<PAGE>
PROSPECTUS DECEMBER 30, 1996
VAN ECK EMERGING MARKETS GROWTH FUND
- -------------------------------------------------------------------------------
Van Eck Emerging Markets Growth Fund is managed by Van Eck Associates
Corporation,
99 Park Avenue, New York, New York 10016
. Account Assistance: (800) 544-4653
- -------------------------------------------------------------------------------
Van Eck Funds (the "Trust") is an open-end management investment company
organized as a "business trust" under the laws of the Commonwealth of
Massachusetts. Emerging Markets Growth Fund is a new series of the Trust and
is one of the Van Eck Global Funds.
Shares of Emerging Markets Growth Fund (the "Fund") are offered in three
classes. See "Purchase of Shares--Alternative Purchase Arrangements" on page
15 of this prospectus to determine your purchase options for the Fund.
EMERGING MARKETS GROWTH FUND (CLASS A, B AND C)--seeks long-term capital
appreciation by investing primarily in equity securities in emerging markets
around the world. Peregrine Asset Management (Hong Kong) Limited ("PAM" or
"Sub-Adviser") serves as sub-investment adviser to this Fund.
The Fund is managed by Van Eck Associates Corporation (the "Adviser"), 99 Park
Avenue, New York, New York 10016. See "Management." Van Eck Securities
Corporation (the "Distributor"), a wholly-owned subsidiary of the Adviser,
serves as Distributor of the Fund's shares.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. It should be read and retained for future
reference. For further information about the Fund, please call the Fund or the
Distributor at the above telephone number.
A Statement of Additional Information, dated December 30, 1996, which further
discusses the Trust and the Fund has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is available
without charge upon request to the Fund or the Distributor at the above
address or by calling the telephone number listed above.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
<S> <C>
Transaction Data........................................................... 3
The Fund................................................................... 4
Investment Objective and Policies.......................................... 4
Risk Factors............................................................... 6
Limiting Investment Risks.................................................. 15
Purchase of Shares......................................................... 15
Exchange Privilege......................................................... 21
Dividends and Distributions................................................ 23
Tax-Sheltered Retirement Plans............................................. 23
Investment Programs........................................................ 23
Redemption of Shares....................................................... 24
Management................................................................. 26
Plan of Distribution....................................................... 27
Advertising................................................................ 28
Taxes...................................................................... 28
Description of the Trust................................................... 29
Additional Information..................................................... 30
</TABLE>
2
<PAGE>
TRANSACTION DATA
The following table is intended to assist an investor in understanding the
various direct and indirect costs and expenses borne by an investor in the
Fund. The sales charges are the maximum sales charges an investor would incur.
Sales charges decline depending on the amount of the purchase, the number of
shares an investor already owns or the use of various investment programs. See
"Purchase of Shares." The Adviser may from time to time waive fees and/or
reimburse certain expenses of the Fund.
<TABLE>
<CAPTION>
CLASS-A CLASS-B CLASS-C
------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on
Purchases (as a percent of offering
price)................................. 4.75% 0% 0%
Contingent Deferred Sales or Redemption
Charge*................................ 0% 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (as a
percent of average net assets):
Management Fees**....................... 1.00% 1.00% 1.00%
12b-1 Fees/Shareholder Servicing Fees... .50% 1.00% 1.00%
Other Expenses***....................... .56% .58% .58%
---- ---- ----
Transfer and Dividend Disbursing...... .15% .17% .17%
Custodian Fees........................ .12% .12% .12%
Other Expenses........................ .29% .29% .29%
--- --- ---
Total Fund Operating Expenses........... 2.06% 2.58% 2.58%
==== ==== ====
</TABLE>
EXAMPLE:
You would bear the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.+
<TABLE>
<CAPTION>
CLASS-A CLASS-B CLASS-C
------- ------- -------
<S> <C> <C> <C>
1 year............................................ $ 67.41 $ 82.39 $35.85
3 years........................................... $109.00 $128.91 $89.45
</TABLE>
- --------
*The Contingent Deferred Sales Charge on Class B shares is applied to the
lesser of purchase price or net asset value at redemption. The charge
imposed on such amount is scaled down from 5% during the first year to 0%
after the sixth year. The Contingent Redemption Charge on Class C shares of
1% is applied to redemptions during the first year of purchase and is
applied to the lesser of purchase price or net asset value at redemption.
**The Adviser may temporarily reimburse and or waive certain operating
expenses of the Fund including management and administrative fees. Such
temporary reimbursements/waivers will have the effect of lowering the Fund's
expense ratio.
*** Other Expenses are estimates which assume $30 million in average daily net
assets. These expenses may vary and may be greater or less than those
shown.
+The 5 and 10 year expenses are not required of those funds in operation for
a period of less than 10 months.
The above examples should not be considered a representation of past or future
expenses or investment return. Actual expenses may be greater or less than
those shown. Information regarding Management Fees and 12b-1 Fees can be found
under "Management" and "Plan of Distribution."
3
<PAGE>
THE FUND
Emerging Markets Growth Fund is a series of Van Eck Funds, an open-end
management investment company organized as a "business trust" under the laws
of the Commonwealth of Massachusetts on April 3, 1985. The Fund is classified
as diversified under the Investment Company Act of 1940, as amended (the "1940
Act"). A diversified fund is a fund which meets the following requirements: At
least 75% of the value of its total assets is represented by cash and cash
items (including receivables), government securities, securities of other
investment companies and other securities for the purpose of this calculation
limited in respect of any one issuer to an amount not greater than 5% of the
value of the fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer.
Van Eck Global Funds refers to the series of the Trust which engage in
investing in equity and/or debt securities globally. The Van Eck Global Funds
are: Asia Dynasty Fund, Asia Infrastructure Fund, Global Balanced Fund, Global
Hard Assets Fund, Global Income Fund and the Fund.
INVESTMENT OBJECTIVE AND POLICIES
A description of the investment objective and policies of the Fund is set
forth below. The investment objective of the Fund may not be changed without
the affirmative vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund. Investors should understand that,
despite the best efforts of the Adviser (and the Sub-Adviser), there is no
assurance that the Fund will achieve its objective. For further information
about the Fund's investment policies, see "Investment Objectives and Policies
of the Funds" in the Statement of Additional Information.
EMERGING MARKETS GROWTH FUND
OBJECTIVE:
EMERGING MARKETS GROWTH FUND SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING
PRIMARILY IN EQUITY SECURITIES IN EMERGING MARKETS AROUND THE WORLD.
POLICIES:
In pursuit of its investment objective, the Fund emphasizes countries that,
compared to the world's major economies, exhibit relatively low gross national
product per capita as well as the potential for rapid economic growth.
Specifically, an "emerging market" or "Emerging Country" is any country that
the World Bank, the International Finance Corporation, the United Nations or
its authorities has determined to have a low or middle income economy.
Emerging Countries can be found in regions such as Asia, Latin America,
Eastern Europe and Africa. The countries that will not be considered Emerging
Countries include the United States, Australia, Canada, Japan, New Zealand and
most countries located in Western Europe such as Austria, Belgium, Denmark,
Finland, France, Germany, Great Britain, Ireland, Italy, the Netherlands,
Norway, Spain, Sweden and Switzerland.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in Emerging Country and emerging market equity securities. The Fund
considers emerging market securities to include securities which are (i)
principally traded in the capital markets of an emerging market country; (ii)
securities of companies that derive at least 50% of their total revenues from
either goods produced or services performed in emerging market countries or
from sales made in Emerging Countries, regardless of where the securities of
such companies are principally traded; (iii) securities of companies organized
under the laws of, and with a principal office in an Emerging Country; (iv)
securities of investment companies (such as country funds) that principally
invest in emerging market securities, and (v) American Depositary Receipts
(ADRs), American Depositary Shares (ADSs), European Depositary Receipts
(EDRs), and Global Depositary Receipts (GDRs) with respect to the securities
of such companies.
4
<PAGE>
Equity securities in which the Fund may invest include common stocks;
preferred stocks (either convertible or non-convertible); rights; warrants;
direct equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; convertible debt instruments; and
special classes of shares available only to foreign persons in those markets
that restrict ownership of certain classes of equity to nationals or residents
of that country. These securities may be listed on securities exchanges or
traded over-the-counter. Direct investments are generally considered illiquid
and will be aggregated with other illiquid investments for purposes of the
limitation on illiquid investments. See "Risk Factors--Emerging Market
Securities".
The Fund may invest indirectly in emerging markets by investing in other
investment companies. Due to restrictions on direct investment by foreign
entities in certain emerging market countries, investment in other investment
companies may be the most practical or only manner in which the Fund can
invest in the securities markets of certain emerging market countries. Such
investments may involve the payment of premiums above the net asset value of
such issuers' portfolio securities; are subject to limitations under the Act;
are constrained by market availability; and may constitute passive foreign
investment companies for Federal income tax purposes. As a shareholder in an
investment company, the Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. The
Adviser and Sub-Adviser have agreed to waive their management fees with
respect to the portion of the Fund's assets invested in shares of other open-
end investment companies. The Fund would continue to pay its own management
fees and other expenses with respect to its investments in shares of closed-
end investment companies.
The Fund may, as described below in "Risk Factors," invest in derivatives.
Derivatives are instruments whose value is "derived" from an underlying asset.
Derivatives in which the Fund may invest include futures contracts, forward
contracts, options, swaps and structured notes and other similar securities as
may become available in the market. These instruments offer certain
opportunities and are subject to additional risks that are described below.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in securities which are not emerging market securities, such as
high grade, liquid debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in money
market instruments denominated in U.S. dollars or a foreign currency. These
money market instruments include, but are not limited to, negotiable or short-
term deposits with domestic or foreign banks with total surplus and undivided
profits of at least $50 million; high quality commercial paper; and repurchase
agreements maturing within seven days with domestic or foreign dealers, banks
and other financial institutions deemed to be creditworthy under guidelines
approved by the Board of Trustees of the Trust. The commercial paper in which
the Fund may invest will, at the time of purchase, be rated P-1 or better by
Moody's Investors Services, Inc. ("Moody's"); A-I or better by Standard &
Poor's Corporation ("S&P"); Fitch-1 by Fitch; Duff-1 by Duff & Phelps ("D&P"),
or if unrated, will be of comparable high quality as determined by the Adviser
or Sub-Adviser.
The Adviser expects that the Fund will normally invest in at least three
different countries. The Fund emphasizes equity securities, but may also
invest in other types of instruments, including debt securities of any quality
(other than commercial paper as described herein). Debt securities may include
fixed or floating rate bonds, notes, debentures, commercial paper, loans,
convertible securities and other debt securities issued or guaranteed by
governments, agencies or instrumentalities, central banks, commercial banks or
private issuers. See "Risk Factors--Debt Securities" and "Risk Factors--Low
Rated or Unrated Debt Securities."
The Adviser believes that the economies of emerging markets will continue to
have among the world's fastest rates of growth over the next decade. In many
instances, the growth in these countries is brought on by a move away from
governmental intervention in the marketplace, and an aggressive move towards
free market capitalism. While many emerging markets are experiencing rapid
growth by U.S. standards, such markets are still developing and considerably
less liquid. Investors can expect there will be periods of volatility and
reduced liquidity in these markets. The Fund involves above-average risk, and
as such, is designed as a long-term investment. There can be no assurance that
the Fund will achieve its investment objective. See "Risk Factors-Foreign
Securities" and "Risk Factors-Emerging Markets Securities" below.
PAM serves as sub-adviser to the Fund. PAM has been registered with the
Securities and Exchange Commission ("SEC") as an investment adviser since
April 17, 1995. PAM was incorporated in Hong Kong in 1991 and is a 100% owned
subsidiary of Peregrine Asset Management Holdings Limited which, in turn, is a
75% owned subsidiary of Peregrine Investment Holdings
5
<PAGE>
Limited ("Peregrine"). Peregrine and its affiliates comprise the largest
independent Asian based investment bank located outside of Japan and Korea.
Established in 1988, Peregrine and its affiliates have offices in fifteen
Asian countries as well as in Europe and the United States. Investment
professionals at PAM collectively have over forty years experience in managing
funds which invest in emerging markets. The Adviser believes PAM has unique
knowledge and experience in global emerging market investing. See
"Management."
There is no limitation on the amount the Fund can invest in emerging markets.
Investors should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign
nations, which are in addition to the usual risks inherent in domestic
investment. Global investing involves economic and political considerations
not typically applicable to the U.S. markets. These considerations, which may
favorably or unfavorably affect the Fund's performance, include changes in
exchange rates and exchange rate controls (which may include suspension of the
ability to transfer currency from a given country), costs incurred in
conversion between currencies, non-negotiable brokerage commissions, default
in foreign government securities, lower trading volume and greater market
volatility, the difficulty of enforcing obligations in other countries, war,
expropriation, nationalization, confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments
in foreign nations, political and social instability and diplomatic
developments which could affect investments in securities of issuers in
foreign nations.
In addition, there is typically less publicly available information concerning
foreign companies than for domestic companies. Foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, and the Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Further, the settlement
period of securities transactions in foreign markets may be longer than in
domestic markets. In many foreign countries there is less government
supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the U.S. The foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid and subject to greater price volatility than
those in the U.S. See "Risk Factors--Foreign Securities" and "Risk Factors--
Emerging Markets Securities" below.
PAM will select investments for the Fund based on its assessment of where
emerging market opportunities for long-term capital appreciation are most
attractive. When making investment decisions, PAM will evaluate
characteristics of various Emerging Countries such as the outlook for economic
growth and inflation and government monetary and fiscal policies. In selecting
specific companies for investment, PAM will analyze such factors as growth
potential, financial strength and management experience.
RISK FACTORS
Assets of the Fund are subject to market fluctuations and risks inherent in
all securities. In addition, assets of the Fund may be subject to other
special considerations, such as those listed below.
FOREIGN SECURITIES
The Fund may purchase securities of foreign issuers including foreign
investment companies. Investments in foreign securities may involve a greater
degree of risk than investments in domestic securities due to the possibility
of exchange rate fluctuations and exchange controls, less publicly available
information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. In addition, some foreign companies are not generally
subject to the same uniform accounting, auditing and financial reporting
standards as are American companies and there may be less government
supervision and regulation of foreign stock exchanges, brokers and companies.
Foreign securities may be subject to foreign taxes, higher custodian fees,
higher brokerage commissions and higher dividend collection fees which could
reduce the yield or return on such securities, although a shareholder of the
Fund may, subject to certain limitations, be entitled to claim a credit or
deduction for United States federal income tax purposes for his or her
proportionate share of such foreign taxes paid by the Fund. In addition, some
foreign securities in which the Fund may invest may be denominated in foreign
currencies, and since the Fund may temporarily hold funds in foreign
currencies, the value of the assets of the Fund
6
<PAGE>
(and thus its net asset value) will be affected by changes in currency
exchange rates. See "Foreign Currency and Foreign Currency Transactions"
below. Transactions in the securities of foreign issuers may be subject to
settlement delays. See "Taxes" in the Prospectus and "Risks Factors--Foreign
Securities" in the Statement of Additional Information. However, the Sub-
Adviser believes that diversification of assets on an international basis
decreases the degree to which events in any one country will adversely affect
the entire portfolio.
In addition to investing directly in the securities of United States and
foreign issuers, the Fund may also invest in American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs), American Depositary Shares
(ADSs), Global Depositary Shares (GDSs) and securities of foreign investment
funds or trusts (including passive foreign investment companies). ADRs are
certificates that are issued by a United States bank or trust company
representing the right to receive securities of a foreign issuer deposited in
a foreign subsidiary, branch or correspondent of that bank. Generally, ADRs,
in registered form, are designed for use in United States securities markets.
Foreign brokerage commissions and custodial expenses are generally higher than
in the United States. Dividend collection fees on foreign securities and ADRs
are generally higher than on United States securities and dividends and
interest may be subject to foreign withholding tax at their source which may
not be permitted to be passed through to shareholders.
EMERGING MARKETS SECURITIES
Investments of the Fund will be made in companies in developing countries.
Shareholders should be aware that investing in the equity and fixed income
markets of developing countries involves exposure to potentially unstable
governments, economies based on only a few industries and securities markets
which trade a small number of securities and may therefore at times be
illiquid. Securities markets of developing countries tend to be more volatile
than the markets of developed countries. Countries with developing markets may
present the risk of nationalization of businesses, restrictions on foreign
ownership or prohibitions of repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with developing markets may be highly vulnerable to change 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.
For example, political and social conditions in a developing country, caused
by an unstable government may pose certain risks to the Fund's investments. If
aggravated by local or international developments, such risks could have an
adverse affect on investments in such developing country, including the Fund's
investments and, under certain conditions, on the liquidity of the Fund's
portfolio and its ability to meet shareholder redemption requests. The ability
of the Fund to invest, or hold its investments, in companies situated in
developing countries may be further affected by changes in United States or
such countries' laws or regulations.
Many of these emerging markets limit the percentage of their domestic issuers
that foreign investors, such as the Fund, may own 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 generally are convertible into local shares.
Foreign shares may be subject to various restrictions, including restrictions
on the right to receive dividends and other distributions and on the right to
vote. 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 most cases foreign shares may be
converted into local shares. In addition, foreign shares often trade at a
premium to local shares, while at other times there is no premium. If the Fund
were to purchase foreign shares at a time when there is 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 or to vote at stockholders'
meetings (while foreign holders of foreign shares would participate). If the
Fund were to own local shares and could not participate in a stock, warrant or
other distribution, the Fund could suffer material dilution of its interest in
that issuer and the value of its holdings could
7
<PAGE>
decline dramatically causing a loss on its investment. Generally, it is
expected that the Fund will hold foreign shares. However, because of their
limited number, foreign shares may, at times, not be available for purchase by
the Fund or, if available, the premiums may be, in the opinion of the Sub-
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 and,
when in the opinion of the Sub-Adviser, the potential for gain in these
markets outweighs the risks that issuers will take corporate actions which may
result in dilution to the 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 Sub-Adviser will be able to assess these risks accurately,
that the Fund will be able to convert its local shares to foreign shares or
that dilution will not result.
The securities markets in the emerging markets are substantially smaller, less
liquid and more volatile than the major securities markets in the United
States. A high proportion of the shares of many issuers may be held by a
limited number of persons and financial institutions. A limited number of
issuers may represent a disproportionately large percentage of market
capitalization and trading value and cause the securities markets to be
susceptible to influence by large investors trading significant blocks of
securities. The Fund's ability to participate fully in the markets may be
limited by its investment policy of investing not more than 15% of its total
net assets in illiquid securities (including repurchase agreements which
mature in more than seven days and over-the-counter foreign currency options).
In addition, limited liquidity may impair the Fund's ability to liquidate a
position at the time and price it wishes to do so. Many of these stock markets
are undergoing a period of growth and change which may result in trading
volatility, and in difficulties in the settlement and recording of
transactions and in interpreting and applying the relevant law and
regulations. Certain developing countries do not have a comprehensive system
of laws, although substantial changes have occurred in this regard in recent
years. Even where adequate law exists in certain developing countries, it may
be impossible to obtain swift and equitable enforcement of such law or to
obtain enforcement of the judgment by a court of another jurisdiction.
In addition, stockbrokers and other intermediaries in emerging markets may not
perform as well as their counterparts in the United States and other more
developed securities markets. The prices at which the Fund may acquire
investments may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by the Fund in particular securities.
The Fund may invest in Russian issuers. Investments in Russia involve the
risks associated with other foreign emerging markets. In particular,
settlement, clearing and registration of securities in Russia is in an
underdeveloped state. Ownership of shares (except those held through
depositories that meet the requirements of the 1940 Act) is defined according
to entries in the issuer's share register and normally evidenced by extracts
from that register, which have no legal enforceability. Furthermore, share
registration is carried out either by the issuer or registrars located
throughout Russia, which are not necessarily subject to effective government
supervision. As a result, it is possible for the Fund to lose its registration
and thus its ownership of these securities due to fraud, illegal amendment,
negligence or even mere oversight. This system also may cause a delay in the
Fund's sale of Russian securities to a potential purchaser and subject the
Fund to the risk of loss in connection with the insolvency of a registrar. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for the Fund to
enforce any rights it may have against the registrar or issuer in the event of
the loss of share registration.
To reasonably ensure that its interest continues to be appropriately recorded,
the Fund will invest only in those companies whose registrars have entered
into a contract with the Fund's Russian sub-custodian, which gives the sub-
custodian the right, among others, to inspect the share register and to obtain
extracts of share registers through regular audits. While these procedures
reduce the risk of loss, there can be no assurance that they will be
effective. This limitation may prevent the Fund from investing in the
securities of certain Russian issuers otherwise deemed suitable by the Sub-
Adviser.
FOREIGN CURRENCY AND FOREIGN CURRENCY TRANSACTIONS
Since some foreign securities in which the Fund may invest may be denominated
in foreign currencies, and since the Fund may temporarily hold foreign
currencies, the value of the assets of the Fund (and thus its net asset value)
may be affected by changes
8
<PAGE>
in currency exchange rates. The Fund's performance will be less favorable if
foreign currency exchange rates move adversely, relative to the U.S. dollar.
Foreign exchange rates are affected by factors such as actual and anticipated
Balance of Payments accounts, central bank policy, political concerns and
changes in interest rates. There can be no assurance that the Sub-Adviser will
be able to anticipate currency fluctuations in exchange rates accurately. The
Fund may invest in a variety of derivatives. The Fund may purchase and sell
put and call options on, or enter into futures contracts or forward contracts
to purchase or sell, foreign currencies. The Fund may use foreign currency
contracts to hedge the U.S. dollar value of a security which it already owns
or anticipates purchasing. A forward currency contract may thus help reduce
the Fund's losses on a security when a foreign currency's value changes. The
Fund will enter into forward contracts to duplicate a cash market transaction.
However, the Fund will invest in securities including short-term obligations,
denominated in a range of foreign currencies and the value of the Fund will be
affected by changes in currency exchange rates. The Fund will not purchase or
sell foreign currency as an investment except that it may enter into currency
swaps. See "Currency Swaps," "Options," "Futures Contracts" and "Hedging and
Other Investment Techniques and Strategies" below and "Foreign Currency
Transactions" and "Futures and Options Transactions" in the Statement of
Additional Information.
CURRENCY SWAPS
The Fund may enter into currency swaps solely for hedging purposes. Currency
swaps involve the exchange of rights to make or receive payments in specified
currencies. Since currency swaps are individually negotiated, the Fund may
expect to achieve an acceptable degree of correlation between its portfolio
investments and its currency swap positions. Currency swaps usually involve
the delivery of the entire principal value of one designated currency in
exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
transactions. If the Sub-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 purposes of the limitation on illiquid
investments.
OPTIONS
For hedging and other purposes (such as creating synthetic positions), 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, financial
futures contracts and commodity futures contracts. This policy may be changed
without shareholder approval.
As the holder of a call or put option, the Fund pays a premium and has the
right (for generally 3 to 9 months) to purchase (in the case of a call option)
or sell (in the case of a put option) the underlying asset at the exercise
price at any time during the option period. An option on a futures contract
gives the purchaser the right, but not the obligation, in return for the
premium paid, to assume a position in a specified underlying futures contract
(which position may be a long or short position) at a specified exercise price
during the option exercise period. If the call or put is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration date
and the Fund will lose its premium payment. The Fund may, with respect to
options it has purchased, sell them, exercise them or permit them to expire.
The Fund may write call or put options. As the writer of an option, the Fund
receives a premium. The Fund keeps the premium whether or not the option is
exercised. If the call or put option is exercised, the Fund must sell (in the
case of a written call option) or buy (in the case of a written put option)
the underlying asset at the exercise price. The Fund may write only covered
put and call options. A covered call option, which is a call option with
respect to which 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 asset which might otherwise have been sold
to protect against depreciation in the market price of the underlying asset. A
covered put option written by the Fund exposes it
9
<PAGE>
during the term of the option to a decline in price of the underlying asset. A
put option sold by the Fund is covered when, among other things, cash or
short-term liquid securities are placed in a segregated account to fulfill the
obligations undertaken. Covering a put option sold does not reduce the risk of
loss.
The Fund may invest in options which are either listed on a domestic
securities exchange or traded on a recognized foreign exchange. In addition,
the Fund may purchase or sell over-the-counter options from dealers or banks
to hedge securities or currencies as approved by the Board of Trustees. In
general, exchange traded options are third party contracts with standardized
prices and expiration dates. Over-the-counter options are two party contracts
with price and terms negotiated by the buyer and seller, are generally
considered illiquid and will be limited to 15% of the Fund's net assets.
FUTURES CONTRACTS
The Fund may buy and sell financial futures contracts which may include
security and interest-rate futures, stock and bond index futures contracts and
foreign currency futures contracts. A security or interest-rate futures
contract is an agreement between two parties to buy or sell a specified
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the
difference between the value of the index at the beginning and at the end of
the contract period. A foreign currency futures contract is an agreement to
buy or sell a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the underlying asset fluctuates, either party to the
contract is required to make additional margin payments, known as "variation
margin," to cover any additional obligation it may have under the contract.
The Fund will not commit more than 5% of its total assets to initial margin
deposits on futures contracts and premiums on options on futures contracts;
however, margin deposits for futures positions entered into for BONA FIDE
hedging purposes, as such term is defined in the Commodity Exchange Act, are
excluded from the 5% limitation.
The Fund may write, purchase or sell put and call options on financial futures
contracts. The Fund may write only covered put and call options. 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. The writer of an
option is obligated to assume a position in a specified futures contract if
the option is exercised.
In establishing a position in a futures contract, which may be a long or short
position, cash or highly liquid equity or liquid high quality debt instruments
equal in value to the current value of the underlying securities less the
margin requirement will be segregated, as may be required, with the Fund's
Custodian to ensure that the Fund's position is unleveraged. This segregated
account will be marked-to-market daily to reflect changes in the value of the
underlying futures contract. Trading in futures contracts traded on foreign
commodity exchanges may be subject to the same or similar risks as trading in
foreign securities. See "Risk Factors-Foreign Securities."
SHORT SALES
Emerging Markets Growth Fund may make short sales of equity securities. A
short sale occurs when the Fund sells a security which it does not own by
borrowing it from a broker. Following the short sale, the Fund must deposit
collateral with the broker. In the event that the value of the security that
the Fund sold short declines, the Fund will gain as it repurchases the
security in the market at the lower price. If the price of the security
increases, the Fund will suffer a loss as it will have to repurchase the
security at the higher price. Short sales may incur higher transaction costs
than regular securities transactions.
Emerging Markets Growth Fund will establish a segregated account with respect
to its short sales and maintain in such account cash not available for
investment, U.S. Government securities or other liquid, high-quality debt
securities having a value equal to the difference between (i) the market value
of the securities sold short at the time they were sold short and (ii) any
cash, U.S. Government securities or other liquid, high-quality debt securities
required to be deposited as collateral with the broker in connection with the
short sale (not including the proceeds from the short sale). Such segregated
account will be marked to
10
<PAGE>
market daily, so that (i) the amount in the segregated account plus the amount
deposited with the broker as collateral equals the current market value of the
securities sold short and (ii) in no event will the amount in the segregated
account plus the amount deposited with the broker as collateral fall below the
original value of the securities at the time they were sold short. The total
value of the assets deposited as collateral with the broker and deposited in
the segregated account will not exceed 50% of the Fund's net assets. The
Fund's ability to engage in short sales may be limited by the requirements of
current U.S. tax law that the Fund derive less than 30% of its gross income
from the sale or other disposition of securities held less than three months.
Securities sold short and then repurchased, regardless of the actual time
between the two transactions, are considered to have been held for less than
three months.
HEDGING AND OTHER INVESTMENT TECHNIQUES AND STRATEGIES
Options and futures contracts can be used by the Fund as part of various
hedging techniques and strategies.
When the Fund intends to acquire securities for its portfolio, it may use call
options or futures contracts as a means of fixing the price of the security it
intends to purchase at the exercise price (in the case of an option) or
contract price (in the case of a futures contract). An increase in the
acquisition cost would be offset, in whole or part, by a gain on the option or
futures contract. Options and futures contracts requiring delivery of a
security may also be useful to the Fund in purchasing a large block of
securities that would be more difficult to acquire by direct market purchases.
If the Fund holds a call option rather than the underlying security itself,
the Fund is partially protected from any unexpected decline in the market
price of the underlying security and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option. Using a futures contract would not offer such partial protection
against market declines and the Fund would experience a loss as if it had
owned the underlying security.
To protect against anticipated declines in the value of the Fund's investment
holdings, the Fund may use options, forward and futures contracts, structured
notes and similar investments (commonly referred to as derivatives) as a
defensive technique to protect the value of an asset the Adviser or Sub-
Adviser deems desirable to hold for tax or other considerations or for
investment reasons. One defensive technique involves selling a futures or
forward contract or purchasing a put option or entering into a swap contract
whose value is expected to be inversely related to the security or asset being
hedged. If the anticipated decline in the value of the asset occurs, it would
be offset, in whole or part, by a gain on the futures contract, put option or
swap. The premium paid for the put option would reduce any capital gain
otherwise available for distribution when the security is eventually sold.
The Fund may hedge against changes in the value of the U.S. dollar in relation
to a foreign currency in which portfolio securities of the Fund may be
denominated. The Fund may employ hedging strategies with options and futures
contracts on foreign currencies before the Fund purchases a foreign security,
during the period the Fund holds the foreign security, or between the date the
foreign security is purchased or sold and the date on which payment therefor
is made or received. Hedging against a change in the value of a foreign
currency in the foregoing manner does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. Furthermore, such hedging transactions reduce or preclude the
opportunity for gain if the value of the hedged currency should change
relative to the U.S. dollar. Last, when the Fund uses options and futures in
anticipation of the purchase of a portfolio security to hedge against adverse
movements in the security's underlying currency, but the purchase of such
security is subsequently deemed undesirable, the Fund may incur a gain or loss
on the option or futures contract.
The Fund may use futures contracts, options, forward contracts and swaps as
part of various investment techniques and strategies, such as creating non-
speculative "synthetic" positions or implementing "cross-hedging" strategies.
A synthetic position is deemed not to be speculative if the position is
covered by segregation of short-term liquid assets. However, since the
financial markets in the developing countries are not as developed as in the
United States, these financial investments may not be available to the Fund
and the Fund may be unable to hedge certain risks or enter into certain
transactions. A "synthetic position" is the duplication of a cash market
transaction when deemed advantageous by the Sub-Adviser for cost, liquidity or
transactional efficiency reasons. A cash market transaction is the purchase or
sale of a security or other asset for cash. For example, from time to time,
the Fund experiences large cash inflows which may be redeemed from the Fund in
a relatively
11
<PAGE>
short period. In this case, the Fund currently can leave the amounts
uninvested in anticipation of the redemption or invest in securities for a
relatively short period, incurring transaction costs on the purchase and
subsequent sale. Alternatively, the Fund may create a synthetic position by
investing in a futures contract on a security, such as a Deutschemark bond or
on a securities index gaining investment exposure to the relevant market while
incurring lower overall transaction costs. The Fund would enter into such
transactions if the markets for these instruments were sufficiently liquid and
there was an acceptable degree of correlation to the cash market. By
segregating cash, the Fund's futures contract position would generally be no
more leveraged or riskier than if it had invested in the cash market-i.e.,
purchased securities.
Consistent with the hedging strategy described above, the Fund may invest in
options and futures contracts and options on futures contracts on foreign
currencies for the purpose of hedging against a decline in the value of
certain U.S. dollar denominated securities or other "cross-hedging"
strategies. "Cross-hedging" involves the use of one currency to hedge against
the decline in the value of another currency. For example, the Fund could
hedge against a currency-related decline in the value of a security
denominated in deutschemark by taking a short position in the Swiss franc. The
Sub-Adviser believes that the value of certain U.S. dollar denominated debt
securities is affected by fluctuations in the value of the U.S. dollar
relative to foreign currencies. Furthermore, the Sub-Adviser believes it can
identify those currencies whose value is likely to move inversely with the
value of the U.S. dollar. By investing a portion of the Fund's assets in
options or futures contracts on those identified currencies, the Sub-Adviser
believes that it may be able to reduce the Fund's exposure to declines in the
value of U.S. dollar denominated securities attributable to currency value
fluctuations. The use of such instruments as described herein involves several
risks. First, there can be no assurance that the prices of such instruments
and the hedged security or the cash market position will move as anticipated.
If prices do not move as anticipated, the Fund may incur a loss on its
investment, may not achieve the hedging protection it anticipated and/or incur
a loss greater than if 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 being
hedged. Third, positions in such instruments can be closed out only on an
exchange that provides a market for those instruments. There can be no
assurance that such a market will exist for a particular futures contract or
option. If the Fund cannot close out an exchange traded futures contract or
option which it holds, it would have to perform its contract obligation or
exercise its option to realize any profit and would incur transaction costs on
the sale of the underlying assets.
Over-the-counter options, together with repurchase agreements maturing in more
than seven days and other investments which do not have readily available
market quotations are, because of liquidity considerations, limited to 15% of
total net assets of the Fund.
In those situations where foreign currency options or futures contracts, or
options on futures contracts may not be readily purchased (or where such
options or contracts may be deemed illiquid) in the primary currency in which
the hedge is desired, the hedge may be obtained by purchasing or selling an
option, futures contract or forward contract on a secondary currency. The
secondary currency will be selected based upon the Sub-Adviser's belief that
there exists a significant correlation between the exchange rate movements of
the primary and secondary currencies. This strategy may be employed with
respect to other securities and assets in which the Fund may invest. However,
there can be no assurances that, in the case of foreign currencies, the
exchange rate or the primary and secondary currencies will move as anticipated
or, in the case of other securities, or generally, that the relationship
between the hedged security and the hedging instrument will continue. If they
do not move as anticipated or the relationship does not continue, a loss may
result to the Fund on its investments in the hedging positions.
See "Futures and Options Transactions" in the Statement of Additional
Information for further information about futures contracts and options,
including tax effects and risks to the Fund.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund would acquire an underlying debt
obligation for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase, and the Fund to resell,
the obligation at an agreed upon price and time, thereby determining the yield
during the Fund's holding period. The agreement results in a fixed rate of
return that is not subject to market fluctuations
12
<PAGE>
during the Fund's holding period. The Fund will enter into repurchase
agreements with respect to securities in which it may invest with member banks
of the Federal Reserve System or certain non-bank dealers. Under each
repurchase agreement the selling institution will be required to maintain the
value of the securities subject to the repurchase agreement at not less than
their repurchase price. Repurchase agreements could involve certain risks in
the event of default or insolvency of the other party, including possible
delays or restrictions upon the Fund's ability to dispose of the underlying
securities. The Sub-Adviser or 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. See
"Repurchase Agreements" in the Statement of Additional Information.
DEBT SECURITIES
The Fund may invest in debt securities. The market value of debt securities
generally varies in response to changes in interest rates and the financial
condition of each issuer. During periods of declining interest rates, the
value of debt securities generally increases. Conversely, during periods of
rising interest rates, the value of such securities generally declines. These
changes in market value will be reflected in the Fund's net asset value.
Debt securities with similar maturities may have different yields, depending
upon several factors, including the relative financial condition of the
issuers. For example, higher yields are generally available from securities in
the lower rating categories of S&P's or Moody's. However, the values of lower-
rated securities generally fluctuate more than those of high grade securities
and lower-rated securities present greater risk of default. A description of
debt securities ratings is contained in the Appendix to the Statement of
Additional Information. High grade means a rating of A or better by Moody's or
S&P's, or of comparable quality in the judgment of the Adviser (or Sub-
Adviser) if no rating has been given by either service. Many securities of
foreign issuers are not rated by these services. Therefore, the selection of
such issuers depends to a large extent on the credit analysis performed by the
Adviser (or Sub-Adviser).
New issues of certain debt securities are often offered on a when-issued
basis, that is, the payment obligation and the interest rate are fixed at the
time the buyer enters into the commitment, but delivery and payment for the
securities normally take place after the date of the commitment to purchase.
The value of when-issued securities may vary prior to and after delivery
depending on market conditions and changes in interest rate levels. However,
the Fund will not accrue any income on these securities prior to delivery. The
Fund will maintain in a segregated account with its Custodian an amount of
cash or highly liquid debt securities equal (on a daily marked-to-market
basis) to the amount of its commitment to purchase the when-issued securities.
LOW RATED OR UNRATED DEBT SECURITIES
Emerging Markets Growth Fund may invest in lower quality, high-yielding debt
securities, including high-yielding foreign debt securities (commonly referred
to as "junk bonds") which are (i) rated as low as CCC by S&P or Caa by Moody's
or (ii) unrated. Lower rated and unrated debt securities have some "equity"
characteristics and are considered speculative and involve greater risk of
loss than higher rated debt securities and are more sensitive to changes in
the financial condition of their issuers and to price fluctuations in response
to changes in interest rates. Debt rated Caa or CCC presents a significantly
greater risk of default than do higher rated securities and, in times of poor
business or economic conditions, the Fund may lose interest and/or principal
on such securities. The Fund will not invest more than 25% of its assets in
debt securities rated below BBB by S&P or Baa by Moody's.
ASSET-BACKED SECURITIES
The Fund may invest in asset-backed securities. Asset-backed securities
represent interests in pools of consumer loans (generally unrelated to
mortgage loans) and most often are structured as pass-through securities.
Interest and principal payments ultimately depend on payment of the underlying
loans by individuals, although the securities may be supported by letters of
credit or other credit enhancements. The value of asset-backed securities may
also depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the credit
enhancement. The issuer of asset-backed securities may not, in certain
instances, be able to perfect its security interest in the underlying
collateral.
13
<PAGE>
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The Fund may invest in CMOs. CMOs are fixed-income securities which are
collateralized by pools of mortgage loans created by commercial banks, savings
and loan institutions, private mortgage insurance companies and mortgage
bankers. In effect, CMOs "pass through" the monthly payments made by
individual borrowers on their mortgage loans. Timely payment of interest and
principal (but not the market value) of these pools is supported by various
forms of insurance or guarantees issued by U.S. Government agencies, private
issuers and the mortgage poolers. The Fund may buy CMOs without insurance or
guarantees if, in the opinion of the Sub-Adviser, the pooler is creditworthy
or if rated A or better by S&P or Moody's. S&P and Moody's assign the same
rating classifications to CMOs as they do to bonds. Prepayments of the
mortgages included in the mortgage pool may influence the yield of the CMO. In
addition, prepayments usually increase when interest rates are decreasing,
thereby decreasing the life of the pool. As a result, reinvestment of
prepayments may be at a lower rate than that on the original CMO. In the event
that any CMOs are determined to be investment companies, the Fund will be
subject to certain limitations under the 1940 Act.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend to broker-dealers portfolio securities with an aggregate
market value of up to one-third of its total assets. Such loans must be
secured by collateral (consisting of any combination of cash, U.S. Government
securities or irrevocable letters of credit) in an amount at least equal (on a
daily marked-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 risk of loss if the broker-dealer with
which it has engaged in a portfolio loan transaction breaches its agreement
with the Fund.
BORROWING
The Fund may borrow up to 30% 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 value, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the investment return received
from the securities purchased with borrowed funds. It is anticipated that such
borrowings would be pursuant to a negotiated loan agreement with a commercial
bank or other institutional lender.
COMMERCIAL PAPER
The Fund may invest in commercial paper which is indexed to certain specific
foreign currency exchange rates. See "Risk Factors-Commercial Paper" in the
Statement of Additional Information.
DIRECT INVESTMENTS
The Fund may invest up to 10% of its total assets in direct investments;
however, the Fund does not currently intend to invest more than 5% of its net
assets in direct investments. For more information, see "Risk Factors--Direct
Investments" in the Statement of Additional Information.
TEMPORARY DEFENSIVE STRATEGIES
During periods of less favorable economic and/or market conditions, the Fund
may make substantial investments for temporary defensive purposes in
obligations of the U.S. Government, debt obligations of one or more foreign
governments, certificates of deposit, time deposits, bankers' acceptances,
high grade commercial paper and repurchase agreements.
14
<PAGE>
LIMITING INVESTMENT RISKS
While an investment in the Fund is not without risk, the Fund follows certain
policies in managing its investments which may help to reduce risk. These
policies may not be changed without shareholder approval. The following are
some of the more significant investment limitations:
1. The Fund will not purchase more than 10% of any class of an issuer's
outstanding voting securities.
2. The Fund will not invest more than 10% of its total assets in securities
of other investment companies.
Further information regarding these and other of the Fund's investment
policies and restrictions is provided in the Statement of Additional
Information.
PURCHASE OF SHARES
Shares of the Fund may be purchased either by (1) ordering the shares through
a selected broker-dealer or bank, and forwarding a completed Application or
brokerage firm settlement instructions with payment;* or (2) completing an
Application and mailing it with payment to the Fund's Transfer Agent and
Dividend Paying Agent, DST Systems, Inc. ("DST"). Payment, made payable to the
Van Eck Funds, must be made in U.S. Dollars. Third party checks will not be
accepted. 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. The Fund
reserves the right to reject any purchase order.
Orders respecting shares of the Fund that are mailed to DST will be processed
as of the day of receipt at DST, provided the order is in proper form and is
received at DST prior to 4:00 p.m., Eastern Time. Orders mailed to DST,
addressed to P.O. Box 418407, Kansas City, Missouri, 64141, must be deposited
in the DST Post Office Box prior to 11:30 a.m., Eastern Time, in order to
receive the price computed that day. If a shareholder desires to guarantee a
price based on a given date of receipt, the order should be mailed by
overnight courier to DST at 1004 Baltimore, 4th Fl., Kansas City, Missouri,
64105, and must be received by DST on the date desired before 4:00 p.m.,
Eastern Time. Orders received by DST after the above times will be processed
on the next business day. Do not send mail to DST marked personal and/or
confidential as this may delay the processing of the order.
An investor who wishes to purchase shares of more than one Fund must complete
separate Applications for each Fund and remit separate checks to each Fund. An
investor may request additional Applications from the Fund or photocopy the
blank Application included with this Prospectus and complete it for each Fund.
If an investor fails to indicate the Fund to be purchased, the check will be
applied to a purchase of the U.S. Government Money Fund, a series of Van Eck
Funds, and notification and a prospectus will be sent to the investor. The
investor may then exchange at current price into the desired Fund. Initial
purchases must be in the amount of $1,000 or more per account. Subsequent
purchases must be in the amount of $100 or more, and may be made through
selected dealers or banks or by forwarding payment to DST. Either minimum may
be waived by the Fund for pension or retirement plans, for investment plans
calling for periodic investments in shares of the Fund, for sponsored payroll
deduction plans, for split funding or other insurance purchase plans or in
other appropriate circumstances.
Van Eck Securities Corporation (the "Distributor"), 99 Park Avenue, New York,
New York 10016, a wholly-owned subsidiary of the Adviser, has entered into a
Distribution Agreement with the Trust in which the Distributor has indicated
that it will exercise its best efforts to solicit sales of the Fund's shares.
The Distributor has entered into Selling Group Agreements with selected
broker-dealers which have agreed to solicit purchasers for shares of the Fund
("Brokers") and into Selling Agency Agreements with banks or their
subsidiaries which have agreed to act as agent for their customers in the
purchase of shares of the Fund ("Agents"). A bank may be required to register
as a broker-dealer pursuant to state law.
ALTERNATIVE PURCHASE ARRANGEMENTS
Emerging Markets Growth Fund (Class A, B and C)
Shares of the Emerging Markets Growth Fund may be purchased under any one of
the following arrangements: (i) with an initial sales charge imposed at the
time of purchase ("Class A shares"), (ii) with a contingent deferred sales
charge imposed at the
- --------
* Except for Investors Fiduciary Trust Company (not affiliated with FII)
fiduciary retirement accounts.
15
<PAGE>
time of redemption if such redemption is within six years of the initial
purchase ("Class B shares") or (iii) with a redemption charge imposed at the
time of redemption if such redemption is within 12 months of the initial
purchase ("Class C shares"). With respect to each class of shares, an ongoing
asset-based fee for distribution and related services (12b-1 fee) is charged.
The distribution and services fee applicable to Class B and C shares will be
higher than that applicable to Class A shares.
The alternative purchase arrangements permit an investor to choose the method
of purchasing shares that is more beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life
of their investment in the Fund, the accumulated distribution and services fee
and, in the case of the Class B shares, the contingent deferred sale charge or
in the case of the Class C shares, the redemption charge, would be less than
the initial sales charge and accumulated distribution and services fee on
Class A shares. To assist investors in making this determination, the table
under the caption "Transaction Data" on page 3 sets forth examples of the
charges applicable to each class of shares. In this regard, Class A shares
will normally be more beneficial to the investor who qualifies for a reduced
initial sales charge. It is the sole responsibility of the investor, and his
or her Broker or Agent, to determine which sales charge alternative is most
advantageous.
An investor who elects the initial sales charge alternative acquires Class A
shares. Class A shares incur an initial sales charge when they are purchased
and enjoy the benefit of not being subject to any sales or redemption charge
when they are redeemed. Class A shares are subject to an ongoing distribution
and services fee at an annual rate of up to .50% of the Fund's aggregate daily
net assets attributable to the Class A shares (see "Plan of Distribution").
Certain purchases of Class A shares qualify for reduced initial sales charges.
It may be more advantageous to purchase Class A shares than Class B and C
shares when the purchase amount is $100,000 or more or when a lesser purchase
amount would qualify for a quantity discount or reduced sales charge.
An investor who elects the contingent deferred sales charge alternative
acquires Class B shares. Class B shares do not incur a sales charge when they
are purchased, but they are subject to a sales charge if they are redeemed
within six years of purchase. Class B shares are subject to an ongoing
distribution and services fee at an annual rate of up to 1% of the Fund's
aggregate average daily net assets attributable to the Class B shares (see
"Plan of Distribution"). Class B shares enjoy the benefit of permitting all of
an investor's dollars to work from the time the investment is made. The higher
ongoing distribution and services fee paid by Class B shares will cause such
shares to have a higher expense ratio, pay lower dividends and have a lower
return than those of Class A shares. Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month in which the
shareholder's order to purchase was accepted, in the circumstances and subject
to the qualifications described in this Prospectus. The purpose of the
conversion feature is to relieve the holder of Class B shares that have been
outstanding for a period of time sufficient for the Distributor to have been
compensated for distribution expenses from the continuing burden of such
distribution-related expenses over an open-ended period of time. See
"Conversion Feature," below.
An investor who elects the redemption charge alternative acquires Class C
shares. Class C shares do not incur a sales charge when they are purchased,
but they are subject to a redemption charge if they are redeemed within one
year of purchase. Class C shares are subject to an ongoing distribution and
services fee at an annual rate of up to 1% of the Fund's average daily net
assets attributable to the Class C shares (see "Plan of Distribution"). Class
C shares enjoy the benefit of permitting all of an investor's dollars to work
from the time the investment is made. The higher ongoing distribution and
services fee paid by the Class C shares will cause such shares to have a
higher expense ratio, pay lower dividends and have a lower return than those
of Class A shares. Class C shares will automatically convert to Class A shares
eight years after the end of the calendar month in which the shareholder's
purchase order was accepted, in the circumstances and subject to the
qualifications described in this Prospectus. See "Conversion Feature," below.
Class A shares acquired under the initial sales charge alternative are subject
to a lower distribution and services fee and, accordingly, pay correspondingly
higher dividends per share and can be expected to have a higher return per
share than Class B and C shares. However, because initial sales charges are
deducted at the time of purchase, such investors would not have all their
money invested initially and, therefore, would initially own fewer shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated distribution charges on
Class B and C shares may exceed the initial sales charge on Class A shares
16
<PAGE>
during the life of the investment. Again, however, such investors must weigh
this consideration against the fact that, because of the initial sales charge,
not all their money will be invested initially. However, other investors might
determine that it would be more advantageous to purchase Class B or C shares
to have all their money invested initially, although remaining subject to
higher distribution charges and, in the case of Class B shares, for a six-year
period being subject to a contingent deferred sales charge or, in the case of
Class C shares, for a one-year period being subject to a redemption charge.
The distribution expenses incurred by the Fund or its Distributor in
connection with the sale of the Fund's shares will be paid, in the case of
Class B and Class C shares, from the proceeds of the ongoing distribution and
services fee and the contingent deferred sales or redemption charge incurred
upon redemption within applicable time periods. (See redemption charts under
"Sales Charges, Distribution Fees," below.) Sales personnel of Brokers and
Agents distributing the Fund's shares may receive differing compensation from
selling Class A, Class B or Class C shares. Investors should understand that
the purpose and function of the contingent deferred sales charge or redemption
charge and ongoing distribution and services fees with respect to the Class B
and Class C shares are the same as those of the initial sales charge and
ongoing distribution and services fee with respect to the Class A shares.
CONVERSION FEATURE. Class B and Class C shares include all shares purchased
pursuant to the contingent deferred sales charge or redemption charge
alternative which have been outstanding for less than the period ending eight
years after the end of the calendar month in which the shareholder's order to
purchase was accepted. At the end of this period, Class B and Class C shares
will automatically convert to Class A shares and will no longer be subject to
the higher distribution and services fees. Such conversion will be on the
basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose of the
conversion feature is to relieve the holder of Class B and Class C shares from
most of the burden of distribution-related expenses for shares that have been
outstanding for a period of time sufficient for the Fund or its Distributor to
have been compensated for such expenses.
For purposes of conversion to Class A shares, shares purchased through the
reinvestment of dividends and distributions paid in respect to Class B or
Class C shares in a shareholder's Fund account will convert in a proportionate
amount to the non-reinvestment shares converted.
It is not recommended that certificates be requested for Class B or Class C
shares, since the return and deposit for such certificated shares may delay
the conversion to Class A shares.
The conversion of Class B or Class C shares to Class A shares is subject to
the continuing availability of an opinion of counsel to the effect that (i)
the assessment of the higher distribution services fee and transfer agency
costs with respect to Class B and Class C shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the
conversion of shares does not constitute a taxable event under Federal income
tax law. The conversion of Class B or Class C shares to Class A shares may be
suspended if such an opinion is no longer available. In that event, no further
conversions of Class B or Class C shares would occur, and shares might
continue to be subject to the higher distribution services fee for an
indefinite period which may extend beyond the period ending eight years after
the end of the month in which the shareholder's order to purchase was
accepted.
There is no initial sales charge on purchases of Class B or Class C Shares.
However, each class pays the Distributor an annual 12b-1 fee for promotion and
distribution services not to exceed 1% of average daily net assets (see "Plan
of Distribution").
The contingent deferred sales charge on Class B and the redemption charge on
Class C is waived on redemptions of shares following the death or disability
of a Class B or Class C shareholder. An individual will be considered disabled
for this purpose if he or she meets the definition thereof in Section 72(m)(7)
of the Code. The Distributor will require satisfactory proof of death or
disability. The charge may be waived where the decedent or disabled person is
either an individual shareholder or owns the shares with his or her spouse as
a joint tenant with right of survivorship, and where the redemption is made
within one year of the death or initial determination of disability. The
waiver of the charge applies to a total or partial redemption but only to
redemptions of shares held at the time of the death or initial determination
of disability. Additionally, the charge may be waived when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The charge may be waived for any redemption in connection with a lump-
sum or other distribution following retirement or, in the case of an IRA or
Keogh Plan or custodial account pursuant to Section 403(b) of the Code, after
attaining age 70 1/2 or, in the case of a qualified
17
<PAGE>
pension or profit-sharing plan, after termination of employment after age 55.
The charge also may be waived on any redemption which results from the tax-
free return of an excess contribution pursuant to Section 408(d)(4) or (5) of
the Code, the return of excess deferral amounts pursuant to Sections 401(k)(8)
or 402(g) of the Code, or from the death or disability of the employee. The
charge is not waived from any distributions from IRAs or other qualified
retirement plans not specifically described above. A shareholder, or the
Broker or Agent, must notify DST at the time the redemption instructions are
provided whenever a waiver of the contingent deferred sales charge or
redemption charge applies.
SALES CHARGES, DISTRIBUTION AND SERVICE FEES
Sales charges on purchases of shares of the Fund are set forth in the table
below. The Fund imposes a 12b-1 distribution and services fee. Class A shares
have a 12b-1 fee of .50%. All or a portion of these fees are paid to banks,
brokers and dealers for their shareholder servicing, promotion or distribution
activities. The portion paid to banks, brokers and dealers is determined from
time to time by the Fund. Shareholders in Class B and Class C should be aware
that dividends reinvested in new shares of the Fund will continue to be
assessed the full 12b-1 fee, including that portion which is retained by the
Distributor. Class B and Class C shares impose a 12b-1 fee of 1% of average
daily net assets. For Class B and Class C shares, of the 1% paid by the Fund,
a portion will be retained by the Distributor and up to .75% of 1% may be paid
to Brokers and Agents for distribution and up to .25 of 1% is for servicing.
The portion retained by the Distributor is in payment for distribution
expenses. The Distributor may vary the portion retained by it from time to
time, but the amount payable by the Fund will not exceed 1%. The Distributor
will monitor payments under the Plan and will reduce such payments or take
such other steps as may be necessary, including payments from its own
resources, to assure that Plan payments will be consistent with the applicable
rules of the National Association of Securities Dealers, Inc. See "Plan of
Distribution."
EMERGING MARKETS GROWTH FUND (CLASS A)
<TABLE>
<CAPTION>
SALES CHARGE AS A DISCOUNT TO
PERCENTAGE OF BROKERS OR AGENTS
-------------------- AS A PERCENTAGE
OFFERING NET AMOUNT OF THE
DOLLAR AMOUNT OF PURCHASE PRICE INVESTED OFFERING PRICE*
- ------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $100,000....................... 4.75% 5.0% 4.00%
$100,000 to less than $250,000........... 3.75% 3.9% 3.15%
$250,000 to less than $500,000........... 2.50% 2.6% 2.00%
$500,000 to less than $1,000,000......... 2.00% 2.0% 1.65%
$1,000,000 and over...................... None***
</TABLE>
EMERGING MARKETS GROWTH FUND (CLASS B)**
<TABLE>
<CAPTION>
SHAREHOLDER'S TIME OF REDEMPTION CONTINGENT DEFERRED SALES CHARGE
- -------------------------------- --------------------------------
<S> <C>
During Year One.................... 5.0% of the lesser of NAV or purchase price
During Year Two.................... 4.0% of the lesser of NAV or purchase price
During Year Three.................. 4.0% of the lesser of NAV or purchase price
During Year Four................... 3.0% of the lesser of NAV or purchase price
During Year Five................... 2.0% of the lesser of NAV or purchase price
During Year Six.................... 1.0% of the lesser of NAV or purchase price
Thereafter......................... None
</TABLE>
EMERGING MARKETS GROWTH FUND (CLASS C)**
<TABLE>
<CAPTION>
SHAREHOLDER'S TIME OF REDEMPTION CONTINGENT DEFERRED REDEMPTION CHARGE
- -------------------------------- -------------------------------------
<S> <C>
During Year One.................... 1.0% of the lesser of NAV or purchase price
Thereafter......................... None
</TABLE>
- --------
* Brokers or Agents who receive substantially all of the sales charge for
shares they sell may be deemed to be statutory underwriters.
** Brokers or Agents who sell Class B shares will receive a sales commission
of 4.0% of the value of the shares sold at the time of investment. Brokers
or Agents who sell Class C shares receive a distribution and a servicing
fee of .75 of 1% and .25 of 1% respectively, of the value of the shares
sold at the time of investment (See "Plan of Distribution.") The
Distributor may alter this amount.
18
<PAGE>
*** For any sale of $1,000,000 or more of Emerging Markets Growth Fund-A, the
Distributor may pay a finder's fee to parties eligible to receive such a
fee. The fee will be paid during the first two years after any such sale
and is calculated as a quarterly payment equal to 0.0625% (.25% on an
annual basis) of the average daily net asset value of the shares sold that
remain outstanding throughout such months. An eligible sale is a single
sale for a single client (sales for other clients cannot be aggregated for
purposes of qualification for the finder's fee). Eligible sales registered
to a street or nominee name account must provide appropriate verification
of eligibility and average daily net assets upon which payment is to be
made. Sales made through a bank trust department or advisory firm which
purchases shares at net asset value do not qualify for the finder's fee.
The finder's fee will be credited to the dealer of record on the record
date (currently, the last calendar day of February, May, August and
November) and will be generally paid on the 20th day of the following
month. Please contact the Distributor to determine eligibility to receive
such fee.
- --------
- --------
Brokers and Agents may receive different compensation for selling Class A,
Class B or Class C shares.
The Class A initial sales charge varies depending on the amount of the
purchase, the number of shares of the Van Eck Group of Funds which are
eligible for the Right of Accumulation that an investor already owns, a Letter
of Intent to purchase additional shares during a 13-month period, or other
special purchase programs. See "Group Purchases," "Combined Purchases,"
"Letter of Intent" and "Right of Accumulation" below. The Fund also pays the
Distributor a fee for promotional and distribution services (see "Plan of
Distribution"). Shares of the Fund may be purchased without a sales charge by
Trustees, officers, full-time employees (and their parents, spouses and
children) and agents of the Trust, the Adviser, the Sub-Adviser and the
Distributor and their affiliates and agents and by employees of Brokers or
Agents (and their spouses and children under the age of 21) or in connection
with a merger or other business combination, or by the Adviser for the benefit
of certain discretionary advisory accounts it manages meeting minimum asset
requirements. Shares may be purchased at net asset value (a) (i) through an
investment adviser who makes such purchases through a broker/dealer, bank or
trust company (each of which may impose transaction fees on the purchase),
(ii) by an investment adviser for its own account or for a bona fide advisory
account over which the investment adviser has investment discretion or (iii)
through a financial planner who charges a fee and makes such purchases through
a financial institution which maintains a net asset value purchase program
that enables the Distributor to realize certain economies of scale or (b)
through bank trust departments or trust 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 whose purpose is other than purchase of Fund shares at net
asset value. Shares of the Fund which are sold with a sales charge may be
purchased by a foreign bank or other foreign fiduciary account for the benefit
of foreign investors at the sales charge applicable to the Fund's $500,000
breakpoint level, in lieu of the sales charges in the above scale. The
Distributor has entered into arrangements with foreign financial institutions
pursuant to which such institutions may be compensated by the Distributor from
its own resources for assistance in distributing Fund shares. Clients of
Netherlands insurance companies who are not U.S. citizens or residents may
purchase shares without a sales charge. Shares may be purchased at net asset
value on behalf of retirement and deferred compensation plans and trusts
funding such plans (excluding Individual Retirement Accounts ("IRAs"), SIMPLE-
IRA and SEP-IRAs unless they qualify for such purchase under one of the prior
exceptions) including, but not limited to, plans and trusts defined in
Sections 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi trusts"
which participate in a program for the purchase of shares at net asset value
offered by a financial institution and which institution maintains an omnibus
account with the Fund. Brokers may charge a transaction fee for effecting
purchases at net asset value or redemptions. See "Availability of Discounts"
below.
The term "purchase" refers to a single purchase by an individual, to the
aggregate of concurrent purchases by an individual, his or her spouse and
children under the age of 21, or to a purchase by a corporation, a partnership
or a trustee or other fiduciary for a single trust, estate or fiduciary
account.
Shares of the Fund are sold at the public offering price next computed after
receipt of a purchase order by the Broker, Agent or DST, provided that the
Broker or Agent receives the purchase order before the close of trading on the
New York Stock Exchange and transmits it to the Distributor by 5:00 P.M.,
Eastern Time, or to DST through the facilities of the National Securities
Clearing Corporation by 7:00 P.M., Eastern Time. If a Broker or Agent receives
an investor's order before the close of trading on the New York Stock Exchange
and fails to transmit it to the Distributor by the above times, any resulting
loss will be borne by the Broker or Agent.
19
<PAGE>
The public offering price is computed once daily on each business day and is
the net asset value plus any applicable sales charge. The net asset value for
the Fund is computed as of the close of regular trading on the New York Stock
Exchange which is currently 4:00 P.M., Eastern Time, Monday through Friday,
exclusive of national business holidays. The assets of the Fund are valued at
market or, if market value is not ascertainable, at fair value as determined
in good faith by the Board of Trustees. The Fund may invest in securities or
futures contracts listed or traded on foreign exchanges which trade on
Saturdays or other customary United States national business holidays (i.e.,
days on which the Fund is not open for business), and consequently, the net
asset value of shares of the Fund may be significantly affected on days when
an investor has no access to the Fund.
Certificates for shares of the Fund are issued only upon specific request to
DST. Due to the conversion feature, certificates are not recommended for Class
B or Class C shareholders.
In addition to the discounts allowed to Brokers and Agents, the Distributor
may, at its own expense, subject to applicable laws and/or regulations,
provide additional promotional incentives or payments in the form of
merchandise (including luxury merchandise) or trips (including trips to luxury
resorts at exotic locations or attendance at seminars/conferences at luxury
resorts) to Brokers or Agents that sell shares of the Fund. In some instances,
these incentives or payments will be offered only to certain Brokers or Agents
who have sold or may sell significant amounts of shares. Brokers and Agents
who receive additional concessions may be deemed to be underwriters as that
term is defined in the Securities Act of 1933.
GROUP PURCHASES
An individual who is a member of a qualified group may purchase shares of the
Fund at the reduced commission applicable to the group taken as a whole. The
commission is based upon the aggregate dollar value, at the current offering
price, of shares owned by the group, plus the securities currently being
purchased. For example, if members of the group held $80,000, calculated at
current offering price, of Emerging Markets Growth Fund-A's shares and now
were investing $25,000, the sales charge would be 3.75%. Information
concerning the current sales charge applicable to a group may be obtained by
contacting the Distributor.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring the Fund's shares at a
discount and (iii) satisfies uniform criteria which enable the Distributor to
realize economies of scale in its costs of distributing shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Distributor and the members of the
group, must agree to include sales and other materials related to the Fund in
its publications and mailings to members at reduced or no cost to the
Distributor, and must seek to arrange the use of the Automatic Investment
Plan. See "Investment Programs" for information concerning the Automatic
Investment Plan.
COMBINED PURCHASES
Shares of Funds in the Van Eck Group of Funds (except U.S. Government Money
Fund ) may be purchased at the initial sales charge applicable to the quantity
purchase levels shown above by combining concurrent purchases.
LETTER OF INTENT
Purchasers who anticipate that they will invest $100,000 or more (other than
through exchanges) in the Van Eck Group of Funds, except for U.S. Government
Money Fund (or $25,000 or more in International Investors Gold Fund, Gold
Opportunity Fund and Gold/Resources Fund), within thirteen months may execute
a Letter of Intent on the form in the Application. The execution of a Letter
of Intent will result in the purchaser paying a lower initial sales charge, at
the appropriate quantity purchase level shown above on all purchases during a
thirteen month period. Purchases of other Funds in the Van Eck Group of Funds,
except for the U.S. Government Money Fund, may be included to fulfill the
Letter of Intent. A purchase not originally made pursuant to a Letter of
Intent may be included under a backdated Letter of Intent executed within 90
days after such purchase. For further details, including escrow provisions,
see the Letter of Intent provisions in the Instructions to the Application.
20
<PAGE>
RIGHT OF ACCUMULATION
The above scale of initial sales charges also applies to current purchases of
shares of the Van Eck Group of Funds (except for U.S. Government Money Fund)
by any of the persons enumerated above, where the aggregate quantity of shares
of these Funds previously purchased, and then owned, determined at the current
offering price, plus the shares being purchased amount to more than $100,000
(or more than $25,000 for International Investors Gold Fund, Gold Opportunity
Fund and Gold/Resources Fund), provided the Distributor or DST is notified by
such person or the Broker or Agent each time a purchase is made which would so
qualify. See "Investment Programs" in the Statement of Additional Information.
AVAILABILITY OF DISCOUNTS
An investor or the Broker or Agent must notify DST or the Distributor at the
time of purchase whenever a quantity discount or reduced sales charge is
applicable to a purchase. Quantity discounts described above may be modified
or terminated at any time without prior notice.
EXCHANGE PRIVILEGE
The Adviser discourages trading in response to short-term market fluctuations.
Such activity may hinder the Adviser's or Sub-Adviser's ability to invest the
Fund's assets in accordance with its investment objective and policies, cause
the Fund to incur additional brokerage, registration and other expenses, and
may be disadvantageous to other shareholders in either the Fund being
exchanged from or into or both. Shareholders will be limited to six exchanges
per calendar year; however, exchanges from International Investors Gold Fund
(Class A) may be excluded from this limitation, if the Fund or Adviser
believes that exclusion will not be materially disadvantageous to other
shareholders. Active shareholders should consult the Fund as to current
policy. For purposes of determining the number of exchanges made per calendar
year, Fund accounts having the same beneficial owner or under common control
will be aggregated. This exchange limitation does not apply to the U.S.
Government Money Fund.
The Fund reserves the right to modify or terminate the Exchange Privilege of
any shareholder or to limit or reject any exchange. Although the Fund will
attempt to give shareholders prior notice whenever it is reasonable to do so,
it may impose these restrictions at any time when it deems it to be in the
best interest of remaining shareholders. If the exchange is rejected,
shareholders will nevertheless be able to redeem their shares.
The Fund has the ability to redeem its shares in kind. The Fund will pay in
cash all requests for redemption by any shareholder of record limited in
amount with respect to each shareholder of record during any ninety-day period
to the lesser of (i) $250,000 or (ii) 1% of the net asset value of the Fund at
the beginning of such period. See "Exchange Privilege" and "Redemption in
Kind" in the Statement of Additional Information. In addition, the Fund has
reserved the right to refuse any purchase order.
The Van Eck Group of Funds consists of Emerging Markets Growth Fund (Class A,
B and C), Asia Dynasty Fund (Class A and B), Asia Infrastructure (Class A and
B), Global Balanced Fund (Class A and B), Global Hard Assets Fund (Class A, B
and C), Global Income Fund (Class A), Gold Opportunity Fund (Class A, B and
C), Gold/Resources Fund (Class A), International Investors Gold Fund (Class A
and C) and U.S. Government Money Fund. Shareholders of these Funds may
exchange shares for shares of the same class of any of the other Funds as
follows (the "Exchange Privilege"). Class B shareholders of Emerging Markets
Growth Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Global Balanced
Fund, Global Hard Assets Fund and Gold Opportunity Fund may only exchange
between those six Funds. Class C shareholders of Emerging Markets Growth Fund,
Global Hard Assets Fund, Gold Opportunity Fund and International Investors
Gold Fund may only exchange between those four Funds. Shares of the U.S.
Government Money Fund acquired other than pursuant to the Exchange Privilege
may only be exchanged into the other Class A Funds included in the Exchange
Privilege, subject to payment of the applicable sales charge. For Federal
income tax purposes, any exchange pursuant to the Exchange Privilege other
than exchanges in retirement plans offered by the Funds, will be regarded as a
sale of shares, and any gain or loss must generally be recognized by the
shareholder.
21
<PAGE>
Class B or C shares exchanged for Class B or C shares of another Fund with a
different contingent deferred sales charge or redemption charge schedule will
be subject to the contingent deferred sales charge or redemption charge
applicable to those shares at the time of original purchase.
The Exchange Privilege may be modified or terminated at any time. See
"Exchange Privilege" in the Statement of Additional Information.
WRITTEN EXCHANGE
Shareholders wishing to exchange shares may do so by sending to DST a written
request in proper form signed by all registered owners exactly as the account
is registered, specifying the number of shares or dollar amount to be
exchanged (or that all shares credited to a Fund account be exchanged), along
with appropriate documentation, if necessary. Exchanges are only available in
states where exchanges may legally be made. A person(s) authorized to sign on
behalf of joint owners, corporations, trusts, custodians, or other
organizations must supply appropriate evidence of the authority of each
signatory with each written request. Accounts not eligible for the telephone
exchange privilege may make a written exchange request. Written exchange
requests will be executed on the first business day of receipt in proper
order. Written exchange requests may be sent by regular mail to: Van Eck
Funds, c/o DST, P.O. Box 418407, Kansas City, MO 64141, or by overnight
courier to Van Eck Funds, c/o DST, 1004 Baltimore, Kansas City, MO 64105.
TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGE
Completion of the Application (or the application for an IRA/SPIRA, Qualified
Pension Plan, 403(b)(7) Plan, SIMPLE-IRA or SEP for the Telephone Exchange
Privilege only) or receipt of settlement instructions from a Broker or Agent
for an eligible account shall constitute an election by the investor to have
available the Telephone Exchange Privilege and Telephone Redemption Privilege,
unless otherwise indicated. By electing the Privileges, the investor is
authorizing the Fund, its agents and affiliates to act on any instructions
they believe to be genuine. The Fund, its agents and affiliates will employ
reasonable procedures to confirm the authenticity of these communications and
cannot be responsible for the authenticity of any telephone instructions nor
will they be liable for any loss of expenses resulting from acting on any
instructions, including those which are fraudulent and those not authorized by
the investor unless they fail to employ these procedures. Shareholders that
elected NOT to establish the Telephone Exchange Privilege or the Telephone
Redemption Privilege on their accounts may later establish the Privilege by
written request, signed by all registered owners on the account, and with
appropriate documentation, as necessary.
The Telephone Exchange Privilege may not be available to accounts held by a
brokerage firm in street name and participants in retirement plans sponsored
by organizations other than the Trust, and participants in such plans should
consult with their sponsors to determine the availability of the Telephone
Exchange Privilege prior to seeking to exercise it.
The Telephone Redemption Privilege is not available to accounts registered in
"street name," nominee or corporate name or custodial accounts held by a
financial institution including Investors Fiduciary Trust Company retirement
accounts.
After acceptance by DST of an Application, a telephone exchange or telephone
redemption may be effected by contacting DST at 1-800-345-8506. Telephone
calls are recorded. Telephone instructions for exchanging or redeeming shares
on deposit with DST may be given by anyone claiming to be the shareholder, the
Broker or Agent of record, or an authorized representative of any of the
foregoing [the caller must identify his/her name and relationship to the
account] and will be executed only if they include the correct social security
number, tax identification number or account number. Telephone instructions
accepted after the close of business on the New York Stock Exchange will not
be effected until the following business day (see "Purchase of Shares"). In
the case of joint or multiple owners, one owner's call may effect the
telephone exchange or redemption.
Because of unusual market conditions, it may be difficult and/or impossible to
contact DST by telephone to effect the exchange or redemption. Shareholders
should continue to try to contact DST by telephone at the above telephone
number and/or may deliver written instructions by post or courier.
The Fund reserves the right to refuse a request for the Telephone Redemption
Privilege without prior notice either during or after the call. The Fund
reserves the right to modify or terminate the Exchange Privilege at any time.
See "Exchange Privilege" in the Statement of Additional Information.
22
<PAGE>
If the exchanging shareholder does not have an account in the fund into which
he/she is exchanging, a new account will be established with the same
registration, dividend and capital gain options, and dealer of record
specified in the shareholder's account in the existing fund. In order to
establish an Automatic Withdrawal or Automatic Investment Plan or other
options for the new account, an exchanging shareholder must make the request
at the time of exchange and may be required to file an application which can
be obtained from DST or the Fund.
For accounts with the Telephone Redemption Privilege, telephone redemption
requests will only be accepted on shares held on deposit for amounts of
$50,000 or less per day if the check is payable to the shareholder(s) and sent
to the address of record. A telephone redemption will not be accepted if a
change to the registered address has been effected within one month of such
request.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to make distributions from net investment income in June and
December and distribute any net realized capital gains resulting from its
investment activity annually in December. Dividends or distributions declared
in December but paid in January will be includible in a shareholder's income
as of the record date (usually in December) of such dividends or
distributions. Short-term capital gains, if declared, are treated the same as
dividend income. The fiscal year of the Fund ends on December 31.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the following
tax-sheltered retirement plans:
INDIVIDUAL RETIREMENT ACCOUNT AND SPOUSAL INDIVIDUAL RETIREMENT ACCOUNT
("IRA/SPIRA")--available to anyone who has earned income (investments may also
be made in the name of a spouse, if the spouse is treated as having no earned
income).
SIMPLE-IRA--available to self-employed individuals, partnerships, corporations
with no more than 100 employees.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP")--available to employers, including
self-employed individuals seeking to provide retirement income to employees
through employer contributions. Salary reduction SEP contributions are
permitted only into SEP Plans in existence on December 31, 1996.
QUALIFIED PENSION PLAN--available to self-employed individuals, partnerships,
corporations and their employees.
403(B)(7) PROGRAM--available to employees of certain tax exempt organizations
and schools. See "Tax Sheltered Retirement Plans" in the Statement of
Additional Information. In addition, information concerning these plans is
available from the Fund. This information should be read carefully and
consultation with an attorney or tax advisor is advisable.
INVESTMENT PROGRAMS
DIVIDEND REINVESTMENT PLAN
Unless a shareholder has given notice directly or through his or her Broker or
Agent to DST (the Fund's dividend paying agent) that he or she elects to
receive dividends and capital gains distributions in cash, dividends and
distributions of the Fund will be reinvested in shares of the Fund at net
asset value without a sales charge. Reinvestments of dividends and
distributions on shares of the Fund will occur on a date selected by the Board
of Trustees.
In addition, dividends and capital gains distributions paid by the Fund
(except Class B and C shares) in cash may be automatically invested at net
asset value on the payable date in Class A shares of any of the other Funds in
the Van Eck Group of Funds. A shareholder wishing to exercise this option
should contact DST for instructions.
AUTOMATIC INVESTMENT PLAN
The Fund offers to investors a program for regularly investing specified
dollar amounts in the Fund. In establishing the Automatic Investment Plan, an
investor authorizes DST to collect a specified amount from his or her checking
account and use the proceeds to purchase shares of the Fund for the investor's
account. Further details of the Automatic Investment Plan are given in an
application which is available from DST or the Fund's distributor. See
"Investment Programs" in the Statement of Additional Information.
23
<PAGE>
AUTOMATIC EXCHANGE PLAN
The Fund offers a program for regularly exchanging specified dollar amounts
into the Fund from an exchange of shares from one of the other Funds in the
Van Eck Group of Funds (except Class B and C shares). In establishing the
Automatic Exchange Plan, an investor authorizes DST to regularly exchange a
specified amount from any of the other Funds in the Van Eck Funds and purchase
shares of the Fund for the investor's account. Further details of the
Automatic Exchange Plan are given in an application which is available from
DST or the Fund. See "Investment Programs" in the Statement of Additional
Information.
AUTOMATIC WITHDRAWAL PLAN
Any shareholder who owns shares of the Fund valued at $10,000 or more at
current offering price may establish an Automatic Withdrawal Plan under which
he or she will receive a monthly or quarterly check in a specified amount. The
Plan is not available to Class B and C shareholders. Further details on the
Automatic Withdrawal Plan are given in an application which is available from
DST or the Fund. See "Investment Programs" in the Statement of Additional
Information.
REDEMPTION OF SHARES
WRITTEN REDEMPTION
A shareholder wishing to redeem shares of the Fund may do so by sending to
DST, P.O. Box 418407, Kansas City, Missouri 64141 (for additional mailing
instructions to DST and times of processing, see "Purchase of Shares"): (1) a
written request for redemption in proper form signed by all registered owners
exactly as the account is registered, specifying the number of shares or
dollar amount to be redeemed (or that all shares credited to a Fund account be
redeemed); (2) if the amount redeemed is $50,000 or more, or if the proceeds
of redemption are paid to other than the registered owner of the shares at the
address on record at DST, a guarantee of the signature of each registered
owner by an eligible guarantor institution (a notarization by a notary public
is not acceptable); and (3) any additional documents concerning authority and
related matters in the case of estates, trusts, guardianships, custodianships,
partnerships and corporations (e.g., appointments as executor or
administrator, trust instruments or certificates of corporate authority)
requested by DST. If the shares to be redeemed were issued in certificate
form, the certificates must be endorsed for transfer (or be accompanied by an
endorsement) and must be submitted with the written request for redemption.
The requirement for a signature guarantee is waived for redemptions of $50,000
or less if the redemption is a transfer of assets from an IFTC held retirement
plan in one of the Funds in the Van Eck Group of Funds to a retirement plan
held by another recognized custodian/trustee.
TELEPHONE REDEMPTION (SEE "TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGE" ON
PAGE 20)
BROKER/AGENT CONFIRMED REDEMPTION
For the convenience of shareholders, the Fund has authorized the Distributor,
as agent, to accept confirmed orders only from Brokers and Agents for the
repurchase of shares of the Fund. If a shareholder uses the services of a
Broker or Agent in effecting repurchases of shares, the Broker or Agent may
charge a fee for its services. The repurchase price is the net asset value per
share next determined after the repurchase order is received by the Broker or
Agent prior to the close of regular trading on the New York Stock Exchange on
the day received. Brokers and Agents have the responsibility of submitting
such repurchase orders, to the Distributor not later than 5:00 p.m., Eastern
Time, or to DST through the facilities of the National Securities Clearing
Corporation by 7:00 p.m., Eastern Time, on such day in order to obtain that
day's applicable redemption price. Settlement of confirmed orders from
accounts will not be effected until receipt of instructions in proper form as
described above or an indemnity from the Broker or Agent of record on the
account, and any certificated shares. Some Brokers or Agents may have self-
imposed restrictions regarding the submission of confirmed redemption orders
on behalf of shareholders.
The redemption price will be the net asset value per share next determined
after the receipt of a request in proper form as described above. See
"Purchase of Shares" for DST processing receipt of mail. The market value of
the securities in the portfolio of the Fund is subject to daily fluctuations
and the net asset value of the Fund's shares will fluctuate accordingly.
Therefore, the redemption value may be more or less than the shareholder's
cost.
24
<PAGE>
Except as noted, payment will normally be made within three days after
delivery of a proper redemption request except for such delays as may be
permitted under applicable law or rule. If shares of the Fund to be redeemed
were purchased by check, the Trust reserves the right to make payment on such
redemption request only after it has assured itself that a shareholder's check
has been cleared for payment, which may take as long as 15 days. The right of
redemption may be suspended and payment postponed for any period during which
the New York Stock Exchange is closed (other than customary weekend and
holiday closings) or trading on that Exchange is restricted as determined by
the applicable rules and regulations of the Securities and Exchange
Commission; or during an emergency, as determined by the Securities and
Exchange Commission, as a result of which it is not reasonably practical for
the Fund to dispose of the securities owned by it or to determine fairly its
net asset value; or for any period that the Securities and Exchange Commission
may by order permit for the protection of shareholders of the Fund.
The Fund reserves the right to redeem its shares and mail the proceeds to a
shareholder if, at any time, the number of shares in a shareholder's account
falls, subsequent to satisfying the initial investment requirement, below a
specified amount, currently 50 shares. Shareholders will be notified and will
have 30 days to bring the number of shares owned by them up to the required
amount before any redemption is made by the Fund.
Any shareholder who redeems Class A shares of the Fund has a one-time right to
reinvest in shares of the Fund at net asset value without the payment of a
sales charge. Such reinvestment must be made within 30 days after the
redemption of shares and is limited to no more than the amount of the
redemption proceeds. The shareholder must inform the Fund or DST that he or
she is exercising this one-time right to reinvest at net asset value. Although
redemption of shares is normally a taxable event and a gain or a loss must be
recognized, subsequent reinvestment within this thirty-day period in the same
Fund is considered a "wash sale" under Federal income tax law and no loss on
such redemption may be recognized for Federal income tax purposes.
EXPEDITED REDEMPTION
Requests for Expedited Redemption of the Van Eck Group of Funds may be made by
telephone, telegram, other wire communication or by letter upon completion and
acceptance of the Expedited Redemption portion of the Application.
Shareholders redeeming a minimum of $1,000 of shares which are on deposit with
DST may redeem by telephoning DST toll free 1-800 345-8506. Proceeds of
redeemed shares will be transmitted by wire to the shareholder's bank account
designated on the Application (which must be at a domestic commercial bank
which is a member of the Federal Reserve System). The wire cost involved may
automatically be deducted from the amount wired. The Fund and/or DST reserve
the right to refuse telephone requests at any time. Shareholders may contact
DST for additional information concerning an Expedited Redemption. Due to
unusual market conditions, it may be difficult or impossible to contact DST to
effect an expedited redemption. Shareholders should continue to try to contact
DST by telephone at the above telephone numbers and/or may deliver written
instructions by post or courier.
TRANSFER OF OWNERSHIP
To transfer ownership (re-register) all or a portion of shares held in a
shareholder's account, the shareholder must provide a written request with any
certificated shares and any documents concerning authority and related matters
as described above (see "Redemption of Shares") in proper form. Also, the
shareholder should provide a properly certified social security number,
taxpayer identification number or certification of non-resident alien status
of the new owner at the time of transfer.
25
<PAGE>
MANAGEMENT
TRUSTEES
The management of the business and affairs of the Fund is the responsibility
of the Board of Trustees. For information on the Trustees and officers of the
Trust, see "Trustees and Officers" in the Statement of Additional Information.
INVESTMENT ADVISER, MANAGER AND ADMINISTRATOR
Van Eck Associates Corporation, 99 Park Avenue, New York, NY 10016, serves as
the investment adviser and manager of the Fund pursuant to an Advisory
Agreement with the Trust. The Adviser oversees the investment operations of
the Fund, including which securities are bought, sold or held, and manages and
administers the business and affairs of the Fund. The Fund pays the Adviser a
monthly fee at the annual rate of 1.00% of average daily net assets, a portion
of which is paid to the Adviser for accounting and administrative services it
provides to the Fund. The advisory fee paid to the Adviser with respect to the
Fund is higher than the fees paid by most investment companies because of the
complexities of managing this type of fund (such as following trends,
industries and companies in many different countries and stock markets
throughout the world).
The Adviser acts as investment adviser or sub-investment adviser to other
mutual funds registered with the Securities and Exchange Commission under the
1940 Act and manages or advises managers of portfolios of pension plans and
others. Total aggregate assets under management of Van Eck Associates
Corporation at November 30, 1996 were approximately $1.7 billion. John C. van
Eck, Chairman and President of the Trust, and members of his immediate family
own 100% of the voting stock of Van Eck Associates Corporation.
Peregrine Asset Management (Hong Kong) Limited, 11/F New World Tower II, 16-18
Queen's Road Central, Hong Kong, serves as sub-investment adviser to the Fund
pursuant to a Sub-Investment Advisory Agreement with the Adviser. PAM manages
the investment operations of the Fund and furnishes the Fund with a continuous
investment program that includes which securities should be bought, sold or
held. As compensation for its services, PAM is paid a monthly fee at an annual
rate of .50% of average daily net assets by the Adviser from the advisory fees
it receives from the Fund. In addition to advising foreign funds, PAM serves
as an investment adviser to other U.S. registered investment company. PAM is a
100% owned subsidiary of Peregrine Asset Management Holdings Limited which, in
turn, is a 75% owned subsidiary of Peregrine Investment Holdings Limited
("Peregrine"). Peregrine was founded in 1988 and is, along with its
affiliates, the largest independent Asian based investment bank outside of
Japan and Korea. Peregrine and its affiliates have offices in fifteen Asian
countries as well as in Europe and the United States. As of November 30, 1996,
total assets under management by Peregrine exceeded $261 million.
The primary portfolio manager responsible for the day-to-day management of the
Emerging Markets Growth Fund is listed below:
Gary Greenberg. C.F.A.--Manager of the Fund. He has been serving in such
capacity since the Fund commenced operations. Mr. Greenberg, Deputy Managing
Director of PAM, joined PAM in July 1994 and is responsible for PAM's
investment strategy in various regions of the world including portfolio
manager for a fund which invests in smaller companies in India. Prior to
joining PAM, Mr. Greenberg served a co-manager of the Acorn International Fund
from 1992 to 1994. During that time period he was principal and portfolio
manager of an asset management company which manages over U.S.$4 billion,
including approximately U.S.$2 billion in non-U.S. companies. Mr. Greenberg
was employed by Harris Associates as an analyst from 1989 until 1992.
Other investment professionals at PAM who are expected to have significant
input with respect to the Fund's investments include:
Bruce Seton--Chief Investment Officer of PAM. Mr. Seton serves as Chief
Executive Officer of PAM and is responsible for establishing PAM's overall
investment guidelines and strategies. Prior to joining PAM in 1994, Mr. Seton
spent twenty-two years at Gartmore Investment Limited managing funds
emphasizing Asian emerging market investments.
Aureole Foong--Senior Fund Manager of PAM. Mr. Foong joined PAM in 1994 as a
fund manager. His responsibilities at PAM include managing a fund which
invests in equities and derivatives in the Asia region. Prior to joining PAM,
Mr. Foong worked from 1990 to 1994 at Unifund, a Geneva based private
investment company, where he served as a Senior Vice President.
26
<PAGE>
EXPENSES
The Fund bears all expenses of its operation other than those incurred by the
Adviser under its Advisory Agreement with the Trust and those incurred by the
Sub-Adviser, if any, under its Sub-Investment Advisory Agreement. In
particular, the Fund pays: investment advisory fees, custodian fees and
expenses, legal, accounting and auditing fees and expenses, brokerage fees,
taxes, expenses of preparing prospectuses and shareholder reports for existing
shareholders, registration fees and expenses (including compensation of the
Adviser's employees in relation to the time spent on such matters), Rule 12b-1
distribution expenses, expenses of the transfer and dividend disbursing agent,
the compensation and expenses of Trustees who are not otherwise affiliated
with the Trust, the Adviser or the Sub-Adviser or any of their affiliates, and
any extraordinary expenses. Expenses incurred jointly by the Funds in the Van
Eck Group of Funds are allocated among the Funds in a manner determined by the
Trustees to be fair and equitable. Under the Advisory Agreement, the Adviser
provides the Fund with office space, facilities and simple business equipment
and provides the services of executive and clerical personnel for
administering the affairs of the Fund. The Adviser or Sub-Adviser compensates
Trustees of the Trust if such persons are employees or affiliates of it or its
affiliates. The Fund reimburses the Adviser for its costs in servicing
shareholder accounts and maintaining books and records of the Fund, including
general ledger and daily net asset value accounting.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. The Plan may be terminated at any time by a vote
of a majority of the Trustees, or by a vote of a majority of the outstanding
voting securities of the Fund. The fee under the Plan will be paid quarterly.
The National Association of Securities Dealers, Inc. rules may limit the
amount payable under the Plan.
The Plan is a compensation plan. Under a compensation type plan, the fees
under the Plan are not directly tied to expenses and payments by the Fund and
may be more or less than actual expenses incurred under the Plan. The excess
of fees received over expenditures may constitute a "profit" to the
Distributor.
The Plan has a "carry-forward" provision, which provides that any reimbursable
or payable amount under the Plan attributable to a fiscal year of the Fund may
be paid by the Fund in a subsequent fiscal year, including after the
termination of the Plan. Amounts payable or reimbursable to the Distributor
under the Plan that are not paid because they exceed the annual limitations
(carry-forward amounts) shall be carried forward by the Fund to subsequent
years and shall be paid within the annual limitation in accordance with the
Plan. Consequently, shareholders may pay distribution expenses incurred by the
Fund prior to becoming a shareholder.
In the event the Plan is terminated, the Distributor shall not be entitled to
reimbursement in respect of costs incurred in, or payment for, performing
distribution activities which occur after termination of the Plan. However,
the Distributor shall be entitled to reimbursement of all carry-forward
amounts and other costs properly incurred in respect of shares distributed
prior to termination of the Plan. The Fund shall continue to make payments to
the Distributor subject to the annual limitation until such time as all such
amounts have been reimbursed.
The 12b-1 fees are accrued daily at an annual rate of .50% of average daily
net assets for Emerging Markets Growth Fund-A, and at an annual rate of 1.00%
of average daily net assets for Emerging Markets Growth Fund-B and Emerging
Markets Growth Fund-C. The Fund pays dealers, through the Distributor, (i) a
service fee and a distribution fee, at the time the shares are sold, not to
exceed .25% and .75%, respectively, of the net asset value of such shares
(excluding shares issued for reinvested dividends and distributions) and (ii)
after the first anniversary of the sale of shares, fees for services and
distribution at annual rates not to exceed an annual rate of .25% and .75%,
respectively, of the average daily net assets (including shares issued for
reinvested dividends and distributions). The Distributor may retain from the
distribution fee, for the payment of distribution expenses, an amount not to
exceed an annual rate of .25% of the average daily net assets. No dealer shall
receive more than .25% of average daily net assets for servicing. The
Distributor will monitor payments under the Plan and will reduce such payments
or take such other steps as may be necessary, including payments from its own
resources, to assure that Plan payments will be consistent with the applicable
rules of the National Association of Securities Dealers, Inc.
27
<PAGE>
Holders of Class C shares on which service and distribution fees were paid at
the time of sale will be required to pay to the Fund a contingent deferred
redemption charge of 1% of the lower of cost or the then net asset value of
the shares redeemed from the Fund before the first anniversary of their
purchase. If the shares are exchanged into another Fund in the Van Eck Group
of Funds offering Class C shares and subsequently redeemed before the first
anniversary of their original purchase, the charge will be collected by the
other Fund for the first Fund.
The Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being compensated for shareholder servicing. If, because of changes
in law or regulation, or because of new interpretations of existing law, a
bank or the Fund were prevented from continuing these arrangements, it is
expected that the Board of Trustees would make other arrangements for these
services and that shareholders would not suffer adverse financial
consequences.
ADVERTISING
From time to time, the Fund may use various media to advertise performance.
Past performance is not necessarily indicative of future performance.
The Fund may advertise performance in terms of average annual total return,
which is computed by finding the average annual compounded rates of return
over a period that would equate the initial amount invested to the ending
redeemable value. The calculation assumes the maximum sales charge is deducted
from the initial $1,000 payment and assumes all dividends and distributions by
the Fund are reinvested on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts. In
addition, the Fund may advertise aggregate total return for a specified period
of time which is determined by ascertaining the percentage change in the net
asset value of shares of the Fund initially purchased assuming reinvestment of
dividends and capital gains distributions on such shares without giving effect
to the length of time of the investment. Sales loads and other non-recurring
expenses may be excluded from the calculation of rates of return with the
result that such rates may be higher than if such expenses and sales loads
were included. All other fees will be included in the calculation of rates of
return. Performance is computed separately for each class.
The Fund may quote performance results from recognized services and
publications which monitor the performance of mutual funds and the Fund may
compare its performance to various published historical indices. These include
market, economical and performance data and indices. For example, the Fund may
quote market performance of the S&P 500, the Europe Australia Far East Index,
etc.; performance of various economies or economic indicators; or compilations
of historical performance data from rating agencies. Micropal, Ltd., a
worldwide mutual fund performance evaluation service, is one such rating
agency. Lipper Analytical Services is another such rating agency. The Lipper
performance analysis assumes reinvestment of capital gains and distributions,
but does not give effect to sales charges or taxes. Emerging Markets Growth
Fund may be compared to a Morgan Stanley Capital International Index, or
another appropriate index. (See the Appendix in the Statement of Additional
Information.)
TAXES
The Fund intends to qualify as a "regulated investment company" under the Code
and will not pay income or excise taxes to the extent that it distributes its
net taxable investment income and capital gains. See "Taxes" in the Statement
of Additional Information.
Notice as to the tax status of a shareholder's dividends and distributions
will be mailed to shareholders annually. Income from dividends and
distributions is normally taxable whether or not reinvested. Distributions
from net investment income and short-term capital gains will be taxed as
ordinary income. Distributions of long-term capital gains will be taxed at
capital gains rates. Dividends or distributions declared in December of any
calendar year but paid during January of the following year are treated as
received by a shareholder on December 31 of the calendar year. Only a portion
of the dividends paid by the Fund is likely to qualify for the 70% dividends
received deduction allowable to corporations. If the Fund fulfills certain
requirements, shareholders may be able to claim a foreign tax credit or
deduction with respect to certain foreign withholding or other taxes paid to
foreign governments during the year.
28
<PAGE>
Distributions of net investment income and short-term capital gains, if any,
made to non-resident aliens will be subject to 30% withholding or lower tax
treaty rates because such distributions are considered U.S. source income.
Currently, the Fund is not required to withhold tax from long-term capital
gains distributions paid to non-resident aliens.
The foregoing discussion relates only to generally applicable Federal income
tax provisions. Shareholders should consult their own tax advisors regarding
taxes, including state and local taxes, applicable to dividends,
distributions, exchanges and redemptions.
DESCRIPTION OF THE TRUST
Van Eck Funds is an open-end management investment company organized as a
"business trust" under the laws of the Commonwealth of Massachusetts.
The Trustees have authority to issue an unlimited number of shares of
beneficial interest of separate series (funds), $.001 par value. To date, ten
series of the Van Eck Funds have been authorized, which shares constitute the
interests in the Emerging Markets Growth Fund (Class A, B and C), Asia Dynasty
Fund (Class A and B), Asia Infrastructure Fund (Class A and B), Global
Balanced Fund (Class A and B), Global Hard Assets Fund (Class A, B and C)
Global Income Fund (Class A), Gold Opportunity Fund (Class A, B and C)
Gold/Resources Fund (Class A), International Investors Gold Fund (Class A and
C) and U.S. Government Money Fund. A "series" is a separate pool of assets
which is separately managed and which may have different investment objectives
from those of another series. The Trustees have the authority, without the
necessity of a shareholder vote, to create any number of new series.
Each share of the Fund has equal dividend, redemption and liquidation rights,
and, when issued, is fully paid and non-assessable by the Trust, except that
expenses related to the distribution of shares of the separate classes, if
any, would be borne by the respective classes as appropriate, and could have
differing voting rights regarding, for example, the Plan of Distribution.
Under the Master Trust Agreement, no annual or regular meeting of shareholders
is required. Thus, there will ordinarily be no shareholder meetings unless
required by the 1940 Act. The Board of Trustees is a self-perpetuating body
until fewer than 50% of the Trustees serving as such are Trustees who were
elected by shareholders. At that time, another meeting of shareholders will be
called to elect Trustees. On any matter submitted to the shareholders, the
holder of each Trust share is entitled to one vote per share (with
proportionate voting for fractional shares). Under the Master Trust Agreement,
any Trustee may be removed by vote of two thirds of the outstanding Trust
shares; and holders of ten percent or more of the outstanding shares of the
Trust can require Trustees to call a meeting of shareholders for the purpose
of voting on the removal of one or more Trustees. Shareholders of all Funds in
the Trust are entitled to vote on matters affecting all of the Funds (such as
the elections of Trustees and ratification of the selection of the Trust's
independent accountants). On matters affecting an individual Fund, a separate
vote of that Fund is required. Shareholders of the Fund are not entitled to
vote on any matter not affecting the Fund and requiring a separate vote of one
of the other Funds.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement of the Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the Trustees. The Master Trust Agreement
provides for indemnification out of the Trust's property for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations. The Adviser believes that, in view of
the above, the risk of personal liability to shareholders is remote.
29
<PAGE>
ADDITIONAL INFORMATION
QUESTIONS ABOUT THE FUND
For further information about the Fund, please call your financial advisor, or
the Fund toll free at 1-800-544-4653, or write to the Fund at the cover page
address.
CUSTODIAN
The Custodian of the assets of the Trust is The Chase Manhattan Bank, Chase
Metrotech Center, Brooklyn, New York 11245.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New York
10019, provides audit services, consultation and advice with respect to
financial information in the Trust's filings with the Securities and Exchange
Commission, consults with the Trust on accounting and financial reporting
matters and prepares the Trust's tax returns.
COUNSEL
Goodwin, Procter & Hoar, One Exchange Place, Boston, Massachusetts 02109,
serves as counsel to the Trust.
30
<PAGE>
VAN ECK FUNDS
Asia Dynasty Fund
Asia Infrastructure Fund
Global Hard Assets Fund
Global Balanced Fund
Global Income Fund
Emerging Markets Growth Fund
Gold Opportunity Fund
International Investors
Gold Fund
Gold/Resources Fund
U.S. Government Money Fund
Your Investment Dealer Is:
----------------------------
Transfer Agent and Shareholder Service Representative:
DST Systems, Inc.
P.O. Box 418407
Kansas City, Missouri 64141
(800) 544-4653
VAN ECK GLOBAL/(SM)/
THE UNUSUAL FUNDS
http://www.vaneck.com
This prospectus is good until 7/31/96 unless superseded.
DECEMBER 30, 1996
VAN ECK
-----------
EMERGING
-----------
MARKETS
-----------
GROWTH
-----------
FUND
-----------
PROSPECTUS
VAN ECK GLOBAL/(SM)/
THE UNUSUAL FUNDS
<PAGE>
VAN ECK FUNDS (THE "TRUST")
VAN ECK GLOBAL FUNDS
VAN ECK GOLD AND MONEY FUNDS
99 PARK AVENUE, NEW YORK, N.Y. 10016
SHAREHOLDER SERVICES: TOLL FREE (800) 544-4653
Van Eck Funds is a mutual fund consisting of ten separate series: Global
Balanced Fund (Class A and B), Asia Dynasty Fund (Class A and B), Asia
Infrastructure Fund (Class A and B), Emerging Markets Growth Fund (Class A, B
and C), 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
(the "Funds"). The Emerging Markets Growth Fund (Class A, B and C) is a new
addition to the fund approved, with all associated agreements, by the Trustees
at the December 1996 Board of Trustees meeting. As the Emerging Markets Growth
Fund is a newly created series of the Van Eck Global Funds, it has no operating
history.
TABLE OF CONTENTS Page
----
General Information........................................................ 2
Investment Objectives and Policies of the Funds............................ 2
Risk Factors............................................................... 8
Investing in Foreign Securities............................................ 8
Foreign Currency Transactions.............................................. 11
Futures and Options Transactions........................................... 12
Mortgage-Backed Securities................................................. 13
Real Estate Securities..................................................... 13
Commercial Paper........................................................... 14
Direct Investments......................................................... 14
Repurchase Agreements...................................................... 15
Rule 144A Securities....................................................... 15
Investment Restrictions.................................................... 16
Investment Advisory Services............................................... 21
The Distributor............................................................ 23
Portfolio Transactions and Brokerage....................................... 25
Trustees and Officers...................................................... 29
Valuation of Shares........................................................ 32
Exchange Privilege......................................................... 35
Tax-Sheltered Retirement Plans............................................. 35
Investment Programs........................................................ 38
Taxes...................................................................... 39
Redemptions in Kind........................................................ 42
Performance................................................................ 42
Additional Information..................................................... 45
Financial Statements....................................................... 45
Appendix................................................................... 46
Performance Charts......................................................... 50
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE FUNDS' CURRENT PROSPECTUSES, DATED APRIL 23, 1996 (THE
"PROSPECTUS"), EXCEPT FOR THE EMERGING MARKETS GROWTH FUND PROSPECTUS, DATED
DECEMBER 30, 1996, WHICH IS AVAILABLE AT NO CHARGE UPON WRITTEN OR TELEPHONE
REQUEST TO THE TRUST AT THE ADDRESS OR TELEPHONE NUMBER 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- DECEMBER 30, 1996
1
<PAGE>
GENERAL INFORMATION
-------------------
Van Eck Funds (the "Trust") is an open-end management investment company
organized as a "business trust" under the laws of The Commonwealth of
Massachusetts on April 3, 1985. The Board of Trustees has authority to create
additional series or funds, each of which may issue a separate class of shares.
There are currently nine series of Van Eck Funds: 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 Emerging
Markets Growth Fund (Class A, B and C) is a new addition to the fund, the tenth
of a series, and began operations on December 30, 1996.
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), Emerging
Markets Growth Fund (Class A, B and C) 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), 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 series of the Trust, other than the Global Income Fund, Global Balanced
Fund, Asia Infrastructure Fund, Gold Opportunity Fund and Global Hard Assets
Fund are classified as a diversified fund under the 1940 Act.
Van Eck Associates Corporation (the "Adviser") serves as investment adviser to
the Funds. Peregrine Asset Management serves as sub-investment adviser to
Emerging Markets Growth Fund and Fiduciary International, Inc. ("FII") serves as
sub-investment adviser to the Global Balanced Fund.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
-----------------------------------------------
International Investors Gold Fund
- ---------------------------------
The Fund's primary objective is long-term capital appreciation, while retaining
freedom to take current income into consideration in selecting investments. The
Fund's fundamental policy is to concentrate its investments in common stocks of
gold mining companies. It may invest in that industry up to 100% of the value of
its assets. In some future period or periods, due to adverse conditions in that
industry, the Fund may for temporary defensive purposes have less than 25% of
the value of its assets invested in that industry, however, under normal
circumstances the Fund will have at least 65% of its total assets invested in
that industry.
The Fund's policy is to invest primarily in securities of companies, wherever
organized, whose properties, products or services are international in scope or
substantially in countries outside the United States, of foreign governments,
and in United States Treasury securities.
Gold/Resources Fund
- -------------------
Gold/Resources Fund may invest in debt and equity securities of companies
engaged in the exploration, development and production of gold and other natural
resources. Gold, other precious metals and natural
2
<PAGE>
resources securities are at times volatile and there may be sharp fluctuations
in prices even during periods of rising prices.
The Fund may invest in any type of security including, but not limited to,
common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may purchase and sell financial and
commodity futures contracts and options on financial futures and commodity
futures contracts and may also write, purchase or sell put or call options on
securities, foreign currencies, commodities and commodity indices.
Gold Opportunity Fund
- ---------------------
The Fund will, under normal market conditions, invest at least 65% of its total
assets in debt and equity securities of companies engaged in the exploration,
development, production and distribution of gold and other precious metal and in
other investments whose value is related to the value of precious metals
("Precious Metals Securities"). Precious Metals Securities include debt and
equity securities; preferred stock; convertible debt and equity securities;
warrants; options, futures and forward contracts on precious metals; structured
notes; and precious metals bullion and coins. The Fund will normally invest a
substantial portion of its assets in the securities of smaller companies engaged
in the precious metals industry ("Emerging Producers") and anticipates that its
portfolio turnover rate will be higher than other funds with similar investment
objectives but will not exceed 200% annually. Precious metal and natural
resource securities are at times volatile and there may be sharp fluctuations in
prices even during periods of rising prices.
The Fund may invest in equity securities. Equity securities include common and
preferred stocks; equity and equity index swap agreements; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; special classes of shares available only to foreign
persons in such markets that restrict the ownership of certain classes of equity
to nationals or residents of the country; convertible preferred stocks and
convertible debt instruments. The Fund may also invest in fixed-income
securities which include obligations issued or guaranteed by a government or any
of its political subdivisions, agencies, instrumentalities, or by a
supranational organization such as the World Bank or European Economic Community
(or other organizations which are chartered to promote economic development and
are supported by various governments and government entities), adjustable-rate
preferred stock, interest rate swaps, corporate bonds, debentures, notes,
commercial paper, certificates of deposit, time deposits, repurchase agreements,
and debt obligations which may have a call on a common stock or commodity by
means of a conversion privilege or attached warrants. The Fund may invest in
debt instruments of the U.S. government and its agencies having varied
maturities.
The Fund may purchase securities, including structured notes, whose value is
linked to the price of a commodity or a commodity index. The Fund may purchase
and sell financial and commodity futures contracts and options on financial
futures and commodity futures contracts and may also write, purchase or sell put
or call options on securities, foreign currencies, commodities and commodity
indices. The preceding securities are all commonly referred to as derivatives.
The Fund may invest in non-mortgage asset-backed securities. The Fund may also
lend its portfolio securities and borrow money for investment purposes (i.e.
leverage its portfolio).
The Fund may also invest in "when issued" securities and "partly paid"
securities. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's Investors Service and
Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
3
<PAGE>
Global Hard Assets Fund
- -----------------------
The Fund will, under normal market conditions, invest at least 65% of its total
assets in "Hard Asset Securities." Hard Asset Securities include equity
securities of "Hard Asset Companies" and securities, including structured notes,
whose value is linked to the price of a commodity or a commodity index. The
term "Hard Asset Companies" includes companies that are directly or indirectly
(whether through supplier relationships, servicing agreements or otherwise)
engaged to a significant extent in the exploration, development, production or
distribution of one or more of the following: (i) precious metals, (ii) ferrous
and non-ferrous metals, (iii) gas, petroleum, petrochemicals or other
hydrocarbons, (iv) forest products, (v) real estate and (vi) other basic non-
agricultural commodities which, historically, have been produced and marketed
profitably during periods of significant inflation. Under normal market
conditions, the Fund will invest at least 5% of its assets in each of the first
five sectors listed above. The Fund has a fundamental policy of concentrating
in such industries and up to 50% of the Fund's assets may be invested in any one
of the above sectors. Precious metal and natural resource securities are at
times volatile and there may be sharp fluctuations in prices even during periods
of rising prices.
The Fund may invest in equity securities. Equity securities include common and
preferred stocks; equity and equity index swap agreements; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; special classes of shares available only to foreign
persons in such markets that restrict the ownership of certain classes of equity
to nationals or residents of the country; convertible preferred stocks and
convertible debt instruments. The Fund may also invest in fixed-income
securities which include obligations issued or guaranteed by a government or any
of its political subdivisions, agencies, instrumentalities, or by a
supranational organization such as the World Bank or European Economic Community
(or other organizations which are chartered to promote economic development and
are supported by various governments and government entities), adjustable-rate
preferred stock, interest rate swaps, corporate bonds, debentures, notes,
commercial paper, certificates of deposit, time deposits, repurchase agreements,
and debt obligations which may have a call on a common stock or commodity by
means of a conversion privilege or attached warrants. The Fund may invest in
debt instruments of the U.S. government and its agencies having varied
maturities.
The Fund may purchase securities, including structured notes, whose value is
linked to the price of a commodity or a commodity index. The Fund may purchase
and sell financial and commodity futures contracts and options on financial
futures and commodity futures contracts and may also write, purchase or sell put
or call options on securities, foreign currencies, commodities and commodity
indices. The Fund may invest in asset-backed securities such as collateralized
mortgage obligations and other mortgage and non-mortgage asset-backed
securities. The Fund may also lend its portfolio securities and borrow money
for investment purposes (i.e. leverage its portfolio).
The Fund may also invest in "when issued" securities and "partly paid"
securities. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's Investors Service and
Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
Global Balanced Fund
- --------------------
Global Balanced Fund may invest in equity securities. Equity securities include
common and preferred stocks; equity and equity index swap agreements; direct
equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; special classes of shares available only
to foreign persons in such markets that restrict the ownership of certain
classes of equity to nationals or residents of the country; convertible
preferred stocks and convertible debt instruments; financial futures contracts
and options on financial futures contracts; forward currency contracts and put
and call options on securities, securities indices and foreign currencies and
foreign currency swaps.
4
<PAGE>
The Fund may also invest in fixed-income securities which include obligations
issued or guaranteed by a government or any of its political subdivisions,
agencies, instrumentalities, or by a supranational organization such as the
World Bank or European Economic Community (or other organizations which are
chartered to promote economic development and are supported by various
governments and government entities), adjustable-rate preferred stock, interest
rate swaps, corporate bonds, debentures, notes, commercial paper, certificates
of deposit, time deposits, repurchase agreements, and debt obligations which may
have a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
government and its agencies having varied maturities. The Fund may invest in
asset-backed securities such as collateralized mortgage obligations and other
mortgage and non-mortgage asset-backed securities. The Fund may also lend its
portfolio securities and borrow money for investment purposes (i.e. leverage its
portfolio).
Emerging Markets Growth Fund
- ----------------------------
The Emerging Markets Growth Fund seeks long-term capital appreciation by
investing primarily in equity securities in emerging markets around the world.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in Emerging Country and emerging market equity securities. An
"emerging market" or "Emerging Country" is any country that the World Bank, the
International Finance Corporation or the United Nations or its authorities has
determined to have a low or middle income economy. Emerging Countries can be
found in regions such as Asia, Latin America, Africa and Eastern Europe. The
countries that will not be considered Emerging Countries include the United
States, Australia, Canada, Japan, New Zealand and most countries located in
Western Europe such as Austria, Belgium, Denmark, Finland, France, Germany,
Great Britain, Ireland, Italy, the Netherlands, Norway, Spain, Sweden and
Switzerland.
The Fund considers emerging market securities to include securities which are
(i) principally traded in the capital markets of an emerging market country;
(ii) securities of companies that derive at least 50% of their total revenues
from either goods produced or services performed in Emerging Countries or from
sales made in Emerging Countries, regardless of where the securities of such
companies are principally traded; (iii) securities of companies organized under
the laws of, and with a principal office in an Emerging Country; (iv) securities
of investment companies (such as country funds) that principally invest in
emerging market securities; and (v) American Depositary Receipts (ADRs),
American Depositary Shares (ADSs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) with respect to the securities of such
companies.
Equity securities in which the Fund may invest include common stocks; preferred
stocks (either convertible or non-convertible); rights; warrants; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; convertible debt instruments; and special classes of
shares available only to foreign persons in those markets that restrict
ownership of certain classes of equity to nationals or residents of that
country. These securities may be listed on securities exchanges or traded over-
the-counter. Direct investments are generally considered illiquid and will be
aggregated with other illiquid investments for purposes of the limitation on
illiquid investments. See "Risk Factors - Emerging Market Securities."
The Adviser expects that the Fund will normally invest in at least three
different countries. The Fund emphasizes equity securities, but may also invest
in other types of instruments, including debt securities of any quality (other
than commercial paper as described herein). Debt securities may include fixed
or floating rate bonds, notes, debentures, commercial paper, loans, convertible
securities and other debt
5
<PAGE>
securities issued or guaranteed by governments, agencies or instrumentalities,
central banks or private issuers.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in securities which are not emerging market securities, such as
high grade, liquid debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in money
market instruments denominated in U.S. dollars or a foreign currency. These
money market instruments include, but are not limited to, negotiable or short-
term deposits with domestic or foreign banks with total surplus and undivided
profits of at least $50 million; high quality commercial paper; and repurchase
agreements maturing within seven days with domestic or foreign dealers, banks
and other financial institutions deemed to be creditworthy under guidelines
approved by the Board of Trustees of the Fund. The commercial paper in which
the Fund may invest will, at the time of purchase, be rated P-1 or better by
Moody's Investors Service, Inc. ("Moody's"); A-1 or better by Standard & Poor's
Corporation ("S&P"); Fitch-1 by Fitch; Duff-1 by Duff & Phelps ("D&P"), or if
unrated, will be of comparable high qualify as determined by the Adviser
Asia Dynasty Fund
- -----------------
Asia Dynasty Fund may invest in equity securities, warrants and equity options
of companies located in, or expected to benefit from the developmental growth of
the economies of countries located in the Asia region ("Asia Growth Companies").
These countries include Burma, Peoples Republic of China ("China"), Cambodia,
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Pakistan, the Philippines,
Singapore, Sri Lanka, Taiwan, Thailand and Vietnam and, when the Fund is in a
defensive posture, Australia, Japan and New Zealand. Equity securities include
common and preferred stocks, direct equity interests in trusts, partnerships,
joint ventures and other unincorporated entities or enterprises, special classes
of shares available only to foreign persons in those markets that restrict
ownership of certain classes of equity to nationals or residents of that
country, convertible preferred stocks and convertible debt instruments. The
Fund may buy and sell financial futures contracts and options on financial
futures contracts, forward currency contracts and put or call options on
securities, securities indices and foreign currencies and foreign currency
swaps. The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e. leverage its portfolio).
Asia Infrastructure Fund
- ------------------------
Asia Infrastructure Fund may invest in equity securities, warrants and equity
options of infrastructure companies located in, or expected to benefit from the
developmental growth of the economies of countries located in the Asia region.
These countries include Burma, Peoples Republic of China ("China"), Cambodia,
Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Pakistan, the Philippines,
Singapore, Sri Lanka, Taiwan, Thailand and Vietnam and Japan. Equity securities
include common and preferred stocks, direct equity interests in trusts,
partnerships, joint ventures and other unincorporated entities or enterprises,
special classes of shares available only to foreign persons in those markets
that restrict ownership of certain classes of equity to nationals or residents
of that country, convertible preferred stocks and convertible debt instruments.
The Fund may buy and sell financial futures contracts and options on financial
futures contracts, forward currency contracts and put or call options on
securities, securities indices and foreign currencies and foreign currency
swaps. The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e. leverage its portfolio).
The term "Asia Region infrastructure companies" includes companies that (i) that
are directly or indirectly (whether through supplier relationships, servicing
agreements or otherwise) involved to a significant extent in any one or more of
the design, construction, development, manufacture, sale, leasing, installation
or operation of, or the ownership of property in connection with, (a)
electricity generation, transmission or
6
<PAGE>
distribution facilities, (b) gas, petroleum, or petrochemical collection,
storage, processing or distribution facilities, (c) roads or other public works,
including water storage, treatment and distribution facilities and waste
processing and disposal facilities, (d) transportation systems and related
products, technologies and equipment, including mass transit systems and
vehicles, airports, airlines, cargo terminals, ports and shipping facilities,
(e) telecommunications systems and related facilities, products, technologies
and equipment, including long distance and local telephone services, cellular
radio telephone services and other radio common carrier communication services,
paging and specialized mobile radio systems, telecommunication cables and wires,
telegraph, satellite, cable, fiber optic, microwave and private communication
networks, electronic mail and other telecommunications technologies, (f) cement
plants, asphalt plants and other facilities for the manufacture or processing of
building products and materials, (g) property development companies and (h)
other public service activities, which, in the opinion of the Adviser, relate to
the development of the basic structure on which a portion of a given country's
economic activities relate, and (ii) that (a) are organized under the laws of an
Asia Region country, (b) have equity securities listed on a securities exchange
in the Asia Region, (c) have 50% or more of their assets in or derive 50% or
more of their revenues or profits from the Asia Region, or (d) have or are
expected to have significant assets or investments committed to the Asia Region
and that, in the opinion of the Adviser, are likely to contribute significantly
to the infrastructure projects and developments in the Asia Region while
providing an opportunity for the Fund to benefit from such activities.
Global Income Fund
- ------------------
Global Income Fund may invest in any type of security including, but not limited
to, common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may buy and sell financial futures
contracts and options on financial futures contracts, which may include bond and
stock index futures contracts and foreign currency futures contracts. The Fund
may write, purchase or sell put or call options on securities and foreign
currencies. In addition, the Fund may lend its portfolio securities and borrow
money for investment purposes (i.e. leverage its portfolio).
- --------------------------------------------------------------------------------
CERTAIN POLICIES APPLICABLE TO GLOBAL BALANCED FUND, GLOBAL HARD ASSETS FUND,
ASIA DYNASTY FUND, EMERGING MARKETS GROWTH FUND, ASIA INFRASTRUCTURE FUND, GOLD
OPPORTUNITY FUND, INTERNATIONAL INVESTORS GOLD FUND, GLOBAL INCOME FUND AND
GOLD/RESOURCES FUND
- --------------------------------------------------------------------------------
The above Funds may invest in "when issued" securities and "partly paid"
securities. Additionally, Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund, Asia Infrastructure Fund and Global Income
Fund may invest in collateralized mortgage obligations. The Appendix to this
Statement of Additional Information contains an explanation of the rating
categories of Moody's Investors Service and Standard & Poor's Corporation
relating to the fixed-income securities and preferred stocks in which the Funds
may invest, including a description of the risks associated with each category.
U.S. Government Money Fund
- --------------------------
U.S. Government Money Fund seeks safety of principal, daily liquidity and
current income through investments in short-term U.S. Treasury securities and
other securities carrying the "full faith and credit" guarantee of the U.S.
Government. The Fund invests in U.S. Treasury bills, notes, and bonds and other
obligations guaranteed by the full faith and credit of the U.S. Government and
repurchase agreements collateralized by such obligations (at least 80% of its
assets will be so invested). All securities mature within thirteen months from
the date of purchase, although repurchase agreements may be collateralized by
securities maturing in more than one year.
7
<PAGE>
Direct obligations issued by the U.S. Treasury include bills, notes and bonds
which differ from each other only in interest rates, maturities and times of
issuance: Treasury bills have maturities of thirteen months or less, Treasury
notes have maturities of one to ten years and Treasury bonds generally have
maturities of greater than ten years. Securities guaranteed by the U.S.
Government include such obligations as securities issued by the General Services
Administration and the Small Business Administration.
U.S. Government Money Fund may also invest in other short-term instruments (up
to 20% of its assets), in all cases subject to the credit quality requirements
of the 1940 Act, including commercial paper, banker's acceptances, and
certificates of deposit. Commercial paper consists of short-term, unsecured
promissory notes issued principally by banks and corporations to finance short-
term credit needs. The commercial paper purchased by the Fund will consist only
of direct obligations of the issuer. Banker's acceptances are drafts or bills of
exchange that have been guaranteed as to payment by a bank or trust company.
Banker's acceptances are used to effect payment of merchandise sold in import-
export transactions, and are backed by the credit strength of the bank which
assumes the obligation. Time deposits are credit instruments evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specific period of time.
Gold/Resources Fund and U.S. Government Money Fund, as a fundamental investment
policy, may not invest in securities of South African issuers; Global Balanced
Fund, Asia Dynasty Fund, Asia Infrastructure Fund, International Investors Gold
Fund and Global Income Fund are not so restricted by their fundamental
investment policies.
RISK FACTORS
------------
INVESTING IN FOREIGN SECURITIES
--------------------------------
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND, GLOBAL HARD ASSETS FUND, ASIA DYNASTY FUND, ASIA
INFRASTRUCTURE FUND, EMERGING MARKETS GROWTH FUND, GLOBAL INCOME FUND,
INTERNATIONAL INVESTORS GOLD FUND, GOLD OPPORTUNITY FUND AND GOLD/RESOURCES FUND
- --------------------------------------------------------------------------------
Investors should recognize that investing in foreign securities involves certain
special considerations which are not typically associated with investing in
United States securities. Since investments in foreign companies will
frequently involve currencies of foreign countries, and since the above Funds
may hold securities and funds in foreign currencies, these Funds may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, if any, and may incur costs in connection with conversions between
various currencies. Most foreign stock markets, while growing in volume of
trading activity, have less volume than the New York Stock Exchange, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. Similarly, volume and liquidity in
most foreign bond markets are less than in the United States, and at times
volatility of price can be greater than in the United States. Fixed commissions
on foreign securities exchanges are generally higher than negotiated commissions
on United States exchanges, although these Funds endeavor to achieve most
favorable net results on their portfolio transactions. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed companies in foreign countries than in the United States. In addition,
with respect to certain foreign countries, there is the possibility of exchange
control restrictions, expropriation or confiscatory taxation, political,
economic or social instability, which could affect investments in those
countries. Foreign securities such as those purchased by these Funds may be
subject to foreign government taxes, higher custodian fees and dividend
collection fees which could reduce the yield on such securities.
8
<PAGE>
Investments may be made from time to time by Global Balanced Fund, Global Hard
Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Emerging Markets Growth
Fund and Asia Infrastructure Fund in companies in developing countries as well
as in developed countries. Asia Dynasty Fund, Emerging Markets Growth Fund,
Asia Infrastructure Fund, Global Hard Assets Fund and Gold Opportunity Fund may
have a substantial portion of their assets in developing countries. Although
there is no universally accepted definition, a developing country is generally
considered by the Adviser to be a country which is in the initial stages of
industrialization. Shareholders should be aware that investing in the equity
and fixed income markets of developing countries involves exposure to unstable
governments, economies based on only a few industries, and securities markets
which trade a small number of securities. Securities markets of developing
countries tend to be more volatile than the markets of developed countries;
however, such markets have in the past provided the opportunity for higher rates
of return to investors.
Since the Emerging Markets Growth Fund will invest at least 65% of its total
assets in emerging market countries, and the Asia Dynasty Fund and Asia
Infrastructure Fund will invest at least 65% of their total assets in Asia
Region investments, their investment performance will be especially affected by
events affecting emerging market countries and Asia Region companies. The value
and liquidity of emerging market countries and Asia Region investments may be
affected favorably or unfavorably by political, economic, fiscal, regulatory or
other developments in the emerging market countries and Asia Region or their
neighboring regions. The extent of economic development, political stability
and market depth of different countries in the emerging market countries and
Asia Region varies widely. Certain countries in the Asia Region, including
Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand, and
Vietnam are either comparatively underdeveloped or are in the process of
becoming developed. Investments typically involve greater potential for gain or
loss than investments in securities of issuers in developed countries. Given
the Funds' investments, the Funds will likely be particularly sensitive to
changes in China's economy as the result of a reversal of economic
liberalization, political unrest or changes in China's trading status.
The Asia Infrastructure Fund will invest at least 65% of its assets in Asia
Region infrastructure companies. Investing in infrastructure and related
companies involves certain special considerations. Infrastructure companies in
the Asia Region are undergoing significant change due to varying and evolving
levels of government regulation or deregulation and other factors. Competitive
pressures are intense and the securities of such companies may be subject to
increased share price volatility. In addition, certain infrastructure companies
are subject to the risk that technological innovations will make their services
obsolete.
The securities markets in the emerging market countries and Asia Region are
substantially smaller, less liquid and more volatile than the major securities
markets in the United States. A high proportion of the shares of many issuers
may be held by a limited number of persons and financial institutions, which may
limit the number of shares available for investment by the portfolio.
Similarly, volume and liquidity in the bond markets in the emerging market
countries and Asia Region are less than in the United States and, at times,
price volatility can be greater than in the United States. A limited number of
issuers in emerging market countries and the Asia Region securities markets may
represent a disproportionately large percentage of market capitalization and
trading value. The limited liquidity of securities markets in the emerging
market countries and Asia Region may also affect the Fund's ability to acquire
or dispose of securities at the price and time it wishes to do so. Accordingly,
during periods of rising securities prices in the more illiquid emerging market
countries and Asia Region securities markets, the Fund's ability to participate
fully in such price increases may be limited by its investment policy of
investing not more than 15% of its net assets in illiquid securities.
Conversely, the Fund's inability to dispose fully and promptly of positions in
declining markets will cause the Fund's net asset value to decline as the value
of the unsold positions is marked to lower prices. In addition, emerging market
countries and Asia Region securities markets are susceptible to being influenced
by large investors trading significant blocks of securities.
9
<PAGE>
The Chinese, Hong Kong and Taiwanese stock markets are undergoing a period of
growth and change which may result in trading volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant law and regulations. In particular, the securities industry in China
is not well developed. China has no securities laws of nationwide
applicability. The municipal securities regulations adopted by Shanghai and
Shenzhen municipalities are very new, as are their respective securities
exchanges and other self-regulatory organizations. In addition, Chinese
stockbrokers and other intermediaries may not perform as well as their
counterparts in the United States and other more developed securities markets.
The prices at which the Funds may acquire investments may be affected by trading
by persons with material non-public information and by securities transactions
by brokers in anticipation of transactions by the Funds in particular
securities. The securities markets in Cambodia, Laos and Vietnam are currently
non-existent.
Asia Dynasty Fund and Asia Infrastructure Fund will invest in Asia Region
countries with emerging economies or securities markets, and the Emerging
Markets Growth Fund will invest world-wide in countries with emerging economies
or securities markets. Political and economic structures in many of such
countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability
characteristic of the United States. Certain of such countries have in the past
failed to recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a result, the risks described
above, including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the value of the Funds' investments in those countries and the
availability to the Funds of additional investments in those countries.
Economies in the emerging market countries and the Asia Region may differ
favorably or unfavorably from the United States economy in such respects as rate
of growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. As export-driven
economies, the economies of the emerging market countries and Asia Region are
affected by developments in the economies of their principal trading partners.
Revocation by the United States of China's "Most Favored Nation" trading status,
which the United States President and Congress reconsider annually, would
adversely affect the trade and economic development of China and Hong Kong. Hong
Kong, Japan and Taiwan have limited natural resources, resulting in dependence
on foreign sources for certain raw materials and economic vulnerability to
global fluctuations of price and supply.
China governmental actions can have a significant effect on the economic
conditions in the Asia Region, which could adversely affect the value and
liquidity of the Fund's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain of the other emerging market countries and Asia Region
countries do not have comprehensive systems of laws, although substantial
changes have occurred in China in this regard in recent years. The corporate
form of organization has only recently been permitted in China and national
regulations governing corporations were introduced only in May 1992. Prior to
the introduction of such regulations Shanghai had adopted a set of corporate
regulations applicable to corporations located or listed in Shanghai, and the
relationship between the two sets of regulations is not clear. Consequently,
until a firmer legal basis is provided, even such fundamental corporate law
tenets as the limited liability status of Chinese issuers and their authority to
issue shares remain open to question. Laws regarding fiduciary duties of
officers and directors and the protection of shareholders are not well
developed. China's judiciary is relatively inexperienced in enforcing the laws
that exist, leading to a higher than usual degree of uncertainty as to the
outcome of litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law, or to obtain
enforcement of the 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,
10
<PAGE>
including the Funds, would be able to realize the value of the assets of the
enterprise or receive payment in convertible currency. As the changes to the
Chinese legal system develop, the promulgation of new laws, existing laws and
the preemption of local laws by national laws may adversely affect foreign
investors, including the Funds. The uncertainties faced by foreign investors in
China are exacerbated by the fact that many laws, regulations and decrees of
China are not publicly available, but merely circulated internally. Similar
risks exist in other emerging market countries and Asia Region 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
-----------------------------
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND, GLOBAL HARD ASSETS FUND, ASIA DYNASTY FUND, ASIA
INFRASTRUCTURE FUND, EMERGING MARKETS GROWTH FUND, GLOBAL INCOME FUND,
INTERNATIONAL INVESTORS GOLD FUND, GOLD OPPORTUNITY FUND, GOLD/RESOURCES FUND
- --------------------------------------------------------------------------------
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the long-term investment decisions made for the
above Funds with regard to overall diversification strategies. Although the
Funds value their assets daily in terms of U.S. Dollars, they do not intend
physically to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. The Funds will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Funds at one rate, while offering a lesser rate of exchange should the
Funds desire to resell that currency to the dealer. The Funds will use forward
contracts, along with futures contracts, foreign exchange swaps (Global Hard
Assets Fund, Gold Opportunity Fund, Global Balanced Fund, Asia Dynasty Fund,
Emerging Markets Growth Fund and Asia Infrastructure Fund only) and put and call
options (all types of derivatives), to "lock in" the U.S. Dollar price of a
security bought or sold and as part of their overall hedging strategy. The
Funds will conduct their foreign currency exchange transactions, either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through purchasing put and call options on, or entering into
futures contracts or forward contracts to purchase or sell foreign currencies.
See "Futures and Options Transactions."
A forward foreign currency contract, like a futures contract, involves an
obligation to purchase or sell a specific amount of currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. Unlike foreign
currency futures contracts which are standardized exchange-traded contracts,
forward currency contracts are usually traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.
The Adviser will not commit any Fund to deliver under forward contracts an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets or obligations denominated in that currency. The
Funds' Custodian will place the securities being hedged, cash or U.S. government
securities or debt securities into a segregated account of the Fund in an amount
equal to the value of the Fund's total assets committed to the consummation of
forward foreign currency contracts to ensure that the Fund is not leveraged
beyond applicable limits. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Funds' commitments with respect to such contracts. At the maturity of a
forward contract, the Funds may either sell the portfolio security and make
delivery of the
11
<PAGE>
foreign currency, or they may retain the security and terminate their
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 Funds will be able to effect such a
closing purchase transaction.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the contract. Accordingly, if a decision is made to sell
the security and make delivery of the foreign currency it may be necessary for a
Fund to purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency that a Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Additionally, although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
FUTURES AND OPTIONS TRANSACTIONS
--------------------------------
Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Asia
Dynasty Fund, Emerging Markets Growth Fund, Asia Infrastructure Fund,
Gold/Resources Fund and Global Income Fund may invest in options on futures
contracts. Compared to the purchase or sale of futures contracts, the purchase
and sale of options on futures contracts involves less potential risk to the
Funds because the maximum exposure is the amount of the premiums paid for the
options. Futures contracts and options thereon are both types of derivatives.
The use of financial futures contracts and commodity futures contracts, options
on such futures contracts and commodities (Gold/Resources Fund, Global Hard
Assets Fund, Gold Opportunity Fund, and International Investors Gold Fund), may
reduce a Fund's exposure to fluctuations in the prices of portfolio securities
and may prevent losses if the prices of such securities decline. Similarly,
such investments may protect a Fund against fluctuation in the value of
securities in which a Fund is about to invest. Because the financial markets in
the Asia Region countries and other developing countries are not as developed as
in the United States these financial investments may not be available to the
Funds and the Funds may be unable to hedge certain risks.
The use of financial futures and commodity futures contracts and options on such
futures contracts and commodities (Gold/Resources Fund, Global Hard Assets Fund,
Gold Opportunity Fund and International Investors Gold Fund) as hedging
instruments involves several risks. First, there can be no assurance that the
prices of the futures contracts or options and the hedged security or the cash
market position will move as anticipated. If prices do not move as anticipated,
a Fund may incur a loss on its investment, may not achieve the hedging
protection anticipated and/or incur a loss greater than if it had entered into a
cash market position. Second, investments in options, futures contracts and
options on futures contracts may reduce the gains which would otherwise be
realized from the sale of the underlying securities or assets which are being
hedged. Third, positions in futures contracts and options can be closed out
only on an exchange that provides a market for those instruments. There can be
no assurances that such a market will exist for a particular futures contract or
option. If a Fund cannot close out an exchange traded futures contract or
option which it holds, it would have to perform its contractual obligation or
exercise its option to realize any profit and would incur transaction costs on
the sale of the underlying assets.
It is the policy of each of the Funds to meet the requirements of the Internal
Revenue Code of 1986, as amended (the "Code") to qualify as a regulated
investment company to prevent double taxation of the Funds
12
<PAGE>
and their shareholders. One of these requirements is that less than 30% of a
Fund's gross income must be derived from gains from the sale or other
disposition of securities held for less than three months./1/ Another test
requires that at least 90% of a Fund's gross income be derived from dividends,
interest, payment with respect to securities loans and gains from the sale or
other disposition of stocks or other securities. Gains from commodity futures
contracts do not currently qualify as income for purposes of the 90% test. The
extent to which the Funds may engage in options and futures contract
transactions may be materially limited by these tests.
MORTGAGE-BACKED SECURITIES
--------------------------
The Funds (except Gold and Natural Resources Fund) may invest in mortgage-backed
securities. A mortgage-backed security may be an obligation of the issuer
backed by a mortgage or pool of mortgages or a direct interest in an underlying
pool of mortgages. The value of mortgage-backed securities may change due to
shifts in the market's perception of issuers. In addition, regulatory or tax
changes may adversely affect the mortgage securities market as a whole. Stripped
mortgage-backed securities are created when a U.S. governmental agency or a
financial institution separates the interest and principal components of a
mortgage-backed security and sells them as individual securities. The holder of
the "principal-only" security ("PO") receives the principal payments made by the
underlying mortgage-backed security, while the holder of the "interest-only"
security ("IO") receives interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly affected
by change in interest rates. As interest rates fall, prepayment rates tend to
increase, which tends to reduce the price of IOs and increase prices of POs.
Rising interest rates can have the opposite effect. Changes in interest rates
may also affect the liquidity of IOs and POs.
REAL ESTATE SECURITIES
----------------------
Although Gold and Natural Resources Fund and Global Hard Assets Fund will not
invest in real estate directly, each of these Funds may invest a percentage of
its assets in equity securities of REITs and other real estate industry
companies or companies with substantial real estate investments. Worldwide Hard
Assets Fund may invest up to 50% of its assets in such securities. Gold and
Natural Resources Fund and Worldwide Hard Assets Fund are therefore 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 Internal Revenue Code of 1986, as amended (the "Code").
- ---------
/1/ From time to time, legislation has been proposed in Congress which, if
enacted, will repeal this requirement.
13
<PAGE>
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).
COMMERCIAL PAPER
----------------
Emerging Markets Growth Fund, Global Balanced Fund, Global Hard Assets Fund and
Global Income Fund may invest in commercial paper which is indexed to certain
specific foreign currency exchange rates. The terms of such commercial paper
provide that its principal amount is adjusted upwards or downwards (but not
below zero) at maturity to reflect changes in the exchange rate between two
currencies while the obligation is outstanding. The Funds will purchase such
commercial paper with the currency in which it is denominated and, at maturity,
will receive interest and principal payments thereon in that currency, but the
amount or principal payable by the issuer at maturity will change in proportion
to the change (if any) in the exchange rate between two specified currencies
between the date the instrument is issued and the date the instrument matures.
While such commercial paper entails the risk of loss of principal, the potential
for realizing gains as a result of changes in foreign currency exchange rate
enables the Funds to hedge or cross-hedge against a decline in the U.S. dollar
value of investments denominated in foreign currencies while providing an
attractive money market rate of return. The Funds will purchase such commercial
paper for hedging purposes only, not for speculation. The staff of the
Securities and Exchange Commission is currently considering whether the purchase
of this type of commercial paper would result in the issuance of a "senior
security" within the meaning of the 1940 Act. The Funds believe that such
investments do not involve the creation of such a senior security, but
nevertheless will establish a segregated account with respect to its investments
in this type of commercial paper and to maintain in such account cash not
available for investment or U.S. Government securities or other liquid high
quality debt securities having a value equal to the aggregate principal amount
of outstanding commercial paper of this type.
DIRECT INVESTMENTS
------------------
Emerging Markets Growth Fund, Global Hard Assets Fund and Global Balanced Fund
may invest up to 10% of their total assets in direct investments. Direct
investments include (i) the private purchase from an enterprise of an equity
interest in the enterprise in the form of shares of common stock or equity
interests in trusts, partnerships, joint ventures or similar enterprises, and
(ii) the purchase of such an equity interest in an enterprise from a principal
investor in the enterprise. In each case the Funds 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 Sub-Adviser anticipates that these agreements will, in appropriate
circumstances, provide the Funds with the ability to appoint a representative to
the board of directors or similar body of the enterprise and for eventual
disposition of the Funds' investment in the enterprise. Such a representative
of the Funds will be expected to provide the Funds with the ability to monitor
its investment and protect its rights in the investment and will not be
appointed for the purpose of exercising management or control of the enterprise.
Certain of the Funds' direct investments 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
14
<PAGE>
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.
Direct investments may involve a high degree of business and financial risk that
can result in substantial losses. Because of the absence of any public trading
market for these investments, the Funds 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 Funds. 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 Funds may
be required to bear the expense of the registration. In addition, in the event
the Funds sell 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
REPURCHASE AGREEMENTS
---------------------
None of the Funds will enter into a repurchase agreement with a maturity of more
than seven business days if, as a result, more than 10% of the value of a Fund's
total assets would then be invested in such repurchase agreements and other
illiquid securities (except that Global Income Fund may invest no more than 15%
of its assets in such repurchase agreements and other money market instruments
and Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Asia
Dynasty Fund, Emerging Markets Growth Fund and Asia Infrastructure Fund may
invest no more than 15% of their total assets in illiquid securities). A Fund
will only enter into a repurchase agreement where (i) the underlying securities
are of the type which the Fund's investment policies would allow it to purchase
directly, (ii) the market value of the underlying security, including accrued
interest, will be at all times equal to or exceed the value of the repurchase
agreement, and (iii) payment for the underlying securities is made only upon
physical delivery or evidence of book-entry transfer to the account of the
custodian or a bank acting as agent.
RULE 144A SECURITIES and
SECTION 4(2) COMMERCIAL PAPER
------------------------------
The Securities and Exchange Commission adopted Rule 144A which allows a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act of 1933 of resales of certain
securities to qualified institutional buyers. The Adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this new regulation and the development of an
automated system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers.
The Adviser will monitor the liquidity of restricted securities in the Funds'
holdings under the supervision of the Board of Trustees. In reaching liquidity
decisions, the Adviser will consider, among other things, the following factors:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanisms of the transfer).
15
<PAGE>
In addition, commercial paper may be issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Such commercial paper is restricted as to disposition
under the federal securities laws and, therefore, any resale of such securities
must be effected in a transaction exempt from registration under the Securities
Act of 1933. Such commercial paper is normally resold to other investors through
or with the assistance of the issuer or investment dealers who make a market in
such securities, thus providing liquidity.
Securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 and commercial paper issued in reliance on the Section 4(2) exemption under
the Act may be determined to be liquid in accordance with guidelines established
by the Board of Trustees for purposes of complying with investment restrictions
applicable to investments by the Funds (except the U.S. Government Money Fund)
in illiquid securities.
INVESTMENT RESTRICTIONS
-----------------------
The following investment restrictions are in addition to those described in the
Prospectus. Policies that are identified as fundamental may be changed with
respect to a Fund only with the approval of the holders of a majority of the
Fund's outstanding shares. Such majority is defined as the vote of the lesser
of (i) 67% or more of the outstanding shares present at a meeting, if the
holders of more than 50% of a Fund's outstanding shares are present in person or
by proxy, or (ii) more than 50% of a Fund's outstanding shares. As to any of
the following policies, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in value of portfolio securities or amount of net assets will not be considered
a violation of the policy.
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND, GLOBAL HARD ASSETS FUND, GOLD OPPORTUNITY FUND, ASIA
DYNASTY FUND, EMERGING MARKETS GROWTH FUND, ASIA INFRASTRUCTURE FUND,
GOLD/RESOURCES FUND, GLOBAL INCOME FUND AND U.S. GOVERNMENT MONEY FUND.
- --------------------------------------------------------------------------------
With respect to Gold/Resources Fund and U.S. Government Money Fund, all of the
following restrictions are fundamental policies except restriction 21, unless
otherwise indicated. With respect to Global Income Fund, restrictions 1, 7, 10,
15 and 21 are not fundamental. With respect to Global Balanced Fund, Global
Hard Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Emerging Markets
Growth Fund and Asia Infrastructure Fund restrictions 1, 4, 6, 7, 10, 12, 13,
17, 18, 19 and 20, are not fundamental, unless otherwise provided for by
applicable federal or state law.
The Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund,
Emerging Markets Growth Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
Gold/Resources Fund, Global Income Fund and U.S. Government Money Fund may not:
1. Invest in securities which (i) with respect to Gold/Resources Fund, Global
Income Fund and U.S. Government Money Fund, are subject to legal or
contractual restrictions on resale ("restricted securities") or for which
there is no readily available market quotation or engage in a repurchase
agreement maturing in more than seven days with respect to any security if
the result is that more than 10% of a Fund's net assets would be invested
in such securities, and (ii) with respect to Global Balanced Fund, Global
Hard Assets Fund, Gold Opportunity Fund, Asia Dynasty Fund, Emerging
Markets Growth Fund and Asia Infrastructure Fund, are "illiquid"
securities, including repurchase agreements maturing in more than 7 days
and options traded over-the-counter if the result is that more than 15% of
Global Balanced Fund's, Global Hard Assets Fund's, Gold Opportunity Fund's,
Asia Dynasty Fund's, Emerging Markets Growth Fund or Asia Infrastructure
Fund's net
16
<PAGE>
assets would be invested in such securities, except that Global Income Fund
may invest an additional 5% of its net assets in short term money market
investments, such as repurchase agreements and time deposits maturing in
more than seven days.
2. Purchase or sell real estate, although the Global Balanced Fund, Gold
Opportunity Fund, Global Hard Assets Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, Gold/Resources Fund, Emerging Markets Growth Fund and
Global Income Fund may purchase securities of companies which deal in real
estate, including securities of real estate investment trusts, and may
purchase securities which are collateralized by interests in real estate.
3. Purchase or sell commodities (non-Hard Asset commodities with respect to
Global Hard Assets) or commodity futures contracts (for the purpose of this
restriction, forward foreign exchange contracts are not deemed to be a
commodity or commodity contract) except that Emerging Markets Growth Fund
may for hedging and other purposes, Gold/Resources Fund may, for hedging
purposes, buy and sell financial futures contracts which may include stock
and bond index futures contracts and foreign currency futures contracts and
Gold/Resources Fund may, for hedging purposes only, buy and sell commodity
futures contracts on gold and other natural resources or on an index
thereon. The Fund may not commit more than 5% of its total assets to
initial margin deposits on futures contracts, (however, the Emerging
Markets Growth Fund is excluded from the 5% limitation for margin deposit
for futures position entered into for bona fide hedging purposes). In
addition, Gold/Resources Fund, International Investors Gold Fund, Global
Hard Assets Fund and Gold Opportunity Fund may invest in gold bullion and
coins.
4. Exclusive of the Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund, Emerging Markets Growth Fund and Asia
Infrastructure Fund, purchase securities of other open-end investment
companies except as part of a merger, consolidation, reorganization or
acquisition of assets; Asia Dynasty Fund, Emerging Markets Growth Fund,
Asia Infrastructure Fund, Global Balanced Fund, Global Hard Assets Fund,
Gold Opportunity Fund, Gold/Resources Fund or Global Income Fund may not
purchase more than 3% of the total outstanding voting stock of any closed-
end investment company if more than 5% of any of these Funds' total assets
would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
In addition, Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
Gold/Resources Fund or Global Income Fund may not invest in the securities
of closed-end investment companies, except by purchase in the open market
involving only customary broker's commissions.
5. Make loans, except by (i) purchase of marketable bonds, debentures,
commercial paper and similar marketable evidences of indebtedness and (ii)
repurchase agreements. Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund, Emerging Markets Growth Fund, Asia
Infrastructure Fund and Global Income Fund may lend to broker-dealers
portfolio securities with an aggregate market value up to one-third of its
total assets.
6. As to 75% of the total assets of each of the Asia Dynasty Fund, Emerging
Markets Growth Fund, Gold/Resources Fund, International Investors Gold Fund
and U.S. Government Money Fund, purchase securities of any issuer, if
immediately thereafter (i) more than 5% of a Fund's total assets (taken at
market value) would be invested in the securities of such issuer, or (ii)
more than 10% of the outstanding securities of any class of such issuer
would be held by a Fund (provided that these limitations do not apply to
obligations of the United States Government, its agencies or
instrumentalities). This limitation does not apply to the Global Income
Fund, Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund,
or Asia Infrastructure Fund.
7. Invest more than 5 percent of the value of its total assets in securities
of companies having, together with their predecessors, a record of less
than three years of continuous operation. This restriction
17
<PAGE>
does not apply to Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Emerging Markets Growth Fund, Asia Dynasty Fund or Asia
Infrastructure Fund.
8. Underwrite any issue of securities (except to the extent that a Fund may be
deemed to be an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities).
9. Borrow money, except that each of the Gold/Resources Fund and U.S.
Government Money Fund may borrow up to 10% of its total assets valued at
cost for temporary or emergency purposes. These Funds will not purchase
securities for investment while borrowings equaling 5% or more of their
total assets are outstanding. In addition, Global Balanced Fund, Global
Hard Assets Fund, Gold Opportunity Fund, Emerging Markets Growth Fund, Asia
Dynasty Fund, Asia Infrastructure Fund and Global Income Fund may borrow up
to 30% of the value of their respective net assets to increase their
holdings of portfolio securities.
10. Mortgage, pledge or otherwise encumber its assets except to secure
borrowing effected within the limitations set forth in restriction (9).
11. Issue senior securities except insofar as a Fund may be deemed to have
issued a senior security by reason of (i) borrowing money in accordance
with restrictions described above; (ii) entering into forward foreign
currency contracts (Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Emerging Markets Growth Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, Gold/Resources Fund and Global Income Fund); (iii)
financial futures contracts purchased on margin (Global Balanced Fund,
Global Hard Assets Fund, Gold Opportunity Fund, Emerging Markets Growth
Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources Funds and
Global Income Fund), (iv) commodity futures contracts purchased on margin
(Gold/Resources Fund, Global Hard Assets Fund, Gold Opportunity Fund); (v)
foreign currency swaps (Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Asia Dynasty Fund, Emerging Markets Growth Fund and Asia
Infrastructure Fund); and (vi) issuing multiple classes of shares (Global
Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Emerging
Markets Growth Fund, Asia Infrastructure Fund and Asia Dynasty Fund).
12. Except for Gold Opportunity Fund and Global Hard Assets Fund, make short
sales of securities, except that Global Balanced Fund, Emerging Markets
Growth Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources
Fund and Global Income Fund may engage in the transactions specified in
restrictions (2), (3) and (14).
13. Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions and, with
respect to Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity
Fund, Emerging Markets Growth Fund, Asia Dynasty Fund, Asia Infrastructure
Fund, Gold/Resources Fund and Global Income Fund, may make initial or
maintenance margin payments in connections with options and futures
contracts and related options and borrowing effected within the limitations
set forth in restriction (9).
14. Write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except that Global Balanced Fund, Global Hard Assets Fund, Gold
Opportunity Fund, Emerging Markets Growth Fund, Asia Dynasty Fund, Asia
Infrastructure Fund, Gold/Resources Fund and Global Income Fund may
purchase or sell puts and calls on foreign currencies and on securities
described under "Options Transactions" herein and in the Prospectus and
that Global Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund,
Emerging Markets Growth Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
Gold/Resources Fund and Global Income Fund may write, purchase or sell put
and call options on financial futures contracts, which include bond and
stock index futures contracts
18
<PAGE>
and Gold/Resources Fund may write, purchase, or sell put and call options
on gold or other natural resources or an index thereon and on commodity
futures contracts on gold or other natural resources or an index thereon.
15. Make investments for the purpose of exercising control or management.
16. Invest more than 25 percent of the value of a Fund's total assets in the
securities of issuers having their principal business activities in the
same industry, except the Gold/Resources Fund, Global Hard Assets Fund and
Emerging Markets Growth Fund and as otherwise stated in any Fund's
fundamental investment objective, and provided that this limitation does
not apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
17. Participate on a joint or joint and several basis in any trading account in
securities, although transactions for the Funds and any other account under
common or affiliated management may be combined or allocated between the
Funds and such account.
18. Purchase participations or other interests (other than equity stock
interests in the case of the Global Balanced Fund, Global Hard Assets Fund,
Gold Opportunity Fund, Emerging Markets Growth Fund, Asia Dynasty Fund,
Asia Infrastructure Fund, Gold/Resources Fund and Global Income Fund) in
oil, gas or other mineral exploration or development programs.
19. Invest more than 5% of its total assets in warrants, whether or not the
warrants are listed on the New York or American Stock Exchanges, or more
than 2% of the value of the assets of a Fund (except Global Balanced Fund,
Global Hard Assets Fund, Gold Opportunity Fund, Emerging Markets Growth
Fund, Asia Dynasty Fund and Asia Infrastructure Fund) in warrants which are
not listed on those exchanges. Warrants acquired in units or attached to
securities or received as dividends are not included in this restriction.
The U.S. Government Money Fund will not invest in warrants.
20. Purchase or retain a security of any issuer if any of the officers,
directors or Trustees of a Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer, or if such persons
taken together own more than 5% of the securities of such issuer (except
Emerging Markets Growth Fund).
21. Invest in real estate limited partnerships or in oil, gas or other mineral
leases.
With respect to restriction 3, forward foreign exchange contracts are not deemed
to be a commodity or commodity contract. The following are not considered
fundamental policies. Asia Dynasty Fund, Asia Infrastructure Fund, Global
Balanced Fund, Global Hard Assets Fund, Gold Opportunity Fund, Global Income
Fund and Emerging Markets Growth Fund may, for hedging purposes, buy and sell
financial futures contracts which may include stock and bond index futures
contracts and foreign currency futures contracts. A Fund may not commit more
than 5% of its total assets to initial margin deposits on futures contracts.
Emerging Markets Growth Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
Global Balanced Fund, Global Hard Assets Fund and Gold Opportunity Fund may not
commit more than 5% of their total assets to initial margin deposits on futures
contracts not used for hedging purposes.
With respect to restriction 16, companies in different geographical locations
will not be deemed to be in the same industry if the investment risks associated
with the securities of such companies are substantially different. For example,
although generally considered to be "interest rate sensitive," investing in
banking institutions in different countries is generally dependent upon
substantially different risk factors, such as the condition and prospects of the
economy in a particular country and in particular industries, and political
conditions.
19
<PAGE>
In order to comply with certain securities laws of a state in which shares of
the Funds are currently sold, the Funds have undertaken with respect to
investment restriction number 1, not to invest more than 10% of their assets in
"restricted securities." To the extent the above restriction has been adopted
to comply with state securities laws, it shall not apply to the Funds once such
laws are no longer in effect.
In order to comply with certain securities laws of a state in which shares of
the Funds are currently sold, the Funds have undertaken with respect to
investment restriction number 7, not to invest more than 5% of their assets in
securities of unseasoned issuers. To the extent the above restriction has been
adopted to comply with state securities laws, it shall not apply to the Funds
once such laws are no longer in effect.
International Investors Gold Fund
- ---------------------------------
Restrictions 1 through 9 are fundamental policies of International Investors
Gold Fund and may not be changed without shareholder approval. Restrictions 10
through 16 are not fundamental policies and may be changed without shareholder
approval.
International Investors Gold Fund may not:
1. Underwrite securities of other issuers.
2. Invest in real estate, commodity contracts or commodities (except that,
subject to applicable state laws, the Fund may invest up to 12.5% of the
value of its total assets as of the date of investment in gold and silver
coins which are legal tender in the country of issue and gold and silver
bullion).
3. Make loans to other persons, except through repurchase agreements or the
purchase of publicly distributed bonds, debentures and other debt
securities.
4. Purchase securities on margin or make short sales.
5. Purchase or retain a security of any issuer if any of the officers or
directors of the Company or its investment adviser own beneficially as much
as 1/2 of 1%, or if such persons taken together own over 5%, of the
issuer's securities.
6. Lend its funds or assets, except through the purchase of securities the
Fund would otherwise be authorized to purchase.
7. Mortgage, pledge or hypothecate more than 15% of the Company's total
assets, taken at cost.
8. Purchase any restricted securities which may not be sold to the public
without registration under the Securities Act of 1933, if by reason of such
purchase the value of the Company's aggregate holdings in all such
securities would exceed 10% of total assets.
9. Issue senior securities. The Fund may (I) borrow money in accordance with
restrictions described above, (ii) enter into forward contracts, (iii)
purchase futures contracts on margin, (iv) issue multiple classes of
securities, and (v) enter into swap agreement or purchase or sell
structured notes or similar instruments.
10. Invest in interests (other than equity stock interests) in oil, gas or
other mineral exploration or development programs or in oil, gas or other
mineral leases.
11. Invest in real estate limited partnerships.
12. Make short sales of foreign currencies.
20
<PAGE>
13. Seek short-term trading profits.
14. Make investments in companies for the purpose of exercising control or
management.
15. Invest more than 10% of its assets in repurchase agreements having
maturities of greater than seven days or in a combination of such
agreements together with restricted securities and securities for which
market quotations are not readily available.
16. Purchase securities for investment while borrowings equal to 5% or more of
the Fund's assets are outstanding.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of net assets will not be considered a violation
of any of the foregoing restrictions.
INVESTMENT ADVISORY SERVICES
----------------------------
The investment adviser and manager of the Funds is Van Eck Associates
Corporation (the "Adviser"), a Delaware corporation, pursuant to an Advisory
Agreement with the Trust dated as of July 30, 1985, as amended. The Adviser
furnishes an investment program for the Funds and determines, subject to the
overall supervision and review of the Board of Trustees, what investments should
be purchased, sold and held. The Adviser is currently the oldest and largest
gold manager investing in gold mining shares. The Adviser's team of gold
managers and analysts average over 25 years of experience.
Peregrine Asset Management (Hong Kong) Limited ("PAM"), a Hong Kong Corporation,
is a sub-adviser to the Emerging Markets Fund pursuant to a Sub-Investment
Advisory Agreement approved by the Trustees on December 10, 1996. Fiduciary
International, Inc. ("FII"), a New York Corporation, is sub-adviser to the
Global Balanced Fund pursuant to a Sub-Investment Advisory Agreement dated
October 30, 1993.
The Adviser (and Sub-Adviser) provides the Funds with office space, facilities
and simple business equipment and provides the services of consultants,
executive and clerical personnel for administering their affairs. The Adviser
(and Sub-Adviser) compensates all executive and clerical personnel and Trustees
of the Trust if such persons are employees or affiliates of the Adviser, Sub-
Adviser, or its affiliates. The Advisory fee is computed daily and paid monthly
at the following annual rates: International Investors Gold Fund, Global Income
Fund and Gold/Resources Fund pay a fee equal to .75 of 1% of the first $500
million of average daily net assets, .65 of 1% of the next $250 million of
average daily net assets and .50 of 1% of the average daily net assets in excess
of $750 million. Asia Dynasty Fund, Asia Infrastructure Fund and Global
Balanced Fund pay the Adviser a fee of .75 of 1% of average daily net assets.
From this fee the Adviser pays the Sub-Adviser a fee of .50 of 1% of average
daily net assets. Gold Opportunity Fund, Emerging Markets Growth Fund and
Global Hard Assets Fund each pay the Adviser 1% of average daily net assets.
From the fee paid by the Emerging Markets Growth Fund, the Advisor pays the Sub-
Advisor a fee of .50 of 1% of average daily net assets. The U.S. Government
Money Fund pays a monthly fee at the annual rate of .50 of 1% for the first $500
million of average daily net assets, .40 of 1% on the next $250 million of
average daily net assets, and .375 of 1% of the average daily net assets in
excess of $750 million.
The Adviser also performs accounting and administrative services for Global
Balanced Fund, Asia Dynasty Fund, Asia Infrastructure Fund, Gold/Resources Fund
and International Investors Gold Fund pursuant to a written agreement. For these
accounting and administrative services, Asia Dynasty Fund, Asia Infrastructure
Fund and Global Balanced Fund each pays .25 of 1% of its respective average
daily net assets. Gold/Resources Fund and International Investors Gold Fund pay
an annual rate of .25 of 1% of the first $750 million of their respective
average daily net assets and .20 of 1% of their respective average daily net
assets in excess of $750 million.
21
<PAGE>
The net assets of the Funds at December 31, 1995, 1994, and 1993 were
approximately: International Investors Gold Fund (Class A) - $519,795,000,
$634,808,000 and $706,171,000, respectively; Gold/Resources Fund (Class A) -
$155,974,000, $186,091,000 and $211,450,000, respectively; U.S. Government Money
Fund - $70,130,000, $47,078,000 and $31,109,000, respectively; Global Income
Fund (Class A) - $112,375,000, $137,242,000 and $251,725,000, respectively;
Asia Dynasty Fund (Class A) $64,275,000, $83,787,000 and $108,661,000,
respectively; Asia Dynasty Fund (Class B) - $27,234,000, $35,024,000 and
$26,205,000, respectively; Global Balanced Fund (Class A) - $30,632,000,
$13,986,000 and $562,000, respectively; Global Balanced Fund (Class B) -
$6,151,000, $5,628,000 and $130,000, respectively. The net assets of the Funds
at December 31, 1995 and 1994 were approximately: International Investors Gold
Fund (Class C) - $720,000 and $430,000 respectively; Asia Infrastructure Fund
(Class A) - $738,000 and $1,038,000 respectively; Global Hard Assets Fund (Class
A) - $3,820,000 and $1,419,000 respectively; and Global Hard Assets Fund (Class
C) - $181,000 and $8,000 respectively. Gold Opportunity Fund (Class A) at
December 31, 1995 - $1,906,000 and Gold Opportunity Fund (Class C) at December
31, 1995 - $105,000.
In 1995, 1994 and 1993, the aggregate remuneration received by the Adviser from
International Investors Gold Fund was $4,256,866, $4,792,990 and $4,056,306,
respectively; from Gold/Resources Fund was $1,317,580, $1,569,404 and
$1,237,378, respectively; from U.S. Government Money Fund was $286,736, $316,603
and $164,283, respectively; from Global Income Fund was $984,254, $1,312,169 and
$2,167,616, respectively; from Asia Dynasty Fund was $818,148, $1,011,806 and
$243,120, respectively. In 1995 and 1994, the aggregate remuneration received
by the Adviser from Global Balanced Fund was $141,393 and $127,782,
respectively; from Global Hard Assets Fund was $29,887 and $1,893, respectively;
from Asia Infrastructure Fund was $7,143 and $12,806, respectively. In 1995,
the aggregate remuneration received by the Adviser from Gold Opportunity Fund
was $14,095.
The expenses borne by each of the Funds include: all the charges and expenses of
the transfer and dividend disbursing agent, custodian fees and expenses, legal,
auditors' and accountants' fees and expenses, brokerage commissions for
portfolio transactions, taxes, if any, the advisory fee (and accounting and
administrative services fees, if any), extraordinary expenses (as determined by
the Trustees of the Trust), expenses of shareholders' and Trustees' meetings,
and of preparing, printing and mailing proxy statements, reports and other
communications to shareholders, expenses of preparing and setting in type
prospectuses and periodic reports and expenses of mailing them to current
shareholders, legal and accounting expenses and expenses of registering and
qualifying shares for sale (including compensation of the Adviser's employees in
relation to the time spent on such matters), expenses relating to the Plan of
Distribution (Rule 12b-1 Plan) exclusive of International Investors Gold Fund,
fees of Trustees who are not "interested persons" of the Adviser (or Sub-
Adviser), membership dues of the Investment Company Institute, fidelity bond and
errors and omissions insurance premiums, cost of maintaining the books and
records of each Fund, and any other charges and fees not specifically enumerated
as an obligation of the Distributor or Adviser or Sub-Adviser.
The Advisory Agreement with respect to Gold Opportunity Fund was approved at a
meeting of the Board of Trustees held on December 13, 1994. The Advisory
Agreement with respect to Global Hard Assets Fund was approved at a meeting of
the Board of Trustees held on October 18, 1994. The Advisory Agreement and Sub-
Advisory Agreements provide that the Adviser and Sub-Adviser shall reimburse the
Trust for expenses of the Trust in excess of certain expense limitations
required by state regulation unless the Trust has obtained an appropriate waiver
of such expense limitations or expense items from a particular state authority.
Under the Advisory Agreement and Sub-Advisory Agreement, the maximum annual
expenses which the Trust may be required to bear, inclusive of the advisory fee
(from which the Adviser pays the Sub-Adviser its fee) but exclusive of interest,
taxes, brokerage fees, Rule 12b-1 Plan distribution payments and extraordinary
items, may not exceed the lowest expense limitation imposed by any state in
which the Funds are registered. Currently, only one state imposes such an
expense limitation on the Funds. For the purposes
22
<PAGE>
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 and/or Sub-Adviser will be
required promptly to reimburse the Funds for the total amount by which expenses
exceed the amount of the limitations, not limited (with respect to the Adviser
only) to the amount of the fees paid. If aggregate annual expenses are within
the limitations, however, any excess amount previously withheld will be paid to
the Adviser and/or Sub-Adviser.
The Advisory Agreement and Sub-Advisory Agreement with respect to Global
Balanced Fund were approved at a meeting of the Board of Trustees held on
October 12, 1993. The Advisory and Sub-Advisory Agreement with respect Emerging
Markets Growth Fund were approved at a meeting of the Board of Trustees held on
December 10, 1996. The Advisory Agreement with respect to Gold/Resources Fund
and International Investors Gold Fund was approved at a meeting of the Board of
Trustees held on May 24, 1994. Advisory Agreements for all the Funds were
reapproved by the Board of Trustees of the Trust, including a majority of the
Trustees who are not parties to such Agreements or interested persons of any
such party at a meeting held on April 23, 1996. The Advisory Agreement was
approved by shareholders of the U.S. Government Money Fund on January 23, 1987;
Global Income Fund on April 12, 1988; and Gold/Resources Fund and International
Investors Gold Fund on July 25, 1994. The Advisory Agreements and Sub-
Investment Advisory Agreements were approved by shareholders of Global Balanced
Fund on December 17, 1993. The Advisory Agreement and Sub-Advisory Agreement
provide that they shall continue in effect from year to year with respect to a
Fund as long as it is approved at least annually both (i) by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
Act) or by the Trustees of the Trust, and (ii) in either event by a vote of a
majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Agreements may be terminated on
60 days written notice by either party and will terminate automatically in the
event of an assignment within the meaning of the Act.
Mr. John C. van Eck is Chairman of the Board of Directors of the Adviser as well
as President and Trustee of the Trust. Mr. Van Eck offered the first global
mutual fund to U.S. investors in 1955 and offered the first gold fund to U.S.
investors in 1968.
THE DISTRIBUTOR
---------------
Shares of the Funds are offered on a continuous basis and are distributed
through Van Eck Securities Corporation, 99 Park Avenue, New York, New York (the
"Distributor"), a wholly-owned subsidiary of Van Eck Associates Corporation.
The Trustees of the Trusts have approved a Distribution Agreement appointing the
Distributor as distributor of shares of the Funds. The Distribution Agreement
with respect to all Funds was reapproved by the action of the Trustees on April
23, 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.
23
<PAGE>
Van Eck Securities Corporation retained distributing commissions on sales of
shares of the Funds for the following fiscal years ended December 31 (except as
noted) after reallowance to dealers as follows:
<TABLE>
<CAPTION>
Van Eck
Securities Reallowance to
Corporation Dealers
----------- --------------
<S> <C> <C> <C>
1995 $161,888 $ 650,766
International 1994 423,706 1,665,173
Investors Gold Fund 1993 485,198 1,851,096
1995 $ 64,047 $ 274,644
Gold/Resources Fund 1994 286,592 1,117,992
1993 342,459 1,290,246
1995 $ 19,771 $ 98,774
Global Income Fund 1994 33,396 136,949
1993 337,156 1,517,371
1995 $ 25,162 $ 119,247
Asia Dynasty 1994 236,565 1,181,535
Fund 3/22/93-12/31/93 211,110 2,409,342
1995 $ 1,982 $ 8,982
Global Balanced 1994 19,768 308,987
Fund 12/20/93-12/31/93 51 5,368
Asia Infra- 1995 $ 717 $ 3,792
structure Fund 8/3/94-12/31/94 1,142 36,798
Global Hard 1995 $ 8,060 $ 44,788
Assets Fund 11/2/94-12/31/94 64 16,554
Gold Opportunity 1995 $ 1,740 $ 7,164
Fund
</TABLE>
As the Emerging Markets Growth Fund will be a newly created series of the Van
Eck Global Funds, the Globally Emerging Markets Fund has no operating history
and therefore is not on the above chart.
To compensate the Distributor for the services it provides and for the expenses
it bears under the Distribution Agreement, each of Gold/Resources Fund (Class
A), Global Income Fund (Class A), and U.S. Government Money Fund has adopted a
Plan of Distribution pursuant to Rule 12b-1 (the "Plan") under the Act. Fees
paid by the Funds under the Plan will be used for servicing and/or distribution
expenses incurred only during the applicable year. Additionally, Global
Balanced Fund (Class A and B), Asia Dynasty Fund (Class A and B), Asia
Infrastructure Fund (Class A and B), International Investors Gold Fund (Class
C), Gold Opportunity Fund (Class A, B and C) and Global Hard Assets Fund (Class
A, B and C) have also adopted a Plan which provides for the compensation of
brokers and dealers who sell shares of these Funds or provide servicing. The
Plan for Asia Dynasty Fund (Class A) is a reimbursement type plan and provides
for the payment of
24
<PAGE>
carry-over expenses to the Distributor, incurred in one year but payable in a
subsequent year(s), up to the maximum for the Fund in any given year. Global
Balanced Fund (Class A and Class B), Asia Dynasty Fund (Class B), Asia
Infrastructure Fund (Class A and B), International Investors Gold Fund (Class
C), Gold Opportunity Fund (Class A, B and C) and Global Hard Assets Fund (Class
A, B and C) Plans are compensation type plans with a carry-forward provision
which provides that the Distributor recoup distribution expenses in the event
the Plan is terminated. For the periods prior to April 30, 1997, the Distributor
has agreed with respect to Plans with a carry-forward provision, notwithstanding
anything to the contrary in the Plan, to waive its right to reimbursement of
carry-forward amounts in the event the Plan is terminated unless the Board of
Trustees has determined that reimbursement of such carry-forward amounts is
appropriate. Pursuant to the Plans, the Distributor provides the Funds at least
quarterly with a written report of the amounts expended under the Plans and the
purpose for which such expenditures were made. The Trustees review such reports
on a quarterly basis.
The Plan was approved with respect to Gold Opportunity Fund by the Trustees of
the Trust on December 13, 1994. The Plan was approved with respect to Global
Hard Assets Fund by the Trustees of the Trust on October 18, 1994. The Plans
were approved, in the case of Asia Infrastructure (Class A) and International
Investors Gold Fund (Class C) by the Trustees of the Trust on October 18, 1994.
The Plans were reapproved for all Funds, by the Trustees of the Trust, including
a majority of the Trustees who are not "interested persons" of the Funds and who
have no direct or indirect financial interest in the operation of the Plan, cast
in person at a meeting called for the purpose of voting on each such Plan on
April 23, 1996. The Plan was approved by shareholders of the Gold/Resources
Fund (Class A) and U.S. Government Money Fund on January 23, 1987; Global Income
Fund on April 12, 1988; Asia Dynasty Fund (Class B) on August 31, 1993; Global
Balanced Fund (Class A and B) on December 17, 1993; International Investors
Gold Fund (Class C) and Asia Dynasty Fund (Class A) on July 25, 1994. A Plan
shall continue in effect as to each Fund, provided such continuance is approved
annually by a vote of the Trustees in accordance with the Act. A Plan may not
be amended to increase materially the amount to be spent for the services
described therein without approval of the shareholders of the Funds, and all
material amendments to the Plan must also be approved by the Trustees in the
manner described above. A Plan may be terminated at any time, without payment
of any penalty, by vote of a majority of the Trustees who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan, or by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the Act) on written notice to any other
party to the Plan. A Plan will automatically terminate in the event of its
assignment (as defined in the Act). So long as the Plan is in effect, the
election and nomination of Trustees who are not "interested persons" of the
Trust shall be committed to the discretion of the Trustees who are not
"interested persons." The Trustees have determined that, in their judgment,
there is a reasonable likelihood that the Plan will benefit the Funds and their
shareholders. The Funds will preserve copies of the Plan and any agreement or
report made pursuant to Rule 12b-1 under the Act, for a period of not less than
six years from the date of the Plan or such agreement or report, the first two
years in an easily accessible place. For additional information regarding the
Plans, see the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
The Adviser or the Sub-Adviser is responsible for decisions to buy and sell
securities and other investments for the Funds, the selection of brokers and
dealers to effect the transactions and the negotiation of brokerage commissions,
if any. In transactions on stock and commodity exchanges in the United States,
these commissions are negotiated, whereas on foreign stock and commodity
exchanges these commissions are generally fixed and are generally higher than
brokerage commissions in the United States. In the case of securities traded on
the over-the-counter markets, there is generally no stated commission, but the
price usually includes an undisclosed commission or markup. In underwritten
offerings, the price includes a disclosed fixed commission or discount. Most
obligations in which the U.S. Government Money Fund invests are normally traded
on a "principal" rather than agency basis. This may be done through a dealer
(e.g. securities firm or bank) who buys or sells for its own account rather than
as an agent for another client, or
25
<PAGE>
directly with the issuer. A dealer's profit, if any, is the difference, or
spread, between the dealer's purchase and sale price for the obligation.
In purchasing and selling the Funds' portfolio investments, it is the Adviser's
or Sub-Adviser's policy to obtain quality execution at the most favorable prices
through responsible broker-dealers. In selecting broker-dealers, the Adviser
will consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for the
security or asset to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer's firm; the broker-
dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions.
In addition, the Adviser may allocate brokerage transactions to broker-dealers
who have entered into arrangements with the Adviser under which the broker-
dealer allocates a portion of the commissions paid by a Fund toward payment of
the Fund's expenses such as transfer agency, printing or other expenses. The
services of the broker-dealer must be comparable to those of other qualified
broker-dealers.
The Adviser or Sub-Adviser may cause the Funds to pay a broker-dealer who
furnishes brokerage and/or research services a commission that is in excess of
the commission another broker-dealer would have received for executing the
transaction if it is determined that such commission is reasonable in relation
to the value of the brokerage and/or research services as defined in Section
28(e) of the Securities Exchange Act of 1934 which have been provided. Such
research services may include, among other things, analyses and reports
concerning issuers, industries, securities, economic factors and trends, and
portfolio strategy. Any such research and other information provided by brokers
to the Adviser and Sub-Adviser are considered to be in addition to and not in
lieu of services required to be performed by the Adviser and Sub-Adviser under
the Advisory Agreement and Sub-Advisory Agreements with the Trust. The research
services provided by broker-dealers can be useful to the Adviser and Sub-Adviser
in serving its other clients or clients of the Adviser's or Sub-Adviser's
affiliates.
26
<PAGE>
The table below shows the commissions paid on purchases and sales of portfolio
securities by each Fund during its respective fiscal year, and the percentages
of such amounts paid to brokers or dealers which furnished daily quotations to
the Funds for the purpose of calculating daily per share net asset value and to
brokers and dealers which sold shares of the Funds. The U.S. Government Money
Fund did not pay brokerage commissions.
<TABLE>
<CAPTION>
Fund (fiscal year end) 1995
% Daily
Commissions Quotations %Fund Sales
<S> <C> <C> <C>
International Investors Gold Fund (Class A and C) (12/31) $ 212,002 1.86% 18.63%
Gold/Resources Fund (Class A) (12/31) $ 235,161 0.00% 17.59%
Global Income Fund (Class A) (12/31) $ 31,325 0.00% 0.00%
Asia Dynasty Fund (Class A and B) (12/31) $ 900,977 0.00% 3.10%
Global Balanced Fund (Class A and B) (12/31) $ 89,406 3.50% 1.92%
Asia Infrastructure Fund (Class A) (12/31) $ 10,104 0.00% 1.36%
Global Hard Assets Fund (Class A and C) (12/31) $ 28,075 2.07% 25.86%
Gold Opportunity Fund (Class A and C)(12/31) $ 26,628 0.00% 11.49%
Fund (fiscal year end) 1994
% Daily
Commissions Quotations %Fund Sales
International Investors Gold Fund (Class A and C) (12/31) $ 403,616 30.92% 15.24%
Gold/Resources Fund (12/31) $ 199,613 2.74% 8.75%
Global Income Fund (12/31) $ 40,340 78.09% -0-
Asia Dynasty Fund (Class A and B) (12/31) $1,011,934 2.36% 2.36%
Global Balanced Fund (Class A and B) (12/31) $ 65,744 10.32% 1.28%
Asia Infrastructure Fund (12/31) $ 57,894 4.75% 3.64%
Global Hard Assets Fund (Class A and C) (12/31) $ 2,687 78.75% 32.04%
Fund (fiscal year end) 1993
% Daily
Commissions Quotations %Fund Sales
International Investors Gold Fund (12/31) $ 285,946 11.49% 13.89%
Gold/Resources Fund (12/31) $ 100,986 -0- -0-
Global Income Fund (12/31) $ 32,000 -0- -0-
Asia Dynasty Fund (Class A and B) (12/31) $ 518,223 22.80% 0.10%
Global Balanced Fund (Class A and B) (12/31) -0- -0- -0-
</TABLE>
As the Emerging Markets Growth Fund will be a newly created series of the Van
Eck Global Funds, the Globally Emerging Markets Fund has no operating history
and therefore is not on the above chart.
The Trustees periodically review the Adviser's and Sub-Adviser's performance of
its responsibilities in connection with the placement of portfolio transactions
on behalf of the Funds and review the commissions paid by the Funds over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Funds.
Investment decisions for the Funds are made independently from those of the
other investment accounts managed by the Adviser, Sub-Adviser or affiliated
companies. Occasions may arise, however, when the same investment decision is
made for more than one client's account. It is the practice of the Adviser and
Sub-Adviser to allocate such purchases or sales insofar as feasible among its
several clients or the clients of its affiliates in a manner it deems equitable.
The principal factors which the Adviser and Sub-Adviser
27
<PAGE>
considers in making such allocations are the relative investment objectives of
the clients, the relative size of the portfolio holdings of the same or
comparable securities and the then availability in the particular account of
funds for investment. Portfolio securities held by one client of the Adviser or
Sub-Adviser may also be held by one or more of its other clients or by clients
of its affiliates. When two or more of its clients or clients of its affiliates
are engaged in the simultaneous sale or purchase of securities, transactions are
allocated as to amount in accordance with formulae deemed to be equitable as to
each client. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser or Sub-Adviser may consider sales of shares of the Funds as a factor in
the selection of broker-dealers to execute portfolio transactions for the Funds.
While it is the policy of the Funds generally not to engage in trading for
short-term gains, the Funds will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser or Sub-Adviser such
transactions are advisable in light of a change in circumstances of a particular
company, within a particular industry or country, or in general market, economic
or political conditions. The Global Hard Assets Fund, Emerging Markets Growth
Fund, Asia Dynasty Fund, Asia Infrastructure Fund and Gold/Resources Fund
anticipate that their annual portfolio turnover rates will not exceed 100%.
The annual portfolio turnover rate of the Global Balanced Fund, Global Income
Fund and Gold Opportunity Fund may exceed 100%. Due to the high rate of
turnover the Funds may pay a greater amount in brokerage commissions than a
similar size fund with a lower turnover rate. The portfolio turnover rates of
all Funds may vary greatly from year to year. In addition, since the Funds may
have a high rate of portfolio turnover, the Funds may realize capital gains or
losses. Capital gains will be distributed annually to the shareholders.
Capital losses cannot be distributed to shareholders but may be used to offset
capital gains at the Fund level. See "Taxes" in the Prospectus and the
Statement of Additional Information.
The Adviser and related persons, may from time to time, buy and sell for their
own accounts securities recommended to clients for purchase or sale. The
Adviser recognizes that this practice may result in conflicts of interest.
However, to minimize or eliminate such conflicts a Code of Ethics has been
adopted by the Adviser which requires that all trading in securities suitable
for purchase by client accounts must be approved in advance by a person familiar
with purchase and sell orders or recommendations. Approval will be granted if
the security has not been purchased or sold or recommended for purchase or sale
on behalf of a client account within seven days; or if the security has been
purchased or sold or recommended for purchase or sale by a client account, it is
determined that the trading activity will not have a negative or appreciable
impact on the price or market of the security or the activity is of such a
nature that it does not present the dangers or potential for abuses or likely to
result in harm or detriment to a client account. At the end of each calendar
quarter, all related personnel of the Adviser are required to file a report of
all transactions entered into during the quarter. These reports are reviewed by
a senior officer of the Adviser.
28
<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.
~ PHILIP DEFEO - President, Chief Executive Officer, Trustee
- --------------
194 Centre Street, Dover, Massachusetts 02030; President and Chief
Exeuctive Officer, and Trustee of other affiliated investment companies
advised by the Adviser. President and Chief Exeuctive Officer and Director
of Van Eck Associates Corporation (investment adviser) and Van Eck
Securities Corporation (broker-dealer); Former Executive Vice President and
Director (1994-1996), Cedel International (finance and settlements); Former
Managing Director (1992-1994), Lehman Brothers (investment bank and
broker/dealer); Former Senior Vice President (1987-1992), Fidelity
Investments (financial services); Former Senior Vice President (1979-1987),
Bankers Trust Company International Securities Division.
#+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
29
<PAGE>
Services, Inc.; Trustee, Peregrine Funds; Former Director, International
Investors Incorporated; and Former Secretary and Treasurer, Millbrook
Advisers, Inc. (investment adviser) Former Chairman, Finacor, Inc.
(financial services).
DAVID J. OLDERMAN - Trustee
- -----------------
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).
30
<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.
31
<PAGE>
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.
CHARLES CAMERON - Vice President
- ---------------
99 Park Avenue, New York, New York; Vice President of the Trust, Director
of Trading of Van Eck Associates Corporation
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.
- -------------------------
~ 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.
32
<PAGE>
Dividends paid by a Fund with respect to Class A, Class B and Class C shares
will be calculated in the same manner, at the same time and on the same day and
will be in the same amount, except that the higher distribution services fee and
any incremental transfer agency costs relating to Class B or Class C shares will
be borne exclusively by that Class. The Trustees have determined that currently
no conflict of interest exists between the Class A and Class B shares or Class A
and Class C shares. On an ongoing basis, the Board of Trustees, pursuant to
their fiduciary duties under the 1940 Act and state laws, will seek to ensure
that no such conflict arises.
Shares of International Investors Gold Fund-A, Global Income Fund-A,
Gold/Resources Fund-A, Global Hard Assets Fund-A, Gold Opportunity Fund-A, Asia
Dynasty Fund-A, Asia Infrastructure Fund-A and Global Balanced Fund-A are sold
at the public offering price which is determined once each day the Funds are
open for business and is the net asset value per share plus a sales charge in
accordance with the schedule set forth in the Prospectus. Shares of the U.S.
Government Money Fund are sold without a sales charge. Shares of Asia Dynasty
Fund-B, Global Balanced Fund-B, Emerging Markets Growth Fund-A, Emerging Markets
Growth Fund-B, Global Emerging Markets-C, Asia Infrastructure Fund-B, Global
Hard Assets Fund-B and Gold Opportunity Fund-B are sold with a contingent
deferred sales charge. Shares of Emerging Markets Growth Fund, International
Investors Gold Fund-C, Global Hard Assets Fund-C and Gold Opportunity Fund -A-C
are sold with a redemption fee.
Set forth below is an example of the computation of the public offering price
for shares of the Global Income Fund-A, International Investors Gold Fund-A,
Gold/Resources Fund-A, Gold Opportunity Fund-A, Asia Dynasty Fund-A, Asia
Infrastructure Fund-A, Global Hard Assets Fund-A and Global Balanced Fund-A on
December 31, 1995 under the then-current maximum sales charge:
<TABLE>
<CAPTION>
Gold/ Global Global International Asia Asia Global Gold
Resources Hard Income Investors Dynasty Infrastruc- Balanced Opportunity
Fund-A Assets Fund-A Gold Fund-A Fund-A ture Fund-A Fund-A Fund-A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value and
repurchase $5.58 $10.68 $9.00 $13.35 $12.40 $7.57 $10.31 $ 9.67
price per share on $.001
par
value capital shares
outstanding
Maximum sales charge (as .34 .53 .45 .81 .62 .38 .51 .59
described in the
Prospectus)
Maximum offering price per
share $5.92 $11.21 $9.45 $14.16 $13.02 $7.95 $10.82 $10.26
</TABLE>
As the Emerging Markets Growth Fund will be a newly created series of the Van
Eck Global Funds, the Emerging Markets Growth Fund has no operating history,
therefore, it does not appear on the above chart.
In determining whether a contingent deferred sales charge is applicable to a
redemption of Class B shares or a redemption charge is applicable to Class C
shares, the calculation will be determined in the manner that results in the
lowest possible rate being charged. Therefore, it will be assumed that the
redemption is first of any Class A shares in the shareholder's Fund account
(unless a specific request is made to redeem a specific class of shares), second
of Class B shares held for over six years, Class C shares held for over one
year, shares attributable to appreciation or shares acquired pursuant to
reinvestment, and third of any Class C shares or Class B held longest during the
applicable period.
To provide two examples, assume an investor purchased 100 Class B shares of
Global Hard Assets Fund at $10 per share (at a cost of $1,000) and in the second
year after purchase, the net asset value per share is $12 and, during such time,
the investor has acquired 10 additional shares upon dividend reinvestment. If
at such time the investor makes his first redemption of 50 shares (proceeds
$600), 10 shares or $120 will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is not
applied to the $80 attributable to appreciation but is applied only to the
original cost of $10 per share and not to the increase in net asset value of $2
per share. Therefore, $200 of the $600 redemption proceeds
33
<PAGE>
will be charged at a rate of 4% (the applicable rate in the second year after
purchase). Instead, assume an investor purchased 100 Class C shares of Global
Hard Assets Fund at $10 per share (at a cost of $1,000) and six months after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional shares upon dividend reinvestment. If at
such time the investor makes his first redemption of 50 shares (proceeds $600),
10 shares or $120 will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is not applied
to the $80 attributable to appreciation but is applied only to the original cost
of $10 per share and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 1%.
The 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.
U.S. Government Money Fund
- --------------------------
It is the policy of the U.S. Government Money Fund to use its best efforts to
maintain a constant per share price equal to $1.00.
The portfolio instruments of the U.S. Government Money Fund are valued on the
basis of amortized cost. This involves valuing an instrument at its cost
initially and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which the value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument.
The valuation of the Fund's portfolio instruments based upon their amortized
cost and simultaneous maintenance of the Fund's per share net asset value at
$1.00 are permitted by a rule adopted by the Securities and Exchange Commission.
Under this rule, the Fund must maintain a dollar-weighted average
34
<PAGE>
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less, and invest only in securities
determined by the Trustees to be of high quality with minimal credit risks. In
accordance with the rule, the Trustees have established procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Trustees, at such
intervals as they may deem appropriate, to determine whether the net asset value
of the Fund calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. The rule also
provides that the extent of any deviation between the Fund's net asset value
based upon available market quotations or market equivalents and $1.00 per share
net asset value based on amortized cost must be examined by the Trustees. In the
event the Trustees determine that a deviation exists which may result in
material dilution or is otherwise unfair to investors or existing shareholders,
they must cause the Fund to take such corrective action as they regard as
necessary and appropriate, including: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per share by
using available market quotations.
EXCHANGE PRIVILEGE
------------------
Class A, Class B and Class C shareholders of a Fund may exchange their shares
for shares of the same class of other of the funds in the Van Eck Group of
Funds. 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
35
<PAGE>
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/her gross
income for such year ending on or before December 31, 1996 (after tax years
ending on December 31, 1996, the maximum deductible amount that the individual
may contribute annually is the lesser of $4000 or 100% of such individual's
compensation includible in his/her gross income for such year); provided,
however, that no more than $2,000 per year for either individual may be
contributed to either the IRA or SPIRA. Contributions to a SEP are excluded from
an employee's gross income and are subject to different 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
ad
36
<PAGE>
verse 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. However, after December
31, 1996, contributions under a salary reduction arrangement are permitted only
into SEP plans in existence on December 31, 1996.
Contributions by employers under a SEP arrangement up to the maximum permissible
amounts are deductible for federal income tax purposes. Contributions up to the
maximum permissible amounts are not includible in the gross income of the
employee. Dividends and capital gains on amounts invested in SEP-IRAs are
automatically reinvested by the Trustee in shares of the mutual fund that paid
such amounts and accumulate tax-free until distribution. Contributions in
excess of the maximum permissible amounts may be withdrawn by the employee from
the SEP-IRA no later than April 15 of the calendar year following the year in
which the contribution is made without tax penalties. Such amounts will,
however, be included in the employee's gross income. Withdrawals of such
amounts after April 15 of the year next following the year in which the excess
contributions is made and withdrawals of any other amounts prior to age 59 1/2,
unless made as a result of disability or death, may result in adverse tax
consequences.
Qualified Pension Plans. The Qualified Pension Plan can be utilized by self-
- ------------------------
employed individuals, partnerships and corporations (for this purpose called
"Employers") and their employees who wish to purchase shares of a Fund under a
retirement program.
The maximum contribution which may be made to a Qualified Pension Plan in any
one year on behalf of a participant is, depending on the benefit formula
selected by the Employer, up to the lesser of $30,000 or 25 percent of
compensation (net earned income in the case of a self-employed individual).
Contributions by Employers to Qualified Pension Plans up to the maximum
permissible amounts are deductible for Federal income tax purposes.
Contributions in excess of permissible amounts will result in adverse tax
consequences and penalties to the Employer. Dividends and capital gains earned
on amounts invested in Qualified Pension Plans are automatically reinvested by
the Trustee in shares of a Fund and accumulate tax-free until distribution.
Withdrawals of contributions prior to age 59-1/2, unless made as a result of
disability, death or early retirement, may result in adverse tax consequences
and penalties.
403(b)(7) Program. The Tax-Deferred Annuity Program and Custodial Account
- -----------------
offered by the Fund (the "403(b)(7) Program") allows employees of certain tax
exempt organizations and schools to have a portion of their compensation set
aside for their retirement years in shares held in an investment company
custodial account.
In general, the maximum limit on annual contributions for each employee is the
lesser of $30,000 per year (as adjusted by the IRS for cost-of-living
increases), 25% of the employee's compensation or the employee's exclusion
allowance specified in Section 403(b) of the Code. However, an employee's
salary reduction contributions to a 403(b)(7) Program may not exceed $9,500 a
year (as adjusted for cost of living expenses). Contributions in excess of
permissible amounts may result in adverse tax consequences and penalties.
Dividends and capital gains on amounts invested in the 403(b)(7) Program are
automatically reinvested in
37
<PAGE>
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.
Further details of the Automatic Exchange Plan are given in the application
which is available from DST or the Funds. This does not apply to Class B or
Class C shares.
An investor should realize that he is investing his funds in securities subject
to market fluctuations, and accordingly the Automatic Exchange Plan does not
assure a profit or protect against depreciation in declining markets. The
Automatic Exchange Plan contemplates the systematic purchase of securities at
regular intervals regardless of price levels.
The expenses of the Automatic Exchange Plan are general expenses of a Fund and
will not involve any direct charge to the participating shareholder. The
Automatic Exchange Plan is completely voluntary and may be terminated on thirty
days notice to DST.
Automatic Investment Plan. Investors may arrange under the Automatic Investment
- -------------------------
Plan to have DST collect a specified amount once a month or quarter from the
investor's checking account and purchase full and fractional shares of a Fund at
the public offering price next computed after receipt of the proceeds. Further
details of the Automatic Investment Plan are given in the application which is
available from DST or the Funds.
An investor should realize that he is investing his funds in securities subject
to market fluctuations, and accordingly the Automatic Investment Plan does not
assure a profit or protect against depreciation in declining markets. The
Automatic Investment Plan contemplates the systematic purchase of securities at
regular intervals regardless of price levels.
The expenses of the Automatic Investment Plan are general expenses of a Fund and
will not involve any direct charge to the participating shareholder. The
Automatic Investment Plan is completely voluntary. The Automatic Investment
Plan may be terminated on thirty days notice to DST.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan is designed to provide
- -------------------------
a convenient method of receiving fixed redemption proceeds at regular intervals
from shares of a Fund deposited by the investor under this Plan. This Plan is
not available to Class B or Class C shareholders. Further details of the
Automatic Withdrawal Plan are given in the application which is available from
DST or the Funds.
38
<PAGE>
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 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
39
<PAGE>
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.
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.
40
<PAGE>
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 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,
Emerging Markets Growth 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.
41
<PAGE>
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
-----------
U.S. Government Money Fund
- --------------------------
The U.S. Government Money Fund may advertise performance in terms of yield based
on a seven day yield or an effective yield.
Seven-day yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one percent.
Effective yield quotation is based on the seven days ended on the date of the
calculation and is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula: EFFECTIVE YIELD = [(BASE PERIOD RETURN +
1)365/7]-1 with the resulting yield figure carried to at least the nearest
hundredth of one percent.
In calculating yield or effective yield quotations, the net change in an account
value includes: (a) the value of additional shares purchased with dividends
from the original share and dividends declared on both the original share and
any such additional shares; (b) all fees, other than nonrecurring account or
sales charges, that are charged to all shareholder accounts in proportion to the
length of the base period. The calculation excludes realized gains and losses
from the sale of securities and unrealized appreciation and depreciation.
The seven day yield and seven day effective yield for the U.S. Government Money
Fund at April 11, 1996 were 3.72% and 3.79%, respectively.
- --------------------------------------------------------------------------------
42
<PAGE>
GLOBAL BALANCED FUND, GOLD OPPORTUNITY FUND, GLOBAL HARD ASSETS FUND, ASIA
DYNASTY FUND, ASIA INFRASTRUCTURE FUND, GOLD/RESOURCES FUND, INTERNATIONAL
INVESTORS GOLD FUND AND GLOBAL INCOME FUND
- --------------------------------------------------------------------------------
The above Funds may advertise performance in terms of average annual total
return for 1, 5 and 10 year periods, or for such lesser periods as any of such
Funds have been in existence. Average annual total return is computed by
finding the average annual compounded rates of return over the periods that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)/n/ = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the year or period;
The calculation assumes the maximum sales load (or other charges deducted from
payments) is deducted from the initial $1,000 payment and assumes all dividends
and distributions by the Fund are reinvested at the price stated in the
prospectus on the reinvestment dates during the period, and includes all
recurring fees that are charged to all shareholder accounts.
Average Annual Total Return for the Period ended December 31, 1995 (after
maximum sales charge).
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life
<S> <C> <C> <C> <C>
International Investors
Gold Fund (Class A) (14.18)% 5.69% 7.44% 11.67%
International Investors
Gold Fund (Class C) (10.78)% - (15.84)%
Gold/Resources Fund (Class A) (1.76)% 6.23% - 5.74%
Gold Opportunity Fund (Class A) - - - (1.72)%
Gold Opportunity Fund (Class C) - - - 3.44%
Global Income Fund (Class A) 11.65% 5.65% - 8.55%
Asia Dynasty Fund (Class A) (1.73)% - - 9.49%
Asia Dynasty Fund (Class B) (3.35)% - - 3.45%
Global Balanced Fund (Class A) 9.85% - - 2.65%
Global Balanced Fund (Class B) 9.54% - - 2.89%
Asia Infrastructure Fund (Class A) 2.44% - - (16.58)%
Global Hard Assets Fund (Class A) 14.37% - - 11.20%
Global Hard Assets Fund (Class C) 19.94% - - 16.50%
</TABLE>
As the Emerging Markets Growth Fund will be a newly created series of the Van
Eck Global Funds, the Emerging Markets Growth Fund has no operating history,
therefore, it does not appear on the above chart.
The Global Balanced Fund, Asia Dynasty Fund, Asia Infrastructure Fund,
Gold/Resources Fund, Global Income Fund, Gold Opportunity Fund, Global Hard
Assets Fund, Emerging Markets Growth Fund, and International Investors Gold Fund
may advertise performance in terms of a 30-day yield quotation. The 30-day
yield quotation is computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last day
of the period, according to the following formula:
================================================================================
YIELD = 2[(A-B/CD + 1) to the 6th power -1]
================================================================================
43
<PAGE>
================================================================================
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during the
period that were entitled to receive dividends
D = the maximum offering price per share on the last day of the
period after adjustment for payment of dividends within 30 days
thereafter
================================================================================
The 30-day yield for the 30-days ended March 31, 1996 for the Class A shares of
the Global Income Fund was 4.33%.
The Global Balanced Fund, Gold Opportunity Fund, Global Hard Assets Fund, Asia
Dynasty Fund, Asia Infrastructure Fund, Gold/Resources Fund, Global Income Fund,
Emerging Markets Growth Fund, and International Investors Gold Fund may also
advertise performance in terms of aggregate total return. Aggregate total
return for a specified period of time is determined by ascertaining the
percentage change in the net asset value of shares of the Fund initially
acquired assuming reinvestment of dividends and distributions and without giving
effect to the length of time of the investment according to the following
formula:
================================================================================
[(B-A)/A](100)=ATR
Where: A = initial investment
B = value at end of period
ATR = aggregate total return
================================================================================
The calculation assumes the maximum sales charge is deducted from the initial
payment and assumes all distributions by the Funds are reinvested at the price
stated in the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
Aggregate Total Return for the period ended December 31, 1995 (after maximum
sales charge).
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life
<S> <C> <C> <C> <C>
International Investors
Gold Fund (Class A) (14.18)% 31.85% 104.90% 8,165.7%
International Investors
Gold Fund (Class C) (10.78)% - - (18.8)%
Gold/Resources Fund (Class A) (1.76)% 35.26% - 73.5%
Gold Opportunity Fund (Class A) (1.70)% - - (1.7)%
Gold Opportunity Fund (Class C) - - - 3.35%
Global Income Fund (Class A) 11.65% 31.62% - 103.5%
Global Balanced Fund (Class A) 9.85% - - 5.5%
Global Balanced Fund (Class B) 9.54% - - 9.0%
Asia Dynasty Fund (A) (1.73)% - - 28.7%
Asia Dynasty Fund (B) (3.35)% - - 12.2%
Asia Infrastructure Fund (Class A) 2.44% - - -22.6%
Global Hard Assets Fund (Class A) 14.37% - - 13.1%
Global Hard Assets Fund (Class C) 19.94% - - 19.5%
</TABLE>
44
<PAGE>
As the Emerging Markets Growth Fund will be a newly created series of the Van
Eck Global Funds, the Emerging Markets Growth Fund has no operating history,
therefore, it does not appear on the above chart.
Advertising Performance
- -----------------------
As discussed in the Funds' Prospectus, the Funds may quote performance results
from recognized publications which monitor the performance of mutual funds, and
the Funds may compare their performance to various published historical indices.
These publications are listed in Part B of the Appendix. In addition, the Funds
may quote and compare their performance to the performance of various economic
and market indices and indicators, such as the S & P 500, Financial Times Index,
Morgan Stanley Capital International Europe, Australia, Far East Index, Morgan
Stanley Capital International World Index, Morgan Stanley Capital International
Combined Far East (ex-Japan) Free Index, Salomon Brothers World Bond Index,
Salomon Brothers World Government Bond Index, GNP and GDP data. Descriptions of
these indices are provided in Part B of the Appendix.
ADDITIONAL INFORMATION
----------------------
Custodian. 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 financial statements of Asia Dynasty Fund, Asia Infrastructure Fund, Global
Hard Assets Fund, Global Balanced Fund, International Investors Gold Fund,
Global Income Fund, Gold Opportunity Fund, Gold/Resources Fund and U.S.
Government Money Fund for the fiscal year ended December 31, 1995, are hereby
incorporated by reference from the Funds' Annual Reports to Shareholders, which
have been delivered with this Statement of Additional Information and are
available at no charge upon written or telephone request to the Trust at the
address or telephone numbers set forth on the first page of this Statement of
Additional Information. As the Emerging Markets Growth Fund is a newly created
series of the Van Eck Global Funds, the Emerging Markets Growth Fund has no
operating history, therefore, it does not have a financial statement.
45
<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
- -----------------------
46
<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.
47
<PAGE>
BB,B,CCC - Preferred stocks rated BB,B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Short-Term Debt Ratings
- -----------------------
Description of Moody's short-term debt ratings:
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by may of the following characteristics:
leading market positions in well-established industries, higher rates of return
of funds employed, conservative capitalization structure with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected be external conditions. Ample alternate liquidity is maintained.
Prime-3--Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of 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.
48
<PAGE>
PART B
- ------
The publications and services from which the Funds will quote performance are:
Micropal, Ltd. (an international investment fund information service), Fortune,
Changing Times, Money, U.S. News & World Report, Money Fund Scorecard,
Morningstar, Inc., Business Week, Institutional Investor, The Wall Street
Journal, Wall Street Transcripts, New York Post, Investment Company Institute
publications, The New York Times, Barron's, Forbes magazine, Research magazine,
Donaghues Money Fund Report, Donaghue's Money Letter, The Economist, FACS, FACS
of the Week, Financial Planning, Investment Daily, Johnson's Charts, Mutual Fund
Profiles (S&P), Powell Monetary Analysis, Sales & Marketing Management Magazine,
Life magazine, Black Enterprise, Fund Action, Speculators Magazine, Time,
NewsWeek, U.S.A Today, Wiesenberger Investment Service, Mining Journal
Quarterly, Mining Journal Weekly, Northern Miner, Gold Gazette, George Cross
Newsletter, Engineering and Mining Journal, Weekly Stock Charts-Canadian
Resources, Jeweler's Circular Keystone, Financial Times, Journal of Commerce,
Mikuni's Credit Ratings, Money Market Directory of Pension Funds, Oil and Gas
Journal, Pension Funds and Their Advisers, Investment Company Data, Inc., Mutual
Funds Almanac, Callan Associates, Inc., Media General Financial Services,
Financial World, Pensions & Investment Age, Registered Investment Advisors, Aden
Analysis, Baxter Weekly, Congressional Yellow Book, Crain's New York Business,
Survey of Current Business, Treasury Bulletin, U.S. Industrial Outlook, Value
Line Survey, Bank Credit Analyst, S&P Corporation Records, Euromoney, Moody's,
Investment Dealer's Digest, Financial Mail, Financial Post, Futures, Grant's
Interest Rate Observer, Institutional Investor, International Currency Review,
International Bank Credit Analyst, Investor's Daily, German Business Weekly,
GATT Trade Annual Report, and Dimensional Fund Advisers, Inc.
49
<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.
- -------------------------
ANNUAL REAL (INFLATION-ADJUSTED) GDP GROWTH
(IN LOCAL CURRENCY TERMS)
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
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% 0.1%
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
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.
50
<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 RETURN
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
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
51
<PAGE>
<TABLE>
<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 DIVIDENDS
REINVESTED)
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%
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
52
<PAGE>
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.
53
