VAN ECK GOLD/RESOURCES FUND
---------------------------
1996 ANNUAL REPORT
Dear Fellow Shareholder:
In 1996, the average gold price rose to $388 an ounce, up 1% from $384 an ounce
in 1995. During the same period, the net asset value of your Fund rose 2.5%,
closing at $5.72 a share.
After hitting a six-year high in February, the price of gold declined. Two key
factors contributed to the downturn: fears of continued central bank selling
after Belgium's sale of 200 tonnes in the first quarter and proposals that the
International Monetary Fund (IMF) sell gold reserves to finance loans to
third-world countries.
In the second half of the year, concerns over renewed producer selling and lack
of investment demand due to the strong run by financial assets also put pressure
on gold's price. But more importantly, data from the New York Commodity Exchange
(COMEX) on open interest in gold futures contracts and the Commitment of Traders
Report appeared to indicate that speculators were shorting huge volumes of gold
futures to capitalize on negative investment sentiment. This strategy enabled
speculators to override--at least temporarily--gold's fundamental strength, such
as the large deficit in the physical market between annual mine production and
scrap on the supply side, and fabrication use (mostly jewelry) on the demand
side.
Against the soft metals market, gold shares around the world recorded mixed
investment results. In North America, the Toronto Gold and Silver Index rose
8.1% in U.S. dollars, while the XAU Index, which includes U.S. and Canadian
stocks, fell 3.0%. The Australian Gold Index was up about 5% in U.S. dollars
thanks to a 7% gain in the Australian dollar. However, the Johannesburg Gold
Share Index fell over 12% in U.S. dollars because the South African rand
declined more than 20%.
In North America, intermediate- and small-capitalization producers registered
good performance. Exploration companies also fared well as investors bid up
prices on good drilling results in successive hot prospecting areas such as
Peru, West Africa and Indonesia. (While the Fund is invested mostly in large
companies, it has about 5% in small-cap and exploration companies and about 10%
in shares of intermediate-sized producers.) Specifically, the Fund benefited
from positions in Arizona Star (in which the Fund realized substantial gains by
the time we sold the shares in August), Bema Gold (up 206% for the year), Dayton
Mining (up 57%), Getchell Gold (up 73%), Goldcorp (up 45%), Richmont (up 59%)
and Tombstone (up 43%). Some senior producers, many of which have had
consistently disappointing production and cost results, suffered sharp setbacks
during the year, bringing the averages down.
On December 31, 1996, the Gold/Resources Fund had most of its assets in North
America (35.9% of investments in Canada and 34.1% in the United States). The
Fund also had a substantial position in Australia (25.7%). Australian stocks
recorded the best investment results (up 5.2%) for the year. Since Australian
stocks generally do not have as much price leverage to bullion as North American
gold stocks, they tend to hold up better during downtrends, such as the sharp
decline in share prices following their peak at the end of May. It is worth
noting that the Fund added a new name in the fourth quarter--Goldstream
Minerals, a participant in the exciting Gawlor Craton exploration play in South
Australia.
Consolidation within the gold-mining industry has become a reality and corporate
activity has led to gains in share prices of several target companies. Small
companies are merging with other small companies to reach critical mass or to
merge cash flow of one with the development prospects of another (examples
include Viceroy with Loki and Granges with Da Capo). Furthermore, senior
producers are taking over junior producers to enhance their reserve and
production profiles (Barrick's acquisition of Arequipa being the prime example);
and senior producers are merging with other senior producers to create economies
of scale or to consolidate specific areas of operation (Santa Fe Pacific Gold
with either Newmont or Homestake).
This corporate activity has created considerable interest in the industry around
the world, not just in North
<PAGE>
America. In Australia, Sons of Gwalia is consolidating the Yilgarn area, having
bought out Burmine and having gained control of Gascoyne. Normandy has brought
its Gold Mines of Kalgoorlie and Posgold subsidiaries into the parent company,
while Homestake and Pegasus bought out the minority interests in their
Australian subsidiaries. Not only is Placer Dome buying in its Placer Pacific
minorities, but it is also trying to acquire Highlands Gold, one of its joint
venture partners at Porgera in Papua New Guinea.
The continued globalization of the industry is also providing opportunities for
investment gains. For many North American companies in particular, the
environmental scene and extensive exploration already conducted on the continent
mean that most of their growth prospects lie in finding and developing
properties offshore. Though cognizant of the risk inherent in working in
unfamiliar or untested political and social arenas, companies will likely be
casting their nets farther in the drive to replace reserves and increase
production. We believe the exploration success of recent years in Latin America,
West Africa and Indonesia will be repeated into the next century (albeit not
always with the spectacular success of a Bre-X Minerals, for example). This will
also create opportunities for profits, regardless of movements in the price of
gold. Some areas that appear attractive today are the Gawlor Craton region in
South Australia, where Resolute has an interesting joint venture; Mexico, where
the geology would appear to be similar to, or even an extension of, the
Southwest U.S.; and areas in Africa, like Mali and Ghana. Additionally, once the
current uncertainty surrounding Indonesia is cleared up, we would expect a
revival of interest in shares with exposure in that country.
Underlying Long-Term Inflationary Forces
There is, in our judgment, a growing probability of a new global inflationary
cycle. The industrialized world has enjoyed an improved credibility of monetary
policy and relative price stability since 1992. However, the political need to
stimulate economic growth and overcome deflationary forces has become important
in Japan and Continental Europe. Consequently, global monetary reserves have
been growing buoyantly at over 20% a year since 1994 (see chart above) due to
expansionary monetary policies in these countries. If this growth continues and
the world has a synchronized expansion as forecasted by the OECD, the IMF and
other leading forecasters, it seems only a question of time until excess global
capacity is gradually absorbed, eventually resulting in rising inflationary
pressures. Since the 1970's, the economic cycle has lengthened. The four- to
five-year cycles have shifted to eight- to ten-year cycles. Thus, the current
cycle could continue until the end of this decade.
Foreign Holdings of U.S. Treasuries Held at the
Federal Reserve
12/31/87 - 1/23/97
[The following table represents a line chart in the printed report]
[ The numbers below are stated in millions and adjusted for chart]
US$ in billions
12/31/87 .....$198823 1/3/91 .....$249134 1/6/94 .....$351034
1/7/88 ..... 201499 1/10/91 ..... 250171 1/13/94 ..... 350916
1/14/88 ..... 204386 1/17/91 ..... 250004 1/20/94 ..... 356291
1/21/88 ..... 205233 1/24/91 ..... 249886 1/27/94 ..... 356660
1/28/88 ..... 210231 1/31/91 ..... 255372 2/3/94 ..... 360213
2/4/88 ..... 212987 2/7/91 ..... 255062 2/10/94 ..... 363257
2/11/88 ..... 215565 2/14/91 ..... 255934 2/17/94 ..... 359498
2/18/88 ..... 216053 2/21/91 ..... 254164 2/24/94 ..... 360084
2/25/88 ..... 220601 2/28/91 ..... 256001 3/3/94 ..... 364925
3/3/88 ..... 222477 3/7/91 ..... 254307 3/10/94 ..... 364648
3/10/88 ..... 224689 3/14/91 ..... 251125 3/17/94 ..... 369072
3/17/88 ..... 227000 3/21/91 ..... 250771 3/24/94 ..... 367270
3/24/88 ..... 225159 3/28/91 ..... 244199 3/31/94 ..... 365373
3/31/88 ..... 225449 4/4/91 ..... 243467 4/7/94 ..... 369706
4/7/88 ..... 228237 4/11/91 ..... 239516 4/14/94 ..... 366814
4/14/88 ..... 226764 4/18/91 ..... 242837 4/21/94 ..... 370252
4/21/88 ..... 229118 4/25/91 ..... 240164 4/28/94 ..... 368705
4/28/88 ..... 226656 5/2/91 ..... 241447 5/5/94 ..... 370716
5/5/88 ..... 228833 5/9/91 ..... 242054 5/12/94 ..... 372683
5/12/88 ..... 229897 5/16/91 ..... 245279 5/19/94 ..... 363985
5/19/88 ..... 231623 5/23/91 ..... 247348 5/26/94 ..... 365291
5/26/88 ..... 230348 5/30/91 ..... 246139 6/2/94 ..... 373415
6/2/88 ..... 231066 6/6/91 ..... 246053 6/9/94 ..... 374763
6/9/88 ..... 228359 6/13/91 ..... 247697 6/16/94 ..... 375986
6/16/88 ..... 227312 6/20/91 ..... 247669 6/23/94 ..... 380346
6/23/88 ..... 231215 6/27/91 ..... 243915 6/30/94 ..... 381850
6/30/88 ..... 226364 7/4/91 ..... 243556 7/7/94 ..... 382609
7/7/88 ..... 225926 7/11/91 ..... 241662 7/14/94 ..... 386280
7/14/88 ..... 225945 7/18/91 ..... 242952 7/21/94 ..... 391234
7/21/88 ..... 224445 7/25/91 ..... 243127 7/28/94 ..... 392681
7/28/88 ..... 224329 8/1/91 ..... 245159 8/4/94 ..... 390207
8/4/88 ..... 224230 8/8/91 ..... 243747 8/11/94 ..... 392088
8/11/88 ..... 224069 8/15/91 ..... 248892 8/18/94 ..... 392187
8/18/88 ..... 225066 8/22/91 ..... 250144 8/25/94 ..... 397924
8/25/88 ..... 225105 8/29/91 ..... 251663 9/1/94 ..... 398851
9/1/88 ..... 223518 9/5/91 ..... 249111 9/8/94 ..... 397180
9/8/88 ..... 226814 9/12/91 ..... 251482 9/15/94 ..... 398335
9/15/88 ..... 227332 9/19/91 ..... 251649 9/22/94 ..... 401042
9/22/88 ..... 223989 9/26/91 ..... 251994 9/29/94 ..... 398798
9/29/88 ..... 224077 10/3/91 ..... 249699 10/6/94 ..... 397222
10/6/88 ..... 225395 10/10/91 ..... 250145 10/13/94 ..... 400556
10/13/88 ..... 226211 10/17/91 ..... 247684 10/20/94 ..... 402593
10/20/88 ..... 227037 10/24/91 ..... 251028 10/27/94 ..... 406989
10/27/88 ..... 227713 10/31/91 ..... 250267 11/3/94 ..... 411381
11/3/88 ..... 228668 11/7/91 ..... 251214 11/10/94 ..... 414476
11/10/88 ..... 227934 11/14/91 ..... 250521 11/17/94 ..... 412436
11/17/88 ..... 229502 11/21/91 ..... 256282 11/24/94 ..... 414559
11/24/88 ..... 231905 11/28/91 ..... 256262 12/1/94 ..... 417344
12/1/88 ..... 235131 12/5/91 ..... 259114 12/8/94 ..... 415332
12/8/88 ..... 235013 12/12/91 ..... 258859 12/15/94 ..... 413713
12/15/88 ..... 234513 12/19/91 ..... 258960 12/22/94 ..... 418499
12/22/88 ..... 235598 12/26/91 ..... 257224 12/29/94 ..... 411727
12/29/88 ..... 232926 1/2/92 ..... 251209 1/5/95 ..... 412970
1/5/89 ..... 233779 1/9/92 ..... 257348 1/12/95 ..... 411713
1/12/89 ..... 230643 1/16/92 ..... 258898 1/19/95 ..... 408202
1/19/89 ..... 230210 1/23/92 ..... 262310 1/26/95 ..... 405890
1/26/89 ..... 228413 1/30/92 ..... 263938 2/2/95 ..... 409168
2/2/89 ..... 228431 2/6/92 ..... 265276 2/9/95 ..... 411459
2/9/89 ..... 228246 2/13/92 ..... 268413 2/16/95 ..... 413486
2/16/89 ..... 231297 2/20/92 ..... 269574 2/23/95 ..... 414268
2/23/89 ..... 230770 2/27/92 ..... 268703 3/2/95 ..... 416571
3/2/89 ..... 231457 3/5/92 ..... 271833 3/9/95 ..... 418601
3/9/89 ..... 233149 3/12/92 ..... 272180 3/16/95 ..... 419363
3/16/89 ..... 232813 3/19/92 ..... 271786 3/23/95 ..... 429482
3/23/89 ..... 233148 3/26/92 ..... 269354 3/30/95 ..... 429710
3/30/89 ..... 234526 4/2/92 ..... 271583 4/6/95 ..... 433735
4/6/89 ..... 237034 4/9/92 ..... 271960 4/13/95 ..... 445790
4/13/89 ..... 236746 4/16/92 ..... 273335 4/20/95 ..... 447937
4/20/89 ..... 238903 4/23/92 ..... 272755 4/27/95 ..... 438611
4/27/89 ..... 237403 4/30/92 ..... 271205 5/4/95 ..... 446896
5/4/89 ..... 236901 5/7/92 ..... 270314 5/11/95 ..... 440471
5/11/89 ..... 237207 5/14/92 ..... 273754 5/18/95 ..... 444649
5/18/89 ..... 237670 5/21/92 ..... 276729 5/25/95 ..... 447256
5/25/89 ..... 235972 5/28/92 ..... 275242 6/1/95 ..... 446653
6/1/89 ..... 234667 6/4/92 ..... 277619 6/8/95 ..... 450921
6/8/89 ..... 234064 6/11/92 ..... 276678 6/15/95 ..... 452735
6/15/89 ..... 232171 6/18/92 ..... 278765 6/22/95 ..... 452305
6/22/89 ..... 227567 6/25/92 ..... 279902 6/29/95 ..... 447726
6/29/89 ..... 233119 7/2/92 ..... 279370 7/6/95 ..... 459901
7/6/89 ..... 231321 7/9/92 ..... 280147 7/13/95 ..... 464871
7/13/89 ..... 232347 7/16/92 ..... 284624 7/20/95 ..... 470039
7/20/89 ..... 234831 7/23/92 ..... 288655 7/27/95 ..... 474534
7/27/89 ..... 237112 7/30/92 ..... 287236 8/3/95 ..... 479040
8/3/89 ..... 238158 8/6/92 ..... 291040 8/10/95 ..... 478258
8/10/89 ..... 239294 8/13/92 ..... 293363 8/17/95 ..... 486717
8/17/89 ..... 241481 8/20/92 ..... 296114 8/24/95 ..... 480798
8/24/89 ..... 240939 8/27/92 ..... 295102 8/31/95 ..... 478286
8/31/89 ..... 242745 9/3/92 ..... 295956 9/7/95 ..... 480340
9/7/89 ..... 240688 9/10/92 ..... 294432 9/14/95 ..... 479996
9/14/89 ..... 241320 9/17/92 ..... 291497 9/21/95 ..... 480439
9/21/89 ..... 239324 9/24/92 ..... 282343 9/28/95 ..... 479346
9/28/89 ..... 239416 10/1/92 ..... 283556 10/5/95 ..... 484600
10/5/89 ..... 236311 10/8/92 ..... 284205 10/12/95 ..... 485542
10/12/89 ..... 234660 10/15/92 ..... 287507 10/19/95 ..... 481636
10/19/89 ..... 233490 10/22/92 ..... 287386 10/26/95 ..... 482862
10/26/89 ..... 234058 10/29/92 ..... 284546 11/2/95 ..... 483834
11/2/89 ..... 233384 11/5/92 ..... 292965 11/9/95 ..... 486656
11/9/89 ..... 234715 11/12/92 ..... 297628 11/16/95 ..... 494848
11/16/89 ..... 236514 11/19/92 ..... 292312 11/23/95 ..... 494229
11/23/89 ..... 237031 11/26/92 ..... 285278 11/30/95 ..... 496481
11/30/89 ..... 233024 12/3/92 ..... 289879 12/7/95 ..... 503956
12/7/89 ..... 235957 12/10/92 ..... 294508 12/14/95 ..... 503956
12/14/89 ..... 233712 12/17/92 ..... 287761 12/21/95 ..... 499545
12/21/89 ..... 232269 12/24/92 ..... 288854 12/28/95 ..... 500554
12/28/89 ..... 230616 12/31/92 ..... 290166 1/4/96 ..... 502958
1/4/90 ..... 228101 1/7/93 ..... 289250 1/11/96 ..... 504929
1/11/90 ..... 228427 1/14/93 ..... 292767 1/18/96 ..... 506981
1/18/90 ..... 228568 1/21/93 ..... 296251 1/25/96 ..... 503921
1/25/90 ..... 228642 1/28/93 ..... 300586 2/1/96 ..... 509044
2/1/90 ..... 228073 2/4/93 ..... 301377 2/8/96 ..... 509346
2/8/90 ..... 229647 2/11/93 ..... 305792 2/15/96 ..... 515332
2/15/90 ..... 227586 2/18/93 ..... 303503 2/22/96 ..... 523930
2/22/90 ..... 225040 2/25/93 ..... 301356 2/29/96 ..... 529208
3/1/90 ..... 224351 3/4/93 ..... 303372 3/7/96 ..... 546891
3/8/90 ..... 223812 3/11/93 ..... 304117 3/14/96 ..... 549096
3/15/90 ..... 221808 3/18/93 ..... 301803 3/21/96 ..... 551910
3/22/90 ..... 220507 3/25/93 ..... 302617 3/28/96 ..... 545127
3/29/90 ..... 223490 4/1/93 ..... 304825 4/4/96 ..... 554993
4/5/90 ..... 224500 4/8/93 ..... 312114 4/11/96 ..... 562062
4/12/90 ..... 222067 4/15/93 ..... 311432 4/18/96 ..... 559241
4/19/90 ..... 223465 4/22/93 ..... 312480 4/25/96 ..... 544205
4/26/90 ..... 222991 4/29/93 ..... 304784 5/2/96 ..... 549259
5/3/90 ..... 223360 5/6/93 ..... 309814 5/9/96 ..... 551297
5/10/90 ..... 223171 5/13/93 ..... 310221 5/16/96 ..... 553043
5/17/90 ..... 223637 5/20/93 ..... 312958 5/23/96 ..... 550963
5/24/90 ..... 229273 5/27/93 ..... 312869 5/30/96 ..... 553973
5/31/90 ..... 227715 6/3/93 ..... 319112 6/6/96 ..... 563166
6/7/90 ..... 227961 6/10/93 ..... 323213 6/13/96 ..... 561601
6/14/90 ..... 231712 6/17/93 ..... 324459 6/20/96 ..... 553403
6/21/90 ..... 230141 6/24/93 ..... 324112 6/27/96 ..... 549345
6/28/90 ..... 227365 7/1/93 ..... 314236 7/4/96 ..... 547336
7/5/90 ..... 227069 7/8/93 ..... 313312 7/11/96 ..... 550556
7/12/90 ..... 226749 7/15/93 ..... 318112 7/18/96 ..... 549228
7/19/90 ..... 228606 7/22/93 ..... 313664 7/25/96 ..... 553814
7/26/90 ..... 226398 7/29/93 ..... 311303 8/1/96 ..... 559611
8/2/90 ..... 228665 8/5/93 ..... 314855 8/8/96 ..... 553739
8/9/90 ..... 230611 8/12/93 ..... 324505 8/15/96 ..... 555005
8/16/90 ..... 232658 8/19/93 ..... 325011 8/22/96 ..... 560583
8/23/90 ..... 234705 8/26/93 ..... 325654 8/29/96 ..... 564101
8/30/90 ..... 234544 9/2/93 ..... 326229 9/5/96 ..... 580109
9/6/90 ..... 235236 9/9/93 ..... 325559 9/12/96 ..... 583427
9/13/90 ..... 237565 9/16/93 ..... 328957 9/19/96 ..... 579080
9/20/90 ..... 234483 9/23/93 ..... 333061 9/26/96 ..... 585105
9/27/90 ..... 233886 9/30/93 ..... 332545 10/3/96 ..... 591049
10/4/90 ..... 236673 10/7/93 ..... 331132 10/10/96 ..... 588066
10/11/90 ..... 237075 10/14/93 ..... 325914 10/17/96 ..... 592665
10/18/90 ..... 237628 10/21/93 ..... 327016 10/24/96 ..... 593389
10/25/90 ..... 238792 10/28/93 ..... 334033 10/31/96 ..... 596136
11/1/90 ..... 240993 11/4/93 ..... 334929 11/7/96 ..... 600971
11/8/90 ..... 239590 11/11/93 ..... 337191 11/14/96 ..... 603941
11/15/90 ..... 241442 11/18/93 ..... 346024 11/21/96 ..... 607563
11/22/90 ..... 241956 11/25/93 ..... 344746 11/28/96 ..... 610668
11/29/90 ..... 245965 12/2/93 ..... 346488 12/5/96 ..... 616949
12/6/90 ..... 252573 12/9/93 ..... 346455 12/12/96 ..... 613715
12/13/90 ..... 250491 12/16/93 ..... 345158 12/19/96 ..... 612387
12/20/90 ..... 248971 12/23/93 ..... 352077 12/26/96 ..... 610954
12/27/90 ..... 250684 12/30/93 ..... 348827 1/2/97 ..... 618074
1/9/97 ..... 617935
1/16/97 ..... 621744
1/23/97 ..... 616303
Source: Federal Reserve
- --------------------------------------------------------------------------------
During 1996, most measures of inflation remained stable, but pressure is rising
on wage and energy prices. The Chairman of the U.S. Federal Reserve warned on
January 21 that "the relatively modest wage gains we have seen are a
transitional rather than a lasting phenomenon" and that "the recent pickup in
some measures of wages suggests that the transition may already be running its
course." In the U.S., the decline in the growth of average hourly earnings and
the employment cost index bottomed in 1992, and these indicators have
subsequently risen. By December, both hourly and weekly annualized earnings over
the past three months had risen by 4.8%. Wage costs comprise the bulk of total
costs and thus are a prime determinant of prices. Moreover, increased demand for
products and services, especially food and energy from emerging economies, is
fueling underlying inflation.
Gold is Undervalued
Gold has performed in a lackluster manner for eight years, during which time its
price has averaged $373 an ounce. Since 1989, the U.S. Consumer Price Index has
risen 32%, from 118.3 to 156.7, and it is still rising. If the price of gold had
risen by the same percentage during this period, it would sell at about $500 an
ounce today. Historically, over long time periods, the price of gold has
maintained its purchasing power compared to the decline in the purchasing power
of currencies, but it moves in cycles.
<PAGE>
Since 1989, there has been a fundamental shortage of gold based on fabrication
and net investment demand for gold compared with supply of mine production and
old gold scrap. The difference has been made up by net additional mine forward
sales, option hedging and gold loans (largely through central banks) and net
central bank sales. Last year the two important factors putting pressure on
prices were European central bank sales and speculative short sales in
anticipation of central bank sales. Also, Japanese net investment demand was
lower due to a return to a more normal level from the exceptional demand in 1995
(the time of the Kobe earthquake). There was a steady decrease in investments in
France because of the deflationary effect of the drive toward European Monetary
Union, as well as in North America, where gold had to compete with the stock
market. Producer hedging over the year was neutral.
Gold has been subject to strong speculative forces because there has been no
open coordinated central bank policy concerning monetary gold reserves. No
currency is convertible into gold at fixed rates. Opportune factors seem to be
the rule. Last year, the Belgian central bank reportedly sold 200 tonnes of gold
to create a profit to reduce its fiscal deficit. The Netherlands' central bank
sold 300 tonnes, the proceeds of which were to be invested into interest-bearing
foreign currency reserves. Russia's central bank bought about 100 tonnes. China
and eight other central banks also purchased gold.
The greatest current issue is how much gold will be pooled into the European
Central Bank reserve and what will happen to it and to any possible remaining
reserves in member national banks. An official of the Bank of England said late
last year, "The window of opportunity for gold sales, in terms of using the book
profits to reduce external debt in the way Belgium has done, is going to close
in about a year's time and so the threat to the gold price from this source
should be time-expired." On January 10, 1997, Bank of France Governor Jean
Claude Trichet said that France's gold reserves represent "an important element
of confidence" for the French economy, the franc and the French people as well.
The historical fact is that, over the long-term, gold has maintained its
purchasing power. Currencies based on monetized government debt continuously
have lost purchasing power. Since 1970, the dollar's purchasing power has fallen
approximately 75%. Gold monetary reserves are a hedge against the consequences
of constant political pressures to keep interest rates low and to finance fiscal
deficits.
Deflationary Scenario
There are rising trends toward economic and financial risks and imbalances, in
our opinion, which threaten the current period of prosperity in the U.S.:
1) The growth in debt may not be sustainable. There is still a heavy burden of
old debt which helped to fuel the boom of the 1980's. The ratio of private
sector debt to gross domestic product in the U.S. climbed from 100% to 128%
during the 1980's and receded only slightly before climbing strongly again
during the past two years. During the past fifteen years, the ratio of household
debt to disposable income has climbed from about 65% to 95% (see chart below).
The burden of debt service payments has risen accordingly. There is an alarming
uptrend in personal bankruptcies and credit card defaults. The pressure of
compound interest on debtors is growing ever more powerful. The preferred option
is always more and more debt--until the game finally ends.
Household Debt as % of Personal Disposable Income
12/31/81 -- 9/30/96
[The following table represents a line chart in the printed report]
Q4 81 .................. 66.1% Q2 89 .................. 82.1%
Q1 82 .................. 65.9% Q3 89 .................. 83.1%
Q2 82 .................. 65.4% Q4 89 .................. 84.3%
Q3 82 .................. 65.0% Q1 90 .................. 83.9%
Q4 82 .................. 65.4% Q2 90 .................. 84.6%
Q1 83 .................. 64.4% Q3 90 .................. 84.9%
Q2 83 .................. 64.9% Q4 90 .................. 85.8%
Q3 83 .................. 65.4% Q1 91 .................. 85.6%
Q4 83 .................. 66.0% Q2 91 .................. 85.7%
Q1 84 .................. 64.8% Q3 91 .................. 86.0%
Q2 84 .................. 65.4% Q4 91 .................. 86.6%
Q3 84 .................. 65.8% Q1 92 .................. 85.1%
Q4 84 .................. 67.5% Q2 92 .................. 84.7%
Q1 85 .................. 69.2% Q3 92 .................. 85.6%
Q2 85 .................. 69.5% Q4 92 .................. 84.8%
Q3 85 .................. 71.8% Q1 93 .................. 85.8%
Q4 85 .................. 73.5% Q2 93 .................. 85.7%
Q1 86 .................. 72.6% Q3 93 .................. 87.1%
Q2 86 .................. 74.1% Q4 93 .................. 87.4%
Q3 86 .................. 75.8% Q1 94 .................. 89.0%
Q4 86 .................. 77.9% Q2 94 .................. 88.5%
Q1 87 .................. 76.8% Q3 94 .................. 89.2%
Q2 87 .................. 79.9% Q4 94 .................. 90.2%
Q3 87 .................. 80.5% Q1 95 .................. 89.7%
Q4 87 .................. 80.0% Q2 95 .................. 91.1%
Q1 88 .................. 79.5% Q3 95 .................. 92.1%
Q2 88 .................. 80.5% Q4 95 .................. 92.8%
Q3 88 .................. 80.9% Q1 96 .................. 92.9%
Q4 88 .................. 82.1% Q2 96 .................. 93.9%
Q1 89 .................. 81.1% Q3 96 .................. 94.3%
Source: DATASTREAM
- --------------------------------------------------------------------------------
2) There may be a systemic risk to the economy in the event of a stock market
crash. Risk is greatest where financial market valuations are high and investor
fear is low. The possibility of a cumulative global deflationary spiral cannot
be dismissed. Including this bull market, there have been six great inflationary
periods in financial assets since the South Sea Bubble of 1720. In each case,
once securities speculation was over, real prices of gold rose for three years.
3) The growth in derivatives may run ever larger counterparty
<PAGE>
risks. The outstanding credit exposure of the major banks is estimated at $2.4
trillion, more than three times the capital of the world's 75 largest banks.
4) The current strength of the dollar could gradually reverse and be replaced by
another period of dollar weakness. If this becomes serious it may raise
questions about the dollar's status as a reserve currency. The United States'
interest payments to foreigners on government securities has been greater than
its investment income since 1994. Its deficit on investment income will continue
to grow as a natural consequence of running persistent current account deficits.
There are risks that the normal recession "stabilizers" may not be effective in
the future. Excessive government debts have reduced the potency of fiscal policy
as a reflationary weapon. In Japan, monetary stimulation has been ineffective in
boosting demand. Short-term interest rates have been reduced to 1/2 of 1% in
Japan, and in Switzerland they have been lowered to 1 1/4%.
Conclusion
It may take time for the gold market to digest recent central bank sales.
However, if no further significant European central bank sales are made, the
undervalued gold market could, in due course, reverse its bearish sentiment and
resume its long-term upward trend.
Longer term, history shows that there are periods when gold and gold-mining
shares substantially outperform industrial shares. During the years 1929-32,
1971-74 and 1976-80, gold investors were up to approximately ten times better
off than investors in the Dow Jones Industrial Average. Only in the 1960's, when
the price of gold was controlled by the central banks, has the ratio of the Dow
to the price of gold been as high as it is currently--about 19. In other words,
it has been a long time since the Dow has been as overvalued and gold shares as
undervalued in relation to each other. In our opinion, the probabilities of a
new inflationary cycle followed by a serious recession over the next few years
could well see another period of declining investor confidence and of gold and
gold shares outperforming the Dow. This is the reason your Fund remains
concentrated in gold-mining shares.
No one knows the future. However, there is merit in contingency planning. Risks,
especially systemic risks, should be hedged and managed prudently. Gold has
proven itself in times of financial stress as a good long-term store of value
not subject to default. Accordingly, we recommend that at least 5% of investment
portfolios be diversified into gold-mining shares for possible capital wealth
preservation and capital appreciation potential.
We appreciate your participation in the Gold/Resources Fund and look forward to
helping you meet your investment objectives in the future.
[PHOTO] [PHOTO]
/s/ John C. van Eck /s/ Lucille Palermo
John C. van Eck Lucille Palermo
Chairman Portfolio Manager
January 29, 1997
- --------------------------------------------------------------------------------
Performance Record as of 12/31/96
- --------------------------------------------------------------------------------
Average Annual After Maximum Before
Total Return Sales Charge of 5.75% Sales Charge
- --------------------------------------------------------------------------------
Life (since 2/15/86) 5.4% 6.0%
- --------------------------------------------------------------------------------
10 year 3.5% 4.1%
- --------------------------------------------------------------------------------
5 year 7.6% 8.9%
- --------------------------------------------------------------------------------
1 year (3.4)% 2.5%
- --------------------------------------------------------------------------------
The performance data represents past performance and is not indicative of future
results. Investment return and principal value of an investment in the Fund will
vary so that shares, when redeemed, may be worth more or less than their
original cost.
Note: C shares are no longer publicly offered.
<PAGE>
GOLD/RESOURCES FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Shares Securities(a) Value (Note 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Australia: 25.7%
275,000 Acacia Resources Ltd.+ $ 535,530
1,650,000 Australian Resources Ltd. 944,282
900,000 Consolidated Gold N.L. 336,222
350,000 Croesus Mining N.L. 228,122
678,500 Delta Gold N.L. 1,272,762
313,600 Dominion Mining Ltd.+ 234,309
156,800 Dominion Mining Ltd. (Option expiring 12/31/98)+ 61,070
700,000 Eagle Mining Corp.+ 1,524,522
230,000 Emperor Mines Ltd.+ 447,898
627,875 Ghana Gold Mines Ltd. 99,813
400,000 Ghana Gold Mines Ltd. (Option expiring 6/30/97)+ 25,435
140,000 Giralia Resources N.L.+ 22,256
750,000 Goldstream Minerals N.L. 435,180
488,400 Great Central Mines N.L. 1,389,773
274,354 Herald Resources Ltd. 202,805
351,483 Imperial Mining N.L. 32,128
471,576 Macraes Mining Co. Ltd. 1,087,013
400,000 Menzies Gold N.L.+ 181,226
150,000 M.I.M. Holdings Ltd. 209,841
650,000 Mount Burgess Gold Mining Co. N.L.+ 134,330
400,000 Mount Leyshon Gold Mines Ltd. 877,515
1,065,000 Newcrest Mining Ltd. 4,232,576
1,083,033 Normandy Mining Ltd. 1,497,877
225,680 Placer Pacific Ltd. 333,650
2,482,500 Plutonic Resources Ltd. 11,543,308
771,428 Resolute Samantha Gold N.L. 1,606,504
799,400 Sons of Gwalia N.L. 4,721,044
------------
34,216,991
------------
Canada: 35.9%
400,000 Barrick Gold Corp. 11,500,000
63,400 Bema Gold Corp.+ 376,954
92,000 Bolivar Goldfields Ltd.+ 73,828
732,100 Dayton Mining Corp.+ 4,860,193
25,000 Dayton Mining Corp. (Warrant expiring 7/31/97)+(b)* 38,300
490,350 El Callao Mining Corp.+ 468,618
320,000 Goldcorp Inc. (Class A) 2,720,000
40,000 Iamgold International African Mining Gold Corp. 194,054
250,000 International Rorrima Gold
(Special Warrant expiring 12/18/97)+(b)* 191,975
75,600 Indochina Goldfields Ltd.+ 887,952
75,000 Meridian Gold Inc. 177,822
320,800 Miramar Mining Corp.+ 1,404,195
56,000 Nevsun Resources
(Special Warrant expiring 9/24/97)+(b)* 267,734
250,000 Northern Crown Mines
(Special Warrant expiring 11/28/97)+(b)* 198,851
200,000 Pegasus Gold Inc.+ 1,512,500
250,000 Placer Dome Inc. 5,437,500
285,000 Prime Resources Group Inc. 2,016,779
415,000 Richmont Mines Inc. 1,740,835
300,000 Rift Resources Ltd.+ 297,647
200,000 Royal Oak Mines Inc.+ 650,000
270,000 Solitario Resources Corp.+ 533,795
555,278 Star Resources Corp. 133,680
240,000 Teck Corporation (Class B) 5,559,001
505,000 Tombstone Exploration Co. Ltd.+ 792,085
312,500 Tombstone Exploration Co. Ltd.
(Warrant first exercise date 5/23/97)+(b)* 34,197
450,000 TVX Gold Inc.+ 3,487,500
320,100 Viceroy Resource Corp.+ 1,424,483
700,000 Vista Gold Corp.+(c) 944,738
------------
47,925,216
------------
<CAPTION>
No. of Shares Securities(a) Value (Note 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ghana: 1.1%
30,191 Ashanti $ 373,614
84,000 Ashanti Goldfields Co. Ltd. (GDR) 1,039,500
30,191 Ashanti Goldfields Co.
Deferred Payment Obligation* 73,432
------------
1,486,546
------------
Peru: 0.4%
32,000 Co. De Minas Buenaventura S.A. (ADR) 546,000
------------
United States: 34.1%
50,000 Agnico Eagle Mines, Ltd. 700,000
645,872 Battle Mountain Canada Inc. (Exchangable Shares) 4,440,370
550,000 Battle Mountain Gold Co. (Class A) 3,781,250
305,000 Canyon Resources Corp. 800,625
303,700 Crown Resources Corp. 1,879,144
177,200 Echo Bay Mines Ltd. 1,173,950
359,000 Freeport McMoran Copper & Gold (Class A) 10,096,875
45,000 Getchell Gold Corp. 1,726,875
675,000 Homestake Mining Co. 9,618,750
75,000 Newmont Gold Co. 3,281,250
78,569 Newmont Mining Corp. 3,515,964
1,000,000 Piedmont Mining Co. Inc.(c) 375,000
195,200 Santa Fe Pacific Gold Corp. 3,001,200
715,000 USMX, Inc. 1,139,531
------------
45,530,784
------------
Total Stocks & Other Investments: 97.2%
(Cost $93,957,075) 129,705,537
============
Princ. Amt. Short-Term Obligations: 2.8%
- ---------------------------------------------------
$ 3,760,000 General Electric Capital Corp. Commercial Paper
1/02/97 Interest Yield of 5.57%
(Amortized Cost $3,760,000) 3,759,426
------------
Total Investments: 100% (Cost: $97,717,075) $133,464,963
============
</TABLE>
- ----------
(a) Unless otherwise indicated, securities owned are shares of common stock.
(b) Restricted security, see Note 6.
(c) Affiliated company, see schedule of affiliated company transactions.
* Fair value as determined by the Board of Trustees.
+ Non-income producing.
Glossary:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
Summary of
Investments % of
by Industry Portfolio
- ---------- ---------
Gold mining ............................................... 84.0%
Copper .................................................... 8.0%
Metals and mining ......................................... 3.3%
Commercial paper .......................................... 3.0%
Industrial metals ......................................... 1.5%
Metals--Miscellaneous ..................................... 0.2%
-----
100.0%
=====
See Notes to Financial Statements.
<PAGE>
GOLD /RESOURCES FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1996
Assets:
Investments at value (cost, $97,717,075) (Note 1) $ 133,464,963
Receivables:
Capital shares sold 55,904
Dividends 17,302
Unrealized appreciation on open forward
currency contracts (Note 7) 905
Other assets 1,980
-------------
Total assets 133,541,054
-------------
Liabilities:
Payables:
Due to custodian 153,428
Capital shares redeemed 854,454
Accounts payable 234,797
-------------
Total liabilities 1,242,679
-------------
Net Assets $ 132,298,375
=============
Class A
Shares outstanding 23,115,766
=============
Net asset value and redemption price per share
($132,298,375/23,115,766) $ 5.72
=============
Maximum offering price per share
(NAV/(1-maximum sales commission)) $ 6.07
=============
Net assets consist of:
Aggregate paid in capital $ 167,482,628
Unrealized appreciation of investments
and foreign currency 35,746,571
Distributions in excess of net
investment income (656,109)
Cumulative realized losses (70,274,715)
-------------
$ 132,298,375
=============
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended December 31, 1996
Income:
Dividends (less foreign taxes withheld of $81,103) $ 1,315,925
Interest income 217,350
------------
Total income 1,533,275
Expenses:
Management (Note 2) $ 1,198,836
Distribution Class A (Note 4) 399,612
Administrative (Note 2) 468,945
Transfer agent 381,929
Custody 39,454
Professional 66,641
Reports to shareholders 53,685
Trustees fees 23,711
Other 98,296
------------
Total expenses 2,731,109
------------
Net investment loss (1,197,834)
Realized and Unrealized Gain
on Investments (Note 3)
Realized gain from security transactions 11,608,917
Realized loss from foreign currency transactions (1,760)
Change in unrealized appreciation (depreciation) of
foreign denominated receivables and payables (1,558)
Change in unrealized appreciation of investments (3,340,865)
------------
Net Increase in Net Assets Resulting from Operations $ 7,066,900
============
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended December 31, 1996 and 1995
1996 1995
------------- -------------
Decrease in Net Assets:
Operations:
Net investment loss $ (1,197,834 $ (776,800)
Realized gain from
security transactions 11,608,917 9,074,322
Realized loss from options -- (65,625)
Realized gain (loss) from foreign
currency transactions (1,760) 622
Change in unrealized
appreciation (depreciation) of
foreign denominated receivables
and payables (1,558) 241
Change in unrealized appreciation of
investments (3,340,865) 1,142,851
------------- -------------
Increase in net assets resulting
from operations 7,066,900 9,375,611
------------- -------------
Capital share transactions:*
Net proceeds from sales of shares
Class A Shares 98,482,977 172,364,530
Class C Shares -- 47,982
------------- -------------
98,482,977 172,412,512
------------- -------------
Cost of shares reacquired
Class A Shares (129,225,878) (211,854,936)
Class C Shares -- (77,390)
------------- -------------
(129,225,878) (211,932,326)
------------- -------------
Decrease in net assets
resulting from capital share
transactions (30,742,901) (39,519,814)
------------- -------------
Total decrease
in net assets (23,676,001) (30,144,203)
Net Assets:
Beginning of year 155,974,376 186,118,579
------------- -------------
End of year (including distributions
in excess of net investment income
of $656,109 and $671,349k
respectively $ 132,298,375 $ 155,974,376
============= =============
*Shares of Beneficial Interest
Issued and Redeemed
(unlimited number of $.001
par value shares authorized)
Class A Class A
------------- -------------
Shares sold 15,679,748 33,182,418
Shares reacquired (20,524,479) (40,012,589)
------------- -------------
Net decrease (4,844,731) (6,830,171)
============= =============
Class C Class C
------------- -------------
Shares sold -- 9,917
Shares reacquired -- (14,997)
------------- -------------
Net decrease -- (5,080)
============= =============
See Notes to Financial Statements.
<PAGE>
GOLD/RESOURCES FUND
- --------------------------------------------------------------------------------
Schedule of Affiliated Company Transactions
Transactions with affiliates for the year ended December 31, 1996 (as defined in
the Investment Company Act of 1940) of the Fund are listed below:
<TABLE>
<CAPTION>
Purchases Sales
12/31/95 -------------- -------------- 12/31/96
Share Realized Share Market Dividend
Issuer Balance Shares Cost Shares Cost Gain (Loss) Balance Value Income
--------- ------- ---- ------- ---- ----------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Piedmont Mining Co., Inc. 1,000,000 -- -- -- -- -- 1,000,000 375,000 --
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each year
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990(c) 1989(c) 1988(c) 1987(c)
----- ----- ----- ----- ----- ----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ..... $5.58 $5.35 $6.34 $3.56 $3.73 $3.90 $5.33 $4.49 $5.72 $3.90
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment
Operations:
Net Investment Income
(Loss) .............. (0.06) (0.03) (0.02) (0.014) 0.002 0.010 0.025 0.002 0.01 0.02
Net Gains (Losses) on
Securities (both
realized and
unrealized) ......... 0.20 0.26 (0.97) 2.794 (0.170) (0.169) (1.430) 0.846 (1.23) 1.82
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment
Operations ............ 0.14 0.23 (0.99) 2.780 (0.168) (0.159) (1.405) 0.848 (1.22) 1.84
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Dividends from
Net Investment
Income (a) .......... -- -- -- -- (0.002) (0.011) (0.025) (0.008) (0.01) (0.02)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of
Year .................. $5.72 $5.58 $5.35 $6.34 $3.56 $3.73 $3.90 $5.33 $4.49 $5.72
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return (b) ........ 2.51% 4.3% (15.6%) 78.09% (4.50%) (4.07%) (26.36%) 18.90% (21.30%) 47.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of
Year (000) ............ $132,298 $155,974 $186,091 $211,450 $114,257 $136,288 $175,171 $252,860 $228,558 $252,717
Ratio of Expenses to
Average Net
Assets ................ 1.71% 1.81% 1.52% 1.39% 1.57% 1.62% 1.44% 1.48% 1.39% 1.27%
Ratio of Net Income
(Loss) to Average
Net Assets ............ (0.75%) (0.44%) (0.30%) (0.29%) 0.07% 0.27% 0.57% 0.04% 0.23% 0.39%
Portfolio Turnover Rate 12.95% 6.16% 13.75% 7.79% 0.93% 7.89% 12.12% 4.17% 1.59% 1.99%
Average Brokerage
Commissions Paid (d) . $0.0186
</TABLE>
- -------------
(a) Net of foreign taxes withheld (to be included in income and claimed as a
tax credit or deduction by the shareholder for federal income tax purposes)
of $.0060 for 1992, $.0080 for 1991, $.0083 for 1990, $.0070 for 1989,
$.0051 for 1988 and $.0237 for 1987.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the year, reinvestment of dividends at net
asset value during the year and a redemption on the last day of the year. A
sales charge is not reflected in the calculation of total return.
(c) Not covered by Report of Independent Accountants.
(d) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades in
which a commission is charged.
See notes to Financial Statements.
<PAGE>
GOLD/RESOURCES FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 1 -- Significant Accounting Policies:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Gold/Resources Fund series, a diversified fund (the "Fund") of the Trust
in the preparation of its financial statements. All of Gold/Resources Fund Class
C shares were redeemed on May 4, 1995 and are not presently offered for sale.
The policies are in conformity with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates and the actual
results could differ.
A. Security Valuation -- Securities traded on national exchanges and traded in
the NASDAQ National Market System are valued at the last sales prices
reported at the close of business on the last business day of the year.
Over-the-counter securities not included in the NASDAQ National Market
System and listed securities for which no sale was reported are valued at
the mean of the bid and asked prices. Direct investments in gold bullion if
any are valued at the mean of the bid and asked price quoted by a major
commodity dealer. Short-term obligations are valued at cost which with
accrued interest approximates value. Securities for which quotations are
not available are stated at fair value as determined by the Board of
Trustees.
B. Federal Income Taxes -- It is the Fund's policy to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
C. Currency Translation-- Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated
into U.S. dollars at the mean of the bid and asked prices of such
currencies. Purchases and sales of investments are translated at the
exchange rates prevailing when such investments were acquired or sold.
Income and expenses are translated at the exchange rates prevailing when
accrued. The portion of realized and unrealized gains and losses on
investments that result from fluctuations in foreign currency exchange
rates are not separately disclosed. Recognized gains or losses attributable
to foreign currency fluctuations on foreign denominated assets and
liabilities are recorded as net realized gains and losses from foreign
currency transactions.
D. Distribution to Shareholders-- Distributions from net investment income and
realized gains, if any, are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions, net operating losses, passive
foreign investment companies and post-October losses. The effect of these
differences for the year ended December 31, 1996 decreased distributions in
excess of net investment income by $1,213,074, increased cumulative
realized losses by $11,692 and decreased aggregate paid in capital by
$1,201,382.
E. Other -- Security transactions are accounted for on the date the securities
are purchased or sold. Dividend income is recorded on the ex-dividend date
net of withholding taxes. Interest income is accrued as earned.
F. Option Contracts-- The Fund may invest, for hedging purposes only, in call
and put options on securities, foreign currencies and commodities. Call and
put options give the Fund the right but not the obligation to buy (calls)
or sell (puts) the instrument underlying the option at a specified price.
The premium paid on the option, should it be exercised, will, on a call,
increase the cost of the instrument acquired and, on a put, reduce the
proceeds received from the sale of the instrument underlying the option. If
the options are not exercised, the premium paid will be recorded as a
capital loss upon expiration. The Fund may incur additional risk to the
extent the value of the underlying instrument does not correlate with the
anticipated movements of the option values.
Note 2 -- Van Eck Associates Corporation earned fees of $1,198,836 for the year
ended December 31, 1996 for investment management and advisory services. The fee
is based on an annual rate of .75 of 1% of the first $500 million of average
daily net assets, .65 of 1% on the next $250 million and .50 of 1% of the excess
over $750 million. Van Eck Securities Corporation received $33,278 for the year
ended December 31, 1996 from commissions earned on sales of Class A shares of
beneficial interest of the Fund after deducting $231,559 allowed to other
dealers. Van Eck Associates Corp. earned a fee of $468,945 for costs incurred in
connection with certain administrative and operational functions. The fee is
based on an annual rate of .25 of 1% on the first $750 million of average net
assets and .20 of 1% of the excess over $750 million. Certain of the officers
and trustees of the Trust are officers, directors or stockholders of Van Eck
Associates Corporation and Van Eck Securities Corporation.
Note 3 -- Purchases and proceeds from sales of investments other than short-term
obligations aggregated $19,986,034 and $50,400,743, respectively, for the year
ended December 31, 1996. For federal income tax purposes the cost of investments
owned at December 31, 1996 was $97,717,075. As of December 31, 1996 net
unrealized appreciation for federal income tax purposes aggregated $35,747,888
of which $51,014,814 related to appreciated investments and $15,266,926 related
to depreciated investments. At December 31, 1996 the Fund had capital loss
carryforwards of 70,079,832 available to offset future capital gains expiring
December 31, 1998, 1999, 2000 of $30,782,696, $31,737,707 and $7,559,429,
respectively.
Note 4 -- Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund
accrues fees of .25 of 1% of average daily net assets of the Fund. The fees are
intended to be used principally for payments to securities dealers who have sold
shares and service shareholder accounts and payments to Van Eck Securities
Corporation ("VESC"), the distributor, for reimbursement of other actual
promotion and distribution expenses incurred by the distributor on behalf of the
Fund.
Note 5 -- The Fund invests in foreign securities. Investments in foreign
securities may involve a greater degree of risk than investments in domestic
securities due to political, economic or social instability. In addition, some
foreign companies are not generally subject to the same uniform accounting,
auditing and financial rules as are American companies, and there may be less
government supervision and regulation. Foreign investments may also be subject
to foreign taxes, dividend collection fees and settlement delays.
<PAGE>
GOLD/RESOURCES FUND
- --------------------------------------------------------------------------------
The Fund may concentrate its investments in companies which are significantly
engaged in the exploration, development, production or distribution of gold and
other metals, minerals, oil, natural gas and coal and by investing in gold
bullion and coins. Since the Fund may so concentrate, it may be subject to
greater risks and market fluctuations than other more diversified portfolios.
The production and marketing of gold and other natural resources may be affected
by actions and changes in governments. In addition, gold and natural resources
securities may be cyclical in nature.
Note 6 -- Restricted Securities
The following securities are restricted as to sale:
<TABLE>
<CAPTION>
Percent of
Date Net Assets
Acquired Cost Value at 12/31/96
-------- ------- -------- -----------
<S> <C> <C> <C> <C>
Dayton Mining
Warrant .................... 1/13/96 -- 38,300 .03%
International
Rorrima Gold
Special Warrant ............ 10/22/96 147,951 191,975 .15%
Nevsun Resources
Special Warrant ............ 9/24/96 409,806 267,734 .20%
Northern Crown
Mines Special
Warrant .................... 11/28/96 242,212 198,851 .15%
Rift Resources Ltd
Warrants ................... 11/13/96 -- -- --
Tombstone Explor-
ation Co. Wt ............... 10/3/96 -- 34,197 .03%
Vista Gold Corp. .............
Warrants ................... 4/25/96 -- -- --
</TABLE>
Note 7 -- Forward Currency Contracts -- The Fund may buy and sell forward
foreign currency contracts to settle purchases and sales of foreign denominated
securities. In addition, the Fund may enter into forward foreign currency
contracts to hedge foreign denominated assets. Realized gains and losses from
forward foreign currency contracts are included in realized gain from foreign
currency transactions. At December 31, 1996, the Fund had the following
outstanding forward foreign currency contract which settled in early 1997:
Foreign Currency Buy Contracts:
Value at Unrealized
Contracts Settlement Date Current Value Appreciation
- -------------- ---------------- ------------- ---------------------
AUD 352,275
expiring in
12/20/96 $279,242 $280,147 $905
The Fund may incur additional risk from investments in forward currency
contracts if the counterparty is unable to fulfill its obligation or there are
unanticipated movements of the foreign currency relative to the U.S. dollar.
Note 8 -- Trustee Deferred Compensation Plan. The Trust established a Deferred
Compensation Plan (the "Plan") for trustees. Commencing January 1, 1996, the
Trustees can elect to defer receipt of their trustee fees until retirement,
disability or termination from the board. The Fund's contributions to the Plan
are limited to the amount of fees earned by the participating trustees. The fees
otherwise payable to the participating trustees are invested in shares of the
Van Eck Funds as directed by the trustees. If a trustee has directed all or a
portion of his fee to be invested in the Fund, the unfunded liability remains
outstanding in the Fund's records since the Fund can not invest in itself. The
Plan has been approved by the Internal Revenue Service.
As of December 31, 1996, the total value of the assets and corresponding
liability of the Fund's portion of the Plan is $13,984.
<PAGE>
GOLD/RESOURCES FUND
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Report of Independent Accountants
To the Shareholders and Board of
Trustees of the Van Eck Funds:
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio of the Gold/Resources Fund (the "Fund") (one of the
series constituting the Van Eck Funds) as of December 31, 1996, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the six years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Gold/Resources Fund series of the Van Eck Funds as of December 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the six years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 21, 1997
<PAGE>
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<PAGE>
VAN ECK FAMILY OF FUNDS
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Global Hard Assets Fund
Seeks long-term capital appreciation by investing globally, primarily in "Hard
Asset Securities." Income is a secondary consideration.
International Investors Gold Fund
Founded in 1955, this Fund is the oldest gold-oriented mutual fund in the U.S.
It invests in gold-mining shares globally and seeks long-term capital
appreciation, moderate yield and protection against monetary uncertainties.
Gold/Resources Fund
Seeking a long-term global hedge against inflation and other risks, this Fund
invests in gold-mining and natural resources companies outside South Africa.
Gold Opportunity Fund
Seeks capital appreciation by investing globally in equity securities of
companies engaged in the exploration, development, production and distribution
of gold and other precious metals, and through active asset allocation between
gold-related assets and cash instruments.
Emerging Markets Growth Fund
This Fund seeks long-term capital appreciation by investing primarily in equity
securities in emerging markets around the world.
Asia Dynasty Fund
This Fund seeks long-term capital appreciation by investing in the equity
securities of companies that are expected to benefit from the development and
growth of the economies in the Asia Region.
Asia Infrastructure Fund
Seeks long-term capital appreciation by investing in the equity securities of
infrastructure companies that are expected to benefit from the development and
growth of the economies in the Asia Region.
Global Balanced Fund
This Fund seeks long-term capital appreciation together with current income by
investing in stocks, bonds and money market instruments worldwide.
Global Income Fund
This Fund seeks high total return through a flexible policy of investing
globally, primarily in debt securities.
U.S. Government Money Fund
This Fund seeks the highest safety of principal and daily liquidity by investing
in U.S. Treasury bills and repurchase agreements collateralized by U.S.
Government obligations.
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This report must be accompanied or preceded by a Van Eck Gold and Money Funds
prospectus, which includes more complete information, such as charges and
expenses and the risks associated with international investing, including
currency fluctuations or controls, expropriation, nationalization and
confiscatory taxation. For a free Van Eck Global Funds prospectus, please call
the number listed below. Please read the prospectus before investing.
[LOGO] VAN ECK GLOBAL
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
http://www.vaneck.com
For account assistance please call (800) 544-4653
FR1197-0130-0040
FR1997-0130-0040
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D E C E M B E R 3 1 , 1 9 9 6
VAN ECK
GOLD/
RESOURCES
FUND
ANNUAL
REPORT
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[LOGO] VAN ECK GLOBAL
