<PAGE> 1
VAN ECK GLOBAL BALANCED FUND
1996 ANNUAL REPORT
Dear Fellow Shareholder:
While not surpassing 1995's exceptionally high returns, global equity markets
produced strong gains in 1996, supported by low interest rates and moderate
economic growth. After selling off sharply in the first quarter due to worries
over stronger-than-expected growth, global bond markets rose modestly. The
Global Balanced Fund recorded a 12.3% total return for the year ended December
31, 1996.
GLOBAL EQUITY MARKETS
Similar to 1995, most major world stock markets produced excellent returns in
1996. The Japanese market was the notable exception. While the impetus for
higher global equity prices varied by market, continued favorable global
monetary policy, along with moderate but controlled economic expansion, provided
an attractive investment backdrop for global equities. For the year, global
equities increased 14.0%, an impressive result considering the 15.4% decline in
the Japanese market (in dollars). The U.S. market again performed well on the
back of continued moderate economic growth, low inflation and good corporate
earnings growth. European equities turned in very strong performances (up 21.6%)
as investors focused on the benefits to continental interest rates from the more
likely implementation of European Monetary Union (EMU). Unrealized expectations
of a sharp rebound in economic and corporate earnings growth and a likely fiscal
tightening for 1997 contributed to the poor investment results in Japanese
equities. Asia Pacific and Latin American markets registered gains of 21%-22% on
average, though performance within these regions was quite different on a
country- and stock-specific basis.
U.S. equities gained 24.1% in 1996, benefiting from strong corporate
profitability and the favorable supply/demand situation with respect to cash
inflows into mutual funds and net corporate buybacks of shares. The market
showed surprising resilience earlier in the year after a sharp sell-off in the
bond market as signs of strengthening economic growth surfaced. As the year
progressed, worries of an accelerating economy faded, producing a reversal in
the bond market and underpinning equity valuations. In this moderate growth
environment, we focused on secular growth themes, overweighting sectors such as
technology, financials and drugs. The former two sectors were the best
performing groups in the U.S., increasing 44.0% and 41.2%, respectively, in
1996.
Though economic expansion was weak in most Continental European countries,
several factors combined to support the strong rally in European shares. A weak
economy encouraged the German Bundesbank and neighboring central banks to lower
short-term interest rates. In addition to bolstering bond prices, this
development had a corresponding positive impact on equity values. Further, in
response to declining inflation, central banks in the peripheral European
countries, such as Sweden, Spain and Italy, lowered base rates significantly,
while their governments addressed fiscal deficits in order to qualify for EMU.
This resulted in a sharp convergence of bond yields throughout the European
markets, much to the benefit of the peripheral equity markets. In such an
environment, it was no surprise that Sweden (+38.0%) and Spain (+41.3%) outpaced
their European counterparts. The UK (+27.4%) and Ireland (+32.0%) also turned in
solid gains, though most of their gains were due to strong domestic economies
and export-led expansions. The Fund's exposure to sought after growth stocks
(SGS-Thomson, Compass Group) and corporate restructuring stories (Hoechst, Royal
Dutch) contributed to the strong performance versus the European index.
Although Japan's economic growth will probably end the March 1997 fiscal year
near 2.5%, expectations by the investment community for higher economic growth
were not met, thereby disappointing market observers. The
weaker-than-anticipated recovery and limited commitment of Japanese companies to
restructure their operations resulted in only modest earnings growth compared to
the declines suffered during the recession of the 1990's. The impact of slower
growth in the current year is compounded when considering changes that will
occur in fiscal policy for 1997. Much of the pick-up that was seen in consumer
spending in 1996 was in anticipation of an increase in the consumption tax from
3% to 5% in April 1997. Thus, even though economic growth in 1996 fell short of
expectations, some of the 1997 consumer spending has already been brought
forward to the current year. This "borrowed" spending, combined with a reduction
in government infrastructure expenditures for 1997, led analysts to downgrade
their growth expectations for Japan in 1997 as well. In the weak Japanese equity
market, autos (on the strength of new models and consumer spending growth) and
non-commodity technology companies recorded above-average investment results due
to strong growth in volumes and profits. In 1996, the Fund was underweighted in
Japan. Specifically, the portfolio was underweighted in Japanese financial
stocks due to fundamental weakness in the banking sector. We overweighted the
portfolio in export-related and technology stocks as the weak yen made companies
in these areas more competitive on a global basis. The cyclical upturn in
technology stocks also prompted us to overweight the Fund in high-tech issues.
There was a marked difference in year-to-date performance among the various Asia
Pacific markets. Hong Kong was clearly the star performer (+33.1%). The market
benefited from a U.S. bond rally after the March sell-off, a recovery in the
Hong Kong residential property market, a stronger Chinese economy and reduced
tension over China's takeover of Hong Kong set for July 1, 1997. The Fund's
overweighted position
<PAGE> 2
in Hong Kong property and financial stocks (Cheung Kong, HSBC) helped
performance as those sectors fared well given the economic backdrop. The
Malaysian market (+25.9%) also benefited from a well-managed cooling of the
previously overheated economy and a marked turnaround in its trade balance.
Conversely, Singapore (-6.9%), Korea (-38.1%) and Thailand (-36.6%) dealt with
weaker export growth in response to the poor DRAM semi-conductor market, high
interest rates, which reigned in previously high economic growth, and political
unrest (in the latter two countries).
Latin American equities produced excellent gains on balance, increasing 22.2%
for the year. Performance among the four major markets differed. Brazil
(+42.5%), Mexico (+18.0%), and Argentina (+20.3%) turned in solid investment
results, while Chile (-13.5%) lagged its regional neighbors as the country's
perennially strong economy decelerated slightly. Economies in Brazil, Mexico and
Argentina showed strong signs of recovering from the 1995 recessions sparked by
the devaluation of the Mexican peso in late 1994. In Brazil, recently (or soon
to be) privatized companies in the utility sector outperformed the market, while
private-sector companies sharply underperformed the local index. Our emphasis on
public-sector companies and, in particular, Telebras (telecom) and Cemig
(electricity) contributed significantly to the Fund's returns. Strength in
Mexican and Argentine shares were more company specific, however, the Argentine
market rallied significantly following the dismissal of former Finance Minister
Cavallo. Investors were encouraged that government reforms started by Mr.
Cavallo would continue under a new government led by Roque Fernandez.
GLOBAL BOND MARKETS
1996 was bittersweet for global fixed income investors. In local currency terms,
every major bond market outpaced the U.S. market, but an appreciating U.S.
dollar erased most of those gains.
Global bonds also experienced an unusual year. The three major bond markets, the
U.S., Japan and Germany, produced the lowest returns, while the riskiest
markets, which include emerging markets and the peripheral European markets,
produced the best investment results.
The U.S. market was the most volatile in 1996 as perceptions of the economy's
strength remained unclear throughout the year. Early in 1996, the Federal
Reserve cut short-term interest rates in response to seemingly weak economic
activity. A series of strong employment reports and rising consumer spending
quickly dashed hopes of further interest rate cuts, prompting some of the
largest one-day price declines in a decade. After being as low as 5.95% on
January 3, the yield on the 30-year U.S. Treasury bond hit a high of 7.19% for
1996 on June 12. Analysts feared that stronger growth would prompt the Federal
Reserve to raise rates. For the balance of 1996, however, yields fell back to
around 6.6% as growth remained steady and the likelihood of any move by the Fed
receded. The dollar benefited from the relative strength of the U.S. economy and
falling interest rates overseas, leading the dollar to its highest levels
against the yen since early 1993. Throughout the year, we hedged a portion of
the Fund's currency exposure back to U.S. dollars, protecting that part of the
portfolio from the negative impact of a rising greenback.
The Canadian and Australian markets have typically tracked the U.S. market
closely, tending to outperform the U.S. when bonds rally and underperform when
they sell off, but this pattern was shattered last year. Political developments
in both countries (the election of a conservative government in Australia and
the lessening of the Quebec sovereignty threat in Canada) boosted these markets,
while continued progress to reduce fiscal deficits and favorable inflation
outcomes permitted central banks to cut interest rates. In Canada, the subdued
pace of domestic demand led the Canadian central bank to drop short-term rates
below U.S. rates and down to the lowest levels in a generation. Bond yields in
both countries fell even as U.S. yields rose.
European bond markets were dominated by two related influences: the European
Monetary Union (EMU) project and the weakness of economic activity. Politicians
across Europe continually affirmed their commitment to make EMU happen on
schedule in 1999. Accordingly, financial markets moved to reflect the increasing
probability of EMU, bringing yields in core European markets (most notably
France) down to the same levels as Germany. Meanwhile, the Italian and Spanish
governments continued to press for membership to EMU from the beginning, despite
budget deficits that seemed likely to miss the reference levels specified in the
Maastricht Treaty EMU blueprint (the "criteria") by a wide margin. Nevertheless,
the building momentum towards EMU helped these markets as investors began to
price in the possibility of EMU membership in 2000 or 2001. When governments
announced very ambitious budget plans aimed at achieving the reference criteria,
a renewed round of yield convergence followed, bringing 10-year Italian yields
to 1.75% over German government bonds, from 4.75% at the beginning of the year.
Sluggish growth and falling interest rates and inflation provided further
reasons for investors to increase weightings in these "peripheral markets."
Approximately 25%-30% of the Fund's bond holdings were in the peripheral markets
for much of the year.
The German economy's sluggish growth performance continued throughout 1996, the
only bright spot being the export sector, which benefited from the depreciation
of the German mark against the dollar and other European currencies. The
Bundesbank dropped short-term rates to 3%, which brought down long-term yields.
In France, the government's commitment to EMU was sorely tested by double-digit
unemployment, industrial action and plummeting popular support.
The UK bond market was the desert in the middle of the oasis in Europe. While
"convergence europhoria" reigned elsewhere, the government took an increasingly
hard-line and isolated position on EMU. A vanishing parliamentary majority
forced the government to take heed of its Eurosceptic wing, leading the
government to all but rule out membership of EMU in 1999. Relations with other
members of the European Union
<PAGE> 3
were further soured by the government's handling of the "mad cow disease"
crisis. The economic situation was also very different, with growth resurgent,
prompting the Bank of England to raise interest rates even as rates were falling
elsewhere in Europe. This growth environment sent the pound soaring but held
back bond prices. By December 31, we increased the Fund's allocation to the
"gilt" market, with UK yields now the highest in Europe.
Following an astonishingly strong first quarter, the Japanese economy proved
disappointing in 1996. Demand remained anemic despite the government's decision
to hold short-term interest rates at 0.5% for the year. The financial sector
utilized the increased liquidity in the domestic and international bond markets
to repair balance sheets that had been destroyed by five years of falling equity
and real estate values. Bond yields fell to record low levels (below 2.5% for
10-year bonds). The Ministry of Finance encouraged foreign investment to push
down the value of the yen (and to boost exports) and to raise returns above the
dismal investment results offered by Japanese assets. These capital outflows
also contributed to the strong performance of some overseas markets this year
(notably Australia). Throughout the year, the Fund was underweighted in Japanese
government bonds because of their low yields relative to bonds in other
countries (10-year bond yields hovered between 2.5% - 3.0%). The total return on
Japanese bonds in both local currency and U.S. dollar terms was well below the
returns recorded by bonds in other countries.
THE OUTLOOK
Similar to the beginning of 1996, we have a favorable investment outlook for
global financial assets and expect reasonable investment results in the year
ahead. We don't anticipate global equity returns to match those of the past two
years. With a moderate growth, low inflation backdrop, we continue to favor
stocks over bonds, with approximately two-thirds of your Fund currently invested
in global equities. We anticipate further dollar strength versus the Japanese
yen and have positioned the portfolio accordingly.
With the exception of Japanese equities, we expect international stocks to
outperform the U.S. in 1997, though on a stock-selective basis, we continue to
find attractive investment ideas domestically. Global inflation does not appear
to be a concern, while growth in the UK, Europe, Latin America and Asia Pacific
should accelerate, with the corresponding favorable impact on corporate earnings
growth in those regions. With inflationary concerns relatively low, the
interest-rate backdrop is likely to remain favorable for equities. Your
portfolio is positioned to capitalize on the growth potential in these regions,
with particular emphasis on companies that can benefit from secular investment
themes, such as aging demographics, technological change, corporate
restructuring, industry consolidation and emerging markets growth. The counter
to our positive stance on the above regions is our underweighted position in
Japan, where economic growth remains modest and will likely suffer in 1997 as
planned fiscal tightening further restricts consumer spending.
In the fixed income markets, European bonds should provide good returns early in
the year because central banks will continue to offset tight fiscal policy with
low interest rates. Additionally, all markets should benefit from the
continuation of Japanese outflows, which should push down the value of the yen
further. Within the dollar block, Australian bonds are likely to still provide
superior performance relative to the U.S. With yields still extremely low in
Japan, bonds there offer little value. The new "Euro-friendly" UK government
should help boost UK bond prices by midyear.
We appreciate your participation in the Global Balanced Fund and look forward to
helping you meet your investment goals in the future.
[PHOTO] [PHOTO] [PHOTO]
/s/Anne M. Tatlock /s/Steven J. Miller /s/Anthony S. Gould
- ------------------ ------------------- -------------------
Anne M. Tatlock Steven J. Miller Anthony S. Gould
Global Strategist Global Equity Global Bond
Manager Manager
January 21, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERFORMANCE RECORD AS OF 12/31/96
- --------------------------------------------------------------------------------
AVERAGE ANNUAL AFTER MAXIMUM BEFORE
TOTAL RETURN SALES CHARGE+ SALES CHARGE
- --------------------------------------------------------------------------------
<S> <C> <C>
A shares - Life (since 12/20/93) 5.7% 7.5%
- --------------------------------------------------------------------------------
1 year 7.0% 12.3%
- --------------------------------------------------------------------------------
B shares - Life (since 12/20/93) 5.8% 6.6%
- --------------------------------------------------------------------------------
1 year 6.5% 11.5%
- --------------------------------------------------------------------------------
</TABLE>
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.
The Advisor is currently waiving certain or all expenses on the Fund. Had the
Fund incurred all expenses, investment returns would have been reduced.
+ A shares: maximum sales charge -- 4.75%
B shares: maximum contingent deferred sales charge -- 5.00%
Note: All equity performance figures are Morgan Stanley Capital International
Indices.
<PAGE> 4
REPRESENTATIVE EQUITY HOLDINGS*
-------------------------------
DECEMBER 31, 1996
AMERICAN INTERNATIONAL GROUP (AIG)
(U.S., 5.0%)
American International Group (AIG) is the premier growth company in the global
insurance business with over 50% of its revenues generated overseas. AIG's
earnings growth is due largely to its superior financial strength, market
leadership in numerous insurance and financial segments and balanced mix of
domestic and international businesses. The company is well positioned to benefit
from the increasing need for financial service products resulting from aging
global demographics.
BANK OF IRELAND
(IRELAND, 0.7%)
The Bank of Ireland is the largest bank in the Republic of Ireland. The bank has
been experiencing strong growth in demand for traditional banking services due
to a very young Irish population that has begun entering the workforce and the
disproportionate share of foreign direct investment into Europe received by the
Irish economy. The bank is also well positioned with leading investment
management and brokerage divisions. Given our positive outlook for the Irish
economy and the favorable aforementioned demographic trend, we expect strong
profit growth to continue.
THE BOEING COMPANY
(U.S., 0.7%)
Boeing is the world's largest manufacturer of commercial airplanes with the
dominant market share position and the broadest product line offering. Recently,
the company announced it would acquire McDonnell-Douglas Corp. If approved by
the U.S. government, this merger would create a global aerospace powerhouse,
with revenues of roughly $48 billion and backlogs in excess of $100 billion. The
combination of Boeing's dominance in commercial aerospace and McDonnell-Douglas'
strength in defense contracting should also reduce Boeing's earnings cyclicality
and extend its earnings cycle. The merger is expected to be finalized by
midyear.
CHEUNG KONG (HOLDINGS) LTD.
(HONG KONG, 0.6%)
Cheung Kong is a leading Hong Kong investment company focusing on residential
property development. It has an estimated land bank of 12 million square feet.
Li Ka Shing, the majority owner (35%), is considered one of the most astute
businessmen in Hong Kong. The company is an excellent proxy for the Hong Kong
equity market and is a direct beneficiary of rising residential property prices.
It also provides a broader exposure to Hong Kong and China assets through its
50% investment interest in Hutchison Whampoa, a Hong Kong conglomerate with
interests in container terminals, infrastructure projects and
telecommunications.
HAYS PLC
(UK, 0.7%)
Hays is a leading UK service company with interests in distribution, employment
services and business mail services. The company is well positioned for future
growth in each of its businesses. In distribution, Hays should continue to
benefit from European trends toward the outsourcing of distribution to third
parties. With its employment services division, the company will benefit from
the increased usage of temporary personnel in a restructuring European
workforce. Finally, in its business mail services division, Hays is likely to
continue attracting lucrative business mail contracts from the bureaucratic UK
post office. Moreover, the company appears well positioned for the eventual
introduction of competition into the European postal markets. With its strong
portfolio of businesses and its proven ability to make very timely acquisitions,
Hays should continue its strong earnings growth into the future.
ROCHE HOLDINGS AG
(SWITZERLAND, 0.7%)
Roche is Switzerland's largest pharmaceutical company and ranks among the world
leaders in the industry. The company is divided into four main groups:
pharmaceuticals, vitamins and fine chemicals, diagnostics, and fragrances and
flavors. Roche maintains an extensive, diversified drug business with leading
positions in antibiotics, cardiac treatments and cancer therapies. The company's
acquisition of Syntex in 1994 has enhanced its research capability and expanded
its distribution network. Roche remains one of the highest quality investment
vehicles within the pharmaceutical sector.
SGS-THOMSON MICROELECTRONIC
(FRANCE, 0.9%)
SGS-Thomson is a broadly-based semiconductor manufacturer ranked 13th worldwide
and 6th in Europe based on sales. The company's four main businesses are focused
on high margin, value-added products in the following areas: dedicated products,
discrete and standard integrated circuits, memory products and programmable
products. SGS-Thomson is a world leader in 70% of its sales and is the leading
maker of analogue integrated circuits. Management's strategy is to have leading
technology and industry positions in above sector-average growth products and to
increase margins through an enhanced product mix. This strategy, in our
judgment, should bode well for the company.
TELECOMUNICACOES BRASILEIRAS (TELEBRAS)
(BRAZIL, 0.6%)
Telebras is a holding company that directly owns all of the telecommunications
concessions for local services as well as domestic and international
long-distance in Brazil. Currently, the Brazilian federal government is in the
process of deregulating the sector and privatizing Telebras at the subsidiary
level. The growth potential of the telecommunications sector in Brazil is very
attractive due to the government's inability to make the appropriate capital
expenditures in recent years and the relatively low telephone penetration levels
versus the rest of the region. In addition, Telebras' valuation ranks among the
least expensive telecom service providers in the region.
NOTE: Equities are listed as percentage of total investments held.
* Portfolio is subject to change.
<PAGE> 5
GLOBAL BALANCED FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (A) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
ARGENTINA: 1.2%
9,400 Banca de Galicia y Buenos Aires
(ADR) $ 227,950
2,800 Telecom Argentina (ADR) 113,050
-----------
341,000
-----------
AUSTRALIA: 1.0%
AUD 31,000 Government of Australia Bond
10.00% 10/15/2007 29,274
AUD 284,000 Government of Australia Bond
10.00% 2/15/2006 264,426
-----------
293,700
-----------
BRAZIL: 1.2%
5,300 Cemig S.A. (ADR) 180,200
2,200 Telecomunicacoes Brasileiras
S.A. (ADR) 168,300
-----------
348,500
-----------
CANADA: 3.0%
CAD 334,000 Government of Canada Bond 6.50%
6/01/2004 248,803
CAD 600,000 Government of Canada Bond 6.75%
8/28/2006 602,866
-----------
851,669
-----------
DENMARK: 1.5%
DKK 2,330,000 Denmark Government Bond 8.00%
3/15/2006 433,784
-----------
FRANCE: 3.0%
200 Carrefour S.A. 130,096
829 Castorama Dubois Investissement 142,639
1,200 Cetelem 138,729
3,700 Legardere SCA 101,518
2,900 Scor S.A.+ 101,975
3,600 SGS-Thomson Microelectronic+ 254,567
-----------
869,524
-----------
GERMANY: 3.9%
DEM 150,000 Bundesrepublik Obligation Bond
5.875% 5/15/2006 102,343
DEM 40,000 Deutschland Republic Bond 6.00%
1/05/2006 26,334
DEM 100,000 Deutschland Republic Bond 6.25%
1/04/2024 61,460
DEM 399,000 Deutschland Republic Bond
7.125% 12/20/2002 285,119
620 Fresenius AG (Pfd.) 127,943
3,100 Hoechst AG 146,249
8,200 Lufthansa AG 111,746
4,500 VEBA AG 259,896
-----------
1,121,090
-----------
HONG KONG: 3.3%
5,000 Asia Satellite
Telecommunications (ADR) 116,875
20,000 Cheung Kong (Holdings) Ltd. 177,775
111,266 First Pacific Co., Ltd.+ 144,576
9,262 HSBC Holdings PLC 198,184
82,971 Mandarin Oriental International 116,989
15,000 Sun Hung Kai Properties Ltd. 183,755
-----------
938,154
-----------
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (A) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
INDIA: 0.5%
3,400 India Magnum Fund 'B'+ $ 134,300
-----------
IRELAND: 1.6%
20,966 Bank of Ireland 191,190
IEP 80,000 Irish Government Bond 6.25%
4/01/1999 136,178
IEP 70,000 Irish Government Bond 6.50%
10/18/2001 120,436
-----------
447,804
-----------
ITALY: 6.5%
21,100 Banco Popolare di Milano 107,029
ITL 490,000,000 BTPS Bond 10.50% 7/15/2000 361,835
ITL 1,850,000,000 BTPS Bond 10.50% 7/15/1998 1,288,846
41,200 Fiat S.p.A. 124,577
-----------
1,882,287
-----------
JAPAN: 11.3%
11,000 Canon Inc. 242,706
8,800 Canon Sales Co. 195,682
1,000 Circle K Japan Co. Ltd. 43,094
9,000 Credit Saison Co., Ltd 200,905
16 DDI Corp. 105,632
JPY 50,000,000 Export-Import Japan Bond 2.875%
7/28/2005 438,806
JPY 20,000,000 IBRD World Bank Bond 4.50%
6/20/2000 192,631
1,000 Keyence Corp. 123,249
3,300 Laox 50,058
9,000 Matsushita Electric Industrial
Co., Ltd. 146,607
38,000 Mitsubishi Heavy Industries
Ltd. 301,315
77,000 NKK Corp. 173,213
50 NTT Data Communications 146,089
14,000 Onward Kashiyama Co., Ltd. 196,682
3,000 Rohm Co. 196,510
4,200 Sony Corp. (ADR) 275,625
15,000 Yamatake-Honeywell 241,758
-----------
3,270,562
-----------
MEXICO: 1.3%
17,000 Apasco S.A. 116,349
3,300 Coca-Cola Femsa S.A. (ADR) 95,288
3,400 Panamerican Beverage Inc. "A" 159,375
-----------
371,012
-----------
NETHERLANDS: 3.6%
3,293 Aegon N.V. 209,778
NLG 330,000 Netherland Government Bond
6.25% 7/15/1998 198,959
1,104 Nutricia Verenigde Bedri 167,679
3,900 Polygram N.V. 198,577
1,500 Royal Dutch Petroleum Co. (N.Y.
Registry Shares) (ADR)* 256,125
-----------
1,031,118
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE> 6
GLOBAL BALANCED FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (A) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
PHILIPPINES: 1.3%
162,000 Fortune Cement Corp. $ 81,593
USD 150,000 National Power Bond 8.40%
12/15/2016 149,250
USD 150,000 National Power Bond 7.875%
12/15/2016 149,445
-----------
380,288
-----------
PORTUGAL: 0.6%
2,500 Telecel-Comunicacaoes Pesso+ 159,523
-----------
SOUTH KOREA: 1.6%
KRW 320,000 Export/Import Bank Bond 6.375%
2/15/2006 316,406
10,403 Korea Mobile Telecom (ADR) 133,939
-----------
450,345
-----------
SPAIN: 3.4%
3,000 Banco de Santander 191,931
12,000 Iberdrola S.A. 169,989
ESP 39,060,000 Kingdom of Spain Bond 10.25%
11/30/1998 324,848
ESP 36,540,000 Kingdom of Spain Bond 8.405%
4/30/2001 307,603
-----------
994,371
-----------
SWEDEN: 1.9%
3,300 Astra AB "A" 162,481
3,100 Scania AB "A" 76,996
3,100 Scania AB "B" 77,222
SEK 1,700,000 Swedish Government Bond 6.00%
2/09/2005 240,787
-----------
557,486
-----------
SWITZERLAND: 2.6%
160 ABB AG 198,583
300 Clariant AG 128,140
96 Novartis AG+ 109,704
18 Roche Holdings Genuseheine
(Warrants expiring
5/05/1998)+ 584
26 Roche Holdings AG 201,856
7,700 Tag Heuer International S.A.
(ADR)+ 124,163
-----------
763,030
-----------
UNITED KINGDOM: 12.0%
9,000 British Aerospace PLC 197,511
GBP 29,000 British Air Capital Conv. Bond
9.75% 6/15/2005 131,481
42,000 Cable & Wireless PLC 349,915
19,100 Compass Group PLC 202,304
82 EMI Group PLC 1,938
22,000 Hays PLC 211,168
25,000 Lloyds TSB Group PLC 184,308
5,300 Reuters Holdings PLC (ADR) 405,450
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (A) (NOTE 1)
------------------------------------------------------------
10,481 Siebe PLC $ 194,205
38,000 Smith & Nephew PLC 117,786
11,370 SmithKline Beecham 157,619
GBP 145,000 United Kingdom Treasury Note
7.50% 12/07/2006 248,157
GBP 90,000 United Kingdom Treasury Note
8.00% 12/07/2015 159,905
GBP 450,000 United Kingdom Treasury Note
9.75% 8/27/2002 854,191
GBP 50,000 United Kingdom Treasury Note
10.00% 2/26/2001 93,840
-----------
3,509,778
-----------
UNITED STATES: 33.6%
5,000 American Express Company* 282,500
13,200 American International Group* 1,428,900
5,000 Baker Hughes Inc. 172,500
5,400 Bank of New York Co. Inc.* 182,250
2,500 Berkley (W.R.) Corp. 126,875
1,800 Boeing Co.* 191,475
2,500 Burlington Northern Santa Fe* 215,938
7,000 Cisco Systems, Inc. 445,375
5,800 Coastal Corp. 283,475
2,500 CPC International Inc. 193,750
3,500 Deere & Co. 142,188
4,000 Disney (Walt) & Co.* 278,500
3,000 Federal Home Loan Mortgage
Corp. 330,375
8,500 Federal National Mortgage
Assoc.+ 316,625
6,100 Federated Department Stores,
Inc.*+ 208,163
10,000 Fort Howard Corp.+ 276,875
3,000 General Electric Co. 296,625
3,500 Intel Corp. 458,281
USD 327,000 KFW International Finance Bond
7.50% 4/21/2005 342,196
3,000 Louisiana Land & Exploration
Co.* 160,875
6,000 Lucent Technologies Inc. 277,500
17,000 Merck & Co. 1,347,250
2,500 Mobil Corp. 305,625
4,000 Oracle Systems 167,000
3,400 Pfizer Inc. 281,775
2,000 Procter & Gamble Co.* 215,000
2,400 State Street Boston Corp. 154,800
USD 110,000 U.S. Treasury Bond 7.875%
2/15/2021* 124,369
USD 120,000 U.S. Treasury Note 7.00%
7/15/2006* 124,706
USD 260,000 U.S. Treasury Note 5.625%
11/30/2000 255,409
USD 90,000 U.S. Treasury Note 6.375%
5/5/1999* 90,802
-----------
9,677,977
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE> 7
GLOBAL BALANCED FUND
INVESTMENT PORTFOLIO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE
CONTRACTS SECURITIES (A) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
TOTAL STOCKS AND OTHER INVESTMENTS: 99.9%
(Cost: $21,691,434) $28,827,302
OPTIONS PURCHASED: 0.1%
900,000 Eurostyle Put Option U.S.
Treasury 7% due 7/15/2006
(strike @ USD 105.25 expiring
2/24/97)+
(Cost: $11,531) 17,719
-----------
TOTAL INVESTMENTS: 100%
(Cost: $21,702,965) $28,845,021
==========
</TABLE>
- ---------------
(a) Unless otherwise indicated, securities owned are shares of common stock.
* These securities are segregated for forward currency contracts.
+ Non-income producing.
Glossary:
ADR -- American Depositary Receipt.
<TABLE>
<CAPTION>
SUMMARY OF
INVESTMENTS % OF
BY INDUSTRY PORTFOLIO
---------- -------
<S> <C>
Aerospace & Defense
Technology 2.4%
Airlines 0.8%
Auto & Trucks 1.0%
Banks 4.3%
Beverages 0.9%
Building Materials 0.7%
Business Services 1.4%
Chemicals-Specialty 0.4%
Consumer Electronics 1.5%
Consumer Non-durable 0.7%
Country fund 0.5%
Distribution 0.7%
Electric Utilities 2.1%
Electronics &
Electrical
Equipment 1.7%
Engineering 1.5%
Entertainment &
Leisure 1.0%
Eurobonds 1.0%
Financial Services 5.1%
<CAPTION>
SUMMARY OF
INVESTMENTS % OF
BY INDUSTRY PORTFOLIO
---------- -------
<S> <C>
Food Processing 1.4%
Foreign Government
Bonds 26.2%
Healthcare 1.4%
Holding Companies 0.8%
Insurance 6.4%
Leisure 0.4%
Luxury Goods 0.4%
Machinery 0.5%
Media 1.4%
Oil & Gas 4.1%
Paper & Forest
Products 1.0%
Pharmaceuticals 8.3%
Real Estate 1.2%
Retail 3.4%
Steel 0.6%
Technology 7.5%
Technology Services 0.5%
Telecommunications 4.0%
Transportation 0.7%
U.S. Government
Agencies &
Obligations 2.1%
------
100.0%
======
</TABLE>
See Notes to Financial Statements.
<PAGE> 8
GLOBAL BALANCED FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost, $21,702,965) (Note 1).............................................................. $28,845,021
Cash........................................................................................................... 676,689
Receivables:
Securities sold.............................................................................................. 225,367
Interest and dividends....................................................................................... 291,558
Unrealized appreciation on open forward foreign currency contracts (Note 5).................................. 100,106
Capital shares sold.......................................................................................... 173,488
From Advisor................................................................................................. 16,509
Deferred organization costs.................................................................................. 13,773
Other assets................................................................................................. 4,581
-----------
Total assets............................................................................................. 30,347,092
-----------
LIABILITIES:
Payables:
Securities purchased......................................................................................... 94,866
Capital shares repurchased................................................................................... 306,446
Dividends payable............................................................................................ 411,259
Unrealized depreciation on open forward foreign currency contracts (Note 5).................................. 93,323
Distribution fees payable.................................................................................... 14,423
Accounts payable............................................................................................. 95,744
-----------
Total liabilities........................................................................................ 1,016,061
-----------
Net assets................................................................................................... $29,331,031
==========
CLASS A
Net asset value and redemption price per share
($24,399,362/2,353,938)...................................................................................... $10.37
======
Maximum offering price per share:
(NAV/1-maximum sales commission)............................................................................. $10.89
======
CLASS B
Net asset value, offering price and redemption price per share ($4,931,669/477,775) (Redemption may be subject
to a contingent deferred sales charge within the first six years of ownership)............................... $10.32
======
Net assets consist of:
Aggregate paid in capital.................................................................................... $22,185,739
Unrealized appreciation of investments, forward currency contracts and options............................... 7,157,573
Overdistributed net investment income........................................................................ (14,809)
Cumulative realized gains.................................................................................... 2,528
-----------
$29,331,031
==========
</TABLE>
See Notes to Financial Statements.
<PAGE> 9
GLOBAL BALANCED FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INCOME
Interest................................................................................ $ 753,869
Dividends (less foreign taxes withheld of $30,825)...................................... 287,718
-----------------
1,041,587
EXPENSES:
Management (Note 2)..................................................................... $ 242,447
Distribution--Class A (Note 4).......................................................... 134,738
Distribution--Class B (Note 4).......................................................... 53,787
Administrative (Note 2)................................................................. 104,145
Transfer agent.......................................................................... 119,526
Custodian............................................................................... 48,777
Professional............................................................................ 37,071
Reports to shareholders................................................................. 52,295
Registration............................................................................ 12,749
Amortization of organization costs...................................................... 6,906
Other................................................................................... 42,468
------------
854,909
Expenses assumed by the Advisor and reduced by custodian fee and directed brokerage
arrangements (Note 2)................................................................. (124,940)
------------
Total expenses.................................................................... 729,969
-----------------
Net investment income............................................................. 311,618
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3)
Realized gain from security transactions................................................ 3,755,314
Realized gain from foreign currency transactions........................................ 251,979
Realized loss on options................................................................ (5,023)
Change in unrealized appreciation of investments and options............................ (733,232)
Change in unrealized appreciation of forward currency contracts and other assets and
liabilities........................................................................... 13,058
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $ 3,593,714
================
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
GLOBAL BALANCED FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................................. $ 311,618 $ 95,512
Realized gain (loss) from security transactions....................................... 3,755,314 (149,178)
Realized gain (loss) from foreign currency transactions............................... 251,979 (126,137)
Realized loss on options.............................................................. (5,023) (126,372)
Change in unrealized appreciation (depreciation) of investments and options........... (733,232) 2,818,138
Change in unrealized appreciation of forward currency contracts and other assets and
liabilities......................................................................... 13,058 90,961
------------ -----------------
Increase in net assets resulting from operations...................................... 3,593,714 2,602,924
------------ -----------------
Dividends to shareholders from:
Net investment income:
Class A Shares...................................................................... (266,076) (316,521)
Class B Shares...................................................................... (27,916) (17,738)
------------ -----------------
(293,992) (334,259)
------------ -----------------
Net realized gain:
Class A Shares...................................................................... (2,388,543) --
Class B Shares...................................................................... (478,173) --
------------ -----------------
(2,866,716) --
------------ -----------------
433,006 2,268,665
------------ -----------------
Capital share transactions (Note 6):
Net proceeds from sales of shares:
Class A Shares...................................................................... 2,010,892 4,933,615
Class B Shares...................................................................... 489,537 967,866
------------ -----------------
2,500,429 5,901,481
------------ -----------------
Net asset value of shares issued in connection with acquisition--Class A Shares (Note
9).................................................................................. -- 19,351,109
------------ -----------------
Reinvestment of dividends:
Class A Shares...................................................................... 2,328,070 327,164
Class B Shares...................................................................... 372,827 28,882
------------ -----------------
2,700,897 356,046
------------ -----------------
Cost of shares reacquired:
Class A Shares...................................................................... (10,938,566) (9,470,615)
Class B Shares...................................................................... (2,147,338) (1,238,087)
------------ -----------------
(13,085,904) (10,708,702)
------------ -----------------
Increase (decrease) in net assets resulting from capital share transactions............. (7,884,578) 14,899,934
------------ -----------------
Total increase (decrease) in net assets........................................... (7,451,572) 17,168,599
NET ASSETS:
Beginning of year....................................................................... 36,782,603 19,614,004
------------ -----------------
End of year (including overdistributed net investment income and undistributed net
investment income of $(14,809) and $53,307, respectively)............................. $29,331,031 $ 36,782,603
============ ================
</TABLE>
See Notes to Financial Statements.
<PAGE> 11
GLOBAL BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------ ------------------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
DECEMBER 20, DECEMBER 20,
1993(A) 1993(A)
YEAR ENDED DECEMBER 31, TO YEAR ENDED DECEMBER 31, TO
---------------------------------------- DECEMBER 31, ---------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $10.31 $9.07 $9.53 $9.53 $10.28 $9.02 $9.53 $9.53
------------ ------------ ------------ ------ ------------ ------------ ------------ ------
Income from
Investment
Operations:
Net Investment
Income......... 0.12 0.07+ 0.19+ -- 0.06 0.01 0.11+ --
Net Gain (Loss)
on Securities
(both
realized and
unrealized)... 1.15 1.31 (0.56) -- 1.14 1.28 (0.57) --
------------ ------------ ------------ ------ ------------ ------------ ------------ ------
Total from
Investment
Operations....... 1.27 1.38 (0.37) -- 1.20 1.29 (0.46) --
------------ ------------ ------------ ------ ------------ ------------ ------------ ------
Less
Distributions:
Dividends from
Net Investment
Income......... (0.11) (0.14) (0.09) -- (0.06) (0.03) (0.05) --
Distribution from
Capital Gains.. (1.10) -- -- -- (1.10) -- -- --
------------ ------------ ------------ ------ ------------ ------------ ------------ ------
(1.21) (0.14) (0.09) -- (1.16) (0.03) (0.05) --
------------ ------------ ------------ ------ ------------ ------------ ------------ ------
Net Asset Value,
End of Period.... $10.37 $10.31 $9.07 $9.53 $10.32 $10.28 $9.02 $9.53
====== ====== ====== ====== ====== ====== ====== =====
Total Return(b)... 12.28% 15.30% (3.90%) 0% 11.49% 14.54% (4.84%) 0%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of
Period (000).... $29,331 $30,632 $13,986 $562 $4,932 $6,151 $5,628 $130
Ratio of Gross
Expenses To
Average Net
Assets........... 2.54% 2.69% 2.59% 7.76% 3.19% 3.20% 3.21% 8.51%
Ratio of Net
Expenses to
Average Net
Assets........... 2.17%(c) 2.69% 1.06%(c) 0.25% *(c 2.71%(c) 3.20% 1.88%(c) 1.00%*(c)
Ratio of Net
Investment Income
(Loss) to Average
Net Assets....... 1.05% 0.68% 1.99% (0.25%)* 0.51% 0.14% 1.14% (1.00%)*
Portfolio Turnover
Rate............. 114.30% 196.69% 174.76% 0% 114.30% 196.69% 174.76% 0%
Average
Commissions Rate
Paid(d).......... $0.0399 $0.0399
</TABLE>
- ---------------
(a) Commencement of operations.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of dividends at net
asset value during the period and a redemption on the last day of the
period. A sales charge is not reflected in the calculations of total return.
Total return for a period of less than one year is not annualized.
(c) After expenses reduced by a custodian fee, directed brokerage or Advisory
fee waiver arrangement.
(d) For 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.
* Annualized.
+ Based on average shares outstanding.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Global Balanced Fund series, a non-diversifed fund (the "Fund") of the
Trust in the preparation of its financial statements. 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 amounts
could differ.
A. SECURITY VALUATION--Securities traded on national or foreign exchanges are
valued at the last sales prices reported at the close of business on the last
business day of the year. Over-the-counter securities and listed securities for
which no sale was reported are valued at the mean of the bid and asked prices.
Short-term obligations are valued at cost which with accrued interest
approximates value. Securities for which quotations are not available are stated
at fair value as determined by the Board of Trustees.
B. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the provisions
of the Internal Revenue Code applicable to regulated
<PAGE> 12
GLOBAL BALANCED FUND
- --------------------------------------------------------------------------------
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 quoted bid and asked prices of such currencies.
Purchases and sales of investments are translated at the exchange rates
prevailing when such investments were acquired or sold. Income and expenses are
translated at the exchange rates prevailing when accrued. Recognized gains or
losses on security transactions and other foreign currency denominated assets
and liabilities attributable to foreign currency fluctuations are recorded as
realized gains and losses from foreign currency transactions. The portion of
unrealized gains and losses on investments that result from fluctuations in
foreign currency exchange rates are not separately disclosed.
D. DISTRIBUTIONS--Dividends to shareholders from net investment income and
realized gains, if any, are recorded on the ex-dividend date. Income and capital
gains distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to the differing treatment of foreign currency
transactions, post-October losses and wash sales. The effect of these
differences for the year ended December 31, 1996 decreased undistributed net
investment income by $85,742, decreased overdistributed realized gains by
$60,258 and increased aggregate paid in capital by $25,484.
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. Interest
income is accrued as earned. Premiums paid on bonds purchased are not amortized.
F. DEFERRED ORGANIZATION COSTS--Deferred organization costs are being amortized
over a period not exceeding five years.
G. USE OF DERIVATIVE INSTRUMENTS
OPTION CONTRACTS--The Fund may invest, for hedging and other purposes, in call
and put options on securities, 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 movement of the option value.
The Fund may also write call or put options. As the writer of an option, the
Fund receives a premium. The Fund keeps the premium whether or not the option is
exercised. The premium will be recorded, upon expiration of the option, as a
short-term capital gain. If the option is exercised, the Fund must sell, in the
case of a written call, or buy, in the case of a written put, the underlying
instrument at the exercise price. The Fund may write only covered puts and
calls. A covered call option is an option in which the Fund owns the instrument
underlying the call. A covered call sold by the Fund exposes it during the term
of the option to possible loss of opportunity to realize appreciation in the
market price of the underlying instrument or to possible continued holding of an
underlying instrument which might otherwise have been sold to protect against a
decline in the market price of the underlying instrument. A covered put exposes
the Fund during the term of the option to a decline in price of the underlying
instrument. A put option sold by the Fund is covered when, among other things,
cash or short-term liquid securities are placed in a segregated account to
fulfill the obligations undertaken. The Fund may incur additional risk from
investments in written currency options if there are unanticipated movements in
the underlying currencies.
FORWARD CURRENCY CONTRACTS--The Fund may buy and sell forward currency contracts
to settle purchases and sales of foreign denominated securities. In addition,
the Fund may enter into forward currency contracts to hedge foreign denominated
assets. The Fund may incur additional risk from investments in forward currency
contracts if the counterparty is unable to fulfill its obligations or there are
unanticipated movements of the foreign currency relative to the U.S. dollar.
Realized gains and losses from forward currency contracts are included in
realized gain (loss) from foreign currency transactions.
NOTE 2--Van Eck Associates Corporation (the "Advisor") earned fees of $242,447
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 Fund's average
daily net assets. Van Eck Associates Corporation also earned fees for accounting
and administrative services in the amount of $104,145 for the year ended
December 31, 1996. The fee is based on an annual rate of .25 of 1% of the Fund's
average daily net assets. For the period May 1, 1996 to December 31, 1996, the
Advisor has agreed to assume expenses in excess of 2% of the average daily net
assets of Class A shares and 2.5% of daily average net assets for Class B
shares. The Fund's expenses were reduced by $103,811 under this agreement.
Fiduciary International, Inc., the sub-investment advisor, earned fees of
$161,631 for the year ended December 31, 1996 for investment management. The fee
is based on an annual rate of .50 of 1% of the Fund's average daily net assets
and is paid by the Advisor from the advisory fees it receives from the Fund. Van
Eck Securities Corporation received $2,382 for the year ended December 31, 1996
from commissions earned on sales of Class A shares after deducting $11,231
allowed to other dealers. Certain of the officers and trustees of the Trust are
officers, directors or stockholders of Van Eck Associates Corporation and Van
Eck Securities Corporation.
The Fund directs certain portfolio trades to a broker that, in turn, pays a
portion of the Fund's operating expenses. The Fund also has a fee arrangement,
based on cash balances left on deposit with the custodian, which also reduces
the Fund's operating expenses. For the year ended December 31, 1996, the Fund's
expenses were reduced by $5,008 and $16,121, respectively, under these
arrangements. The Fund could have invested the assets used in connection with
the custodian fee arrangement in an income producing asset if it had not entered
into such an arrangement.
NOTE 3--Purchases and proceeds from sales of investments other than short-term
obligations, aggregated $35,676,207 and $42,511,283, respectively, for the year
ended December 31, 1996. For federal income tax purposes the cost of investments
owned at December 31, 1996 was $21,702,965. As of December 31, 1996 net
unrealized appreciation for federal income tax purposes aggregated $7,142,056 of
which $7,459,223 related to appreciated investments and $317,167 related to
depreciated investments.
NOTE 4--Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund is
authorized to incur distribution expenses which will principally be payments to
securities dealers who have sold shares and service shareholder accounts and
payments to Van Eck Securities Corporation ("VESC"), the distributor, for
reimbursement of other actual promotion and distribution expenses incurred by
the distributor on behalf of the Fund. The amount paid under the Plan in any one
year is limited to .50% of average daily net assets for Class A shares, and
1.00% of average daily net assets for Class B shares (the "Annual Limitation").
Distribution expenses incurred under the Plan that have not been paid because
they exceed the Annual Limitation may be carried forward to future years and
paid by the Fund within the Annual Limitation. VESC has waived its right to
reimbursement for the carried forward amounts as of December 31, 1995 through
April 30, 1997 in the event the Plan is terminated, unless the Board of Trustees
determines that reimbursement of carried forward amounts is appropriate.
<PAGE> 13
GLOBAL BALANCED FUND
- --------------------------------------------------------------------------------
The excess of distribution expenses incurred over the Annual Limitation at
December 31, 1996 was $510,763 for Class A shares and $350,823 for Class B
shares.
NOTE 5--FORWARD CURRENCY CONTRACTS--The Fund may buy and sell forward currency
contracts to settle purchases and sales of foreign denominated securities. In
addition, the Fund may enter into forward currency contracts to hedge foreign
denominated assets. Realized gains and losses from forward currency contracts
are included in realized loss from foreign currency transactions. At December
31, 1996, the Fund had the following outstanding forward currency contracts:
<TABLE>
<CAPTION>
VALUE AT UNREALIZED
SETTLEMENT CURRENT APPRECIATION
CONTRACTS DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY PURCHASE CONTRACTS:
AUD 22,000 expiring
1/17/97 $ 17,332 $ 17,483 $ 151
CAD 335,000 expiring
1/21/97 246,604 244,735 (1,869)
DEM 2,501,000 expiring
2/21/97 1,673,022 1,628,480 (44,542)
DKK 65,000 expiring
2/13/97 11,238 11,053 (185)
ESP 14,678,000
expiring 1/13/97 112,548 112,965 417
FRF 3,876,000 expiring
1/17/97 248,263 247,596 (667)
GBP 58,075 expiring
1/02/97 96,562 99,322 2,760
JPY 65,252,000
expiring 1/09/97 572,921 563,135 (9,786)
SEK 2,594,061 expiring
2/12/97 384,787 379,695 (5,092)
FOREIGN CURRENCY SALE CONTRACTS:
DEM 461,127 expiring
2/21/97 303,089 300,255 2,834
ESP 24,519 expiring
1/13/97 192,298 188,701 3,597
FRF 3,876,000 expiring
1/17/97 760,942 747,409 13,533
GBP 374,000 expiring
5/08/97 619,100 638,338 (19,238)
HKD 2,332,000 expiring
2/24/97 301,557 301,525 32
IEP 151,000 expiring
1/10/97 249,452 255,626 (6,174)
ITL 1,453,256 expiring
1/21/97 951,492 956,552 (5,060)
JPY 347,986,392
expiring
1/07/97-1/09/97 3,072,230 3,002,523 69,707
NLG 344,000 expiring
1/21/97 198,614 199,324 (710)
SEK 1,324,000 expiring
2/12/97 200,515 193,440 7,075
-------------
$ 6,783
==============
</TABLE>
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 6--Shares of Beneficial Interest Issued and Redeemed (unlimited number of
$.001 par value shares authorized):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
CLASS A
Shares sold 188,315 494,827
Shares issued in connection with
an acquisition -- 1,869,672
Reinvestment of dividends 224,134 32,689
------------ ------------
412,449 2,397,188
Shares reacquired (1,028,397) (970,107)
------------ ------------
Net increase (decrease) (615,948) 1,427,081
============ ============
CLASS B
Shares sold 46,481 100,484
Reinvestment of dividends 36,074 3,060
------------ ------------
82,555 103,544
Shares reacquired (202,890) (129,053)
------------ ------------
Net decrease (120,335) (25,509)
============ ============
</TABLE>
NOTE 7--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. Foreign investments
may also be subject to foreign taxes and settlement delays.
The Fund will attempt to maintain an asset allocation of 60% in equity
securities and 40% in debt securities. Since the Fund may have significant
investments in foreign debt securities it may be subject to greater credit and
interest risks and greater currency fluctuations than portfolios with
significant investments in domestic debt securities.
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 $2,861.
NOTE 9--As of the close of business on December 22, 1995, the Fund acquired all
the net assets of World Trends Fund pursuant to a plan of reorganization
approved by World Trends Fund shareholders on December 18, 1995. The acquisition
was accomplished by a tax-free exchange of 1,869,672 shares of Global Balanced
Fund (Class A) (valued at $19,351,109) for the 2,333,233 shares of World Trends
Fund outstanding on December 22, 1995. World Trends Fund's net assets at that
date, $19,351,109, including $5,370,095 of unrealized appreciation, were
combined with those of the Fund. The aggregate net assets of Global Balanced
Fund and World Trends Fund before the acquisition were $17,967,912 and
$19,351,109, respectively.
<PAGE> 14
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE
VAN ECK FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of the Global Balanced 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 three years in the period then ended and for the
period December 20, 1993 (commencement of operations) to December 31, 1993.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 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
Global Balanced 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 three years in the period then ended and for the period December
20, 1993 (commencement of operations) to December 31, 1993, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 21, 1997
<PAGE> 15
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<PAGE> 16
DECEMBER 31, 1996
VAN ECK
GLOBAL
BALANCED
FUND
ANNUAL
REPORT
[VAN ECK GLOBAL LOGO]
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 Global Funds
prospectus, which includes more complete information, such as charges and
expenses and the risks associated with international investing, including
currency fluctuations or controls, expropriation, nationalization and
confiscatory taxation. For a free Van Eck Gold & Money Funds prospectus, please
call the number listed below. Please read the prospectus before investing.
[VAN ECK GLOBAL LOGO]
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
http://www.vaneck.com
FOR ACCOUNT ASSISTANCE PLEASE CALL (800) 544-4653
