regularly invest a specified dollar amount in a Fund.
The amount you select will be deducted from your checking account and used to
purchase Fund shares on a monthly or quarterly basis.
Automatic Exchange Plan
- -----------------------
This plan allows a regular exchange of a specified dollar amount from one Fund
for shares of another Fund in the Van Eck Group of Funds. Class A shares may
exchange only Class A shares; and Class B shares only for Class B shares of
another Fund.
Automatic Withdrawal Plan
- -------------------------
If the value of your account is $10,000 or more at the current offering price,
you may establish an Automatic Withdrawal Plan. This plan allows you to receive
a monthly or quarterly check in a stated amount of $50.00 or more. This plan is
not available to Class B shareholders.
TAX-SHELTERED RETIREMENT PLANS
You may purchase Fund shares for your tax-sheltered retirement plans. These
plans allow individuals to shelter investment income and capital gains from
current taxes. Contributions may be tax deductible. These accounts require
separate applications to open. Additional information about these plans may be
found in the SAI or may be requested from the Fund.
[IRAS] An Individual Retirement Account and Spousal Individual Retirement
Account (IRA/SPIRA) are available to anyone who has earned income. (Investments
may also be made for a spouse, if the spouse has earned income of less than
$250.)
21
<PAGE>
[SEP] A Simplified Employee Pension Plan (SEP) is available to employers,
including self-employed individuals that want to provide retirement income to
their employees without all the administrative requirements of qualified plans.
[QUALIFIED PENSION PLAN] A Qualified Pension Plan is available to self-employed
individuals, partnerships, corporations and their employees.
[403 (B) PLANS] A 403(b)(7) Program is available to employees of certain tax-
exempt organizations and schools.
FACTS ABOUT YOUR ACCOUNT
[YOUR ACCOUNT] DST maintains Fund account records. However, brokers, banks and
financial institutions maintain account records for shares that are held in
street name for their clients. If you purchased your shares from a financial
institution and the shares are held in street name you must call or write to the
institution if you have questions about your account or want to sell shares you
own. DST will have no record of your account.
[MINIMUM ACCOUNT SIZE] If, at any time, the number of shares in your account
falls below a specified amount, currently 50 shares, you will be notified and
will have 30 days to bring the number of shares you own up to the minimum
amount. If you do not meet the account minimum within 30 days, a Fund may
redeem your Fund shares involuntarily and mail the proceeds to you. Your shares
will be redeemed at the net asset value on the day your account is closed.
[FUNDS' BUSINESS DAYS] You may transact business (buy and sell shares) in your
account on each day the NYSE is open. Shares are purchased and sold at the net
asset value per share (NAV) next calculated after your order is received and
accepted. The NAV is calculated at the close of business on the NYSE, currently
4:00 P.M., Eastern Time.
[FUND'S NAV] A Fund's NAV is the value of one share. It is computed by adding
the value of the Fund's investments, cash and other assets, subtracting the
Fund's liabilities and dividing the result by the number of shares outstanding
at the time.
[VALUATION OF FUND'S INVESTMENTS] The assets of a Fund are primarily valued on
the basis of market quotations. Foreign securities are valued on the basis of
quotations from the primary market in which they are traded. If market value is
not ascertainable, investments are valued at fair value as determined in good
faith by the Board of Trustees. Foreign investments will be valued in U.S.
Dollars using the prevailing exchange rates on that day. The Funds invest in
securities, options or futures contracts listed or traded on foreign exchanges
which may trade on Saturdays or other customary U.S. national business holidays
(days on which a Fund is not open for business). Consequently, a Fund's NAV may
be affected on days when you may not purchase or redeem shares.
[SPECIAL SERVICES] You may charged a fee for special services you request, such
as providing historical account documents.
[TRANSFER OF OWNERSHIP] To transfer ownership of (re-register) all or a portion
of your shares you must provide a written request with any documents DST may
request to satisfy itself that the request is
22
<PAGE>
genuine. See "Buying and Selling Fund Shares - How to Sell Shares." DST will
require the same information and certifications, all in proper form, necessary
to open and close an account.
MANAGEMENT
[INVESTMENT ADVISER] Van Eck is the investment adviser and manages each Fund's
portfolio of investments pursuant to an Investment Advisory Agreement. Van Eck
manages the affairs of the Funds and performs accounting and administrative
services for each Fund such as calculating the Fund's NAV, maintaining the
Fund's records and providing certain other accounting and administrative
services. It is paid an investment advisory fee ("Management Fee") by each Fund
at an annual rate of 1.00% of average daily net assets. Van Eck currently acts
as adviser to 16 mutual funds registered with the SEC under the 1940 Act and
manages pension plans, and other portfolios. Total aggregate assets under
management by Van Eck were approximately $2.0 billion as of 1996.
Van Eck has voluntarily agreed to waive the Advisory Fee and/or assume operating
expenses (excluding interest, taxes, brokerage commissions and extraordinary
expenses) in order to limit each Fund's total expenses to an annual rate of
2.00% of the Fund's average daily net assets until the Fund's net assets reach
$30 million or December 31, 1996, whichever is earlier.
The Advisory Fees paid by the Funds are generally more than those paid by other
comparable mutual funds.
PLAN OF DISTRIBUTION
The Class A and Class B shares of each Fund have adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). Under the Plans, each
Fund pays a distribution and services fee. The Class A Shares of each Fund pay
a fee at an annual rate of .50% of the Class A average daily net assets; Class
B Shares pay a fee at the annual rate of 1% of average daily net assets. All or
a portion of these fees are paid to Brokers and Agents for the shareholder
servicing, promotion or distribution activities. Currently the Distributor
retains .25% of the fee on the Class A Shares and .75% of the fee on the Class
B Shares with the balance paid to Brokers or Agents for their services. The
portion retained by the Distributor is for the distribution expenses it
incurred, such as the commissions it has advanced on Class B shares. The
Distributor will monitor payments under the Plans and will reduce these payments
or take other steps to assure that Plan payments are consistent with the
applicable rules of the National Association of Securities Dealers, Inc.
The Plans adopted by the Funds are compensation-type plans. The fees under the
Plans are not directly tied to expenses and payments by the Fund may be more or
less than the actual expenses incurred under the Plan. Any excess of fees
received over the amount spent by the Distributor may constitute a profit. The
Plan has a "carry-forward" provision under which any amount payable under the
Plan attributable to a fiscal year may be paid by the Fund in a subsequent
fiscal year, including after termination of the Plan. Carry forwards are amounts
that are not paid by the Fund because they exceed the annual limitation under
the Plan in any one year. Consequently, shareholders may pay distribution
expenses incurred by a Fund prior to becoming a shareholder. The Distributor
has waived its right to receive carry forward amounts in the event a Plan is
terminated for expenses incurred before May 1, 1997.
23
<PAGE>
ADVERTISING
From time to time, each Fund may advertise its performance. Past performance is
not indicative of future performance.
[AVERAGE ANNUAL TOTAL RETURN] A Fund may advertise its performance in terms of
average annual total return, which is computed by finding the average annual
compounded rate of return over a period so that the initial amount invested
would equal the ending account value. The calculation assumes that all
dividends and distributions by the Fund are reinvested and includes all
recurring fees charged to all shareholder accounts. It is not the actual return
in each year, but an average. The actual return in any year may be more or less
than the average. Average annual total return for periods of less than a year
is equal to the actual return annualized and assumes that performance to date
will continue for the rest of the year.
[AGGREGATE TOTAL RETURN] The Fund may advertise aggregate total return for a
specified period of time, which is the percentage change in the net asset value
of Fund shares initially purchased assuming reinvestment of dividends and
capital gains distributions without giving consideration to the length of time
of the investment.
Non-recurring expenses may be excluded from the calculation of rates of return
so that the rates may be higher than if these expenses were included. The SAI
describes the methods used to calculate the Fund's total return.
The 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, economic and performance data and indices. For example, the Funds may
quote the market performance of the S&P 500; Morgan Stanley Capital
International Europe Australia Far East (EAFE) Index; the Morgan Stanley Capital
International Combined Far East Ex-Japan Free Index or another appropriate
index; performance of various world economies or economic indicators; or
compilations of historical performance data from rating agencies. The Funds are
rated in the Asia/Pacific Basin Funds Category by performance rating agencies.
Micropal, Ltd., a worldwide mutual fund performance evaluation service, is one
rating agency; Lipper Analytical Services is another.
TAXES
[FUND'S TAX STATUS] Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code and will not pay income or excise taxes
to the extent that it distributes its net taxable investment income and capital
gains.
[TAXATION OF DIVIDENDS YOU RECEIVE] Notice as to the tax status of dividends
and distributions will be mailed to you annually. Income from dividends and
distributions is normally taxable whether or not reinvested. Distributions from
net investment income and short-term capital gains will be taxed as ordinary
income. Distributions of long-term capital gains will be taxed at capital gain
rates. If a Fund fulfills certain requirements, shareholders of the Fund may be
able to claim a foreign tax credit or deduction for foreign taxes paid to
foreign governments by the Fund during the year. The Fund does not
24
<PAGE>
anticipate that any portion of the Fund's dividends will be eligible for the
70% corporate dividends received deduction.
[TAXATION ON SALE OF SHARES] When you redeem your shares you may incur a
capital gain or loss for tax purposes. The amount of the capital gain or loss,
if any, is the difference between what you paid for your shares and what you
receive. Be sure to keep your regular statements - they contain the information
necessary to calculate the capital gain or loss.
This discussion was a brief description of the tax consequences of an investment
in the Fund. You should consult your tax adviser for additional tax
consequences, including state and local taxation, of dividends, distributions
and sale of Fund shares.
[NON-RESIDENTS] Distributions of net investment income and short-term capital
gains, if any, made to non-resident aliens will be subject to 30% withholding or
lower tax treaty rates because such distributions are considered U.S. source
income. Currently, the Funds are not required to withhold tax from long-term
capital gains distributions paid to non-resident aliens.
ADDITIONAL INFORMATION
[QUESTIONS ABOUT THE FUND] For further information about a Fund, please call
your financial advisor or the Fund toll free at (800) or write to the Funds at
the cover page address.
[CUSTODIAN] The custodian of the assets of the Trust is The Chase Manhattan
Bank, N.A., 4 Chase Metrotech Center, Brooklyn, New York 11245.
[INDEPENDENT ACCOUNTANTS] Coopers & Lybrand Avenue of the Americas, New York,
New York 10036,is the Funds independent accountant.The Fund's annual financial
statements are audited by Coopers & Lybrand.
[COUNSEL] Goodwin, Proctor & Hoar, 1 Exchange Place, Boston, Massachusetts
02109, serves as outside counsel to the Trust.
[TRANSFER AND DIVIDEND DISBURSING AGENT] DST Systems, Inc., 1004 Baltimore,
Kansas City, Missouri 64105, serves as the Fund's transfer, dividend disbursing
and shareholder servicing agent.
[INVESTMENT ADVISER] Van Eck Associates Corporation, 99 Park Avenue, New York,
New York 10016 serves as the investment adviser to the Funds.
[DISTRIBUTOR] Van Eck Securities Corporation, 99 Park Avenue, New York, New
York 10016, serves as distributor for the Funds' shares.
25
<PAGE>
JULY __, 1996
VAN ECK FUNDS (THE "TRUST")
ASIA SECTOR PORTFOLIOS
99 PARK AVENUE, NEW YORK, N.Y. 10016
SHAREHOLDER SERVICES: TOLL FREE (800) 544-4653
Van Eck Funds is a mutual fund consisting of twelve separate series. The Asia
Sector Portfolio, consist of three separate series: Asia Select Financial
Services Portfolio ("Financial Services Portfolio"); Asia Select Property
Portfolio ("Property Portfolio") and Asia Select Utilities Portfolio ("Utilities
Portfolio") (together the "Funds"). Each of the Funds offers three classes:
Class A, B and D.
TABLE OF CONTENTS Page
----
General Information................................................. 2
Overview of Investment Objectives and Policies of the Funds......... 3
Risk Factors........................................................ 4
Foreign Securities............................................. 4
Emerging Market Securities..................................... 4
Foreign Currency Transactions.................................. 7
Futures and Options Contracts and Complex Securities........... 8
Options, Futures and Forward Contracts......................... 8
Hedging and Other Investment Techniques........................ 9
Indexed Securities and Structured Notes........................ 10
Swap Agreements................................................ 11
Loans of Portfolio Securities.................................. 11
Borrowing...................................................... 11
Real Estate Securities......................................... 12
Investment Company Securities.................................. 12
Rights......................................................... 12
Partly Paid Securities......................................... 12
Direct Investments............................................. 13
Repurchase Agreements.......................................... 14
Debt Securities................................................ 14
Rule 144A Securities and Section 4(2) Commercial Paper......... 14
Investment Restrictions............................................. 15
Investment Advisory Services........................................ 16
The Distributor..................................................... 17
Portfolio Transactions and Brokerage................................ 18
Trustees and Officers............................................... 20
Valuation of Shares................................................. 23
Alternative Purchase Arrangements................................... 24
Exchange Privilege.................................................. 25
Tax-Sheltered Retirement Plans...................................... 25
Investment Programs................................................. 27
Taxes............................................................... 29
Redemptions in Kind................................................. 31
Performance......................................................... 31
Additional Information.............................................. 33
Financial Statements................................................ 33
Appendix............................................................ 34
Performance Charts.................................................. 38
1
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
ANY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE
A PROSPECTUS.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE FUND'S CURRENT PROSPECTUS, DATED JULY__, 1996 (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 - JULY____, 1996
GENERAL INFORMATION
-------------------
Van Eck Funds (the "Trust") is an open-end management investment company
organized as a "business trust" under the law 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 twelve series of Van Eck Funds: Van Eck Asia Sector
Portfolios: Asia Select Financial Services Portfolio (Class A, B and D), Asia
Select Property Portfolio (Class A, B and D) and Asia Select Utilities Portfolio
(Class A, B and D), Global Balanced Fund (Class A and B), Asia Dynasty Fund
(Class A and B), Asia Infrastructure Fund (Class A and B), International
Investors Gold Fund (Class A and C), Gold/Resources Fund (Class A), Global
Income Fund (Class A), Gold Opportunity Fund (Class A, B and C), Global Hard
Assets Fund (Class A, B 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), Asia Dynasty Fund (Class A and B),
Asia Infrastructure Fund (Class A and B), Global Income Fund (Class A) and
Global Hard Assets Fund (Class A, B and C) 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, B and C) and Global Hard Assets
Fund (Class A, B 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 of the Asia Sector Portfolios is classified as a diversified fund under the
1940 Act.
Van Eck Associates Corporation (the "Adviser") serves as investment adviser to
the Funds.
2
<PAGE>
OVERVIEW OF INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
----------------------------------------------------------
The Financial Services Portfolio seeks long-term capital appreciation by
investing in the securities of companies that are in the financial services
industry in Asia. These companies include issuers that are directly or
indirectly involved in (a) savings, commercial or industrial banking, (b)
investment banking, (c) securities brokerage, (d) leasing or (e) consumer or
industrial financing.
The Property Portfolio seeks long-term capital appreciation by investing in the
securities of real estate companies in Asia, including conglomerates with
substantial real estate investments and real estate investment trusts ("REITs").
These include, among others, office, warehouse and industrial facilities, hotels
and resort facilities, single and multi-family residential properties and land
for development and car parks.
The Utilities Portfolio seeks long-term capital gain by investing in the
securities of utility companies in Asia. A utility company is one that is
directly or indirectly involved in the generation, transmission or
transportation of (a) electricity (b) telecommunications (c) natural gas or
petroleum products or (d) water.
The Funds may invest in a broad range of equity securities, warrants and equity
options of companies located in, or expected to benefit from the development and
growth of the economies of countries located in Asia. The Funds consider
Asia tose countries include Bangladesh, Cambodia, China (Republic),
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Myanmar (formerly
Burma),Myanmar (formerly, Burma,) Peoples Republic of China ("China"), Cambodia,
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Nepal, Pakistan, Papua
New Guinea, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam.
Other countries may be added in the future. Currently, the Financial
Securities and Utilities Portfolios do not invest in Australia and Japan, while
the Property Portfolio may. Equity securities include common and preferred
stocks, structured notes, equity swaps, direct equity interests in trusts,
partnerships, joint ventures and other unincorporated entities or enterprises,
special classes of shares available only to foreign persons in those markets
that restrict ownership of certain classes of equity to nationals or residents
of that country, convertible preferred stocks and convertible debt instruments,
financial futures contracts and options on financial futures contracts, put or
call options on a security or securities indices and other instruments which may
be or become available that are consistent with a Fund's investment objective.
In addition, a Fund may buy and sell forward, futures and options contracts on
foreign currencies, currency swaps and currency indexed and structured notes and
other similar instruments. Each Fund may also lend its portfolio securities and
borrow money for investment purposes (i.e., leverage its portfolio).
Although each Fund will invest its assets in a manner consistent with its
investment objectives and policies there can be no assurance the Fund will be
able to achieve its objective.
Each Fund expects that under normal market conditions at least 65%, and at
times, substantially all of its assets will normally be invested in equity
securities, as described above, of issuers in its industry. Issuers that the
Fund may invest in consist of companies that (a) are located in Asia or whose
securities are principally traded in an Asian country, or (b)(i) have at
least 50% of their assets in one or more countries located in Asia 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. or (c) have manufacturing or other operations in China that are
significant to such companies. A company will be considered to have
significant manufacturing or other operations in China if such operations
currently, or, within five years, are expected to represent 25% of the
company's assets, or, to contribute 25% of gross sales, revenues or
profits. These investments are typically listed on stock exchanges or
traded in the over-the-counter markets in Asian, but may be traded on
exchanges or in markets outside the Asia. 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 Asia, and will normally
invest in at least three countries. .The Fund may invest, without limitation,
in depository shares or depository receipts, such as American Depository
Receipts and Shares and Global Depository Receipts and Shares. Depository
receipts and shares are generally issued by custodian banks as evidence of
ownership of the underlying foreign securities.
Each Fund has a policy of concentrating in an industry. Under normal market
conditions, a Fund will invest at least 65% of its total assets in the equity
securities of issuers in the Fund's industry. Each Fund may, for temporary
defensive purposes, invest more than 35% of its total assets in high grade,
liquid debt securities of foreign and United States companies which are not in
Asia, foreign governments and the U.S. Government, and
their respective agencies instrumentalities, political subdivisions and
authorities, as well
3
<PAGE>
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 Investors Services, Inc. ("Moody's") or, A-1 or
better by Standard & Poor's Corporation ("S&P") or, Fitch-1 by Fitch or Duff-1
by Duff & Phelps or, a comparable rating by a recognized rating agency or, if
unrated, will be of comparable high quality as determined by the Adviser.
Some countries in Asia have favorable tax treaties with other countries, the
effect of which is that entities organized under the laws of a the tax favored
country pay a lower rate of tax on income or capital gains earned on investments
in the taxing country. In addition, foreign investors may not invest in certain
countries except through an entity organized in another country. A Fund may
invest, when it is advantageous for tax or other reasons, through wholly-owned
entities.
The Funds 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.
RISK FACTORS
--------------
FOREIGN SECURITIES
------------------
Investors should recognize that investing in foreign securities involves certain
special considerations which are not typically associated with investing in
United States securities. Since investments in foreign companies will
frequently involve currencies of foreign countries, and since the Funds may hold
securities and funds in foreign currencies, the Fund may be affected favorably
or unfavorably by changes in currency rates and in exchange control regulations,
if any, and may incur costs in connection with conversions between various
currencies. Most foreign stock markets, while growing in volume of trading
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 and equity 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. There is generally less government supervision and
regulation of securities exchanges, brokers and listed companies in foreign
countries than in the United States. In addition, with respect to certain
foreign countries, in particular, emerging market countries, there 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.
EMERGING MARKET SECURITIES
--------------------------
Many countries in Asia are considered developing or emerging countries. The Fund
may have a substantial portion of its assets in these countries or countries
with developing securities markets. Although there is no universally accepted
definition, a developing or emerging country is generally considered by the
Adviser to be a country which is in the initial stages of industrialization or
economic development. With the exception of Japan, the other
countries in Asia are considered developing or emerging markets.
Shareholders should be aware that investing in the equity and fixed income
markets of those countries and emerging markets involves exposure to unstable
governments, economies based on only a few industries,
4
<PAGE>
and securities markets which trade a small number of securities. Securities
markets of these countries tend to be more volatile than the markets of
developed countries; however, such markets have in the past provided the
opportunity for higher rates of return to investors. Some of these countries do
not have securities markets or exchanges or are in the initial stages of
formation.
Political and economic structures in many such countries may be undergoing
significant evolution and rapid development, and therefore, such countries may
lack the social, political and economic stability characteristic of the United
States. Certain of these countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated the assets of
private companies. An investment in the Fund presents a greater risk of loss to
investors than would an investment in a fund investing in a more diversified
portfolio of companies located in more stable countries. The economies of
countries with developing markets may be highly vulnerable to changes in local
or global trade conditions, and may suffer from extreme 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.
Since each Fund invests at least 65% of its total assets in Asian investments,
the investment performance will be especially affected by events affecting
companies in Asia. The value and liquidity of these investments may be affected
favorably or unfavorably by political, economic, fiscal, regulatory or other
developments in Asia or neighboring regions. The extent of economic
development, political stability and market depth of different countries in Asia
varies widely. Certain countries in Asia, including Bangladesh, Cambodia, China,
Laos, Indonesia, Malaysia, Nepal, the Philippines, Thailand, and Vietnam, are
either comparatively underdeveloped or are in the process of becoming developed.
Investments in these countries typically involve greater potential for
gain or loss than investments in securities of issuers in developed countries.
Given each Fund's investments, the Fund will likely be particularly sensitive to
changes in China's economy as the result of a reversal of economic
liberalization, political unrest or changes in China's trading status. In
additional, the Fund will invest a significant portion of its assets in Hong
Kong and will be affected by the return of Hong Kong to Chinese control.
The securities markets in Asia are substantially smaller, less liquid and more
volatile than the major securities markets in the United States and other
developed countries. A high proportion of the shares of many issuers may be
held by a limited number of persons and financial institutions, which may limit
the number of shares available for investment by the Fund. A limited number of
issuers in securities markets in Asia may represent a disproportionately large
percentage of market capitalization and trading value. The limited liquidity of
securities markets in Asia may also affect a 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 securities
markets, the Fund's ability to participate fully in such price increases may be
limited by its investment policy of investing not more than 15% of its net
assets in illiquid securities. Conversely, the Fund's inability to dispose
fully and promptly of positions in declining markets will cause the Fund's net
asset value to decline as the value of the unsold positions is marked to lower
prices. In addition, securities markets in Asia are susceptible to being
influenced by large investors trading significant blocks of securities.
Many of the emerging countriesmarkets 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
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
5
<PAGE>
premium to local shares, while at other times there is no premium. If a Fund
were to purchase foreign shares at a premium and sell when there is a lower or
no premium, the Fund could realize a loss on its investment. Ownership by
foreign investors of local shares may be illegal in some jurisdictions and, in
others, foreign owners of local shares may not be entitled, among other things,
to participate in certain corporate actions such as stock dividends, rights and
warrant offerings (while foreign holders of foreign shares would participate).
If a Fund were to own local shares and could not participate in a stock, warrant
or other distribution, the Fund could suffer material dilution of its interest
in that issuer and the value of its holdings could decline dramatically, over a
very short period, causing a loss on its investment. Generally, it is expected
that the 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, unjustified or
prohibitively high. In order to participate in these markets, the Fund may deem
it advisable to purchase local shares which may expose the Fund to the
additional risks described above. The Fund will only purchase local shares where
foreign shares are not available for purchase or premiums are deemed by the
Adviser to be excessive and, when, in the opinion of the Adviser, the potential
for gain in these markets outweighs the risks that an issuers will take
corporate actions which may result in dilution to the Fund. Where permitted by
local law, the Fund will attempt to convert local shares to foreign shares
promptly. There can be no assurance that the Adviser will be able to assess
these risks accurately or that the Fund will be able to convert its their local
shares to foreign shares or that dilution will not result.
The stock markets in certain Asian countries, particularly the Chinese
markets, are undergoing a period of growth and change which may result in
trading volatility and difficulties in the settlement and recording of
transactions, and in interpreting and applying the relevant law and regulations.
In particular, the securities industry in China is not well developed. China
has no securities laws of nationwide applicability. The municipal securities
regulations adopted by Shanghai and Shenzhen municipalities are very new, as are
their respective securities exchanges and other self-regulatory organizations.
In addition, Chinese stockbrokers and other intermediaries may not perform as
well as their counterparts in the United States and other more developed
securities markets. The prices at which the Fund may acquire or dispose of
investments may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by a Fund in particular securities. The securities markets in
Cambodia, Laos and Vietnam are currently non-existent.
Economies of countries in Asia 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 Asia 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 under United States international trade laws,
which the United States' President and Congress reconsider annually, would
adversely affect the trade and economic development of China and Hong Kong.
Hong Kong and Taiwan have limited natural resources, resulting in dependence on
foreign sources for certain raw materials and economic vulnerability to global
fluctuations of price and supply.
Governmental actions (economic and military) in China can have a
significant effect on the economic conditions in the Asia Pacific region, which
could adversely affect the value and liquidity of the 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.
China and certain countries in the region do not have comprehensive systems of
laws, although substantial changes have occurred in China in this regard in
recent years. The corporate form of organization has only recently been
permitted in China and national regulations governing corporations were
introduced only in recently. 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
6
<PAGE>
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 athe judgment by a court of another
jurisdiction. The bankruptcy laws pertaining to state enterprises have rarely
been used and are untried in regard to an enterprise with foreign shareholders,
and there can be no assurance that such shareholders, including the Fund,
would be able to realize the value of the assets of the enterprise or receive
payment in convertible currency. As the changes to the Chinese legal system
develops, the promulgation of new laws, existing laws and the preemption of
local laws by national laws may adversely affect foreign investors, including
the Fund. The uncertainties faced by foreign investors in China are exacerbated
by the fact that many laws, regulations and decrees of China are not publicly
available, but merely circulated internally. Similar risks exist in other Asian
countries.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.
FOREIGN CURRENCY TRANSACTIONS
-----------------------------
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the long-term investment decisions made for a
Fund with regard to overall diversification strategies. Although the Fund
values its assets daily in terms of U.S. Dollars, it does not intend physically
to convert holdings of foreign currencies into U.S. Dollars on a daily basis.
The Fund will do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Fund, at times, will use forward
contracts, along with futures contracts, foreign exchange swaps, structured
notes and put and call options (all types of derivatives), to "lock in" the U.S.
Dollar price of a security bought or sold and as part of itstheir overall
hedging strategy, for defensive purposes and for cash management purposes. The
Fund will conduct foreign currency exchange transactions, either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through purchasing put and call options on, or entering into futures
contracts or forward contracts to purchase or selling foreign currencies or
using structured notes, swap agreements or other instruments that may become
available. See "Futures and Options Contracts and Complex Securities."
At the maturity of the 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. Similarly, if the Fund uses
another instrument, it may enter into a closing transaction or otherwise
terminate its obligation under the instrument. The Fund would realize a gain or
loss.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the forward currency contract. Accordingly, the Fund may
decide to proceed with the purchase or sale as anticipated or may determine not
to proceed. In the first instance, the Fund may have to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security has fluctuated; or in the second, to enter into
an offsetting transaction.
7
<PAGE>
FUTURES AND OPTIONS CONTRACTS AND COMPLEX SECURITIES
----------------------------------------------------
The Fund may buy and sell forward, futures and options contracts, structured
notes, swap agreements and other complex securities which are or may become
available for hedging and investment purposes. These are commonly referred to as
"derivatives." Derivatives are futures and forward contracts and
include financial futures and forward contracts on which may include foreign
or domestic currency, security, interest-rate, stock and bond indicesex
or forward futures and forward contracts.
OPTIONS, FUTURES AND FORWARD CONTRACTS
--------------------------------------
A forward contract, like a futures contract, involves an obligation to purchase
or sell a specific asset at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. Unlike futures contracts which are standardized exchange-
traded contracts, forward contracts are usually traded in the over-the-counter
market conducted directly between financial institutions and their customers. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for such trades. There is, however, an interest rate
factor reflected in the delivery prices. A security or interest-rate futures or
forward contract is an agreement to buy or sell a specified security at a set
price on a future date. An index contract is an agreement to take or make
delivery of an amount of cash based on the difference between the value of the
index at the beginning and at the end of the contract period. A foreign
currency contract is an agreement to buy or sell a specified amount of a
currency for a set price on a future date.
When 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 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. A Fund will not commit more than 5% of its total assets to initial
margin deposits on futures contracts and premiums on options, except that
margin deposits for futures positions entered into for bona fide hedging
purposes are excluded from the 5% limitation.
In establishing a position in a futures or forward contract, which may be a long
or short position, the Fund will own an offsetting position orfor other than
hedging purposes appropriate high grade, liquid assets, such as U.S. Government
securities or cash will be segregated with the Fund's Custodian to ensure that
the position is not leveraged above applicable limits. See "Borrowing" below.
This segregated account will be marked-to-market daily to reflect changes in the
value of the underlying futures or forward contract. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of thea Fund's commitments with respect to
such contracts. Certain exchanges do not permit trading in particular futures
contracts at prices in excess of daily price fluctuation limits set by the
exchange. Trading in futures contracts traded on foreign exchanges may be
subject to the same or similar risks as trading in foreign securities.
The Fund may invest in options on futures contracts. Compared to the purchase or
sale of futures contracts, the purchase and sale of options on futures contracts
involves less potential risk to the Fund because the maximum exposure is the
amount of the premiums paid for the options.
The Fund may invest up to 5% of its total assets, taken at market value at the
time of investment, in premiums on call and put options on domestic and foreign
securities, foreign currencies, stock and bond indices and financial futures
contracts (entered into for other than bona fide hedging purposes). As the
holder of a call or put option, the Fund pays a premium and has the right (for
generally 3 to 9 months) to purchase (in the case of a call option) or sell (in
the case of a put option) the underlying asset at the exercise price at any time
during the option period ("American"("American" option) or at expiration of
the contract ("European"("European" option). An option on a futures contract
gives the purchaser the right, but not the obligation, in return for the premium
paid, to assume a position in a specified underlying futures contract (which
position may be a long or short position) at a specified exercise price during
the option exercise period. If
8
<PAGE>
the call or put is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its premium
payment. The Fund may, with respect to options it has purchased, sell them,
exercise them or permit them to expire.
The Fund may write call or put options. As the writer of an option, the Fund
receives a premium. The Fund keeps the premium whether or not the option is
exercised. If the call or put option is exercised, the Fund must sell (in the
case of a written call option) or buy (in the case of written put option) the
underlying asset at the exercise price. The Fund may write only covered put and
call options. A covered call option, which is one where the Fund owns the
underlying asset, sold by the Fund exposes it during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying asset or 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 Fund may invest in options which are either listed on a domestic securities
exchange, traded on a foreign exchange or over-the-counter.
In general, exchange traded options are third party contracts with standardized
prices and expiration dates. Over-the-counter options are two party contracts
with price and terms negotiated by the buyer and seller, are generally
considered illiquid, and will be aggregated with other illiquid positions for
purposes of the limitation on illiquid investments. With respect to over-the-
counter options, the Fund is exposed to the risk that the other party will fail
to perform under the contract;, in such a case the Fund would incur a loss
equal to the then current "market" value of the option.
HEDGING AND OTHER INVESTMENT TECHNIQUES
---------------------------------------
The Fund may use options, forward and futures contracts, structured aand indexed
notes, swaps and similar investments (commonly referred to as derivatives) as a
defensive technique to protect against declines in the values of assets the
Adviser deems desirable to hold for tax or other considerations and to gain
investment exposure to certain securities, markets or assets. One defensive
technique involves selling a futures or forward contract, purchasing a put
option or structured or indexed note or entering into a swap agreement whose
value is expected to be inversely related to the asset being hedged. If the
anticipated decline in the value of the asset occurs, it would be offset, in
whole or part, by a gain on the instrument. The premium paid for the put option
would reduce any capital gain otherwise available for distribution when the
asset is eventually sold.
Hedging against a change in the value of an asset a Fund holds may reduces
or precludes the opportunity for gain if the value of the hedged asset should
increase.
The Funds may use futures contracts, options, structured and indexed notes,
forward contracts and swaps and other similar instruments for investment
purposes, such as creating non-speculative "synthetic" positions or implementing
"cross-hedging" strategies. A synthetic position will beis not deemed to
be speculative if the position is covered by segregation of short-term liquid
assets. A synthetic position permits the Fund to obtain investment exposure and
is the duplication of a cash market transaction when deemed advantageous by the
Adviser for cost, liquidity, tax or transactional efficiency reasons. A cash
market transaction is the purchase or sale of a security or other asset for
cash. For example, from time to time, the Fund experiences large cash inflows
which may be redeemed from the Fund in a relatively short period. In this case,
the Fund currently can leave the amounts uninvested in anticipation of the
redemption or the Fund can invest in securities for a relatively short period,
incurring transaction costs on the purchase and subsequent sale. Alternatively,
the Fund may create a synthetic position by investing in a futures contract on
an asset, such as a securities index
9
<PAGE>
gaining investment exposure to the relevant market while incurring lower overall
transaction costs. By segregating cash, the Fund's futures contract position
would generally be no more leveraged or riskier than if it had invested in the
cash market - i.e., purchased the securities. In addition, a structured note may
permit the Fund to gain investment exposure that might not otherwise be
available. For example, some countries permit only residents or nationals to
invest in their markets. The Fund could enter into a structured note whose
principal value would be tied to the performance of that country's market index,
thereby gaining investment exposure to the market.
Cross-hedging involves the use of one asset to hedge against the decline in
value of another asset. For example, the Fund could hedge against a decline in
the value of a Taiwanese securities position by taking a position in the Hong
Kong market that is expected to perform inversely to the Taiwanese market.
The use of such instruments as described herein involves several risks. First,
there can be no assurance that the prices of such instruments and the hedged
asset or the cash market position will move as anticipated. If prices do not
move as anticipated the Fund may incur a loss on its investment, may not achieve
the hedging protection it anticipated and/or incur a loss greater than if it had
entered into a cash market position. Second, investments in such instruments may
reduce the gains which would otherwise be realized from the sale of the
underlying securities or assets which are hedged. Third, positions in such
instruments can be closed out only on an exchange that provides a market for
those instruments. There can be no assurance that such a market will exist for a
particular futures contract or option. If the Fund cannot close out an exchange
traded futures contract or option which it holds, it would have to perform its
contract obligation or exercise its option to realize any profit and would incur
transaction costs on the sale of the underlying assets. Further, if the other
party to a swap, structured or indexed note, forward contract or option were to
default on its obligation, the Fund would incur a loss. There is no assurance
that a "synthetic" position will perform identically to a cash market position.
Finally, certain of these derivative instruments may be illiquidillegal,
difficult to value accurately and subject to extreme volatility.
The futures and options markets in certain Asian countries are not as developed
as similar markets of more developed countries, and a Fund may not be able to
hedge or employ the strategies described above. In addition, swaps and
indexed or structured notes may not be available. It is the policy of the 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 Fund and its shareholders. One of these requirements is that less than
30% of a Fund's gross income must be derived from gains from the sale or other
disposition of securities held for less than three months. The extent to which
a Fund may engage in the foregoing transactions may be materially limited by
this requirement test.
INDEXED SECURITIES AND STRUCTURED NOTES
---------------------------------------
The Funds may invest in securities whose value is linked to one or more
currencies, interest rates, or stocks, bonds, financial instruments or indices.
An indexed security or structured note enables the Fund to purchase a note whose
coupons and/or principal redemption are linked to the performance of an
underlying asset. Indexed securities may be positively or negatively indexed
(i.e., their value may increase or decrease if the underlying instrument
appreciates). Indexed securities may have return characteristics similar to
direct investments in the underlying instrument or to one or more options on the
underlying asset or other assets. Indexed securities may be more volatile than
the underlying instrument itself, and present many of the same risks as
investing in forwards, futures and options contracts. Indexed securities are
also subject to credit risks associated with the issuer of the security with
respect to both principal and interest. Indexed securities may be publicly
traded or may be two-party contracts (such two-party agreements are referred to
here collectively as "structured notes"). When the Fund purchases a
structured note, it will make a payment of principal to the counterparty. Some
structured notes have a guaranteed repayment of principal while others place a
portion (or all) of the principal at risk. Structured notes may give the
Fund access to markets that it might otherwise be precluded from investing in or
increased liquidity. These instruments may also be difficult to value
accurately.
10
<PAGE>
The Adviser will monitor the liquidity of these instruments under the
supervision of the Board of Trustees and those instrumentsnotes determined to
be illiquid will be aggregated with other illiquid securities and limited to 15%
of the net assets of the Fund and structured notes may give the Fund access to
markets that it might otherwise be precluded from investing in or increased
liquidity.
SWAP AGREEMENTS
---------------
The Funds may enter into swap agreements. Swap agreements permit a Fund to swap
(trade) the performance of one asset for another. For example, the Fund may
swap the performance of the Hang Seng Index (Hong Kong) for the Bombay Index,
(India). By entering into such a swap, the Fund could simultaneously hedge a
portion of its exposure to the Hong Kong market and gain exposure to the Indian
market. Rather than enter into a swap agreement, the Fund could have sold
its Hong Kong holdings and purchased Indian securities, thereby incurring
transaction and other costs. Since swaps are individually negotiated, the Fund
may expect to achieve an acceptable degree of correlation between its portfolio
investments and its swap position. Currency swaps usually involve the delivery
of the entire principal value of one designated currency in exchange for the
other designated currency. Therefore, the entire principal value of a currency
swap is subject to the risk that the other party to the swap will default on its
contractual delivery obligations.
The use of swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
transactions. If the Adviser is incorrect in its forecasts of market values and
currency exchange rates, the investment performance of the Fund would be less
favorable than it would have been if this investment technique were not used.
Swaps are generally considered illiquid and will be aggregated with other
illiquid positions for purpose of the limitation on illiquid investments.
High grade, liquid assets, such as U.S. Government securities or cash will be
segregated with the Fund's Custodian in an amount equal to the Fund's net
obligation on such swap agreements. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of thea Fund's commitments with respect to such contracts.
LOANS OF PORTFOLIO SECURITIES
-----------------------------
The 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 (consisting of any combination of cash, U.S. Government securities
or irrevocable letters of credit) in an amount at least equal (on a daily mark-
to-market basis) to the current market value of the securities loaned. The Fund
may terminate the loans at any time and obtain the return of the securities
loaned within one business day. The Fund will continue to receive any interest
or dividends paid on the loaned securities and will continue to have voting
rights with respect to the securities. The Fund might experience a loss if the
broker-dealer with which it has engaged in a portfolio loan transaction breaches
its agreement.
BORROWING
---------
The Funds may borrow up to 33-1/3% of the value of its net assets to
increase its holdings of portfolio securities. Under the 1940 Act, the Fund is
required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% because of market
fluctuations or other factors, even if the sale would be disadvantageous from an
investment standpoint. Leveraging by means of borrowing will exaggerate the
effect of any increase or decrease in the value of portfolio securities on the
Fund's net asset values, and money borrowed will be subject to interest and
other costs (which may include commitment fees and/or the cost of maintaining
minimum average balances) which may or may not exceed the investment
11
<PAGE>
return from the securities purchased with borrowed funds. It is anticipated that
such borrowings would be pursuant to a negotiated loan agreement with a
commercial bank or other institutional lender.
REAL ESTATE SECURITIES
----------------------
The Financial Services and Utilities Portfolios will not invest in real estate
directly, However, the Funds may invest their assets in equity securities of
real estate investment trusts ("REITs") and other real estate industry companies
or companies with substantial real estate investments. When a Fund invests in
REITs, it may be subject to certain risks associated with direct ownership of
real estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; possible lack of
availability of mortgage funds; extended vacancies of properties; risks related
to general and local economic conditions; overbuilding; increases in
competition, property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties for damages
resulting from, environmental problems; casualty or condemnation losses;
uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest rates.
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. REITs are not taxed on income
distributed to shareholders, provided they comply with several requirements
of the Code.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for the exemption from tax for distributed income under the
Code. REITs (especially mortgage REITs) are also subject to interest rate risk
(i.e., as interest rates rise, the value of the REIT may decline).
INVESTMENT COMPANY SECURITIES
-----------------------------
The Funds may invest in issuers which are considered under the 1940 Act to be
investment companies. These investment companies may or may not be registered
with the Securities and Exchange Commission ("SEC")SEC and . may be
foreign investment companies. Investing in foreign investment companies
involves the same risks as investing in foreign securities. Investing in
investment companies permits the Fund to invest in markets that might otherwise
have been inaccessible and to obtain greater diversification. These
investments involve the payment of dual management fees.
RIGHTS
------
Rights are privileges granted to existing shareholders or may be attached to
other securities. Rights entitle the holder to purchase shares of a new issue
before being offered to the public, often below the public offering price the
stock is offered to the public. Some rights are registered and are freely
transferable while others are not. Rights are similar to options in that they
give the holder the right, notand the obligation, to purchase shares.
PARTLY PAID SECURITIES
----------------------
Partly paid securities are securities for which the purchaser pays on an
installment basis. A partly paid security trades net of outstanding installment
payments. For this reason, the obligation to make payment
12
<PAGE>
is usually transferred upon sale of the security. Fluctuations in the market
value do not affect the obligation to make installment payments when due. Partly
paid securities become fully paid securities upon payment of the final
installment. Until that time, the issuer of a partly paid security typically may
retain the right to restrict the voting and dividend rights of the security and
to impose restrictions and penalties in the event of a purchaser's default.
High grade, liquid assets, such as U.S. Government securities or cash will be
segregated with the Fund's Custodian in an amount equal to the
"unpaid""unpaid" installments on these securities. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of thea Fund's commitments with respect to
such contracts.
DIRECT INVESTMENTS
------------------
The Funds may invest up to 10% of its total assets in direct investments. Direct
investments include (i) the private purchase from an enterprise of an equity
interest in the enterprise in the form of shares of common stock or equity
interests in trusts, partnerships, joint ventures or similar enterprises, and
(ii) the purchase of such an equity interest in an enterprise from a principal
investor in the enterprise. In each case the Fund will, at the time of making
the investment, enter into a shareholder or similar agreement with the
enterprise and one or more other holders of equity interests in the enterprise.
The Adviser anticipates that these agreements will, in appropriate
circumstances, provide the Fund with the ability to appoint a representative to
the board of directors or similar body of the enterprise and for eventual
disposition of the Fund's investment in the enterprise. Such a representative of
the Fund will be expected to provide the Fund with the ability to monitor its
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 a Fund's direct investments will include investments in smaller, less
seasoned companies. These companies may have limited product lines, markets or
financial resources, or they may be dependent on a limited management group. The
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. Such direct investments may be made in entities that are reasonably
expected in the foreseeable future to benefit from the growth and development in
Asia either by expanding current operations or establishing significant
operations in Asia.
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, thea Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices on
these sales could be less than those originally paid by the Fund. Furthermore,
issuers whose securities are not publicly traded may not be subject to public
disclosure and other investor protection requirements applicable to publicly
traded securities. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration. In addition, in the event the
Fund sells unlisted foreign securities, any capital gains realized on such
transactions may be subject to higher rates of taxation than taxes payable on
the sale of listed securities. Direct investments are generally considered
illiquid and will be aggregated with other illiquid investments for purposes of
the limitation on illiquid investments. Direct investments can be difficult to
price and shall will generally be valued at fair value as determined in good
faith by the Board of Trustees. The pricing of direct investments may not
reflect the price at which these assets could be liquidated.
13
<PAGE>
REPURCHASE AGREEMENTS
---------------------
The Funds may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund acquires an underlying asset for a
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase, and the Fund to resell, the asset at an
agreed upon price and time, thereby determining the yield during the holding
period. The agreement results in a rate of return that is not subject to market
fluctuations during the holding period. Repurchase agreements could involve
certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying asset. The Adviser acting under the supervision of the Board of
Trustees, reviews the creditworthiness of those non-bank dealers with which the
Fund enters into repurchase agreements to evaluate these risks. Entering into
repurchase agreements with foreign dealers poses similar risks to investing in
foreign securities.
The Funds will not enter into a repurchase agreement with a maturity of more
than seven business days if, as a result, more than 15% of the value of the
Fund's total assets would then be invested in such repurchase agreements and
other illiquid securities. The Fund will only enter into a repurchase agreement
where (i) the underlying asset is of the type which the Fund's investment
policies would allow it to purchase directly, (ii) the market value of the
underlying security, including accrued interest, will be at all times equal to
or exceed the value of the repurchase agreement, and (iii) payment for the
underlying securities is made only upon physical delivery or evidence of book-
entry transfer to the account of the custodian or a bank acting as agent.
DEBT SECURITIES
---------------
The 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 increases. Conversely, during periods of rising
interest rates, the value of such securities generally declines. These changes
in market value will be reflected in the Fund's net asset value. Debt securities
with similar maturities may have different yields, depending upon several
factors, including the relative financial condition of the issuers. For example,
higher yields are generally available from securities in the lower rating
categories of S&P or Moody's. However, the values of lower-rated securities
generally fluctuate more than those of high grade securities. Many securities
of foreign issuers are not rated by these services. Therefore the selection of
such issuers depends to a large extent on the credit analysis performed by the
Adviser.
RULE 144A SECURITIES AND
SECTION 4(2) COMMERCIAL PAPER
-----------------------------
Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act of 1933 ("1933 Act") for resales of
certain securities to qualified institutional buyers. TThe Securities and
Exchange Commission ("SEC") adopted Rule 144A towhich 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 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 1933 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 1933 Securities Act of 1933. Such
commercial paper is normally resold to other investors through or
14
<PAGE>
with the assistance of the issuer or investment dealers who make a market in
such securities, thus providing liquidity.
Securities eligible for resale pursuant to Rule 144A under the 1933 Act
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 accordance with
guidelines established by the Board of Trustees for purposes of complying with
investment restrictions applicable to investments by each Funds 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 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 the
Fund's outstanding shares are present in person or by proxy, or (ii) more than
50% of the Fund's outstanding shares. As to any of the following policies, if a
percentage restriction is adhered to at the time of investment, a later increase
or decrease in percentage resulting from a change in value of portfolio
securities or amount of net assets will not be considered a violation of the
policy. Restrictions 1, 4, 5, 9, 11, 12, 14, and 15 are not fundamental,
unless otherwise provided for by applicable federal or state law.
A Fund may not:
1. Invest in securities which are subject to legal or contractual restrictions
on resale ("restricted securities") or for which there is no readily
available market quotation or engage in a repurchase agreement maturing in
more than seven days with respect to any security if the result is that more
than 15% of the Fund's net assets would be invested in such securities,
excluding securities which are deemed to be liquid under Rule 144A under the
Securities Act of 1933.
2. Purchase or sell real estate, except the Funds may purchase securities of
companies which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are collateralized by
interests in real estate.
3. Purchase or sell commodities or commodities futures contracts.
4. Purchase more than 3% of the total outstanding voting stock of any investment
company or invest more than 5% of its total assets in the securities of
any investment company or invest more than 10% of its total assets in
investment companies in general. Such purchases may involve only customary
broker's commissions.
5. Lend to broker-dealers portfolio securities with an aggregate market value in
excess of 33-1/3% of its total assets.
6. As to 75% of the Fund's total assets, purchase securities of any issuer,
if immediately thereafter (i) more than 5% of the Fund's total assets (taken
at market value) would be invested in the securities of such issuer, or (ii)
more than 10% of the outstanding voting securities of such issuer would be
held by the Fund. This restriction does not apply to any company of which
the Fund is the sole beneficial owner or securities acquired as part of a
merger, acquisition of assets or other reorganization.
7. Underwrite any issue of securities (except to the extent that the Fund may be
deemed to be an underwriter within the meaning of the Securities Act of 1933
in the purchase of securities for investment or disposition of restricted
securities).
15
<PAGE>
8. Borrow money, in excess of 33-1/3% of the value of its net assets to
increase holdings of portfolio securities.
9. Mortgage, pledge or otherwise encumber its assets except to secure borrowing
effected within the limitations set forth in restriction (8).
10. Issue senior securities. The Fund may(for purposes of this
restriction (i) borrowing money in accordance with restrictions described
above,; (ii) entering into forward contracts, (iii) purchase
futures contracts purchased on margin, (iv) issueing multiple classes
of securities, and (v) entering into swap agreement or purchaseing or
sell structured notes or similar instruments which are or may become
available.
11. Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions and, may
make initial or maintenance margin payments in connection with options and
futures contracts and options on future contracts and borrowing effected
within the limitations set forth in these restrictions.
12. Participate on a joint or joint and several basis in any trading account in
securities, although transactions for the Fund and any other account under
common or affiliated management may be combined or allocated between the
Fund and such account.
13. Purchase participations or other interests (other than equity stock
interests) in oil, gas or other mineral, leases or exploration or
development programs.
14. Invest in real estate limited partnerships or in oil, gas or other mineral
leases.
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 its assets in
"restricted securities" and not to invest more than 5% of itstheir assets in
securities of "unseasoned" issuers, i.e., companies which together with their
predecessors have a record of less than three years continuous operation. To
the extent the above restrictions have been adopted to comply with state
securities laws, they shall not apply to the Fund once such laws are no longer
in effect.
INVESTMENT ADVISORY SERVICES
----------------------------
Description of Peregrine Asset Management (Hong Kong) Limited
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 June 30, 1996, 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 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 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 annual rates of 1% of each Fund's
average daily net assets.
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
16
<PAGE>
employees in relation to the time spent on such matters), expenses relating to
the Plan of Distribution (Rule 12b-1 Plan), fees of Trustees who are not
"interested persons" of the 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 provides that the 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, the maximum annual expenses which the Trust may be required
to bear, inclusive of the advisory 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: (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 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.
The Advisory Agreement provides 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 the Funds was approved by the action of the Trustees on July
__, 1996.
The Distribution Agreement provides that the Distributor will pay all fees and
expenses in connection with printing and distributing prospectuses and reports
for use in offering and selling shares of the Funds and 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.
Additionally, the Class A and B shares of the Funds have adopted a Plan which
provides for the compensation of brokers and dealers who sell shares of these
Funds or provide servicing. The 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, 1997, the Distributor has agreed with respect to Plans with a carry-forward
provision, notwithstanding anything to the contrary in the
17
<PAGE>
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 for the Funds was approved 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
July __, 1996. 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 is responsible for decisions to buy and sell securities and other
investments 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. 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
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 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 are
considered to be in addition to and not in lieu of services required to be
performed by the Adviser under the Advisory Agreement with the Trust. The
18
<PAGE>
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 affiliates.
The Trustees periodically review the 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 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 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 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. Each Fund anticipates that its annual portfolio turnover rate will
not exceed 100%. However, the annual portfolio turnover rate of the
__________________ Fund may exceed 100%. Due to the high rate of turnover the
Fund 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. In addition, other procedures
have been adopted and implemented to minimize conflicts. 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.
19
<PAGE>
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. For the fiscal year ended December 31, 1995, compensation received by
any Trustee did not exceed $60,000.
Trustees of Van Eck Funds:
*. JOHN C. van ECK, C.F.A. - Chairman of the Board
- -------------------------
270 River Road, Briarcliff Manor, New York; Chairman of the Board and President
of other affiliated investment companies advised by the Adviser; Chairman, Van
Eck Associates Corporation (investment adviser) and Van Eck Securities
Corporation (broker-dealer); Director, Eclipse Financial Asset Trust (mutual
fund); Former President of the Adviser and its affiliated companies; Former
Director (1992-1995), 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).
.#+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; Chairman of the Board to all funds of Davis Funds Group
(mutual fund management company); Former Director, International Investors
Incorporated (1990-1991).
#+RICHARD C. COWELL - Trustee
- -------------------
240 El Vedado Way, Palm Beach, Florida 33480; Trustee of other affiliated
investment companies advised by the Adviser; Private Investor; Director, West
Indies & Caribbean Development Ltd. (real estate); Former 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.
.RODGER A. LAWSON - Trustee
- -----------------
330 East 38th Street, New York, New York 10016; Trustee of other affiliated
investment companies advised by the Adviser; President, Chief Executive Officer
and a Director 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 10016; 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.; Trustee, Peregrine Funds; Former Director, International
Investors Incorporated; and
20
<PAGE>
Former Secretary and Treasurer, Millbrook Advisers,
Inc. (investment adviser) Former Chairman, Finacor, Inc. (financial services).
DAVID J. OLDERMAN - Trustee
- -----------------
40 East 52nd Street, 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); Chairman of the Board,
Brighton Partners, Inc. (1993-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 08559; Trustee of other affiliated
investment companies advised by the Adviser; Former Chairman of the Board,
Former Chairman of the Executive Committee 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; Former Director,
International Investors Incorporated.
RICHARD D. STAMBERGER - Trustee
- ---------------------
888 17th Street, N.W., Washington, D.C. 20006; Principal, National Strategies,
Inc., a public policy firm in Washington, D.C.; Partner and Co-founder, Quest
Partners, Inc. (management consulting firm/since 1988); Executive Vice
President, Chief Operating Officer, and a Director of NuCable Resources
Corporation (technology firm/since 1988); Trustee, Peregrine Funds; 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).
**.FRED 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; Executive Vice President of the Trust;
President of International Investors Gold Fund series of Van Eck Funds and Gold
and Natural Resources Fund series of Van Eck Worldwide Insurance Trust;
Executive Vice President of other affiliated investment companies advised by the
Adviser; Executive Managing Director of the Adviser; Formerly an officer of the
Adviser and affiliated companies; 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.
LUCILLE PALERMO - Executive Vice President
- ------------------------------------------
99 Park Avenue, New York, New York; Executive Vice President of the Trust;
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).
21
<PAGE>
MADIS SENNER - Executive Vice President
- ---------------------------------------
99 Park Avenue, New York, New York; Executive Vice President of the Trust;
President of Global Income Fund series of Van Eck Funds and Worldwide Bond Fund
series of Van Eck Worldwide Insurance Trust; Director, Global Fixed Income of
the Adviser; Executive Vice President of other affiliated investment companies
advised by the Adviser; Former Global Bond Manager, Chase Manhattan Private Bank
(1992-1994); Former President and founder, Sunray Securities, Inc. (1989-1992).
***.DEREK van ECK, C.F.A. - Executive Vice President
- ----------------------------------------------------
99 Park Avenue, New York, New York; Executive Vice President of the Trust;
President of Global Hard Assets Fund series of Van Eck Funds and Worldwide Hard
Assets Fund series of Van Eck Worldwide Insurance Trust; Vice President of
Global Balanced Fund, Gold Opportunity Fund and Asia Infrastructure Fund series
of Van Eck Funds; Executive Vice President, Director, Global Investments and
Director of Van Eck Associates Corporation and Van Eck Securities Corporation.
MICHAEL G. DOORLEY - Vice President
- -----------------------------------
99 Park Avenue, New York, New York; Vice President of the Trust, Senior Vice
President and Chief Financial Officer of Van Eck Associates Corporation and Van
Eck Securities Corporation, Senior Vice President and Chief Financial Officer of
other affiliated investment companies advised by the Adviser.
BRUCE J. SMITH - Vice President and Treasurer
- ---------------------------------------------
99 Park Avenue, New York, New York; Vice President and Treasurer of the Trust,
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.
JOSEPH P. DiMAGGIO - Controller
- -------------------------------
99 Park Avenue, New York, New York; Controller of the Trust, 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
- ---------------------
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 the Trust,
Vice President and Secretary of other affiliated investment companies advised by
the Adviser; Vice President, Secretary 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; Vice President of the Trust, Managing
Director, Mutual Fund Operations of Van Eck Securities Corporation.
PAUL A. DiPERNA - Vice President
- --------------------------------
99 Park Avenue, New York, New York; Assistant Vice President of the Trust,
Associate Manager, Trading, of Van Eck Associates Corporation; Portfolio Manager
of U.S. Government Money Fund series of Van Eck Funds.
22
<PAGE>
CHARLES CAMERON - Vice President
- --------------------------------
99 Park Avenue, New York, New York; Vice President of the Trust, Director of
Trading of Van Eck Associates Corporation; Bond Trader, Standard Chartered Bank
(1989-1995).
BARBARA J. ALLEN - Assistant Secretary
- --------------------------------------
99 Park Avenue, New York, New York; Assistant Secretary of the Trust, Compliance
Officer of Van Eck Associates Corporation and Van Eck Securities Corporation;
Senior Counsel, Arizona Corporation Commission, Securities Division (1990-1994).
- -------------------------
. 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 April 1, 1996, all Officers and Trustees as a group owned the number of
shares indicated of each Fund: 142,672 of International Investors Gold Fund,
equal to less than 1% of shares outstanding; 23,104 shares of Gold/Resources
Fund, equal to less than 1% of shares outstanding; 848,997 shares of U.S.
Government Money Fund, equal to less than 1% of shares outstanding; 18,451
shares of Global Income Fund, equal to less than 1% of shares outstanding;
20,799 shares of Asia Dynasty Fund, equal to less than 1% of shares outstanding;
22,456 shares of Global Balanced Fund, equal to less than 1% of shares
outstanding; 22,058 shares of Global Hard Assets Fund, equal to approximately
4.8% of shares outstanding and 3,368 shares of Gold Opportunity Fund, equal to
less than 1% of shares outstanding.
At April 1, 1996, Mr. John C. van Eck and members of his family owned 1,271,508
shares of the U.S. Government Money Fund, which represented approximately 1.3%
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. 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.
Dividends paid by a Fund with respect to Class A, Class B and Class D 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 shares will be borne
exclusively by that Class. The Trustees have determined that currently no
conflict of interest exists between
23
<PAGE>
the Class A and Class B shares or Class A and Class D 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.
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 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.
ALTERNATIVE PURCHASE ARRANGEMENTS
---------------------------------
Shares of each Fund may be purchased under alternative purchase arrangements. If
you purchase Class A shares, you will be required to pay an initial sales charge
at the time of purchase. When purchasing Class B shares, you will not pay a
sales charge at the time of purchase, but will be subject to a contingent
deferred sales charge that will be deducted from your redemption proceeds if you
redeem at any time within six years of purchase. Class D shares are available
for purchase only by qualified retirement plans and other institutional
investors and are sold without a sales charge.
In determining whether a contingent deferred sales charge is applicable to a
redemption of Class B 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, shares attributable
to appreciation or shares acquired pursuant to reinvestment, and finally of
Class B held longest during the applicable period.
To provide an example, assume an investor purchased 100 Class B shares of the
Financial Services Portfolio at $10 per share (at a cost of $1,000) and in the
third 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
24
<PAGE>
cost of $10 per share and not to the increase in net asset value of $2
per share. Therefore, $200 of the $600 redemption proceeds will be charged at a
rate of 4% (the applicable rate in the third year after purchase).
EXCHANGE PRIVILEGE
------------------
Class A and Class B and Class D 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. 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.
25
<PAGE>
Contributions to a SEP are excluded from an employee's gross income and are
subject to different 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.
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
26
<PAGE>
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 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.
27
<PAGE>
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.
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. Further details of the
Automatic Withdrawal Plan are given in the application which is available from
DST or the Funds.
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 for a specified amount 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 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
28
<PAGE>
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.
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.
29
<PAGE>
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 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
30
<PAGE>
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, Asia Dynasty Fund, Asia
Infrastructure Fund, International Investors Gold 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 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
-----------
The 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:
31
<PAGE>
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year
periods at the end of the year or period;
The calculation assumes 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.
The Funds 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:
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 Funds 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.
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
32
<PAGE>
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. Chase Manhattan Bank, New York, New York is the custodian of the
- ---------
Trust's portfolio securities, cash, coins and bullion. The Custodian is
authorized, upon the approval of the Trust, to establish credits or debits in
dollars or foreign currencies with, and to cause portfolio securities of 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 audited financial statements will be available on or about March 1, 1997 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.
33
<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.
Preferred Stock Ratings
- -----------------------
34
<PAGE>
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 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
35
<PAGE>
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 debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime--Issuers rated Not Prime do not fall within any of the Prime rating
categories.
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.
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
36
<PAGE>
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.
37
<PAGE>
PERFORMANCE CHARTS
BEST PERFORMING WORLD GOVERNMENT BOND MARKETS*
1986 THROUGH DECEMBER, 1995
1986 JAPAN 47.4%
1987 U.K. 46.6%
1988 AUSTRALIA 28.8%
1989 CANADA 16.2%
1990 U.K. 30.9%
1991 AUSTRALIA 23.5%
1992 JAPAN 10.8%
1993 JAPAN 27.6%
1994 BELGIUM 12.2%
1995 SWEDEN 34.8%
*in U.S. dollar terms
Source: 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.
- -------------------------
<TABLE>
<CAPTION>
ANNUAL REAL (INFLATION-ADJUSTED) GDP GROWTH
(IN LOCAL CURRENCY TERMS)
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
HONG KONG 2.6% 3.4% 5.1% 6.3% 6.4% 5.4%
SINGAPORE 9.4% 8.1% 7.0% 6.4% 10.1% 10.1%
THAILAND 12.2% 11.6% 8.4% 7.9% 8.2% 8.5%
MALAYSIA 9.2% 9.7% 8.7% 7.8% 8.3% 8.7%
INDONESIA 7.5% 7.2% 7.0% 6.5% 6.5% 7.3%
PHILIPPINES 6.2% 3.0% -0.5% 0.3% 2.1% 4.4%
SOUTH KOREA 6.4% 9.5% 9.1% 5.1% 5.8% 8.4%
CHINA 4.3% 3.9% 8.0% 13.2% 13.8% 11.9%
Source: All Countries except Hong Kong: International Financial Statistics (International Monetary Fund) - 2/96
Hong Kong: Datastream
</TABLE>
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.
38
<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 8 YR. COMPOUNDED
AVG. ANNUAL RETURN AVG. ANNUAL RETUTRN
1988 1989 1990 1991 1992 1993 1994 1995 12/31/92 12/31/95
----- ----- ----- ----- ----- ----- ----- ----- ------------------ -------------------
<S> <C> <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% 18.2% 25.5% 19.3%
INDONESIA 227.8% 77.1% 5.2% -46.4% -2.1% 102.2% -27.0% 7.5% -3.6% 22.5%
MALAYSIA 23.9% 52.6% -9.9% 3.1% 15.7% 107.3% -20.7% 4.0% 15.3% 16.8%
PHILIPPINES 40.0% 62.9% -47.7% 83.5% 37.1% 121.4% -8.3% -11.8% 35.1% 23.4%
SINGAPORE 32.3% 43.3% -15.8% 41.6% 3.0% 71.4% 4.7% 11.0% 23.8% 21.2%
SO. KOREA 94.0% 0.4% -28.5% -17.1% 0.0% 29.1% 22.1% -4.6% 4.5% 7.2%
TAIWAN 117.3% 83.5% -55.4% 11.8% -24.6% 82.3% 19.7% -30.2% 5.1% 10.9%
THAILAND 41.6% 106.1% -29.7% 18.1% 30.4% 97.8% -11.2% -5.7% 20.6% 23.0%
</TABLE>
Source: Morgan Stanley & Co. Incorporated
Performance provided in U.S. dollar terms and does not include reinvestment of
dividends. Past performance is not 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.
- -----------------------------
<TABLE>
<CAPTION>
MORGAN STANLEY CAPITAL INTERNATIONAL STOCK MARKET INFORMATION
(IN US CURRENCY WITH NET DIVIDENDS REINVESTED)
AS OF DECEMBER 31, 1995
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ----- ----- ----- ----- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AUSTRALIA 11.2% 5.4% 35.2% -10.8% 33.6% -17.5% 9.3% 36.4% 9.3% 42.3%
AUSTRIA -4.7% -6.3% 28.1% -10.7% -12.2% 6.3% 103.9% 0.6% 2.2% 34.7%
BELGIUM 25.9% 8.2% 23.5% -1.5% 13.8% -11.0% 17.3% 53.6% 7.9% 78.4%
CANADA 18.3% -3.0% 17.6% -12.2% 11.1% -13.0% 24.3% 17.1% 13.9% 9.9%
DENMARK 18.8% 3.8% 32.8% -28.3% 16.6% -0.9% 43.9% 52.7% 13.2% 1.2%
FINLAND 4.6% 52.2% 82.7% -13.0% -18.1% -31.7% -9.6% 13.7% N/A N/A
FRANCE 14.1% -5.2% 20.9% 2.8% 17.8% -13.8% 36.2% 37.9% -13.8% 78.4%
GERMANY 16.4% 4.7% 35.6% -10.3% 8.2% -9.4% 46.3% 20.6% -24.8% 35.3%
HONG KONG 22.6% -28.9% 116.7% 32.3% 49.5% 9.2% 8.4% 28.1% -4.1% 56.1%
IRELAND 22.4% 14.5% 42.4% -21.2% 12.2% -16.7% 41.2% 25.1% N/A N/A
ITALY 1.0% 11.6% 28.5% -22.2% -1.8% -19.2% 19.4% 11.5% -21.3% 108.3%
JAPAN 0.7% 21.4% 25.5% -21.5% 8.9% -36.1% 1.7% 35.4% 43.0% 99.4%
MALAYSIA 5.2% -19.9% 110.0% 17.8% 5.0% -7.9% 55.8% 26.5% N/A N/A
</TABLE>
39
<PAGE>
<TABLE>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ----- ----- ----- ----- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NETHERLANDS 27.7% 11.7% 35.3% 2.3% 17.8% -3.2% 35.8% 14.2% 7.1% 40.7%
NEW ZEALAND 20.9% 8.9% 67.7% -1.4% 18.3% -37.7% 11.4% -13.8% N/A N/A
NORWAY 6.0% 23.6% 42.0% -22.3% -15.5% 0.7% 45.5% 42.4% 5.7% -2.5%
SINGAPORE 6.5% 6.7% 68.0% 6.3% 25.0% -11.7% 42.3% 33.3% 2.3% 45.2%
SPAIN 29.8% -4.8% 29.8% -21.9% 15.6% -13.7% 9.8% 13.5% 36.9% 121.2%
SWEDEN 33.4% 18.3% 37.0% -14.4% 14.4% -21.0% 31.8% 48.3% 2.0% 65.6%
SWITZERLAND 44.1% 3.5% 45.8% 17.2% 15.8% -6.2% 26.2% 6.2% -9.5% 33.4%
UNITED KINGDOM 21.3% -1.6% 24.4% -3.7% 16.0% 10.3% 21.9% 6.0% 35.1% 27.0%
US 37.1% 1.1% 9.1% 6.4% 30.1% -3.2% 30.0% 14.6% 2.9% 16.3%
</TABLE>
MORGAN STANLEY CAPITAL INTERNATIONAL INDEX
(IN US CURRENCY WITH NET DIVIDENDSREINVESTED)
AS OF DECEMBER 31, 1995
10 YEAR ANNUAL TOTAL RETURN
---------------------------
AUSTRALIA 13.7%
AUSTRIA 10.4%
BELGIUM 19.3%
CANADA 7.6%
DENMARK 13.1%
FINLAND N/A
FRANCE 14.7%
GERMANY 10.1%
HONG KONG 23.8%
IRELAND N/A
ITALY 6.9%
JAPAN 12.7%
MALAYSIA N/A
NETHERLANDS 18.1%
NEW ZEALAND N/A
NORWAY 10.1%
SINGAPORE 20.2%
SPAIN 16.8%
SWEDEN 18.6%
SWITZERLAND 16.2%
UNITED KINGDOM 15.0%
USA 13.7%
40
<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.
41
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
---------------------------------
a) FINANCIAL STATEMENTS and FINANCIAL HIGHLIGHTS
(1) Financial Statements (None)
b) EXHIBITS (An * denotes inclusion in this filing and # denotes an item to
be filed in a subsequent amendment)
(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 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 Restated Master Trust Agreement
adding Gold Opportunity Fund as series of
1
<PAGE>
the Trust (incorporated by reference from Post-effective Amendment No.
37). Ninth Amendment to Amended and Restated Master Trust Agreement
adding Class B shares to Asia Infrastructure Fund, Global Hard Assets
Fund and Gold Opportunity Fund series of the Trust (incorporated by
reference from Post-effective Amendment No. 39).
# (1)(b) Tenth Amendment to Amended and Restated Master Trust Agreement
adding Asia Sector Portfolio
(2) By-laws of Registrant (incorporated by reference from Registration
Statement No. 2-97596).
(3) Not Applicable.
(4)(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 Gold Opportunity Fund (incorporated by reference from Post-
effective Amendment No. 35); Form of certificate of Class B shares of
beneficial interest of Asia Infrastructure Fund, Global Hard Assets Fund
and Gold Opportunity Fund (incorporated by reference from Post-effective
Amendment No. 39).
* 4(b) Form of certificate of Class A and Class B shares of beneficial
interest of Asia Select Portfolio
(5)(a) Advisory Agreement (incorporated by reference from Post-Effective
Amendment No. 1.
(5)(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).
(5)(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).
2
<PAGE>
(5)(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).
(5)(e) 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).
(5)(f) Advisory Agreement between Van Eck Associates Corporation and
Global Hard Assets Fund (incorporated by reference from Post-effective
Amendment No. 36).
(5)(g) Form of Letter Agreement to add Gold Opportunity Fund
(incorporated by reference from Post-effective Amendment No. 37).
* 5(g)(1) Form of Letter Agreement adding Asia Select Portfolio
(5)(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 (incorporated by reference from Post-Effective
Amendment No. 30).
(6)(a) Distribution 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. 9); Letter Agreement to add Asia
Dynasty Fund (Incorporated by reference from Post-effective Amendment
No. 23).
(6)(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).
* (6)(c)(1) Form of Letter Agreement adding Asia Select Portfolio
(6)(d) Amendment to Form of Selling Group Agreement (incorporated by
reference from Post-Effective Amendment No. 9).
(6)(e) Selling Agency Agreement (incorporated by reference from Post-
Effective Amendment No. 12).
3
<PAGE>
(7) Form of Deferred Compensation Plan. (incorporated by refernece from
Post-Effective Amendment No. 40)
(8)(a) Custodian Agreement (incorporated by reference from Post-
Effective Amendment No. 1).
(8)(a)(1) Form of Custody Agreement between the Van Eck Funds and
Bankers Trust Company (Incorporated by reference from Post-Effective
Amendment No. 20).
(8)(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).
*(8)(c) Form of Custody Agreement.
(9)(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).
(9)(b) Commodity Customer's Agreement between World Income Fund and
Morgan Stanley & Co. (incorporated by reference from Post Effective
Amendment No. 10).
(9)(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
from Post-Effective Amendment No. 17).
(9)(d) Form of Accounting and Administrative Services Agreement with
respect to Asia Dynasty Fund (Incorporated by reference from Post-
effective Amendment No. 23).
(9)(e) Accounting and Administrative Services Agreement with respect to
Global Balanced Fund (incorporated by reference from Post-effective
Amendment No. 31).
(9)(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).
(10) 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
4
<PAGE>
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). Opinion of Goodwin, Procter & Hoar, including
consent, with regard to the issuance of Class B shares of Asia
Infrastructure Fund, Global Hard Assets Fund and Gold Opportunity Fund
(incorporated by reference from Post-Effective Amendment No. 40)
*(10)(a) Opinion of Goodwin, Procter & Hoar on Asia Select Portfolio
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14)(a) Forms of prototype "Keogh" and 403(b)(7) Plans utilized by
registrant (incorporated by reference from Post-Effective Amendment No.
10).
(14)(b) Registrant's revised form of IRA Plan (incorporated by reference
from Post-Effective Amendment No. 10).
(14)(c) Registrant's form of Simplified Employee Plan (incorporated by
reference from Post-Effective Amendment No. 10).
(14)(d) Amendments to the Retirement Plan for Self-Employed Individuals,
Partnerships and Corporation using shares of Van Eck Funds and
International Investors Incorporated; Profit Sharing Plan Adoption
Agreement. (incorporated by reference from Post-Effective Amendment No.
14).
(15) 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).
(15)(a) 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).
(15)(b) 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).
* (15)(b)(1) Form of Letter Agreement to add Asia Select Portfolio
5
<PAGE>
(15)(c) 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). 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); Form of Plan of Distribution with respect
to Asia Infrastructure Fund (Class B), Global Hard Assets Fund (Class B)
and Gold Opportunity Fund (Class B) (incorporated by reference from
Post-effective Amendment No. 39).
* (15)(d) Form of Letter Agreement to add Asia Select Portfolio
(16) Not applicable.
(17) Power of Attorney (incorporated by reference from Post-Effective
Amendment No. 5).
(18) Form of plan entered into pursuant to Rule 18f-3. (incorporated by
reference from Post-Effective Amendment No. 40).
ITEM 25. Persons controlled by or under common control with Registrant
-------------------------------------------------------------
Not Applicable.
ITEM 26. Number of Holders of Securities
-------------------------------
Not Applicable.
ITEM 27. 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
6
<PAGE>
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 28. Business and other Connections of Investment Adviser
----------------------------------------------------
Reference is made to the caption "Management" in the Prospectus and to the
captions "The Distributor" and "Trustees and Officers" in the Statement of
Additional Information.
ITEM 29. Principal Underwriters
----------------------
(a) Van Eck Securities Corporation, principal underwriter for the
Registrant, also distributes shares of Van Eck Worldwide Insurance
Trust.
(b) The following table presents certain information with respect to each
director and officer of Van Eck Securities Corporation:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Office
Business Address with Underwriter with Registrant
- ---------------- ------------------- ---------------
<S> <C> <C>
John C. van Eck Chairman Chairman and
99 Park Avenue President
New York, NY 10016
Sigrid S. van Eck Director, V.P. and None
270 River Road Assistant Treasurer
Briarcliff Manor, NY
Fred M. van Eck Director Trustee
99 Park Avenue
New York, NY 10016
Derek van Eck Director Executive V.P.
99 Park Avenue
New York, NY 10016
Jan van Eck Director and None
99 Park Avenue Executive Vice President
New York, NY 10016
Rodger A. Lawson President and Chief Trustee
99 Park Avenue Executive Officer
New York, NY 10016
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Michael G. Doorley Senior Vice President, Chief Vice President
99 Park Avenue Financial Officer, Treasurer
New York, NY 10016 and Controller
Thaddeus Leszczynski Vice President Vice President
99 Park Avenue General Counsel and Secretary /Secretary
New York, NY 10016
Stephen Ilnitzki Chief Operating Officer None
99 Park Avenue
New York, New York
Bruce J. Smith Senior Managing Director, Vice President and
99 Park Avenue Portfolio Accounting Treasurer
New York, NY 10016
Joseph P. DiMaggio None Controller
99 Park Avenue
New York, NY
Keith Fletcher Senior Managing Director, None
99 Park Avenue Marketing
New York, NY 10016
Susan C. Lashley Managing Director, Operations Vice President
99 Park Avenue
New York, NY 10016
Robin Kunhardt Director, Product Management None
99 Park Avenue
New York, NY 10016
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records
--------------------------------
The following table sets forth information as to the location of accounts, books
and other documents required to be maintained pursuant to Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder.
Accounts, books and
documents listed by
reference to specific
subsection of 17 CFR 270 31a-1 Person in Possession and
to 31a-3 Address
- -------- -------
31a-1(b)(1) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
8
<PAGE>
31a-1(b)(2)(i) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(ii) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(iii) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(b)(2)(iv) DST Systems, Inc.
21 West Tenth Street
Kansas City, Missouri 64105
31a-1(b)(3) Not Applicable
31a-1(b)(4) Thaddeus Leszczynski
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(b)(5) Van Eck Associates
99 Park Avenue
New York, NY 10016
31a-1(b)(6) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(b)(7) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(b)(8) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
9
<PAGE>
31a-1(b)(9) Van Eck Associates
99 Park Avenue
New York, NY 10016
31a-1(b)(10) Van Eck Associates
99 Park Avenue
New York, NY 10016
31a-1(b)(11) Van Eck Associates
99 Park Avenue
New York, NY 10016
31a-1(b)(12) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
31a-1(c) Not Applicable
31a-1(d) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, NY 10016
10
<PAGE>
31a-1(e) Not Applicable
31a-1(f) Michael G. Doorley
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-2(a)(1) Bruce J. Smith
Van Eck Funds
99 Park Avenue
New York, New York 10016
DST Systems, Inc.
21 West Tenth Street
Kansas City, Missouri 64105
31a-2(b) Not Applicable
31a-2(c) Bruce J. Smith
Van Eck Securities Corporation
99 Park Avenue
New York, NY 10016
31a-2(d) Not Applicable
31a-2(e) Michael G. Doorley
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
31a-3 Not Applicable
Item 31. Management Services
-------------------
None
Item 32. Undertakings
------------
None
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant hereby certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(a)(2) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of April, 1996.
VAN ECK FUNDS
By: /s/ John C. van Eck
----------------------------------
John C. van Eck, President and CEO
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
Signature Title Date
/s/ John C. van Eck
- ---------------------- President, Chairman 4/29/96
John C. van Eck and Chief Exec. Officer
/s/ Bruce J. Smith
- ---------------------- Vice President and 4/29/96
Bruce J. Smith Treasurer
/s/ Jeremy Biggs*
- ---------------------- Trustee / /
Jeremy Biggs
/s/ Richard Cowell*
- ---------------------- Trustee / /
Richard Cowell
/s/ Wesley G. McCain*
- ---------------------- Trustee / /
Wesley G. McCain
/s/ Ralph F. Peters*
- ---------------------- Trustee / /
Ralph F. Peters
/s/ Rodger A. Lawson*
- ---------------------- Trustee / /
Rodger A. Lawson
/s/ David J. Olderman*
- ---------------------- Trustee / /
David J. Olderman
<PAGE>
/s/ Richard Stamberger*
- ---------------------- Trustee / /
Richard Stamberger
/s/ Fred M. van Eck*
- ---------------------- Trustee / /
Fred M. van Eck
_________________________
*Executed on behalf of Trustee by John C. van Eck, attorney-in-fact.
<PAGE>
EXHIBIT INDEX
Exhibit (4)(b) Form of certificate of Class A and Class B shares of beneficial
interest of Asia Select Portfolio
(5)(g)(1) Form of Letter Agreement adding Asia Select Portfolio to
Investment Advisory Agreement
(6)(c)(1) Form of Letter Agreement adding Asia Select Portfolio to
Distribution Agreement
(8)(c) Form of Custody Agreement
(15)(b)(1) Form of Letter Agreement to add Asia Select Portfolio (Class A)
to Plan of Distribution
(5)(d) Form of Letter Agreement to add Asia Select Portfolio (Class B)
to Plan of Distribution
<PAGE>
EXHIBIT 4(b)
NUMBER VAN ECK FUNDS SHARES
(A MASSACHUSETTS BUSINESS TRUST)
ASIA SELECT PORTFOLIO - A
SHARES OF BENEFICIAL INTEREST
ACCOUNT NO ALPHA CODE
--------------------
THIS CERTIFIES THAT CUSIP
--------------------
REVERSE FOR CERTAIN
DEFINITIONS
IS THE REGISTERED OWNER OF
FULL PAID AND NON-ASSESSABLE SHARES ($.001 PAR VALUE) OF
ASIA SELECT PORTFOLIO - A
A Series of Shares established and designated under the Master Trust
Agreement of the Van Eck Funds, a Massachusetts business trust (the "Trust")
dated April 3, 1985 as amended from time to time (the "Trust Agreement".) The
Terms of the Trust Agreement, a copy of which is on file with the Secretary of
the Commonwealth of Massachusetts, are hereby incorporated by reference as fully
as if set down herein in their entirety. As provided in the Trust Agreement, the
beneficial interest in the Trust has been divided into Shares of such Series as
may be established and designated from time to time, and the Shares evidenced
hereby represent the beneficial interest in an undivided proportionate part of
the assets belonging to the above designated Series subject to the liabilities
belonging to such Series. Such Series and other Series have the relative rights
and preferences set forth in the Trust Agreement and the Trust will furnish to
the holder of this certificate upon written request and without charge a
statement of such relative rights and preferences. THE SHARES EVIDENCED HEREBY
ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust Agreement. This
certificate is issued by the Trustees of VAN ECK FUNDS not individually but as
Trustees under the Trust Agreement, and represents shares of the above
designated Series and does not bind any of the Trustees, Shareholders, Officers,
Employees or Agents of the Trust personally but only the assets and property of
the Trust. Subject to the provisions of the Trust Agreement the shares
represented by this certificate are transferable upon the books of the Trust by
the registered holder hereof in person or by his duly authorized attorney upon
surrender of this certificate.
Witness the facsimile signature of the President and Treasurer of the Trust
and the signature of its duly authorized agent.
[SEAL]
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
Treasurer President
<PAGE>
EXHIBIT 4(b)
NUMBER VAN ECK FUNDS SHARES
(A MASSACHUSETTS BUSINESS TRUST)
ASIA SELECT PORTFOLIO - B
SHARES OF BENEFICIAL INTEREST
ACCOUNT NO ALPHA CODE
-------------------
THIS CERTIFIES THAT CUSIP
-------------------
REVERSE FOR CERTAIN
DEFINITIONS
IS THE REGISTERED OWNER OF
FULL PAID AND NON-ASSESSABLE SHARES ($.001 PAR VALUE) OF
ASIA SELECT PORTFOLIO - B
A Series of Shares established and designated under the Master Trust
Agreement of the Van Eck Funds, a Massachusetts business trust (the "Trust")
dated April 3, 1985 as amended from time to time (the "Trust Agreement"). The
Terms of the Trust Agreement, a copy of which is on file with the Secretary of
the Commonwealth of Massachusetts, are hereby incorporated by reference as fully
as if set down herein in their entirety. As provided in the Trust Agreement, the
beneficial interest in the Fund has been divided into Shares of such Series as
may be established and designated from time to time, and the Shares evidenced
hereby represent the beneficial interest in an undivided proportionate part of
the assets belonging to the above designated Series subject to the liabilities
belonging to such Series. Such Series and other Series have the relative rights
and preferences set forth in the Trust Agreement and the Trust will furnish to
the holder of this certificate upon written request and without charge a
statement of such relative rights and preferences. THE SHARES EVIDENCED HEREBY
ARE SUBJECT TO REDEMPTION BY THE TRUST pursuant to the procedures that may be
determined by the Trustees in accordance with the Trust Agreement. This
certificate is issued by the Trustees of VAN ECK FUNDS not individually but as
Trustees under the Trust Agreement, and represents shares of the above
designated Series and does not bind any of the Trustees, Shareholders, Officers,
Employees or Agents of the Trust personally but only the assets and property of
the Trust. Subject to the provisions of the Trust Agreement the shares
represented by this certificate are transferable upon the books of the Trust by
the registered holder hereof in person or by his duly authorized attorney upon
surrender of this certificate.
Witness the facsimile signature of the President and Treasurer of the Trust
and the signature of its duly authorized agent.
[SEAL]
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
Treasurer President
<PAGE>
EXHIBIT (5)(g)(1)
FORM OF
VAN ECK FUNDS
99 Park Avenue
New York, New York 10016
Van Eck Associates Corporation
99 Park Avenue
New York, New York 10016
Ladies/Gentlemen:
Pursuant to Section 9(b) of the Investment Advisory Agreement, dated
October 20, 1994 (the "Agreement"), between Van Eck Funds (the "Trust") and Van
Eck Associates Corporation (the "Adviser"), please be advised that an additional
series of the Trust, namely, (the
"Fund:) has adopted the Agreement and retained the Adviser to render services
contemplated by the Agreement for the Fund. A certification by the Secretary of
the trust of the resolution adopted by the Board of Trustees and an amended
Exhibit A reflecting the addition of the Fund to the Plan are attached.
Please confirm below your willingness to render such services.
VAN ECK FUNDS
ATTEST:_________________________________ By:___________________________
Confirmed, Agreed to and Accepted this _____________________
VAN ECK ASSOCIATES
CORPORATION
ATTEST:_________________________________ By:_____________________________
<PAGE>
EXHIBIT A
Annual Advisory Fee
Name of Series (as a % of average daily net assets)
- -------------- ------------------------------------
Global hard Assets Fund 1.00%
Gold Opportunity Fund 1.00%
<PAGE>
EXHIBIT (6)(c)(1)
FORM OF
VAN ECK FUNDS
99 Park Avenue
New York, New York 10016
Van Eck Securities Corporation
99 Park Avenue
New York, New York 10016
Ladies/Gentlemen:
Pursuant to Section 1 of the Distribution Agreement, dated July 30, 1985
(the "Agreement"), between Van Eck Funds (the "Trust") and Van Eck Securities
Corporation (the "Distributor"), please be advised an additional series of the
Trust, namely, ______________________________ (the "Fund") has adopted the
Agreement and retained the Distributor to render services contemplated by the
Agreement for the Fund. The Fund will issue two classes of shares, namely,
Class A and Class B shares. Class A shares will be sold at "net asset value per
share" plus a front-end sales charge and the Class B shares will be sold at "net
asset value per share" plus _____________________ in accordance with the then
current prospectus of the Trust, as from time to time amended.
Please confirm below your willingness to render such services.
VAN ECK FUNDS
ATTEST:_______________________________ BY:___________________________
Confirmed, Agreed to and Accepted this _____________________
VAN ECK SECURITIES
CORPORATION
ATTEST:_______________________________ BY:____________________________
<PAGE>
EXHIBIT(8)(C)
FORM OF
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective December 20, 1995, and is between THE CHASE
MANHATTAN BANK, N.A.(the "Bank")and Peregrine Funds for the benefit of the
Asis Growth Fund (the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.
<PAGE>
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or
<PAGE>
its Subcustodian shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount, but may act
for the Customer upon Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are returned by
the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty (60) days of receipt, the Customer shall be
<PAGE>
deemed to
have approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
a. Corporate Actions. Whenever the Bank receives information concerning the
Securities which requires discretionary action by the beneficial owner of the
Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the Bank
will give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, but if Instructions are not received in time
for the Bank to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Bank is authorized to sell such
rights entitlement or fractional interest and to credit the Deposit Account with
the proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. The Bank will deliver proxies to the Customer or its
designated agent pursuant to special arrangements which may have been agreed to
in writing. Such proxies shall be executed in the appropriate nominee name
relating to Securities in the Custody Account registered in the name of such
nominee but without indicating the manner in which such proxies are to be voted;
and where bearer Securities are involved, proxies will be delivered in
accordance with Instructions. Proxy voting services may be provided by the Bank
or, in whole or in part, by one or more third parties appointed by the Bank
(which may be affiliates of the Bank); provided that the Bank shall be liable
for the performance of any such third party to the same extent as the Bank would
have been if it performed such services itself.
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will apply
------------
for a reduction of withholding tax and any refund of any tax paid or tax credits
which apply in each applicable market in respect of income payments on
Securities for the benefit of the Customer which the Bank believes may be
available to such Customer.
(ii) The provision of tax reclaim services by the Bank is conditional upon
the Bank receiving from the beneficial owner of Securities (A) a declaration of
its identity and place of residence and (B) certain other documentation (pro
forma copies of which are available from the Bank). The Customer acknowledges
that, if the Bank does not receive such declarations, documentation and
information, additional United Kingdom taxation will be
<PAGE>
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup withholding
tax will be deducted from U.S. source income. The Customer shall provide to the
Bank such documentation and information as it may require in connection with
taxation, and warrants that, when given, this information shall be true and
correct in every respect, not misleading in any way, and contain all material
information. The Customer undertakes to notify the bank immediately if any such
information requires updating or amendment.
(iii) The Bank shall not be liable to the Customer or any third party for
any tax, fines or penalties payable by the Bank or the Customer, and shall be
indemnified accordingly, whether these result from the inaccurate completion of
documents by the Customer or any third party, or as a result of the provision to
the Bank or any third party of inaccurate or misleading information or the
withholding of material information by the Customer or any other third party, or
as a result of any delay of any revenue authority or any other matter beyond the
control of the Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from any
cash received or credited to the Cash Account any taxes or levies required by
any revenue or governmental authority for whatever reason in respect of the
Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at its
absolute discretion, supplement or amend the markets in which the tax reclaim
services are offered. Other than as expressly provided in this sub-clause, the
Bank shall have no responsibility with regard to the Customer's tax position or
status in any jurisdiction.
(vi) The Customer confirms that the Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to the Customer or the Securities and/or Cash held for the Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or in
part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized
<PAGE>
Persons until such time as the Bank receives Instructions from the Customer or
its designated agent that any such employee or agent is no longer an Authorized
Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement as follows:
(i) The Bank will use reasonable care with respect to its obligations under
this Agreement and the safekeeping of Assets. The Bank shall be liable to the
Customer for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping of such
Assets to the same extent that the Bank would be liable to the Customer if the
Bank were holding such Assets in New York. In the event of any loss to the
Customer by reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the market value of the
property which is the subject of the loss at the date of discovery of such loss
and without reference to any special conditions or circumstances. Alternatively,
the customer may, at its election and at its sole expense, be subrogated to the
rights of the Bank in respect of any Subcustodian in connection with such a
loss. The Bank will not be responsible for the insolvency of any Subcustodian
which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission. default or the
solvency of any broker or agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its obligations
under this Agreement, the Bank may rely on the genuineness of any document which
it believes in good faith to have been validly executed.
<PAGE>
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income from
or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing or
holding Assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or the
retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided in
Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person regarding
the financial condition of any broker, agent or other party to which Securities
are delivered or payments are made pursuant to this Agreement;
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
13. FEES AND EXPENSES.
<PAGE>
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
reasonable legal fees. The Bank shall have a lien on and is authorized to charge
any Accounts of the Customer for any amount owing to the Bank under any
provision of this Agreement.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
-----------------------------
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement shall apply to such transaction.
(b) Certification of Residency. etc. The Customer certifies that it is a
--------------------------
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement.
The Customer will indemnify the Bank against all losses, liability, claims or
demands arising directly or indirectly from any such certifications.
(c) Access to Records . The Bank shall allow the Customer' s independent
-----------------
public accountant reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be governed
-------------------------------------
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) Entire Agreement: Applicable Riders. Customer represents that the
-----------------------------------
Assets deposited in the Accounts are (Check one):
_ Employee Benefit Plan or other assets subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERlSA");
XX Mutual Fund assets subject to certain Securities and Exchange Commission
- --
("SEC") rules and regulations;
_ Neither of the above.
This Agreement consists exclusively of this document together with Schedule
A, Exhibits I -and the following Rider(s) [Check applicable rider(s)]:
___ERISA
<PAGE>
XX MUTUAL FUN
--
__ SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severabilitv. In the event that one or more provisions of this
------------
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
------
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right.
No waiver by a party of any provision of this Agreement, or waiver of any breach
or default, is effective unless in writing and signed by the party against whom
the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
-------
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
Customer: Peregrine Funds
c/o Van Eck Associates Corporation
99 Park Avenue, 8th Floor
New York, NY 10018
Attention: Thaddeus Leszczynski
Facsimile No: (2(2_) 687-5248
(i) Termination. This Agreement may be terminated by the Customer or the
-----------
Bank by giving sixty (60) days written notice to the other, provided that such
notice to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty (60) days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts
<PAGE>
which the Bank determines in good faith to be owed to it under Section 13. If
within sixty (60) days following receipt of a notice of termination by the Bank,
the Bank does not receive Instructions from the Customer specifying the names of
the persons to whom the Bank shall deliver the Assets, the Bank, at its
election, may deliver the Assets to a bank or trust company doing business in
the State of New York to be held and disposed of pursuant to the provisions of
this Agreement, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to the Bank.
Peregrine Funds
By:_/S/ Gary Greenberg
_________________________
Title Trustee
THE CHASE MANHATTAN BANK, N.A.
By: ________________________
Title
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Peregrine Funds for the benefit of the Asia Pacific Growth Fund, effective
December 20, 1995
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
------------------------------------------
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority
owned direct or indirect subsidiary of a qualified U.S. bank or bank holding
company that is incorporated or organized under the laws of a country other than
the United States and that has shareholders' equity in excess of S100 million in
U.S. currency (or a foreign currency equivalent thereof) (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank; or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and
<PAGE>
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent book-
entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through of Schedule A, and further represents that its Board has
determined that the use of each Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the Fund(s) and its (their)
shareholders. The Bank will supply-the Customer with any amendment to Schedule A
for approval. The Customer has supplied or will supply the Bank with certified
copies of its Board of Directors resolution(s) with respect to the foregoing
prior to placing Assets with any Subcustodian so approved.
Section 11. Instructions.
-------------
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is to be
made and Customer shall be solely responsible to assure that Instructions are in
accord with any limitations or restrictions applicable to the Customer by law or
as may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
<PAGE>
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such securities which are not returned promptly when due other
than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 14(i).
Section 12. Standard of Care; Liabilities.
------------------------------
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank' s established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
<PAGE>
Section 14. Access to Records.
------------------------------
Add the following language to the end of Section 14(c):
-------------------------------------------------------
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
GLOBAL CUSTODY AGREEMENT
WITH PEREGRINE FUNDS FOR THE
BENEFIT OF THE ASIA PACIFIC
GROWTH FUND
DATE December 20, 1995
<PAGE>
DOMESTIC
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions will apply rather than the provisions of Section
8 of the Agreement:
The Bank will send to the Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of the Bank's
nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or relate
to legal proceedings within a reasonable time after sufficient copies are
received by the Bank for forwarding to its customers. In addition, the Bank
will follow coupon payments, redemptions, exchanges or similar matters with
respect to Securities in the Custody Account and advise the Customer or the
Authorized Person for such Account of rights issued, tender offers or any
other discretionary rights with respect to such Securities, in each case,
of which the Bank has received notice from the issuer of the Securities, or
as to which notice is published in publications routinely utilized by the
Bank for this purpose.
Fees
- ----
The fees referenced in Section 13 of this Agreement cover only domestic and
euro-dollar holdings. There will be no Schedule A to this Agreement, as there
are no foreign assets in the Accounts.
<PAGE>
EXHIBIT (15)(b)(1)
FORM OF
VAN ECK FUNDS
99 Park Avenue
New York, New York 10016
Van Eck Securities Corporation
99 Park Avenue
New York, New York 10016
Ladies/Gentlemen:
Pursuant to Section 3(b) of the Plan of Distribution pursuant to Rule 12b-
1, dated October 29, 1993 (the "Plan"), please be advised that an additional
series of the Trust, namely, ________________________ (the "Fund"), which will
issue Class A Shares have adopted the Plan for the Fund. A certification by the
Secretary of the Trust of the resolution adopted by the Board of Trustees and an
amended Exhibit A reflecting the addition of the Fund to the Plan are attached.
VAN ECK FUNDS
ATTEST:______________________________ BY:_________________________
<PAGE>
VAN ECK FUNDS
EXHIBIT A
Maximum 12b-1 Fees/Annual Limitation
Name of Series (Annually as a % of average daily net assets)
- -------------- ---------------------------------------------
Global Balanced Fund -A 0.50%
Asia Infrastructure Fund-A 0.50%
Global SmallCap Fund-A 0.50%
Global Hard Assets Fund-A 0.50%
Gold Opportunity Fund-A 0.50%
<PAGE>
EXHIBIT (5)(d)
FORM OF
VAN ECK FUNDS
99 Park Avenue
New York, New York 10016
Van Eck Securities Corporation
99 Park Avenue
New York, New York 10016
Ladies/Gentlemen:
Pursuant to Section 3(b) of the Plan of Distribution pursuant to Rule
12b-1, dated October 29, 1993 (the "Plan"), please be advised that an
additional series of the Trust, namely, ________________________ (the "Fund"),
which will issue Class B Shares have adopted the Plan for the Fund. A
certification by the Secretary of the Trust of the resolution adopted by the
Board of Trustees and an amended Exhibit A reflecting the addition of the Fund
to the Plan are attached.
VAN ECK FUNDS
ATTEST:______________________________ BY:__________________________________
<PAGE>
VAN ECK FUNDS
EXHIBIT A
Maximum 12b-1 Fees/Annual Limitation
Name of Series (Annually as a % of average daily net assets)
- -------------- ---------------------------------------------
Asia Infrastructure Fund-B 1.00%
Global Hard Assets Fund-B 1.00%
Gold Opportunity Fund-B 1.00%
