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PROSPECTUS JUNE 2, 1997
VAN ECK GLOBAL REAL ESTATE FUND
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99 Park Avenue, New York, New York 10016
Account Assistance: (800) 544-4653
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Van Eck Funds (the "Trust") is an open-end management investment company
consisting of separate funds. This Prospectus relates only to Global Real
Estate Fund (the "Fund").
GLOBAL REAL ESTATE FUND (CLASS A, CLASS B AND CLASS C)--seeks to maximize
total return by investing primarily in equity securities of domestic and
foreign companies which are principally engaged in the real estate industry or
which own significant real estate assets.
Van Eck Associates Corporation (the "Adviser"), 99 Park Avenue, New York, New
York 10016, serves as investment adviser to the Fund. See "Management". Van
Eck Securities Corporation (the "Distributor"), a wholly-owned subsidiary of
the Adviser, serves as Distributor of the Fund's shares. See "Purchase of
Shares--Alternative Purchase Arrangements" on page 14 to determine your
purchase options for the Fund.
INVESTORS SHOULD BE AWARE THAT AN INVESTMENT IN THE FUND HAS GREATER
INVESTMENT RISK THAN MANY MUTUAL FUNDS. THE FUND INTENDS TO ENGAGE IN A NUMBER
OF INVESTMENT ACTIVITIES INCLUDING INVESTING IN A SINGLE INDUSTRY, BORROWING
FOR INVESTMENT PURPOSES (I.E., ENGAGE IN LEVERAGING), INVESTING IN COUNTRIES
WITH EMERGING SECURITIES MARKETS AND ECONOMIES AND INVESTING IN RESTRICTED
SECURITIES OF UNSEASONED ISSUERS AND NON-READILY MARKETABLE SECURITIES. THESE
INVESTMENT ACTIVITIES ARE CONSIDERED TO BE SPECULATIVE AND COULD RESULT IN
ADDITIONAL COST AND INVESTMENT RISK TO THE FUND. CONSEQUENTLY, THE FUND IS NOT
INTENDED TO BE A COMPLETE INVESTMENT AND ARE INTENDED FOR THOSE INVESTORS WHO
CAN ASSUME GREATER RISK WITH RESPECT TO A PORTION OF THEIR INVESTMENT
PORTFOLIO. FURTHER INFORMATION ON THE FUND AND THESE ACTIVITIES IS PROVIDED ON
PAGES 4-13 AND INVESTORS SHOULD READ THIS MATERIAL CAREFULLY.
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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 more information about the Fund, please call the Fund or the
Distributor at the above telephone number.
A Statement of Additional Information, dated June 2, 1997, which further
discusses the Trust and the Fund, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. For a free copy,
write to the above address or call the telephone number listed above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS PAGE
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Transaction Data........................................................... 3
The Fund................................................................... 4
Investment Objective and Policies.......................................... 4
Risk Factors............................................................... 5
Limiting Investment Risks.................................................. 12
Purchase of Shares......................................................... 13
Exchange Privilege......................................................... 19
Tax-Sheltered Retirement Plans............................................. 20
Investment Programs........................................................ 21
Redemption of Shares....................................................... 21
Dividends and Distributions................................................ 23
Management................................................................. 23
Plan of Distribution....................................................... 24
Advertising................................................................ 25
Taxes...................................................................... 26
Description of the Trust................................................... 26
Additional Information..................................................... 27
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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 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.
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CLASS-A CLASS-B CLASS-C
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<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%
==== ==== ====
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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.++
CLASS-A CLASS-B CLASS-C
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1 year............................................... $ 67.41 $ 76.11 $36.11
3 years.............................................. $109.00 $120.25 $80.25
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* 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. A 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.
*** Long-term shareholders in the Fund may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the NASD.
The shareholder servicing fee will not exceed .25%.
+ 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 existence 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."
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THE FUND
Global Real Estate Fund is a series of the Trust, a "business trust" organized
under the laws of the Commonwealth of Massachusetts on April 3, 1985. Class A
shares are denoted with the suffix -A, Class B shares with the suffix -B and
Class C shares with the suffix -C. The Fund is known as one of the Van Eck
Global Funds. The other Van Eck Global Funds are Asia Dynasty Fund, Emerging
Markets Growth Fund, Global Balanced Fund, Global Hard Assets Fund and Global
Income Fund. The Trust also consists of other series, all of which together
are hereinafter referred to as the "Van Eck Group of Funds."
The Fund is classified as non-diversified as defined in the Investment Company
Act of 1940, as amended (the "Act"). This means that the Fund at the close of
each quarter of its taxable year, must, in general, limit its investments in
the securities of a single issuer to (i) no more than 25% of its assets, (ii)
with respect to 50% of the Fund's assets, no more than 5% of its assets and
(iii) the Fund will not own more than 10% of the outstanding voting
securities.
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 securities of the Fund,
as defined in the Act. As a result of the market risk inherent in any
investment, there is no assurance that the Fund will achieve its objective.
For further information about the Fund's investment policies, see "Investment
Objective and Policies of the Fund" in the Statement of Additional
Information.
GLOBAL REAL ESTATE FUND
OBJECTIVE:
Global Real Estate Fund seeks to maximize total return, through both income
and capital appreciation, by investing primarily in equity securities of
domestic and foreign companies which are principally engaged in the real
estate industry or which own significant real estate assets.
POLICIES:
The Fund will, under normal conditions, invest at least 65% (and at times,
nearly all) of its total assets in equity securities of domestic and foreign
companies which are principally engaged in the real estate industry or which
own significant real estate assets ("Real Estate Companies"). Equity
securities include common stocks, rights or warrants to purchase common
stocks, securities convertible into common stocks, preferred shares and real
estate investment trusts ("REITs"). American Depositary Receipts (ADRs),
American Depositary Shares (ADSs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs), equity swaps, indexed securities and similar
instruments whose values are tied to one or more equity securities are
considered to be equity securities. These securities may be listed on
securities exchanges or traded over-the-counter. A Real Estate Company is one
that has at least 50% of its assets in, or derives at least 50% of its
revenues or net profits from, the ownership, construction, financing,
management or sale of residential, commercial, industrial or hospitality real
estate. Real Estate Companies may include, among others: equity REITs;
mortgage REITs; hybrid REITs; hotel companies; real estate brokers or
developers; and companies which own significant real estate assets.
A REIT's assets generally consist primarily of interest in real estate and
real estate loans. REITs are often classified as equity, mortgage or hybrids.
An equity REIT owns interests in property and realizes income from rents and
gain or loss from the sale of real estate interests. A mortgage REIT invests
in real estate mortgage loans and realizes income from interest payments on
the loans. A hybrid REIT invests in both equity and debt. An equity REIT may
be an operating or financing company. An operating company provides
operational and management expertise to and exercises control over, many if
not most operational aspects of the property.
The Fund pursues a flexible strategy of investing in a diversified portfolio
of securities of companies throughout the world including the United States.
The percentage of the Fund's assets invested in particular geographic regions
will shift from time to time in accordance with the judgment of the Adviser.
The Fund will normally invest in at least three countries including the
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United States. The Adviser anticipates that the Fund will give particular
consideration to investments in the United States, Canada, Hong Kong,
Singapore, Malaysia, Japan, Australia, France, the Netherlands and the United
Kingdom. The Fund may also invest in other non-U.S. markets, including
emerging markets in Asia, Latin America and Eastern Europe.
The Fund may invest up to 35% of its assets in debt securities of Real Estate
Companies and in equity and debt securities of non-Real Estate Companies,
which may include issuers whose products and services are related to the real
estate industry or which own real estate assets.
To attempt to protect against uncertainties in the markets or in anticipation
of the need for cash to meet redemption requests or settlement of portfolio
transactions, the Fund may, for temporary defensive purposes, invest in short-
term debt securities and money market instruments in excess of 35% of its
total assets. There is no limit on the amount of foreign currencies or short-
term instruments denominated in a foreign currency the Fund may hold.
The Fund may invest more than 25% of its total assets in any one sector of the
real estate industry or any real estate related industry. Because the Fund
concentrates investments in a single industry, an investment in the Fund can
be expected to be more volatile than an investment in funds that invest in
many industries. Risks associated with investment in securities of companies
in the real estate industry include: declines in the value of real estate,
risks related to general and local economic conditions, overbuilding and
increased competition, increases in property taxes and operating expenses,
changes in zoning and other laws, casualty or condemnation losses, variations
or limitations in rental income, changes in neighborhood values, the appeal of
properties to tenants, governmental actions, the ability of borrowers and
tenants to make loan payments and rents, and increase in interest rates. In
addition, 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 credit extended. Equity and mortgage REITs are dependent
upon management skills, may not be diversified and are subject to the risks of
financing projects. They are also subject to heavy cash flow dependency,
defaults by borrowers, self liquidation and the possibility of failing to
qualify for tax-free pass-through of income under the Internal Revenue Code of
1986, as amended (the "Code") and failing to maintain exemption from the Act.
The Fund currently intends to limit its investments in debt securities rated
lower than Baa by Moody's Investors Services Inc. ("Moody's") to 25% of its
total assets. Purchase of a debt security is consistent with the Fund's debt
quality policy if it is rated at or above the stated level by Moody's or rated
in the equivalent categories by Standard & Poor's Corporation ("S&P"), or
other rating agency or is unrated but judged to be of equivalent rating
quality by the Adviser. Up to 10% of total assets may be invested in unrated
debt securities of issuers secured by real estate assets where the Adviser
believes that the securities are trading at a discount and the underlying
collateral will ensure repayment of principal. In such situations, it is
conceivable that the Fund could, in the event of default, end up holding the
underlying real estate directly. See "Risk Factors--Debt Securities" and "Risk
Factors--Low Rated or Unrated Debt Securities."
The Fund may, as described below in "Risk Factors," invest in derivatives.
Derivatives in which the Fund may invest include futures contracts, forward
contracts, options, swaps, indexed securities, currency exchange contracts and
other similar securities as may become available in the market. The Fund may
also invest up to 10% of its total assets in direct investments. For more
information, see "Risk Factors--Direct Investments."
PORTFOLIO TURNOVER AND BROKERAGE: It is anticipated that the annual portfolio
turnover rate for the Fund may exceed 100%. A portfolio turnover rate of 100%
would occur if all of the Fund's portfolio securities were replaced in one
year. The portfolio turnover rate experienced by the Fund directly affects
brokerage commissions and other transaction costs which the Fund bears
directly. A high rate of portfolio turnover will increase such costs. See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Fund.
RISK FACTORS
The risks associated with investing in equity securities include the risk that
stock values tend to fluctuate in response to the activities of individual
companies and general market and economic conditions. The securities of
smaller, less well-known companies may be particularly volatile. Fixed-income
and short term instrument values tend to fluctuate with interest rates and the
credit rating of the issuer. Since shares of the Fund represent an investment
in securities with fluctuating market prices, shareholders should understand
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that the value of shares of the Fund will vary as the aggregate value of the
Fund's portfolio securities increases or decreases. Moreover, any dividends
paid by the Fund will increase or decrease in relation to the income received
by the Fund from its investments. The Adviser will select investments for the
Fund that it believes offer the greatest opportunity for maximum total return.
There can be no assurance that the Adviser will be successful. 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. See "Foreign
Currency and Foreign Currency Transactions" below. See also "Taxes" in the
Prospectus and "Risks Factors--Foreign Securities" in the Statement of
Additional Information.
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). See "Foreign
Securities" in the Statement of Additional Information.
EMERGING MARKETS SECURITIES
Investments of the Fund may be made in companies in developing countries as
well as in developed countries. Shareholders should be aware that investing in
the markets of developing countries involves exposure to potentially unstable
governments, the risk of naturalization of businesses, restrictions on foreign
ownership, prohibitions on repatriation of assets and a system of laws that
may offer less protection of property rights. Emerging market economies may be
based on only a few industries, may be highly vulnerable to change in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates.
Securities markets in these countries may trade a small number of securities,
may have a limited number of issuers and a high proportion of shares of many
issuers may be held by a relatively small number of persons or institutions.
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. 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. In addition,
stockbrokers and other intermediaries in emerging markets may not perform in
the way their counterparts in the United States and other more developed
securities markets do. 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. Limited liquidity may impair the Fund's ability
to liquidate a position at the time and price it wishes to do so. In addition,
the Fund's ability to participate fully in the smaller, less liquid emerging
markets may be limited by the policy restricting its investments in illiquid
securities.
FOREIGN CURRENCY AND FOREIGN CURRENCY TRANSACTIONS
Changes in currency exchange rates may affect the Fund's net asset value and
performance. There can be no assurance that the Adviser will be able to
anticipate currency fluctuations in exchange rates accurately. The Fund may
invest in a variety of derivatives and enter into hedging transactions to
attempt to moderate the effect of currency fluctuations. 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. This may reduce the
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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. 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 of the entire
principal value 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. 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 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. The Fund may write call or put options. An
options transaction involves the writer of the option, upon receipt of
premium, giving the right to sell (call option) or buy (put option) an
underlying asset at an agreed-upon exercise price.
The holder of the option has the right to purchase (call option) or sell (put
option) the underlying asset at the exercise price. If the option is not
exercised or sold, it becomes worthless at its expiration date and the premium
payment is lost to the option holder. As the writer of an option, the Fund
receives a premium. The Fund keeps the premium whether or not the option is
exercised. 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 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 subject to the limitation on investments in
illiquid securities.
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
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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.
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,
except that 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. 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 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, cash or high quality
securities 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" above and
"Futures and Options Transactions" in the Statement of Additional Information.
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, swaps and similar investments (commonly referred to as derivatives) as
a defensive technique to protect the value of an asset the Adviser deems
desirable to hold for tax or other considerations or for investment reasons.
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 one currency in relation to
another 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 other currency. Last, when the Fund uses options and futures
in anticipation of the purchase of a portfolio security to hedge against
adverse movements in the
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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.
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, or futures contract or forward contract on a secondary currency. The
secondary currency will be selected based upon the 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.
The Fund may also use futures contracts and options, forward contracts and
swaps as part of various investment techniques and strategies, such as
creating non-speculative "synthetic" positions (covered by segregation of
liquid assets) or implementing "cross-hedging" strategies. 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. "Cross-hedging" involves the use of one
currency to hedge against the decline in the value of another currency. 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 and other investments which do not have readily
available market quotations, are subject to the limitation on investments in
illiquid securities.
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.
INDEXED SECURITIES AND STRUCTURED NOTES
The Fund may invest in indexed securities whose value is linked to one or more
currencies, interest rates, commodities, or financial or commodity indices. An
indexed security enables the investor to purchase a note whose coupons and/or
principal redemption are linked to the performance of an underlying asset.
Indexed securities may be positively or negatively indexed (i.e., their value
may increase or decrease if the underlying instrument appreciates). Indexed
securities may have return characteristics similar to direct investments in
the underlying instrument or to one or more options on the underlying
instrument. Indexed securities may be more volatile than the underlying
instrument itself, and present many of the same risks as investing in futures
and options. Indexed securities are also subject to credit risks associated
with the issuer of the security with respect to both principal and interest.
Indexed securities may be publicly traded or may be two-party contracts (such
two-party agreements are referred to here collectively as structured notes).
When the Fund purchases a structured note, a type of derivative, it will make
a payment of principal to the counterparty. Some structured notes have a
guaranteed repayment of principal while others place a portion (or all) of the
principal at risk. The Fund will purchase structured notes only from
counterparties rated A or better by S&P, Moody's or another nationally
recognized statistical rating organization. The Adviser will monitor the
liquidity of structured notes under the supervision of the Board of Trustees
and notes determined to be illiquid will be aggregated with other illiquid
securities and subject to the Fund's limitation on illiquid securities.
9
<PAGE>
DEBT SECURITIES
The market value of debt securities generally varies in response to changes in
interest rates and the financial condition of each issuer. These changes in
market value will be reflected in the Fund's net asset value. Debt securities
have varying degrees of quality and varying levels of sensitivity to changes
in interest rates. Longer-term bonds are generally more sensitive to interest
rate changes than short-term bonds.
Debt securities with similar maturities may have different yields, depending
upon several factors, including the relative financial condition of the
issuers. 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 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.
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 high quality securities equal (on a daily marked-to-market basis) to
the amount of its commitment to purchase the when-issued securities. See "Debt
Securities" in the Statement of Additional Information.
LOW RATED OR UNRATED DEBT SECURITIES
The 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 Baa 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. Lower
rated debt securities present 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 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, 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.
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. 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. Timely payment of interest
and principal (but not the market value) of these pools is supported by
various forms of insurance or guarantees. The Fund may buy CMOs without
insurance or guarantees if, in the opinion of the 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. In the event that
any CMOs are determined to be investment companies, the Fund will be subject
to certain limitations under the Act.
10
<PAGE>
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 one-third of the value of its net assets to increase
its holdings of portfolio securities. Under the 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% 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 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.
DIRECT INVESTMENTS
Direct investments include the private purchase from an enterprise or a
principal investor in the enterprise of an equity interest in the enterprise
in the form of shares of common stock, rights or warrants to purchase common
stocks, securities convertible into common stock or equity interests in
trusts, partnerships, joint ventures or similar enterprises. In each case the
Fund will, at the time of making the investment, enter into a shareholder or
similar agreement with the enterprise and one or more other holders of equity
interests in the enterprise. The Adviser anticipates that these agreements
may, in appropriate circumstances, provide for the Fund to appoint a
representative to the board of directors or similar body of the enterprise and
for eventual disposition of the Fund's investment in the enterprise. Such a
representative of the Fund would be expected to provide the Fund with the
ability to monitor its investment and protect its rights in the investment and
would not be appointed for the purpose of exercising management or control of
the enterprise.
Certain of the Fund's direct investments will include investments in smaller,
less seasoned companies. These companies may have limited scope of operations,
markets or financial resources, or they may be dependent on a limited
management group. The Fund does not anticipate making direct investments in
start-up operations, although it is expected that in some cases the Fund's
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 Fund may take longer to liquidate
these positions than would be the case for publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices on these sales could be less than those originally paid by the
Fund. Furthermore, issuers whose securities are not publicly traded may not be
subject to public disclosure and other investor protection requirements
applicable to publicly traded securities. If such securities are required to
be registered under the securities laws of one or more jurisdictions before
being resold, the Fund may be required to bear the expenses of registration.
In addition, in the event the Fund sells unlisted foreign securities, any
capital gains realized on such transactions may be subject to higher rates of
taxation than taxes payable on the sale of listed securities. Direct
investments are generally considered illiquid and will be aggregated with
other illiquid investments for purposes of the limitation on illiquid
investments. Direct investments can be difficult to price and will be valued
at fair value as determined in good faith by the Board of Trustees. The
pricing of direct investments may not be reflective of the price at which
these assets could be liquidated. See "Risk Factors--Direct Investments" in
the Statement of Additional Information.
11
<PAGE>
SHORT SALES
The 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.
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.
The 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 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 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
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 25% of the Fund's net assets. The value
of securities of any one issuer sold short will constitute no more than 5% of
the Fund's net assets or no more than 2% of the issuer's outstanding class of
securities. 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.
REPURCHASE AGREEMENTS
In a repurchase agreement, the Fund acquires a security for a relatively short
period, and simultaneously agrees to sell it back at an agreed upon price and
time. The agreement results in a fixed rate of return that is not subject to
market fluctuations 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. The 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. Repurchase agreements with
foreign dealers may be less well-secured than U.S. repurchase agreements, and
they may be denominated in foreign currencies. They may also involve greater
risk of loss or counterparty default. Some counterparties in these
transactions may be less creditworthy and subject to less regulation than
those in U.S. markets. See "Risk Factors--Repurchase Agreements" in the
Statement of Additional Information.
LIMITING INVESTMENT RISKS
While an investment in any of the Fund is not without risk, the Fund follows
certain policies in managing its investments which may help to reduce risk.
Certain of these policies are deemed fundamental and may be changed as to the
Fund only with the approval of the holders of a majority of outstanding
shares. Such majority is defined as the vote of the lesser of (i) 67% or more
of the outstanding shares present at a meeting, if the holders of more than
50% of outstanding shares are present in person or by proxy, or (ii) more than
50% of outstanding shares. Certain of the more significant investment
restrictions applicable to the Fund are set forth below. Additional
restrictions are described in the Statement of Additional Information.
1. The Fund will not invest more than 15% of the value of its net assets in
securities which are not readily marketable (including repurchase
agreements which mature in more than seven days and over-the-counter
options and over-the-counter foreign currency options).
2. The Fund will not purchase more than 10% of any class of a company's
outstanding voting securities.
3. The Fund will not invest more than 10% of its total assets in securities
of other investment companies.
12
<PAGE>
4. Purchase or sell real estate, although the Fund may purchase securities
of companies which deal in real estate, including securities of real
estate investment trusts, and may purchase securities which are
collateralized by interests in real estate.
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 "Broker" or "Agent," as defined below, and forwarding a completed
Application or brokerage firm settlement instructions with payment (except for
Investors Fiduciary Trust Company fiduciary retirement accounts, which must be
purchased direct); 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 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.
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. Either minimum may
be reduced or 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.
Shares of the Fund are sold at the public offering price (net asset value plus
applicable sales charge) next computed after receipt of a purchase order in
proper form, as follows. Generally, orders must be received by DST prior to
the close of business on the New York Stock Exchange, currently 4:00 p.m.,
Eastern Time. Orders mailed to DST, addressed to P.O. Box 418407, Kansas City,
Missouri, 64141, must be deposited in the DST P.O. Box prior to 11:30 a.m.,
Eastern Time, in order to receive the price computed that day. If a
shareholder desires to guarantee a given date of receipt, the order may be
mailed by overnight courier to DST at 1004 Baltimore, 4th Fl., Kansas City,
Missouri, 64105. Do not send mail to DST marked personal and/or confidential
as this may delay the processing of the order. If 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, the investor will receive the price of that day. 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. Orders
received after the above times will be processed on the next business day.
The net asset value of the Fund is computed once daily, as of the close of
business on the New York Stock Exchange which is normally at 4:00 P.M.,
Eastern Time, on each business day, 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.
An investor who wishes to purchase shares of more than one fund in the Van Eck
Group of Funds must complete separate Applications for each fund and remit
separate checks to 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 the investor may then exchange at
current price into the desired fund.
13
<PAGE>
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.
Van Eck Securities Corporation, 99 Park Avenue, New York, New York 10016,
which is a wholly-owned subsidiary of the Adviser, serves as distributor of
the Fund's shares and 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
Shares of the Fund may be purchased under any one or all 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 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 services (12b-1 fee) is charged. The distribution 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 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 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.
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. Certain purchases of Class A shares qualify for reduced initial
sales charges. 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").
Because Class A shares are subject to a lower distribution and services fee,
they 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, investors do 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 or C shares may exceed the initial sales charge on Class A
shares during the life of the investment.
Class B and Class C shares do not incur a sales charge when they are
purchased, but Class B shares are subject to a sales charge if they are
redeemed within six years of purchase and Class C shares are subject to a
redemption charge if they are redeemed within one year of purchase. Class B
and Class C 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 that Class of shares (see "Plan of Distribution"). Class B and
Class C shares enjoy the benefit of permitting all of the investor's dollars
to work from the time the investment is made. The higher ongoing distribution
and services fee paid by Class B and 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 B and
14
<PAGE>
Class C 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 the Class B and Class C 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.
Some investors might determine that it would be more advantageous to purchase
Class B or C shares in order 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 Fund 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 tables of sales charges on
page 16.) 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. Eight years after the end of the month in which the
shareholder's order to purchase Class B or Class C shares was accepted, such
shares will automatically convert to Class A shares and will no longer be
subject to the higher distribution and services fees. This 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.
The conversion of Class B or Class C shares to Class A shares is subject to
the continuing availability of an opinion of counsel to the effect that (i)
the assessment of the higher distribution services fee and transfer agency
costs with respect to Class B or Class C shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the
conversion of shares does not constitute a taxable event under federal income
tax law. The conversion of Class B or Class C shares to Class A shares may be
suspended if such an opinion is no longer available. In that event, no further
conversions of Class B or Class C shares would occur, and shares might
continue to be subject to the higher distribution services fee for an
indefinite period which may extend beyond the period ending eight years after
the end of the month in which the shareholder's order to purchase was
accepted.
SALES CHARGES, DISTRIBUTION AND SERVICE FEES
Sales charges on purchases of shares of the Fund are set forth in the tables
below. The Fund imposes a 12b-1 distribution and services fee. The Fund's
Class A shares have a 12b-1 fee of .50% of average daily net assets per annum.
All or a portion of these fees may be paid to banks, brokers and dealers for
their shareholder servicing, promotion or distribution activities, as
determined from time to time by the Fund.
The Fund's Class B and/or Class C shares impose a 12b-1 fee of 1% of average
daily net assets. 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% for servicing. The portion retained by the
Distributor is in payment for distribution expenses. The Distributor may vary
the portion retained by it from time to time, but the amount payable by the
Fund will not exceed 1%. The Distributor will monitor payments under the Plans
and will reduce such payments or take such other steps as may be necessary,
including payments from its own resources, to assure that Plan payments will
be consistent with the applicable rules of the National Association of
Securities Dealers, Inc. See "Plan of Distribution".
15
<PAGE>
CLASS A
(GLOBAL REAL ESTATE FUND)
<TABLE>
<CAPTION>
SALES CHARGE AS A DISCOUNT TO
PERCENTAGE OF BROKERS OR AGENTS
------------------- AS A PERCENTAGE
OFFERING NET AMOUNT OF THE
DOLLAR AMOUNT OF PURCHASE PRICE INVESTED OFFERING PRICE*
- ------------------------- -------- ---------- -----------------
<S> <C> <C> <C>
Less than $100,000........................ 4.75% 5.0% 4.00%
$100,000 to less than $250,000............ 3.75% 3.9% 3.15%
$250,000 to less than $500,000............ 2.50% 2.6% 2.00%
$500,000 to less than $1,000,000.......... 2.00% 2.0% 1.65%
$1,000,000 and over....................... None**
</TABLE>
<TABLE>
<CAPTION>
CLASS B***
(GLOBAL REAL ESTATE FUND)
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
<CAPTION>
CLASS C***
(GLOBAL REAL ESTATE FUND)
SHAREHOLDER'S TIME OF REDEMPTION CONTINGENT DEFERRED REDEMPTION CHARGE
- -------------------------------- -------------------------------------
<S> <C>
During Year One.......................................... 1.0% of the lesser of NAV or purchase price
Thereafter............................................... None
</TABLE>
- --------
* Brokers or Agents who receive substantially all of the sales charge for
shares they sell may be deemed to be statutory underwriters.
** For any single purchase of $1,000,000 or more of Class A shares 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
purchase 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
purchased that remain outstanding throughout such months. An eligible
purchase is a single purchase for a single client (purchases for other
clients cannot be aggregated for purposes of qualification for the
finder's fee). Eligible purchases 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. Purchases made through
a bank trust department, advisory firm or special program, as determined
by the Distributor, 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 or Agents who sell Class B Shares 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 these amounts.
========
Brokers and Agents may receive different compensation for selling Class A,
Class B or Class C shares.
The Class A initial sales charges vary depending on the amount of the
purchase, the number of shares of the Van Eck Group of Funds which are
eligible for the Right of Accumulation that an investor already owns, a Letter
of Intent to purchase additional shares during a 13-month period, or other
special purchase programs. See "Group Purchases," "Combined Purchases,"
"Letter of Intent" and "Right of Accumulation" below.
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
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he or she meets the definition thereof in Section 72(m)(7) of the Internal
Revenue 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
those 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 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.
Shares of the Fund may be purchased without a sales charge by Trustees,
officers and full-time employees (and their parents, spouses and children
under the age of 21) and agents of the Trust, the Adviser or the Distributor
and their affiliates and agents and by employees of Brokers or Agents (and
their spouses and children under the age of 21) or in connection with a merger
or other business combination, or by the Adviser for the benefit of certain
discretionary advisory accounts it manages meeting minimum asset requirements.
Shares may also 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 a trust company on behalf of bona fide trust or
fiduciary accounts by notifying the Distributor in advance of purchase. A bona
fide advisory, trust or fiduciary account is one which is charged an asset-
based fee and whose purpose is other than purchase of Fund shares at net asset
value. Shares of the 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") and SEP-
IRAs unless they qualify for such purchase under one of the prior exceptions)
including, but not limited to, plans and trusts defined in Sections 401(a),
403(b) or 457 of the Internal Revenue Code and "rabbi trusts" which
participate in a program for the purchase of shares at net asset value offered
by a financial institution and which institution maintains an omnibus account
with the Fund. Brokers may charge a transaction fee for effecting purchases at
net asset value or redemptions. See "Availability of Discounts."
The term "purchase" refers to a single purchase by an individual, to the
aggregate of concurrent purchases by an individual, his spouse and children
under the age of 21, or to a purchase by a corporation, a partnership or a
trustee or other fiduciary for a single trust, estate or fiduciary account.
Class A shares purchased and paid for with the proceeds of shares redeemed in
the past 3 months from a mutual fund (other than a fund managed by the Adviser
or any of its affiliates) on which a sales charge was paid (including Fund
shares purchased by means of an exchange from U.S. Government Money Fund whose
shares were purchased and paid for in this manner) may be purchased at net
asset value, provided that the representative of record is the same for the
Fund account as it was for the other mutual fund account. This waiver must be
requested when the purchase (or exchange) order is placed for shares of the
Fund, and the Distributor may require evidence of the investor's qualification
for this waiver.
In addition to the discounts allowed to Brokers and Agents, the Distributor
may, at its own expense, subject to applicable laws, provide additional
promotional incentives or payments in the form of merchandise (including
luxury merchandise) or trips
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(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 the Fund's Class A 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 enables the Distributor to
realize economies of scale in its costs of distributing shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Distributor and the members of the
group, must agree to include sales and other materials related to the 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 (other than through exchanges)
$100,000 or more in one or more of the funds in the Van Eck Group of Funds,
except for U.S. Government Money Fund (or $25,000 or more in International
Investors Gold 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. A purchase not originally made
pursuant to a Letter of Intent may be included under a backdated Letter of
Intent executed within 90 days after such purchase. For further details,
including escrow provisions, see the Letter of Intent provisions in the
Instructions to the Application.
RIGHT OF ACCUMULATION
The above scale of initial sales charges also applies to an investor's current
purchase of shares of any of the funds in the Van Eck Group of Funds (except
for U.S. Government Money Fund) where the aggregate value of those shares plus
shares of these funds previously purchased and still owned, determined at the
current offering price, is more than $100,000 (or more than $25,000 for
International Investors Gold Fund and Gold/Resources Fund), provided the
Distributor or DST is notified by the investor 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.
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EXCHANGE PRIVILEGE
The Adviser discourages trading in response to short-term market fluctuations.
Such activity may hinder the 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 are limited to six exchanges per calendar year;
however, exchanges from International Investors Gold Fund may be excluded from
this limitation if that fund or the Adviser believes that exclusion will not
be materially disadvantageous to other shareholders. 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 U.S. Government Money Fund. The
Adviser may impose other restrictions on trading in Fund shares in response to
short-term market fluctuations. Active shareholders should consult the Fund as
to current policy.
The Fund reserves the right to modify or terminate the Exchange Privilege of
the Fund or 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.
Shareholders of funds in the Van Eck Group of Funds may exchange shares, at
net asset value, for shares of the same Class of any of the other funds.
Shares of U.S. Government Money Fund acquired other than pursuant to the
Exchange Privilege may only be exchanged into Class A shares, 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 Fund, will be regarded as a sale of shares,
and any gain or loss must generally be recognized by the shareholder.
Class B or C shares exchanged for Class B or C shares of another fund with a
different contingent deferred sales charge or redemption charge schedule will
be subject to the contingent deferred sales charge or redemption charge
applicable to those shares at the time of original purchase.
The 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.
WRITTEN EXCHANGE
Shareholders wishing to exchange shares may do so by sending to DST a written
request in proper form signed by all registered owners exactly as the account
is registered, specifying the number of shares or amount of investment to be
exchanged (or that all shares credited to a fund account be exchanged), along
with appropriate documentation, if necessary. Exchanges are only available in
states where purchases may legally be made. All persons 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. Written exchange requests in proper order
will be executed on the day of receipt (or, if that is not a business day of
the Fund, on the next business day following receipt). Written exchange
requests may be sent to Van Eck Funds, c/o DST, either by regular mail to:
P.O. Box 418407, Kansas City, MO 64141, or by overnight courier to: 1004
Baltimore, 4th Floor, Kansas City, MO 64105.
TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES
Completion of the Account Application 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, except
for retirement plan accounts, the Telephone Redemption Privilege, unless
otherwise indicated. By electing one or both of 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, described below, 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 or expenses resulting from
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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 exercising it.
The Telephone Redemption Privilege is not available to accounts registered in
"street name", nominee or corporate name and custodial accounts held by a
financial institution including Investors Fiduciary Trust Company retirement
accounts.
After acceptance by DST of an Application, a telephone exchange or telephone
redemption may be effected by contacting DST at 1-800-345-8506. Telephone
calls are recorded. Telephone instructions for exchanging or redeeming shares
on deposit with DST may be given by anyone claiming to be the shareholder, the
Broker or Agent of record, or an authorized representative of any of the
foregoing [the caller must identify his/her name and relationship to the
account] and will be executed only if they 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.
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 if the shares are held on deposit, if the
amount of the request is $50,000 or less per day and 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.
Because of unusual market conditions it may be difficult and/or impossible to
contact DST to effect the exchange or redemption. Shareholders should continue
to try to contact DST by telephone at the above telephone number or may
deliver written instructions by post or courier.
The Fund reserves the right to refuse a request for the Telephone Redemption
or Exchange 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.
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.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP")--available to employers, including
self-employed individuals, seeking to provide retirement income to employees
through employer contributions or salary reduction contributions to employee
individual retirement accounts.
QUALIFIED PENSION PLAN--available to self-employed individuals, partnerships,
corporations and their employees.
403(B)(7) PROGRAM--available to employees of certain tax exempt organizations
and schools. See "Tax Sheltered Retirement Plans" in the Statement of
Additional Information. In addition, information concerning these plans is
available from the Fund. This information should be read carefully and
consultation with an attorney or tax advisor is advisable.
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INVESTMENT PROGRAMS
DIVIDEND REINVESTMENT PLAN
Unless a shareholder has given notice to DST (the Fund's dividend paying
agent), either directly, or through a Broker or Agent, that dividends and
capital gains distributions of the Fund should be paid in cash, dividends and
capital gains distributions will be reinvested in shares of the Fund at net
asset value without a sales charge. Reinvestments of dividends and capital
gains distributions in 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 fund 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 Distributor. See "Investment
Programs" in the Statement of Additional Information.
AUTOMATIC EXCHANGE PLAN
The Fund offers a program for regularly exchanging a specified dollar amount
from one fund to another fund 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, and purchase
shares of, another fund in the Van Eck Group. 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
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 Fund's redemption value may be more or less than
the shareholder's cost. (See "Purchase of Shares.")
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 the 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 them 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.
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The Fund reserves the right to redeem shares of the Fund and mail the proceeds
to a shareholder if, at any time, the number of shares in a shareholder's
account falls, subsequent to satisfying the initial investment requirement,
below a specified amount, currently 50 shares. Shareholders will be notified
and will have 30 days to bring the number of shares owned by them up to the
required amount before any redemption is made by the Fund.
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: (1) a written request for
redemption in proper form signed by all registered owners exactly as the
account is registered, specifying the number of shares or amount of investment
to be redeemed (or that all shares credited to the 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 (such as a broker-dealer or bank; 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. For additional
mailing instructions to DST and times of processing, see "Purchase of Shares."
TELEPHONE REDEMPTION (SEE "TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES" ON
PAGE 19)
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
redemption of shares of the Fund. If a shareholder uses the services of a
Broker or Agent in effecting a redemption of shares, the Broker or Agent may
charge a fee for its services. The redemption price is the net asset value per
share next determined after the redemption order is received by the Broker or
Agent prior to the close of business on the New York Stock Exchange on the day
received. Brokers and Agents have the responsibility of submitting such
redemption 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
(including any share certificates) as described above or an indemnity from the
Broker or Agent of record on the account. Some Brokers or Agents may have
self-imposed restrictions regarding the submission of confirmed redemption
orders on behalf of shareholders. See "Purchase of Shares" for DST's times of
processing.
EXPEDITED REDEMPTION
Requests for Expedited Redemption of shares of any of the funds in the Van Eck
Group of Funds may be made by telephone, telegram, other wire communication or
by letter upon completion of the Expedited Redemption portion of the Account
Application. Shareholders redeeming a minimum of at least $1,000 of shares
which are on deposit with DST may redeem by telephoning DST at 1-800-345-8506.
The Fund and/or DST reserve the right to refuse telephone requests at any
time. 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.
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 the redemption. Shareholders should
continue to try to contact DST by telephone at the above telephone numbers or
may deliver written instructions by post or courier.
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BUY-BACK PRIVILEGE
Any shareholder who redeems Class A shares of any of the funds in the Van Eck
Group of Funds has a one-time right to reinvest in shares of these funds at
net asset value without the payment of a sales charge within 30 days after the
redemption. The amount of this reinvestment cannot exceed the amount of the
redemption proceeds and shareholders must inform the Fund or DST that they are
exercising this right at the time of the reinvestment. Although redemption of
shares is normally a taxable event and a gain or a loss must be recognized,
subsequent reinvestment within such 30-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.
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.
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 the
Fund's investment activity annually in December. Dividend or capital gain
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
distributions. Short-term capital gains, if declared, are treated the same as
dividend income. The fiscal year of the Fund ends on December 31.
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 to the Fund pursuant to an Advisory
Agreement with the Trust. The Adviser manages the investment operations of the
Fund and furnishes the Fund with a continuous investment program which
includes determining which securities should be bought, sold or held. 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 and companies in many different countries and stock
markets throughout the world).
The Adviser acts as investment adviser or sub-investment adviser to other
registered investment companies and manages or advises managers of portfolios
of pension plans and others. Total aggregate assets under management of Van
Eck Associates Corporation at May 31, 1997 were approximately $1.6 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.
Kevin L. Reid--Portfolio Manager of Global Real Estate Fund. He is responsible
for managing the Fund's portfolio of investments. Mr. Reid also serves as Co-
Portfolio Manager of the Global Hard Assets Fund. He is an officer of the
Trust and another mutual fund advised by the Adviser. Mr. Reid has over ten
years of experience in many facets of real estate including acquisitions,
financings, portfolio management and construction. Mr. Reid was previously
employed by Trammel Crow Co. and Merrill Lynch and Co., and was a principal in
a private contracting firm. He holds an M.B.A. from Harvard University and a
B.A. from Colgate University.
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Other investment professionals who are expected to have significant input with
respect to the Fund's investments include:
Derek S. van Eck, CFA--Director of Global Investments and Executive Vice
President of the Adviser and Co-Portfolio Manager of Global Hard Assets Fund.
He is also an officer of the Trust and another mutual fund advised by the
Adviser. Prior to joining Van Eck, he was an analyst at CS First Boston. Mr.
van Eck holds an M.B.A. from Northwestern University and a B.A. from Williams
College.
Timothy Chan--Hong Kong based Director of Asian Equities and Portfolio Manager
of the Asia Dynasty Fund. Mr. Chan has 12 years of investment management
experience in Hong Kong and Tokyo. Prior to joining Van Eck, Mr. Chan served
as Portfolio Manager of BZW Investment Management. Before that, he was with
Sun Hun Kai Fund Management and Standard Chartered Bank. Mr. Chan holds a B.A.
from the University of Hong Kong.
EXPENSES
The Fund bears all expenses of its operation other than those incurred by the
Adviser under its Advisory Agreement with the Trust. 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 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 compensates Trustees of the Trust if such persons are
employees or affiliates of the Adviser 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 Plans of Distribution pursuant to Rule 12b-1 (the "Plan")
under the 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 fees under the Plan are paid quarterly. The
National Association of Securities Dealers, Inc. rules may limit the amount
payable under the Plans.
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 limitation
(carry-forward amounts) are carried forward by the Fund to subsequent years
and are 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 would 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 would 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 would continue to make payments to
the Distributor subject to the annual limitation until such time as all such
amounts had been reimbursed.
The 12b-1 fees are accrued daily at an annual rate of .50% of average daily
net assets for Global Real Estate Fund-A and at an annual rate of 1.00% of
average daily net assets for Global Real Estate Fund-B and Global Real Estate
Fund-C. For the periods prior to April 30, 1998, the Distributor has agreed,
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.
24
<PAGE>
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.
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
any 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 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 of the Fund 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, economic and performance data and indices. For example, the Fund may
quote market performance of the S&P 500 and the Europe Australia Far East
Index; the 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. Global Real
Estate Fund may be compared to the following indices: Salomon Brothers World
Property Index, Morgan Stanley Capital International Real Estate Index, NAREIT
Equity Index, Wilshire Real Estate Securities Index and Morgan Stanley REIT
Index, among others. See the Appendix in the Statement of Additional
Information.
25
<PAGE>
TAXES
The Fund intends to qualify as a "regulated investment company" under the Code
and will not pay federal 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 are 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.
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 each fund, $.001 par value. As of October 15, 1997,
nine funds of the Trust are being offered, which shares constitute the
interests in the Asia Dynasty Fund (Class A and B), Emerging Markets Growth
Fund (Class A, B and C), Global Balanced Fund (Class A and B), Global Hard
Assets Fund (Class A, B and C), Global Income Fund (Class A), Global Real
Estate Fund (Class A, B and C), Gold/Resources Fund (Class A), International
Investors Gold Fund (Class A) and U.S. Government Money Fund. A "fund" is a
separate pool of assets which is separately managed and which may have
different investment objectives from those of another fund. The Trustees have
the authority, without the necessity of a shareholder vote, to create any
number of new funds.
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 Act. The Board of Trustees is a self-perpetuating body unless
and until fewer than 50% of the Trustees, then serving as Trustees, 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 election 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.
26
<PAGE>
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.
ADDITIONAL INFORMATION
CUSTODIAN
The Custodian of the assets of the Trust is The Chase Manhattan Bank, Chase
Metrotech Center, Brooklyn, New York 11245.
TRANSFER AGENT
DST Systems, Inc., 1004 Baltimore, 2nd Floor, Kansas City, Missouri, 64105,
serves as the Fund's transfer agent.
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 LLP, One Exchange Place, Boston, Massachusetts 02109,
serves as counsel to the Trust.
27
<PAGE>
VAN ECK FUNDS
ASIA DYNASTY FUND
EMERGING MARKETS
GROWTH FUND
GLOBAL BALANCED FUND
GLOBAL HARD ASSETS FUND
GLOBAL INCOME FUND
GLOBAL REAL ESTATE FUND
GOLD/RESOURCES FUND
INTERNATIONAL INVESTORS
GOLD 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
[LOGO] VAN ECK GLOBAL
June 2, 1997
VAN ECK
GLOBAL
REAL ESTATE
FUND
PROSPECTUS
[LOGO] VAN ECK GLOBAL
<PAGE>
VAN ECK FUNDS (the "Trust")
VAN ECK GLOBAL REAL ESTATE FUND
99 Park Avenue, New York, N.Y. 10016
Shareholder Services: Toll Free (800) 544-4653
Van Eck Funds is a mutual fund consisting of separate series. This
Statement of Additional Information relates only to Global Real Estate Fund (the
"Fund").
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
- ----------------- ----
<S> <C>
GENERAL INFORMATION....................................................................................... 2
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND............................................................. 2
RISK FACTORS ............................................................................................. 3
INVESTING IN FOREIGN SECURITIES...................................................................... 3
FOREIGN CURRENCY TRANSACTIONS........................................................................ 5
FUTURES AND OPTIONS TRANSACTIONS..................................................................... 6
MORTGAGE-BACKED SECURITIES........................................................................... 7
REAL ESTATE SECURITIES............................................................................... 7
COMMERCIAL PAPER..................................................................................... 7
DEBT SECURITIES...................................................................................... 8
SHORT SALES.......................................................................................... 8
DIRECT INVESTMENTS................................................................................... 8
REPURCHASE AGREEMENTS................................................................................ 9
RULE 144A SECURITIES................................................................................. 9
INVESTMENT RESTRICTIONS................................................................................... 10
INVESTMENT ADVISORY SERVICES.............................................................................. 12
THE DISTRIBUTOR........................................................................................... 13
PORTFOLIO TRANSACTIONS AND BROKERAGE...................................................................... 14
TRUSTEES AND OFFICERS..................................................................................... 16
VALUATION OF SHARES....................................................................................... 19
EXCHANGE PRIVILEGE........................................................................................ 21
TAX-SHELTERED RETIREMENT PLANS............................................................................ 21
INVESTMENT PROGRAMS....................................................................................... 24
TAXES..................................................................................................... 25
REDEMPTIONS IN KIND....................................................................................... 28
PERFORMANCE .............................................................................................. 28
ADDITIONAL INFORMATION.................................................................................... 29
FINANCIAL STATEMENTS...................................................................................... 30
APPENDIX.................................................................................................. 31
MARKET INDEX DESCRIPTIONS................................................................................. 37
</TABLE>
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's current Prospectus, dated June 2, 1997 (the
"Prospectus"), 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 JUNE 2, 1997
<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 being offered: Asia Dynasty
Fund (Class A and B), Emerging Markets Growth Fund (Class A, B and C), Global
Balanced Fund (Class A and B), Global Hard Assets Fund (Class A, B and C),
Global Income Fund (Class A), Global Real Estate Fund (Class A, B and C),
Gold/Resources Fund (Class A), International Investors Gold Fund (Class A), and
U.S. Government Money Fund.
The Fund is known as one of the Van Eck Global Funds. The other Van Eck
Global Funds are Asia Dynasty Fund, Emerging Markets Growth Fund, Global
Balanced Fund, Global Hard Assets Fund and Global Income Fund. The remainder of
the funds in the Trust are referred to as the Van Eck Gold and Money Funds.
The Fund is classified as a non-diversified fund under the Investment
Company Act of 1940 (10the "1940 Act").
Van Eck Associates Corporation (the "Adviser") serves as investment adviser
to the Fund.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
---------------------------------------------
Global Real Estate Fund
- -----------------------
The Global Real Estate Fund seeks to maximize total return by investing
primarily in equity securities of domestic and foreign companies which are
principally engaged in the real estate industry or which own significant real
estate assets.
The Fund will, under normal conditions, invest at least 65% (and at times
nearly all) of its total assets in equity securities of domestic and foreign
companies which are principally engaged in the real estate industry or which own
significant real estate assets ("Real Estate Companies").
The Fund may invest up to 35% of its assets in debt securities of Real
Estate Companies and in equity and debt securities of non-Real Estate Companies,
which may include issuers whose products and services are related to the real
estate industry or which own real estate assets.
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 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
2
<PAGE>
RISK FACTORS
------------
Investing In Foreign Securities
-------------------------------
Investors should recognize that investing in foreign securities involves
certain special considerations which are not typically associated with investing
in United States securities. Since investments in foreign companies will
frequently involve currencies of foreign countries, and since the Fund may hold
securities and funds in foreign currencies, the Fund may be affected favorably
or unfavorably by changes in currency rates and in exchange control regulations,
if any, and may incur costs in connection with conversions between various
currencies. Most foreign stock markets, while growing in volume of trading
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 the Fund endeavors 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 the Fund may be subject to foreign
government taxes, higher custodian fees and dividend collection fees which could
reduce the yield on such securities.
Investments may be made from time to time by Global Real Estate Fund in
companies in developing countries as well as in developed countries. Global
Real Estate Fund may have a substantial portion of its 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.
The value and liquidity of emerging market countries investments may be
affected favorably or unfavorably by political, economic, fiscal, regulatory or
other developments in the emerging market countries or their neighboring
regions. The extent of economic development, political stability and market
depth of different countries in the emerging market countries varies widely.
Investments typically involve greater potential for gain or loss than
investments in securities of issuers in developed countries. Given the Fund's
investments, the Fund will likely be particularly sensitive to changes in
China's economy as the result of a reversal of economic liberalization,
political unrest or changes in China's trading status.
The securities markets in the emerging market countries 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 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
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 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 securities markets, the Fund's ability to participate fully in such
price increases may be limited by its investment policy of investing not more
3
<PAGE>
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 securities
markets are susceptible to being influenced by large investors trading
significant blocks of securities.
The Chinese, Hong Kong and Taiwanese stock markets are undergoing a period
of growth and change which may result in trading volatility and difficulties in
the settlement and recording of transactions, and in interpreting and applying
the relevant law and regulations. In particular, the securities industry in
China is not well developed. China has no securities laws of nationwide
applicability. The municipal securities regulations adopted by Shanghai and
Shenzhen municipalities are very new, as are their respective securities
exchanges and other self-regulatory organizations. In addition, Chinese
stockbrokers and other intermediaries may not perform as well as their
counterparts in the United States and other more developed securities markets.
The prices at which the Fund may acquire investments may be affected by trading
by persons with material non-public information and by securities transactions
by brokers in anticipation of transactions by the Fund in particular securities.
The securities markets in Cambodia, Laos and Vietnam are currently non-existent.
Global Real Estate 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 Fund's investments in those countries and the
availability to the Fund of additional investments in those countries.
Economies in the emerging market countries 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 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 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
4
<PAGE>
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, including the Fund, would
be able to realize the value of the assets of the enterprise or receive payment
in convertible currency. As the changes to the Chinese legal system develop, the
promulgation of new laws, existing laws and the preemption of local laws by
national laws may adversely affect foreign investors, including the Fund. The
uncertainties faced by foreign investors in China are exacerbated by the fact
that many laws, regulations and decrees of China are not publicly available, but
merely circulated internally. Similar risks exist in other emerging market
countries.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.
Foreign Currency Transactions
-----------------------------
Under normal circumstances, consideration of the prospects for currency
exchange rates will be incorporated into the long-term investment decisions made
for the Fund with regard to overall diversification strategies. Although the
Fund values its assets daily in terms of U.S. Dollars, it does not intend
physically to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer. The Fund will use forward
contracts, along with futures contracts, foreign exchange swaps 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 Fund
will conduct its 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 the 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
Fund's Custodian will place the securities being hedged, cash or U.S. government
securities or debt or equity 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 Fund's commitments with respect to such contracts. At the
maturity of a forward contract, the Fund may either sell the portfolio security
and make delivery of the foreign currency, or it may retain the security and
terminate its contractual obligation to deliver the foreign currency prior to
maturity by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. There can be no assurance, however, that the Fund will be
able to effect such a closing purchase transaction.
5
<PAGE>
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 the 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 the Fund is obligated
to deliver.
If the 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 Real Estate Fund may invest in options on futures contracts.
Compared to the purchase or sale of futures contracts, the purchase and sale of
options on futures contracts involves less potential risk to the Fund because
the maximum exposure is the amount of the premiums paid for the options.
Futures contracts and options thereon are both types of derivatives.
The use of financial futures contracts and commodity futures contracts, and
options on such futures contracts, may reduce the 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 the
Fund against fluctuation in the value of securities in which the Fund is about
to invest. Because the financial markets in the other 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.
The use of financial futures and commodity futures contracts, and options
on such futures contracts 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, the 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 the 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 the Fund to meet the requirements of the Internal
Revenue Code of 1986, as amended (the "Code") to qualify as a regulated
investment company to prevent double taxation of the Fund and its shareholders.
One of these requirements is that less than 30% of the Fund's gross income must
be derived from gains from the sale or other disposition of securities held for
less than three months. Another test requires that at least 90% of the 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 Fund may engage in
options and futures contract transactions may be materially limited by these
tests.
6
<PAGE>
Mortgage-Backed Securities
--------------------------
The 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
----------------------
The assets of real estate investment trusts ("REITs") consist primarily of
interest in real estate and real estate loans. REITs are often classified as
equity REITs, mortgage REITs or hybrid REITs. Equity REITs own interests in
property and realize income from rents and gain or loss from the sale of real
estate interests. Mortgage REITs invest in real estate mortgage loans and
realize income from interest payments on the loans. Hybrid REITs invest in both
equity and debt. Equity REITs may be operating or financing companies. An
operating company provides operational and management expertise to and exercises
control over, many if not most operational aspects of the property.
REITs are not taxed on income distributed to shareholders provided they
comply with several requirements of the Internal Revenue Code of 1986, as
amended (the "Code").
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for the exemption from tax for distributed income under the
Code. REITs (especially mortgage REITs) are also subject to interest rate risk
(i.e., as interest rates rise, the value of the REIT may decline).
Commercial Paper
----------------
Global Real Estate 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 Fund 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 Fund to hedge or cross-hedge against a decline in the U.S. dollar
value of investments denominated in foreign currencies while providing an
attractive money market rate of return. The Fund will purchase such commercial
paper for hedging purposes only, not for speculation. The staff of the
Securities
7
<PAGE>
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 Fund believes 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 securities
having a value equal to the aggregate principal amount of outstanding commercial
paper of this type.
Debt Securities
---------------
The Fund may invest in debt securities. The market value of debt
securities generally varies in response to changes in interest rates and the
financial condition of each issuer. During periods of declining interest rates,
the value of debt securities generally increases. Conversely, during periods of
rising interest rates, the value of such securities generally declines. These
changes in market value will be reflected in the Fund's net asset value. Debt
securities with similar maturities may have different yields, depending upon
several factors, including the relative financial condition of the issuers. For
example, higher yields are generally available from securities in the lower
rating categories of S&P or Moody's. However, the values of lower-rated
securities generally fluctuate more than those of high grade securities. Many
securities of foreign issuers are not rated by these services. Therefore the
selection of such issuers depends to a large extent on the credit analysis
performed by the Adviser.
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 does 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 high quality securities equal (on a daily marked-to-market basis) to the
amount of its commitment to purchase the when-issued securities.
Short Sales
-----------
Global Real Estate Fund will establish a segregated account with respect to
its short sales and maintain in the account cash not available for investment or
US Government securities or other liquid, high-quality 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, US Government
securities or other liquid, high-quality securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). The segregated account will be marked to 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 25% of the Fund's net assets. The Fund's
ability to engage in short sales may be limited by the requirement of current US
tax laws 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.
Direct Investments
------------------
Global Real Estate Fund may invest up to 10% of its total assets in direct
investments. Direct investments include (i) the private purchase from an
enterprise of an equity interest in the enterprise in the
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<PAGE>
form of shares of common stock or equity interests in trusts, partnerships,
joint ventures or similar enterprises, and (ii) the purchase of such an equity
interest in an enterprise from a principal investor in the enterprise. In each
case the Fund will, at the time of making the investment, enter into a
shareholder or similar agreement with the enterprise and one or more other
holders of equity interests in the enterprise. The Adviser anticipates that
these agreements will, in appropriate circumstances, provide the Fund with the
ability to appoint a representative to the board of directors or similar body of
the enterprise and for eventual disposition of the Fund's investment in the
enterprise. Such a representative of the Fund will be expected to provide the
Fund with the ability to monitor its investment and protect its rights in the
investment and will not be appointed for the purpose of exercising management or
control of the enterprise.
Certain of the Fund's direct investments will include investments in
smaller, less seasoned companies. These companies may have limited product
lines, markets or financial resources, or they may be dependent on a limited
management group. The Fund does not anticipate making direct investments in
start-up operations, although it is expected that in some cases the Fund's
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 Fund may take longer to liquidate
these positions than would be the case for publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
on these sales could be less than those originally paid by the Fund.
Furthermore, issuers whose securities are not publicly traded may not be subject
to public disclosure and other investor protection requirements applicable to
publicly traded securities. If such securities are required to be registered
under the securities laws of one or more jurisdictions before being resold, the
Fund may be required to bear the expense of the registration. In addition, in
the event the Fund sells unlisted foreign securities, any capital gains realized
on such transactions may be subject to higher rates of taxation than taxes
payable on the sale of listed securities. Direct investments are generally
considered illiquid and will be aggregated with other illiquid investments for
purposes of the limitation on illiquid investments
Repurchase Agreements
---------------------
Global Real Estate Fund will not enter into a repurchase agreement with a
maturity of more than seven business days if, as a result, more than 15% of the
value of the Fund's total assets would then be invested in such repurchase
agreements and other illiquid securities. The Fund will only enter into a
repurchase agreement where (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
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.
9
<PAGE>
The Adviser will monitor the liquidity of restricted securities in the
Funds' holdings under the supervision of the Board of Trustees. In reaching
liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanisms of the transfer).
In addition, commercial paper may be issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Such commercial paper is restricted as to disposition
under the federal securities laws and, therefore, any resale of such securities
must be effected in a transaction exempt from registration under the Securities
Act of 1933. Such commercial paper is normally resold to other investors through
or with the assistance of the issuer or investment dealers who make a market in
such securities, thus providing liquidity.
Securities eligible for resale pursuant to Rule 144A under the Securities
Act of 1933 and commercial paper issued in reliance on the Section 4(2)
exemption under the Act may be determined to be liquid in accordance with
guidelines established by the Board of Trustees for purposes of complying with
investment restrictions applicable to investments by the Fund.
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 the 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 the Fund's outstanding shares are present in person
or by proxy, or (ii) more than 50% of the Fund's outstanding shares. As to any
of the following policies, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in percentage resulting from a
change in value of portfolio securities or amount of net assets will not be
considered a violation of the policy.
With respect to Global Real Estate Fund, restrictions 1, 4, 8, 10, 14, 15
and 16, are not fundamental, unless otherwise provided for by applicable federal
or state law.
The Global Real Estate Fund may not:
1. Invest in securities which 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 Real Estate Fund's net
assets would be invested in such securities.
2. Purchase or sell real estate, although the Global Real Estate Fund may
purchase securities of companies which deal in real estate, including securities
of real estate investment trusts, and may purchase securities which are
collateralized by interests in real estate.
3. Purchase or sell commodities or commodity futures contracts (for the
purpose of this restriction, forward foreign exchange contracts are not deemed
to be a commodity or commodity contract) except that Global Real Estate Fund may
for hedging and other purposes buy and sell financial futures contracts which
may include stock and bond index futures contracts and foreign currency futures
contracts. The Fund may not commit more than 5% of its total assets to initial
margin deposits on futures contracts, (however, the Global Real Estate Fund is
excluded from the 5% limitation for margin deposit for futures position entered
into for bona fide hedging purposes).
10
<PAGE>
4. Purchase more than 3% of the total outstanding voting stock of any
closed-end investment company if more than 5% of the Fund's 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 Real Estate 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 Real Estate Fund may lend to broker-dealers
portfolio securities with an aggregate market value up to one-third of its total
assets.
6. Underwrite any issue of securities (except to the extent that the Fund
may be deemed to be an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities).
7. Borrow money, except that Global Real Estate Fund may borrow up to 30%
of the value of its net assets to increase its holdings of portfolio securities.
8. Mortgage, pledge or otherwise encumber its assets except to secure
borrowing effected within the limitations set forth in restriction (7).
9. Issue senior securities except insofar as the 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; (iii) financial futures contracts purchased on margin; (iv) commodity
futures contracts purchased on margin; (v) foreign currency swaps; and (vi)
issuing multiple classes of shares.
10. 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 Real Estate 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 (7).
11. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except that Global Real Estate 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 Real Estate Fund may
write, purchase or sell put and call options on financial futures contracts,
which include bond and stock index futures contracts.
12. Make investments for the purpose of exercising control or management.
13. Invest more than 25 percent of the value of the Fund's total assets in
the securities of issuers having their principal business activities in the same
industry, except the Global Real Estate Fund and as otherwise stated in the
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.
14. Participate on a joint or joint and several basis in any trading
account in securities, although transactions for the Fund and any other account
under common or affiliated management may be combined or allocated between the
Fund and such account.
11
<PAGE>
15. Purchase participations or other interests (other than equity stock
interests in the case of the Global Real Estate Fund) in oil, gas or other
mineral exploration or development programs.
16. 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. Warrants
acquired in units or attached to securities or received as dividends are not
included in this restriction.
17. Invest 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. Global Real Estate
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. Global Real Estate Fund may not commit more than 5% of its total
assets to initial margin deposits on futures contracts not used for hedging
purposes.
INVESTMENT ADVISORY SERVICES
----------------------------
The investment adviser and manager of the Fund 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
oversees an investment program for the Fund, subject to the overall supervision
and review of the Board of Trustees. 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.
The Adviser provides the Fund with office space, facilities and simple
business equipment and provides the services of consultants, executive and
clerical personnel for administering its affairs. The Adviser compensates all
executive and clerical personnel and Trustees of the Trust if such persons are
employees or affiliates of the Adviser or its affiliates. The advisory fee is
computed daily and paid monthly at the annual rate of 1% of average daily net
assets.
The expenses borne by the Fund 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), fees of Trustees who are not "interested
persons" of the Adviser, membership dues of the Investment Company Institute,
fidelity bond and errors and omissions insurance premiums, cost of maintaining
the books and records of the Fund, and any other charges and fees not
specifically enumerated as an obligation of the Distributor or Adviser.
The Advisory Agreement with respect Global Real Estate Fund was approved at
a meeting of the Board of Trustees held on April 22, 1997. The Advisory
Agreement provides that it shall continue in effect from year to year with
respect to the 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 1940 Act) or by the Trustees of
12
<PAGE>
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 Agreement may be terminated on 60 days written notice by either
party and will terminate automatically in the event of an assignment within the
meaning of the 1940 Act.
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. Mr. van Eck and members of his immediate family own
100% of the voting stock of the Adviser.
THE DISTRIBUTOR
---------------
Shares of the Fund 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 Trust have approved a Distribution Agreement appointing the
Distributor as distributor of shares of the Fund. The Distribution Agreement
with respect to the Fund was approved by the action of the Trustees on April 22,
1997.
The Distribution Agreement provides that the Distributor will pay all fees
and expenses in connection with printing and distributing prospectuses and
reports for use in offering and selling shares of the Fund and preparing,
printing and distributing advertising or promotional materials. The Fund will
pay all fees and expenses in connection with registering and qualifying its
shares under federal and state securities laws.
To compensate the Distributor for the services it provides and for the
expenses it bears under the Distribution Agreement, Global Real Estate Fund
(Class A, B and C) has adopted Plans of Distribution pursuant to Rule 12b-1 (the
"Plans") under the 1940 Act which provide for the compensation of brokers and
dealers who sell shares of the Fund or provide servicing. Global Real Estate
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 Plans are terminated. For the periods prior to April 30, 1998,
the Distributor has agreed with respect to Plans with a carry-forward provision,
notwithstanding anything to the contrary in the Plans, to waive its right to
reimbursement of carry-forward amounts in the event the Plans are 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 Fund 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 Plans were approved for the Fund, by the Trustees of the Trust,
including 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 Plans, cast in person at a meeting called for the purpose of voting on each
such Plan on April 22, 1997. A Plan shall continue in effect as to the Fund,
provided such continuance is approved annually by a vote of the Trustees in
accordance with the 1940 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 Fund, 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
1940 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 1940
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
13
<PAGE>
that, in their judgment, there is a reasonable likelihood that the Plans will
benefit the Fund and its shareholders. The Fund will preserve copies of the Plan
and any agreement or report made pursuant to Rule 12b-1 under the 1940 Act, for
a period of not less than six years from the date of the Plan or such agreement
or report, the first two years in an easily accessible place. For additional
information regarding the Plans, see the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
The Adviser is responsible for decisions to buy and sell securities and
other investments for the Fund, the selection of brokers and dealers to effect
the transactions and the negotiation of brokerage commissions, if any. In
transactions on stock and commodity exchanges in the United States, these
commissions are negotiated, whereas on foreign stock and commodity exchanges
these commissions are generally fixed and are generally higher than brokerage
commissions in the United States. In the case of securities traded on the over-
the-counter markets, there is generally no stated commission, but the price
usually includes an undisclosed commission or markup. In underwritten
offerings, the price includes a disclosed fixed commission or discount.
In purchasing and selling the Fund's portfolio investments, it is the
Adviser's policy to obtain quality execution at the most favorable prices
through responsible broker-dealers. In selecting broker-dealers, the Adviser
will consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for the
security or asset to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer'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 the 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 may cause the Fund to pay a broker-dealer who furnishes
brokerage and/or research services a commission that is in excess of the
commission another broker-dealer would have received for executing the
transaction if it is determined that such commission is reasonable in relation
to the value of the brokerage and/or research services as defined in Section
28(e) of the Securities Exchange Act of 1934 which have been provided. Such
research services may include, among other things, analyses and reports
concerning issuers, industries, securities, economic factors and trends, and
portfolio strategy. Any such research and other information provided by brokers
to the Adviser are considered to be in addition to and not in lieu of services
required to be performed by the Adviser under the Advisory Agreement with the
Trust. The research services provided by broker-dealers can be useful to the
Adviser in serving its other clients or clients of its affiliates.
The Trustees periodically review the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund and review the commissions paid by the Fund over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Fund.
Investment decisions for the Fund are made independently from those of the
other investment accounts managed by the Adviser 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 to allocate such
purchases or sales insofar as feasible among its several clients or the clients
of its affiliates in a manner it deems equitable. The principal factors which
the Adviser considers in making such allocations are the
14
<PAGE>
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 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 Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, the Adviser may
consider sales of shares of the Fund as a factor in the selection of broker-
dealers to execute portfolio transactions for the Fund.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, the Fund will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser such transactions are
advisable in light of a change in circumstances of a particular company, within
a particular industry or country, or in general market, economic or political
conditions. The Global Real Estate Fund anticipates that its annual portfolio
turnover rate may exceed 100%.
The portfolio turnover rates of the Fund may vary greatly from year to
year. In addition, since the Fund may have a high rate of portfolio turnover,
the Fund 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.
15
<PAGE>
TRUSTEES AND OFFICERS
---------------------
The Trustees and officers of the Van Eck Funds, their address, position with the
Trust and principal occupations during the past five years are set forth below.
Trustees of Van Eck Funds:
@ * JOHN C. van ECK, CFA (81) - Chairman of the Board
- -------------------------
270 River Road, Briarcliff Manor, New York; President of the Asia Dynasty
Fund, Global Balanced Fund and Emerging Markets Growth Fund series of Van Eck
Funds and the Worldwide Balanced Fund and Worldwide Emerging Markets Fund series
of Van Eck Worldwide Insurance Trust; Chairman of the Board and President of
another investment company 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 (61) - Trustee
- ---------------------
1220 Park Avenue, New York, NY 10128; Trustee of another investment company
advised by the adviser; Vice Chairman, Director and Chief Investment Officer,
Fiduciary Trust Company International (investment manager), parent company of
Fiduciary International, Inc., which has entered into sub-advisory agreements
with Van Eck Funds and Van Eck Worldwide Insurance Trust as to the Global
Balanced Fund and the Worldwide Balanced Fund series, respectively; 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 (69) - Trustee
- ---------------------
240 El Vedado Way, Palm Beach, Florida 33480; Trustee of another investment
company 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 D. DEFEO (51) - Trustee
- -------------------
99 Park Avenue, New York, NY 10016; Trustee of another investment company
advised by the Adviser; President, Chief Executive Officer and Director of Van
Eck Associates Corporation (investment adviser) and Van Eck Securities
Corporation (broker-dealer) since September 1996; Former Executive Vice
President and Director of Marketing and Customer Services (June 1994 - August
1996), Cedel International (finance and settlements); Former Managing Director
(July 1992 - April 1994), Lehman Brothers (investment bank and broker-dealer);
Former Senior Vice President, Fidelity Investments and Former President,
Fidelity Services Company (financial services); (1987-1992).
16
<PAGE>
# + WESLEY G. McCAIN (54) - Trustee
- --------------------
144 East 30th Street, New York, New York 10016; Trustee of other affiliated
investment companies advised by the Adviser; Chairman and Owner, Towneley
Capital Management, Inc., (investment adviser); Chairman, Eclipse Financial
Asset Trust (mutual fund); Chairman and Owner, Eclipse Financial Services, Inc.;
General Partner, Pharaoh Partners, L.P.; Principal, Pharaoh Partners (Cayman)
LDC; President, Millbrook Associates, Inc. (investment adviser); Trustee, Libre
Group Trust; Former Director, International Investors Incorporated; Former
Chairman and Owner, Finacor, Inc. (financial services).
# DAVID J. OLDERMAN (61) - Trustee
- -------------------
40 East 52nd Street, New York, New York 10022; Trustee of another
investment company advised by the Adviser; 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 (68) - Trustee
- -------------------
66 Strimples Mill Road, Stockton, New Jersey 08559-1703; Trustee of another
investment company 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 (38) - Trustee
- -----------------------
888 17th Street, N.W., Washington, D.C. 20006; Trustee of two other
investment companies advised or administered by the Adviser; Principal, National
Strategies, Inc., a public policy firm in Washington, D.C.; Partner and Co-
founder, Quest Partners, L.L.C. (management consulting firm/since 1988);
Executive Vice President, Chief Operating Officer, and a Director of NuCable
Resources Corporation (technology firm/since 1988); associated with Anderson
Benjamin & Reed, a regulatory consulting firm based in Washington, D.C. (1985-
1986); White House Fellow-Office of Vice President (1984-1985); Director of
Special Projects, National Cable Television Association (1983-1984).
@ ** FRED M. van ECK (78) - Trustee
- --------------------
99 Park Avenue, New York, New York; Trustee of another investment company
advised by the Adviser; Private Investor; 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:
LUCILLE PALERMO (51) - Executive Vice President
- ---------------
99 Park Avenue, New York, New York 10016; President of Gold/Resources Fund
and International Investors Gold Fund; Officer of another investment company
advised by the Adviser; Associate Director, Mining Research of the Adviser;
Investment Strategist and Analyst with Drexel Burnham Lambert (1979-1989).
17
<PAGE>
MADIS SENNER (43) - Executive Vice President
- ------------
99 Park Avenue, New York, New York 10016; President of the Global Income Fund
series of Van Eck Funds and the Worldwide Bond Fund series of Van Eck Worldwide
Insurance Trust; Officer of another investment company advised by the Adviser;
Director, Global Fixed Income of Van Eck Associates Corporation; Former Global
Bond Manager, Chase Manhattan Private Bank (1992-1994); Former President and
founder, Sunray Securities, Inc. (1989-1992).
DEREK van ECK (32) - Executive Vice President
- -------------
99 Park Avenue, New York, New York 10016; President of the Global Hard Assets
Fund series of Van Eck Funds and the Worldwide Hard Assets Fund series of Van
Eck Worldwide Insurance Trust; Officer of another investment company adviser by
the Adviser; Executive Vice President, Director, Global Investments and
Director of Van Eck Associates Corporation and Executive Vice President and
Director of Van Eck Securities Corporation and other affiliated companies.
BRUCE J. SMITH (42) - Vice President and Treasurer
- --------------
99 Park Avenue, New York, New York 10016; Officer of other investment
companies advised or administered by the Adviser; Senior Managing Director,
Portfolio Accounting of Van Eck Associates Corporation and Senior Managing
Director of Van Eck Securities Corporation.
THADDEUS M. LESZCZYNSKI (50) - Vice President and Secretary
- -----------------------
99 Park Avenue, New York, New York 10016; Officer of other investment
companies advised or administered by the Adviser; Vice President, Secretary and
General Counsel of Van Eck Associates Corporation, Van Eck Securities
Corporation and other affiliated companies.
JOSEPH P. DiMAGGIO (40) - Controller
- ------------------
99 Park Avenue, New York, New York 10016; Officer of another investment
company advised by the Adviser; Director of Portfolio Accounting of Van Eck
Associates Corporation (since 1993); Former Accounting Manager, Alliance Capital
Management (1985-1993).
CHARLES CAMERON (37) - Vice President
- ---------------
99 Park Avenue, New York, New York 10016; Officer of another investment company
advised by the Adviser; Director of Trading of Van Eck Securities Corporation
SUSAN C. LASHLEY (42) - Vice President
- ----------------
99 Park Avenue, New York, New York 10016; Officer of another investment company
advised by the Adviser; Managing Director, Mutual Fund Operations of Van Eck
Securities Corporation.
KEVIN REID (34) - Vice President
- ----------
99 Park Avenue, New York, New York 10016; President of the Global Real
Estate Fund series and Vice President of the Global Hard Assets Fund series of
Van Eck Funds and President of the Worldwide Real Estate Fund and Vice President
of the Worldwide Hard Assets Fund series of Van Eck Worldwide Insurance Trust;
Officer of another investment company advised by the Adviser; Director, Real
Estate Research of Van Eck Associates Corporation.
BARBARA J. ALLEN (40) - Assistant Secretary
- ----------------
99 Park Avenue, New York, New York 10016; Officer of another investment company
advised by the Adviser; Compliance Officer of Van Eck Associates Corporation and
Van Eck Securities Corporation; Former Senior Counsel, Arizona Corporation
Commission, Securities Division (1990-1994).
18
<PAGE>
SUSAN I. GRANT (44) - Assistant Secretary
- --------------
99 Park Avenue, New York, New York 10016; Officer of another investment company
advised by the Adviser; Senior Attorney of Van Eck Associates Corporation;
formerly employed by The Royce Funds (1994 to 1996) and First Investors
Corporation (1989 to 1994).
Gregory Krenzer (24) President of Van Eck U.S. Government Money Fund
- ---------------
99 Park Avenue, New York, New York 10016; Research Analyst and Portfolio
Assistant (Global Fixed Income) of Van Eck Associates Corporation since 1994.
- ----------------
@ An "interested person" as defined in the 1940 Act.
* Member of Executive Committee -exercises general powers of Board of
Trustees between meetings of the Board.
** Brother of Mr. John C. van Eck.
. # Member of the Nominating Committee.
+ Member of the Audit Committee -reviews fees, services, procedures,
conclusions and recommendations of independent auditors
<TABLE>
<CAPTION>
1996 Compensation Table
-----------------------
<S> <C> <C> <C>
Van Eck Funds Van Eck Funds Total Fund Complex
(Current Trustees Fees) (Deferred Compensation) Compensation(a)
----------------------- ----------------------- ---------------
John C. van Eck $0 $0 $0
Jeremy H. Biggs $22,108 $ 8,929 $40,000
Richard C. Cowell $57,884 $0 $66,500
Philip D. DeFeo $0 $0 $0
Wesley G. McCain $0 $34,684 $44,000
David J. Olderman $0 $27,521 $35,000
Ralph F. Peters $24,408 $0 $31,000
Richard D. Stamberger $15,158 $16,808 $40,875
Fred M. van Eck $0 $0 $0
</TABLE>
(a) The term "fund complex" refers to the funds of the Trust and the series of
the Van Eck Worldwide Insurance Trust, which are also managed by the
Adviser. The Trustees are paid a fee for their services to the Trust. No
other compensation, including pension or other retirement benefits, is paid
to the Trustees by the fund complex.
VALUATION OF SHARES
-------------------
The net asset value per share of the Fund is computed by dividing the value
of all of the Fund's securities plus cash and other assets, less liabilities, by
the number of shares outstanding. The net asset value per share is computed as
of the close of the New York Stock Exchange, Monday through Friday, exclusive of
national business holidays. The Fund 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 value
need not be computed on a day in which no orders to purchase, sell or redeem
shares of the Fund have been received.
Dividends paid by the 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
19
<PAGE>
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 Global Real Estate Fund-A are sold at the public offering price
which is determined once each day the Fund is 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 Global Real Estate Fund-B are sold with a
contingent deferred sales charge. Shares of Global Real Estate Fund-C are sold
with a redemption fee.
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 Real Estate 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 or her 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 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 Real Estate 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 or her 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.
20
<PAGE>
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 Fund 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.
EXCHANGE PRIVILEGE
------------------
Class A, Class B and Class C shareholders of the 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 the 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 Fund reserves the right to (i) charge a fee of not more than $5.00 per
exchange payable to the 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 funds, 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 Prospectus).
TAX-SHELTERED RETIREMENT PLANS
------------------------------
The Trust offers several prototype tax-sheltered retirement plans through
which shares of the 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 Trust.
Persons who wish to establish a tax-sheltered retirement plan should consult
their own tax advisors or attorneys regarding their eligibility to do so and the
laws applicable thereto, such as the fiduciary responsibility provisions and
diversification requirements and the reporting and disclosure obligations under
the Employee Retirement Income Security Act of 1974. The Trust is not
responsible for compliance with such laws. Further information regarding the
retirement plans, including applications and fee schedules, may be obtained upon
request to the Fund.
21
<PAGE>
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, 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 or her 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 $4000 IRA
deduction is reduced by $400 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
$4,000 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 the Fund and
accumulate tax-free until distribution. Distributions from either an IRA or
SPIRA prior to age 59-1/2, unless made as a result of disability or death, may
result in adverse tax consequences and penalties. In addition, there is a
penalty on contributions in excess of the contribution limits and other
penalties are imposed on insufficient payouts after age 70-1/2.
22
<PAGE>
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. 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 the 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 the Fund and accumulate tax-free until distribution.
Withdrawals of contributions prior to age 59-1/2, unless made as a result of
disability, death or early retirement, may result in adverse tax consequences
and penalties.
403(b)(7) Program. The Tax-Deferred Annuity Program and Custodial Account
-----------------
offered by the Fund (the "403(b)(7) Program") allows employees of certain tax
exempt organizations and schools to have a portion of their compensation set
aside for their retirement years in shares held in an investment company
custodial account.
In general, the maximum limit on annual contributions for each employee is
the lesser of $30,000 per year (as adjusted by the IRS for cost-of-living
increases), 25% of the employee's compensation or the employee's exclusion
allowance specified in Section 403(b) of the Code. However, an employee's
salary reduction contributions to a 403(b)(7) Program may not exceed $9,500 a
year (as adjusted for cost of living expenses). Contributions in excess of
permissible amounts may result in adverse tax consequences and penalties.
Dividends and capital gains on amounts invested in the 403(b)(7) Program are
automatically reinvested in shares of the 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
23
<PAGE>
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 Fund will
--------------------------
occur on a date selected by the Board of Trustees.
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 Fund. This does not apply to Class B or
Class C shares.
An investor should realize that the Fund's securities are 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 the
Fund and will not involve any direct charge to the participating shareholder.
The Automatic Exchange Plan is completely voluntary and may be terminated on
fifteen 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
the 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 Fund.
An investor should realize that the Fund's securities are 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 the
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 the 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 Fund.
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 the Fund having a total value of not less
than $10,000 based on the offering price on the date the Application is
accepted.
24
<PAGE>
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 the investor, monthly or quarterly (January, April, July
and October). The Fund will bear the cost of administering the Automatic
Withdrawal Plan.
Redemption of shares of the 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 the investment since part of such payments may be a return of
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 the 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 or her duly appointed legal
representatives.
TAXES
-----
Taxation of the Fund -- In General
- ----------------------------------
The Fund intends to qualify and elect to be treated each taxable year as a
"regulated investment company" under Subchapter M of the Code. To so qualify,
the Fund must, among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of any of the following which was held less than three months (the
"30% test"): (i) short sales of securities; (ii) stock or securities; (iii)
options, futures or forward contracts (other than on foreign currencies) or (iv)
foreign currencies (or options, futures or forward contracts on foreign
currencies) but only if such currencies (or options, futures or forward
contracts) are not directly related to the Fund's principal business of
investing in stock or securities; and (c) satisfy certain diversification
requirements.
As a regulated investment company, the Fund will not be subject to federal
income tax on its net investment income and capital gain net income (capital
gains in excess of its capital losses) that it distributes to shareholders if at
least 90% of its net investment income and short-term capital gains for the
taxable year are distributed. However, if for any taxable year the Fund does not
satisfy the requirements of Subchapter M of the Code, all of its taxable income
will be subject to tax at regular corporate rates without any deduction for
distribution to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of the Fund's current or
accumulated earnings or profits.
25
<PAGE>
The Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
-------------
requirement. To avoid the tax, during each calendar year the Fund must
distribute (i) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (ii) at least 98% of its capital
gain net income for the twelve month period ending on October 31 (or December
31, if the Fund so elects), and (iii) any portion (not taxed to the Fund) of the
2% balance from the prior year. The Fund intends to make sufficient
distributions to avoid this 4% excise tax.
Taxation of the Fund's Investments
- ----------------------------------
Original issue discount. For federal income tax purposes, debt securities
-----------------------
purchased by the Fund may be treated as having an original issue discount.
Original issue discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption price at
maturity of a debt obligation over the issue price. Original issue discount is
treated for federal income tax purposes as income earned by the Fund, whether or
not any income is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of original issue
discount included in the income of the Fund each year is determined on the basis
of a constant yield to maturity which takes into account the compounding of
accrued interest.
Debt securities may be purchased by the Fund at a discount which exceeds
the original issue discount remaining on the securities, if any, at the time the
Fund purchased the securities. This additional discount represents market
discount for income tax purposes. In the case of any debt security issued after
July 18, 1984, having a fixed maturity date of more than one year from the date
of issue and having market discount, the gain realized on disposition will be
treated as interest to the extent it does not exceed the accrued market discount
on the security (unless the Fund elects to include such accrued market discount
in income in the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Fund may be required to capitalize,
rather than deduct currently, part or all of any direct interest expense
incurred or continued to purchase or carry any debt security having market
discount, unless the it makes the election to include market discount currently.
Because the Fund must include original issue discount in income, it will be
more difficult for the Fund to make the distributions required for it to
maintain its status as a regulated investment company under Subchapter M of the
Code or to avoid the 4% excise tax described above.
Options and Futures Transactions Certain of the Fund's investments may be
--------------------------------
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Fund's income for purposes of the 90% test, the 30% test, the
excise tax and the distribution requirements applicable to regulated investment
companies, (ii) defer recognition of realized losses, and (iii) characterize
both realized and unrealized gain or loss as short-term or long-term gain or
loss. Such provisions generally apply to options and futures contracts. The
extent to which the Fund makes such investments may be materially limited by
these provisions of the Code.
Foreign Currency Transactions Under Section 988 of the Code, special rules
-----------------------------
are provided for certain foreign currency transactions. Foreign currency gains
or losses from foreign currency contracts (whether or not traded in the
interbank market), from futures contracts that are not "regulated futures
contracts," and from unlisted options are treated as ordinary income or loss
under Section 988. The Fund may elect to have foreign currency-related
regulated futures contracts and listed options subject to ordinary income or
loss treatment under Section 988. In addition, in certain circumstances, the
Fund may elect capital gain or loss for foreign currency transactions. The
rules under Section 988 may also affect the timing of income recognized by the
Fund.
26
<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 the
Fund, the amount of the distribution deemed to have been received by
participating shareholders is the fair market value of the shares received
rather than the amount of cash which would otherwise have been received. In such
case, participating shareholders will have a basis for federal income tax
purposes in each share received from the Fund equal to the fair market value of
such share on the payment date.
Distributions by the Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain as described above,
even though, from an investment standpoint, it may constitute a partial return
of capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a distribution will then receive
a return of their investment upon distribution which will nevertheless be
taxable to them.
If a shareholder (i) incurs a sales load in acquiring shares in the 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 the Fund may give rise to withholding and other taxes
imposed by foreign countries. If more than 50% of the value of the Fund's
assets at the close of a taxable year consists of securities of foreign
corporations, the Fund may make an election that will permit an investor to take
a credit (or, if more advantageous, a deduction) for foreign income taxes paid
by the Fund, subject to limitations contained in the Code. When Global Real
Estate Fund satisfies this requirement, the Fund will make such an election. As
an investor, you would then include in gross income both dividends paid to you
and the foreign taxes paid by the Fund on its foreign investments.
The Fund cannot assure investors that it will be eligible for the foreign
tax credit. The Fund will advise shareholders annually of your share of any
creditable foreign taxes paid by the Fund.
The Fund may be required to withhold federal income tax at a rate of 31%
from dividends made to any shareholder who fails to furnish a certified taxpayer
identification number ("TIN") or who fails to certify that he or she is exempt
from such withholding or who the Internal Revenue Service notifies the
27
<PAGE>
Fund as having provided the Fund with an incorrect TIN or failed to properly
report for federal income tax purposes. Any such withheld amount will be fully
creditable on each shareholder's individual federal income tax return.
The foregoing discussion is a general summary of certain of the current
federal income tax laws affecting the Fund and investors in 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
-------------------
The Fund elects to have the ability to redeem its shares in kind,
committing itself to pay in cash all requests for redemption by any shareholder
of record limited in amount with respect to each shareholder of record during
any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of the net asset
value of such company at the beginning of such period.
PERFORMANCE
-----------
The Fund may advertise performance in terms of average annual total return
for 1, 5 and 10 year periods, or for such lesser periods as the Fund has been in
existence. Average annual total return is computed by finding the average
annual compounded rates of return over the periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
Where: P=A hypothetical initial payment of $1,000
T=Average annual total return
n=Number of years
ERV=Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the year or
period
The calculation assumes the maximum sales load (or other charges deducted
from payments) is deducted from the initial $1,000 payment and assumes all
dividends and distributions by the Fund are reinvested at the price stated in
the prospectus on the reinvestment dates during the period, and includes all
recurring fees that are charged to all shareholder accounts.
The Global Real Estate 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:
28
<PAGE>
YIELD = 2[(A-B/CD + 1)6-1]
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during
the period that were entitled to receive dividends
D = the maximum offering price per share on the last day
of the period after adjustment for payment of dividends
within 30 days thereafter
The Global Real Estate 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 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.
Advertising Performance
- -----------------------
As discussed in the Fund's Prospectus, the Fund may quote performance
results from recognized publications which monitor the performance of mutual
funds, and the Fund may compare its performance to various published historical
indices. These publications are listed in Part B of the Appendix. In addition,
the Fund may quote and compare its performance to the performance of various
economic and market indices and indicators, such as the S&P 500, Financial Times
Index, Morgan Stanley Capital International Europe, Australia, Far East Index,
Salomon Brothers World Property Index, Morgan Stanley Capital International Real
Estate Index, NAREIT Equity Index, Wilshire Real Estate Securities Index, Morgan
Stanley REIT Index and GNP and GDP data. Descriptions of these indices are
provided in Part B of the Appendix.
ADDITIONAL INFORMATION
----------------------
Custodian. The Chase Manhattan Bank, Chase Metrotech Center, Brooklyn, 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 the Fund to be held by its overseas branches or
subsidiaries, and foreign banks and foreign securities depositories which
qualify as eligible foreign custodians under the rules adopted by the Securities
and Exchange Commission.
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, LLP Exchange Place, Boston,
-------
Massachusetts 02109 serves as counsel to the Trust.
29
<PAGE>
FINANCIAL STATEMENTS
--------------------
As the Global Real Estate Fund is a newly created series of the Trust, the
Fund has no operating history and therefore does not yet have a financial
statement.
30
<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.
<PAGE>
Preferred Stock Ratings
- -----------------------
Moody's Investors Service, Inc. describes its preferred stock ratings as:
aaa -An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of convertible preferred stocks.
aa -An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a -An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa -An issue which is rated baa is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba -An issue which is rated ba is considered to have speculative elements,
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safe-guarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b -An Issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payment.
ca -An issue which is rated ca is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual payment.
c -This is the lowest rated class of preferred or preference stock. Issues
so rated can be regarded as having extremely poor prospects of every attaining
any real investment standing.
Standard & Poor's Corporation describes its preferred stock ratings as:
AAA -This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A -An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions.
BBB -An issue rated BBB is regarded as backed by an adequate capacity to
play the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or
<PAGE>
changing circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the A
category.
BB,B,CCC -Preferred stocks rated BB,B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some 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.
<PAGE>
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
<PAGE>
PART B
- ------
The publications and services from which the Fund will quote performance
are: Micropal, Ltd. (an international investment fund information service),
Fortune, Changing Times, Money, U.S. News & World Report, Money Fund Scorecard,
Morningstar, Inc., Business Week, Institutional Investor, The Wall Street
Journal, Wall Street Transcripts, 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.
<PAGE>
PERFORMANCE CHARTS
Best Performing World Government Bond Markets*
1986 through December, 1996
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%
1996 Italy 27.2%
*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)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Hong Kong 2.6% 3.4% 5.1% 6.3% 6.4% 5.4% 4.7%
Singapore 9.4% 8.1% 7.3% 6.2% 10.4% 10.1% 8.8%
Thailand 12.2% 11.6% 8.4% 7.8% 8.3% 8.8% 8.6%
Malaysia 9.2% 9.7% 8.4% 7.8% 8.3% 9.2% 9.5%
Indonesia 7.5% 7.2% 7.0% 6.5% 6.5% 7.7% 8.2%
Philippines 6.2% 3.0% -0.5% 0.3% 2.1% 4.4% 4.8%
South Korea 6.4% 9.5% 9.1% 5.1% 5.8% 8.6% 9.0%
China 4.3% 3.9% 9.2% 14.2% 13.5% 12.7% 10.6%
</TABLE>
Source: All Countries except Hong Kong: International Financial Statistics
(International Monetary Fund) - 2/96 and 5/97 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.
<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>
9yr.
5yr. Compounded
Compounded avg.
avg. annual annual
return return
1988 1989 1990 1991 1992 1993 1994 1995 1996 (1991-1995) 12/31/96
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------- ----------
<S> <C> <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% 28.9% 23.0% 20.3%
Indonesia 227.8% 77.1% 5.2% -46.4% -2.1% 102.2% -27.0% 7.5% 25.4% 14.3% 22.8%
Malaysia 23.9% 52.6% -9.9% 3.1% 15.7% 107.3% -20.7% 4.0% 24.5% 19.7% 17.7%
Philippines 40.0% 62.9% -47.7% 83.5% 37.1% 121.4% -8.3% -11.8% 16.8% 23.5% 22.7%
Singapore 32.3% 43.3% -15.8% 41.6% 3.0% 71.4% 4.7% 11.0% -0.7% 15.3% 18.5%
So. Korea 94.0% 0.4% -28.5% -17.1% 0.0% 29.1% 22.1% -4.6% -38.4% -1.5% 0.8%
Taiwan 117.3% 83.5% -55.4% 11.8% -24.6% 82.3% 19.7% -30.2% 38.9% 9.8% 13.7%
Thailand 41.6% 106.1% -29.7% 18.1% 30.4% 97.8% -11.2% -5.7% -38.0% 14.0% 14.0%
</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.
- ----------------------------
Morgan Stanley Capital International Stock Market Information
(in US currency with net dividends reinvested)
as of December 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Australia 16.5% 11.2% 5.4% 35.2% -10.8% 33.6% -17.5% 9.3% 36.4% 9.3%
Austria 4.5% -4.7% -6.3% 28.1% -10.7% -12.2% 6.3% 103.9% 0.6% 2.2%
Belgium 12.0% 25.9% 8.2% 23.5% -1.5% 13.8% -11.0% 17.3% 53.6% 7.9%
Canada 28.5% 18.3% -3.0% 17.6% -12.2% 11.1% -13.0% 24.3% 17.1% 13.9%
Denmark 21.8% 18.8% 3.8% 32.8% -28.3% 16.6% -0.9% 43.9% 52.7% 13.2%
Finland 33.9% 4.6% 52.2% 82.7% -13.0% -18.1% -31.7% -9.6% 13.7% N/A
France 21.2% 14.1% -5.2% 20.9% 2.8% 17.8% -13.8% 36.2% 37.9% -13.8%
Germany 13.6% 16.4% 4.7% 35.6% -10.3% 8.2% -9.4% 46.3% 20.6% -24.8%
Hong Kong 33.1% 22.6% -28.9% 116.7% 32.3% 49.5% 9.2% 8.4% 28.1% -4.1%
Ireland 32.0% 22.4% 14.5% 42.4% -21.2% 12.2% -16.7% 41.2% 25.1% N/A
Italy 12.6% 1.0% 11.6% 28.5% -22.2% -1.8% -19.2% 19.4% 11.5% -21.3%
Japan -15.5% 0.7% 21.4% 25.5% -21.5% 8.9% -36.1% 1.7% 35.4% 43.0%
Malaysia 25.9% 5.2% -19.9% 110.0% 17.8% 5.0% -7.9% 55.8% 26.5% N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Netherlands 27.5% 27.7% 11.7% 35.3% 2.3% 17.8% -3.2% 35.8% 14.2% 7.1%
New Zealand 17.2% 20.9% 8.9% 67.7% -1.4% 18.3% -37.7% 11.4% -13.8% N/A
Norway 28.6% 6.0% 23.6% 42.0% -22.3% -15.5% 0.7% 45.5% 42.4% 5.7%
Singapore -6.9% 6.5% 6.7% 68.0% 6.3% 25.0% -11.7% 42.3% 33.3% 2.3%
Spain 40.1% 29.8% -4.8% 29.8% -21.9% 15.6% -13.7% 9.8% 13.5% 36.9%
Sweden 37.2% 33.4% 18.3% 37.0% -14.4% 14.4% -21.0% 31.8% 48.3% 2.0%
Switzerland 2.3% 44.1% 3.5% 45.8% 17.2% 15.8% -6.2% 26.2% 6.2% -9.5%
United Kingdom 27.4% 21.3% -1.6% 24.4% -3.7% 16.0% 10.3% 21.9% 6.0% 35.1%
US 23.2% 37.1% 1.1% 9.1% 6.4% 30.1% -3.2% 30.0% 14.6% 2.9%
</TABLE>
Morgan Stanley Capital International Index
(in US currency with net dividends reinvested)
as of December 31, 1996
10 year annual total return
---------------------------
Australia 11.4%
Austria 7.6%
Belgium 13.8%
Canada 9.3%
Denmark 15.2%
Finland N/A
France 10.3%
Germany 8.2%
Hong Kong 21.9%
Ireland N/A
Italy 0.5%
Japan 3.4%
Malaysia N/A
Netherlands 16.9%
New Zealand N/A
Norway 13.2%
Singapore 15.0%
Spain 11.6%
Sweden 16.4%
Switzerland 13.1%
United Kingdom 15.1%
USA 14.4%
MARKET INDEX DESCRIPTIONS
Salomon Brothers World Property Equity Index: A top-down, float
capitalization-weighted index that includes shares of approximately 380
companies in 19 countries.
GPR-LIFE Global Real Estate Securities Index: A market capitalization-
weighted index of property companies in 33 countries.
<PAGE>
Morgan Stanley Capital International Real Estate Index: An arithmetic,
market value-weighted average of the performance of property shares worldwide.
NAREIT Equity Index: A capitalization-weighted index comprised of publicly
traded equity real estate investment trusts excluding mortgage REITs.
Wilshire REIT Securities Index: A capitalization-weighted index comprised
of publicly traded real estate investment trusts (excluding special purpose or
health care REITs).
Morgan Stanley REIT Index: A capitalization-weighted index with dividends
reinvested of the most actively traded real estate investment trusts.
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.
