VAN ECK FAMILY OF FUNDS
- ------------------------------------------------------------------------------
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.
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.
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.
- --------------------------------------------------------------------------------
This report must be accompanied or preceded by a 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 and Money Funds or Van Eck Global 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
www.vaneck.com
FOR ACCOUNT ASSISTANCE PLEASE CALL (800) 544-4653
FX1997-0721-0021
====================
JUNE 30, 1997
VAN ECK
--------------------
EMERGING
--------------------
MARKETS
GROWTH FUND
SEMI-ANNUAL
REPORT
--------------------
====================
[LOGO]
VAN ECK GLOBAL
<PAGE>
VAN ECK EMERGING MARKETS GROWTH FUND
---------------------------------------
1997 SEMI-ANNUAL REPORT
Dear Fellow Shareholder:
We are pleased to report that the Van Eck Emerging Markets Growth Fund rose
19.9% during the first six months of 1997, outperforming the Morgan Stanley
Capital International (MSCI) Emerging Markets Free Index (+17.8%) and the Lipper
Emerging Markets Fund Average (+17.9%). This strong performance was due
principally to our emphasis early in the year on the Brazilian and Russian
markets and participation in Hong Kong's strong second quarter recovery.
The year started very positively with emerging markets seeing strong gains.
These slowed in February and reversed in March and April as the threat of rising
U.S. interest rates materialized. However, by May, U.S. growth had slowed and
the interest rate outlook had become more benign. This gave both local and
foreign investors confidence that the global backdrop would remain supportive
and most markets saw significant rallies.
Eastern Europe continued to lead spurred by the prospects of economic recovery
and cheap valuations: Russia rose 118% and Hungary 56%. The Fund had a
significant weighting in this region, particularly in Russia. Russia has made a
great deal of progress since Yeltsin's recovery from his heart operation. This
year Yeltsin appointed a reformist cabinet to restructure the tax system, clear
wage arrears and restructure the natural monopolies. So far the government has
collected a good proportion of overdue taxes, paid much of the wage backlog and
encouraged utilities to give discounts for cash payments of debts. Falling
inflation has led to a steep decline in interest rates and economic growth is
turning positive. Asset valuations are still far below comparables in the
developed world and we are confident this discount will narrow. Sector holdings
in Eastern Europe include energy and telecommunications in Russia and
pharmaceuticals in Hungary.
Latin America also performed well as the region's economies continued to
recover. The Brazilian market rose 54% stimulated by the passage of a
constitutional amendment enabling the re-election of President Cardoso. His
success in combating inflation via the Real plan has enabled progress on tariff
rebalancing (an adjustment of telephone usage billing) and privatization in the
public sector. The Fund's weighting in Brazil is largely focused on public
sector companies, particularly electricity and telecommunications.
Telecommunications tariff rebalancing and increased traffic has resulted in
strong profit gains for Telebras, the Fund's largest holding, as well as for
Telerj and Telepar, other Fund positions. In addition, the results of several
electricity companies already privatized provide evidence of the efficiency
gains possible from privatization. These gains, on top of rising tariffs, are
contributing to sharply rising profits in the electricity sector as well. Chile
rose 32% as local interest rates have been trending downwards. Mexico, Argentina
and Peru are all seeing stronger economic growth after recessions induced by the
Tequila crisis (the Mexican peso devaluation of 1994). Elsewhere in Latin
America, the Fund is focused on consumer and financial stocks.
In the Middle East, the Fund has focused on the NASDAQ-listed, Israeli-domiciled
pharmaceutical and technology sectors. Israel performed well, rising 26%, as the
government reduced its budget deficit and interest rates and inflation trended
lower, despite the stalled peace talks. Egypt (+24%) started the year strong,
but lost a little ground in the second quarter as the government slowed down the
pace of privatization.
Asia has had mixed performance over the past six months. Politics were a
non-issue, generally. The handover to China actually improved the prospects for
many Hong Kong blue chip companies, with many China-backed "red chips," some of
which the Fund owns, performing spectacularly. Despite the rioting shown on
television, the Indonesian elections created nothing more than a six-week fall
in the market, which was quickly recouped over the following six weeks. In
India, the fall of the Gowda Government did not signal any significant changes
<PAGE>
in government policy and the market rose strongly. Korean politics were as
tumultuous as ever, with high profile arrests, bankruptcies and student
demonstrations, but the bad news was in the market already and it rose, in fits
and starts, by over 11%.
In Thailand, a new Finance Minister floated the baht (Thailand's currency)
and the market fell sharply (-36%). The dollar's decline since 1985 resulted in
booming exports for many of the Southeast Asian economies, all of whose
currencies are targeted against the dollar. This dollar link led to too much
borrowing of relatively "cheap" dollars, leading to overcapacity, especially in
the property sector. Trouble arose when central banks tightened the screws to
reign in domestic growth just as exports to the developed world slowed
significantly. Higher interest rates and slower exports lead to slower
economies. In Thailand's case, a property bust and a move to a floating
currency ensued. The Fund's allocation to Thailand is very low at approximately
0.4% of assets.
With the exception of Malaysia, the currency problem is not acute in the rest of
the region. Singapore's currency floats freely and has appreciated over the last
several years. We expect the Philippine peso to begin to float as well, and a
large depreciation is not necessary given that exports are growing strongly.
Listed property developers are not highly leveraged and overseas worker
remittances largely cover the trade deficit. The Indonesian rupiah already moves
in a steady depreciation against the dollar, which goes a long way toward
covering the inflation differential.
The outlook for emerging markets remains positive. Economic growth in Eastern
Europe and Latin America is sufficient to keep pressure off reformist
governments, yet not so strong as to threaten overheating. In Southeast Asia, a
new export cycle this fall should provide the ingredient missing so far-
liquidity. The move to floating exchange rates will allow greater flexibility
for monetary policy and result in the better use of capital in the future. In
Greater China and India, liquidity conditions are in place for continued
strength. The possibility of an exogenous shock is always present, especially as
markets move to discount good news. However, currently emerging market
valuations are fair and earnings are improving against a background of declining
interest rates.
We appreciate your participation in the Emerging Markets Growth Fund and look
forward to helping you meet your investment goals in the future.
- -------------- ---------------
[PHOTO] [PHOTO]
- ------------- ---------------
JOHN C. VAN ECK GARY GREENBERG
CHAIRMAN PORTFOLIO MANAGER
July 23, 1997
- ------------------------------------------------------------------------------
PERFORMANCE RECORD AS OF 6/30/97
- ------------------------------------------------------------------------------
AFTER MAXIMUM BEFORE SALES
TOTAL RETURN+ SALES CHARGE ++ CHARGE
- ------------------------------------------------------------------------------
A shares-Life (since 12/30/96) 14.2% 19.9%
- ------------------------------------------------------------------------------
B shares-Life (since 12/30/96) 15.2% 20.2%
- ------------------------------------------------------------------------------
C shares-Life (since 12/30/96) 18.9% 19.9%
- -------------------------------------------------------------------------------
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.
+ not annualized
++ A shares: maximum sales charge = 4.75%
B shares: maximum contingent deferred sales charge = 5.00%
C shares: 1% redemption charge, 1st year
<PAGE>
TOP 10 EQUITY HOLDINGS*
--------------------------
AS OF JUNE 30, 1997
TELECOMUNICACOES BRASILEIRAS S.A. (TELEBRAS)
(BRAZIL, 4.2%)
Telebras is the monopoly telephone operator in Brazil for both cellular and
fixed line. Brazil has a very low penetration of telephone lines per capita. The
government has rebalanced tariffs to bring them into line with international
norms. Telebras is seeing major improvements in profitability levels from this
rebalancing and considerable cost savings from staff reduction. The company is
valued at a discount to other Latin American telecom companies and should be
fully privatized within the next several years.
TEVA PHARMACEUTICALS INDUSTRIES LTD.
(ISRAEL, 2.9%)
Teva is the largest company in Israel by market capitalization. Moreover, it is
a world class drug producer little affected by the vagaries of the peace
process. Teva's multiple sclerosis drug, Copaxone, was recently launched in the
U.S. and early indications of patient response are encouraging. Teva took over
U.S. drug producer Biocraft in 1996 to acquire a more significant presence in
the U.S. market. The company is also negotiating with European distributors to
strengthen its network in Europe and has acquired companies in the UK and
Hungary.
FOMENTO ECONOMICO MEXICANO, S.A. DE C.V.
(FEMSA)
(MEXICO, 2.7%)
Femsa has four main areas of business: soft drink bottling, brewing, packaging
and convenience stores. Femsa has a bottling joint venture with the Coca Cola
franchises for Mexico City and Buenos Aires. The beer division is seeing rising
volumes as a result of Mexico's economic recovery. The packaging division claims
to be the most efficient in Latin America, and the convenience stores are
expanding steadily.
PETROLEO BRASILEIRO S.A.
(BRAZIL, 2.7%)
The oil and gas production monopoly of Brazil, Petrobras, remains under state
control. Petrobras is unlikely to be fully privatized in the short run, but a
30% strategic stake is likely to be sold off. It has considerable reserves, both
proven and potential, and holds the world record for the deepest drilled marine
well. Recent developments in legislation governing the industry should result in
a much more favorable outlook for Petrobras as they will enable the company to
initiate joint ventures with international oil companies and remove loss-making
social obligations.
GRUPO FINANCIERO BANCOMER S.A.
(MEXICO, 2.6%)
Bancomer is Mexico's second largest bank, with "associates" (companies of which
Bancomer holds 20% - 50%) in insurance, asset management and other financial
services. Widespread loan default in the Mexican banking system last year
resulted in a government bailout of the banking sector. Since then, the bank has
been recapitalized and most loans have been restructured. Accounting regulation
changes have brought more transparency to Mexican bank financial statements. The
company is also part of a consortium providing long distance telephone service
in Mexico and has the largest market share in the nascent private pension fund
industry. The Mexican banking sector currently trades at around a 25% discount
to the Latin American average.
MOSENERGO
(RUSSIA, 2.5%)
Mosenergo has a monopoly on electricity distribution for Moscow, the most
important economic region in Russia, with a population of 14 million people.
Demand for electricity has been rising as the economy recovers. Further,
Mosenergo has been able to pass on all gas price increases to customers due to a
close relationship with the city government. As one of the few companies in
Russia with an ADR (American Depositary Receipt), Mosenergo is more liquid and
transparent than most stocks in Russia and is valued at less than half the
rating of similar companies in the U.S. with far better growth prospects.
BANCO FRANCES DEL RIO DE LA PLATA S.A.
(ARGENTINA, 2.4%)
Banco Frances is the second largest private bank in Argentina with approximately
5% of the country's loans and deposits. Previously emphasizing corporate
borrowers, Frances is now focusing on higher margin consumer lending as the
<PAGE>
decline in inflation and subsequent economic recovery leads to an increased
number of bank customers. In 1996, Banco Bilbao Vizcaya of Spain took a 30%
stake as part of its Latin American expansion strategy. This will give Banco
Frances additional management expertise and capital resources. A recent merger
with Banco Credito Argentino has also strengthened Frances' position, providing
a good strategic fit, increasing the branch network and the customer base.
KA WAH BANK
(HONG KONG, 2.4%)
Ka Wah Bank is a small bank in Hong Kong providing a range of general banking
and related financial services. CITIC Beijing, which is directly controlled by
the Chinese government, owns 61% of the bank. Ka Wah has recently adopted a more
aggressive strategy in its businesses and has increased its disclosure levels.
After a recent capital-raising exercise, the bank is well placed to achieve
faster growth.
CREDICORP LTD.
(PERU, 2.4%)
Peru's largest provider of banking, insurance and other financial services,
Credicorp should see significant loan demand as the Peruvian economy is growing
in excess of 5% per annum. Credicorp is well capitalized and has low levels of
non-performing loans, leaving it well positioned for expansion. Its insurance
business is 20% owned by AIG. Peru has a low penetration of banking services.
SURGUTNEFTEGAZ
(RUSSIA, 2.1%)
Russia's second largest integrated oil and gas production company, Surgut trades
at a large discount to similar Western companies. Surgut exports approximately
one- third of its production, providing foreign exchange for investment. As the
Russian economy regains liquidity, Surgut will be able to develop its reserves,
which should highlight its hidden value.
*Portfolio is subject to change.
Note: Equities listed as percentage of total net assets.
GEOGRAPHICAL DISTRIBUTION
----------------------------------
JUNE 30, 1997
PERCENT OF TOTAL NET ASSETS
[The following table represents a pie chart in the printed report.]
Russia 13.2%
Hong Kong 12.7%
Brazil 10.8%
Mexico 10.5%
Israel 6.9%
Indonesia 5.2%
Malaysia 4.9%
Philippines 4.4%
China 3.9%
Egypt 3.8%
Other Countries 7.0%
Hungary 3.1%
Argentina 3.0%
Chile 3.0%
Cash/Equiv. 7.6%
<PAGE>
EMERGING MARKETS GROWTH FUND
STATEMENT OF NET ASSETS JUNE 30, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------
NO. OF SHARES SECURITIES(a) VALUE (NOTE 1)
- -------------------------------------------------------------------------------
ARGENTINA: 3.0%
2,230 Banco Frances del Rio de la Plata S.A. (ADR) $ 72,475
1,102 IYE de la Patagonia Class B 16,202
-----------
88,677
-----------
BRAZIL: 10.8%
20,000 Banco Iteu S.A. Pfd. 11,315
470 Cemig SA (ADR) 24,205
374,000 Cia Eletricidade De Bah 34,431
2,700,000 Cia Paranaense De Energi-Pfb 48,158
2,900 Petroleo Brasileiro S.A. 80,475
825 Telecomunicacoes Brasileiras S.A. 125,194
-----------
323,778
-----------
CHILE: 3.0%
1,400 Banco De A. Edward 29,225
1,900 Santa Isabel S.A. (Sponsored ADR) 61,275
-----------
90,500
-----------
CHINA: 3.9%
40,000 Shenzhen Fangda Co. Ltd. 58,087
30,000 Huaneng Power International, Inc. 30,750
30,000 Huangshan Tourism Development Co. Ltd. 27,540
-----------
116,377
-----------
EGYPT: 3.8%
1,600 Commercial International Bank (GDR) 33,840
2,000 Eastern Tobacco Co. 50,607
1,480 Suez Cement Co. (GDR) 29,156
-----------
113,603
-----------
GREECE: 0.7%
600 Hellenic Bottling Co. S.A. 22,148
-----------
HONG KONG: 12.7%
2,000 Beijing Enterprises Holdings Ltd. 12,598
12,000 China Everbright-IHD Pacific Ltd. 35,859
8,000 China Light & Power Co., Ltd. 45,334
8,000 China Resources Enterprise, Ltd. 39,241
4,000 Citic Pacific Ltd. Ord. 24,990
5,106 Great Eagle Holdings Ltd. 16,840
21,000 Guangdong Investment Ltd. 31,580
11,000 Henderson China Hldg. Ltd. 18,530
6,000 Johnson Electric Holdings Ltd. 17,891
55,000 Ka Wah Bank 71,350
20,000 Min Xin Holdings 14,199
13,000 NG Fung Hong Ltd. 19,466
62,000 Qingling Motor Co. 32,012
-----------
379,890
-----------
HUNGARY: 3.1%
5,050 Euronet Services Inc. 55,866
400 Gedeon Richter Rt. (Sponsored GDR) 36,600
-----------
92,466
-----------
INDONESIA: 5.2%
7,000 Hanjaya Mandala Sampoe 26,696
22,000 PT Bank Bimantara "F" 38,446
27,500 PT Bank Bali Bira "F" 40,425
10,000 PT Ramayaha Lestari Sentosa "F" 28,783
3,000 PT Semen Gresik "F" 6,723
9,000 Putra Sarya Multiden 14,340
-----------
155,413
-----------
ISRAEL: 6.9%
16,000 Bank Leumi Le-Israel 24,257
3,000 Bio-Technology General Corp. 40,500
800 Orbotech Ltd. 25,600
4,000 Oshop Technologies Ltd. 29,500
1,360 Teva Pharmaceuticals Industries Ltd. (ADR) 88,060
-----------
207,917
-----------
MALAYSIA: 4.9%
10,000 Arab Malaysian Finance Berhad 21,386
13,000 KFC Holdings (Malaysia) Berhad 48,911
5,500 Malaysia Assurance Alliance Berhad 32,020
4,000 Tenaga Nasional Berhad 19,485
4,000 UMW Holdings Berhad 18,851
1,000 United Engineers (Malaysia) Ltd. 7,208
-----------
147,861
-----------
MEXICO: 10.5%
13,091 Cifra SA (ADR) 23,498
340 Coca-Cola Femsa (ADR) 17,553
13,500 Fomento Economico Mexicano, S.A. de C.V. 80,493
8,076 Grupo Financiero Bancomer S.A. (GDR) 78,741
2,802 Kimberly-Clark de Mexico S.A. (ADR) 55,340
13,000 Nacional de Drogas S.A. de C.V. Class "L" 44,327
300 Telefonos de Mexico S.A. de C.V. 14,325
-----------
314,277
-----------
PERU: 2.4%
3,220 Credicorp Ltd. (ADR) 70,840
-----------
PHILIPPINES: 4.4%
146,000 Belle Corp. 42,612
3,000 Benpres Holdings Corp. (GDR) 21,450
400 Philippine Long Distance Telephone Co. 12,963
11,510 San Miguel Ord. (Class B) 30,321
86,500 SM Prime Holdings Inc. 25,574
-----------
132,920
-----------
POLAND: 1.2%
1,415 Computerland Poland S.A. 34,874
-----------
RUSSIA: 13.2%
500 Kubanelektrorosvyas Pfd. 10,075
2,700 Leningrad Metals Plant 20,250
380 Lukoil Holding (ADR) 29,640
1,100 Lukoil Holdings Pfd. (ADR) 28,050
1,750 Mosenergo (ADR) 73,500
11 Norilsk Nickel Pfd. (RDC) 59,125
1 Rostelecom (RDC) 39,000
1,150 Surgutneftegaz (ADR) 61,525
800 Unified Energy Systems 28,951
500 UralTelecom 16,875
4,000 Uralmash Preferred 27,400
-----------
394,391
-----------
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
STATEMENT OF NET ASSETS JUNE 30, 1997 (CONTINUED)
- ------------------------------------------------------------------------------
NO. OF SHARES SECURITIES(a) VALUE (NOTE 1)
- ------------------------------------------------------------------------------
SINGAPORE: 1.7%
14,000 Clipsal Industries Ltd. $ 49,560
---------
SOUTH AFRICA: 0.5%
600 Liberty Life Assoc. of Africa Ltd. 16,050
---------
SOUTH KOREA: 0.1%
34 Korea Mobile Telecom
(Warrants Expiring 12/7/99) 3,398
---------
THAILAND: 0.4%
2,200 Bangkok Bank Public Co., Ltd. 11,513
---------
TOTAL INVESTMENTS: 92.4% (Cost: $2,485,646) 2,766,453
OTHER ASSETS LESS LIABILITIES: 7.6% 227,683
---------
NET ASSETS: 100.0% $2,994,136
=========
SUMMARY OF
INVESTMENTS % OF
BY INDUSTRY PORTFOLIO
- ---------- --------
Auto & Truck 1.8%
Banking/Insurance 7.9
Building Materials 2.1
Cement 1.3
Conglomerates 7.4
Consumer 4.4
Electric Utilities 11.0
Financial Services 12.5
Food Services 2.5
Infrasructure Development 0.3
Mail Operator 0.9
Metals 1.7
Mining 2.1
Motorcycle Financing 0.5
Oil & Gas 7.2
Paper Products 2.0
Pharmaceuticals 7.6
Real Estate 2.8
Retail 4.1
Soft Drinks/Beer 4.6
Supermarkets 0.6
Technology 5.7
Telecom 8.0
Tourism 1.0
----
100.0%
====
- ---------------------
(a) Unless otherwise indicated, securities owned are shares of common stock.
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
RDC--Russian Depositary Certificate
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS:
Investments at value (cost $2,485,646) (Note 1) $2,766,453
Cash 335,513
Receivables:
Capital shares sold 86,417
From Advisor 30,474
Securities sold 12,752
Dividends and interest 7,292
Due from Broker (Note 4) 6,137
Deferred organization costs and other assets (Note 1) 4,378
---------
Total assets 3,249,416
---------
LIABILITIES:
Payables:
Securities purchased 247,040
Dividends payable 961
Accounts payable 7,279
---------
Total liabilities 255,280
---------
NET ASSETS $2,994,136
=========
CLASS A
Net asset value and redemption price per share
($2,801,739/246,545) $11.36
======
Maximum offering price per share
(NAV/(1-maximum sales commission)) $11.93
======
CLASS B
Net asset value, offering price and redemption price per share
($130,140/11,426) (Redemption may be subject to a
contingent deferred sales charge within the first six years
of ownership) $11.39
======
CLASS C
Net asset value, offering price and redemption price per share
($62,257/5,479) (Redemption may be subject to a
contingent deferred sales charge within the first year
of ownership) $11.36
======
Net assets consist of:
Aggregate paid in capital $2,676,751
Unrealized appreciation of investments, swaps and
foreign denominated assets and liabilities 286,858
Undistributed net investment income 3,404
Undistributed realized gains 27,123
---------
$2,994,136
=========
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997
INCOME:
Dividends (less foreign taxes withheld of $1,454) $ 16,236
Interest 30
---------
Total income 16,266
EXPENSES:
Management (Note 2) $ 8,044
Distribution Class A (Note 4) 3,775
Distribution Class B (Note 4) 315
Distribution Class C (Note 4) 178
Administration (Note 2) 50
Transfer agent 9,200
Professional 5,012
Reports to shareholders 5,000
Registration 10,060
Custody 300
Amortization of deferred organization costs 554
Other 451
---------
Total expenses 42,939
Expenses assumed by the Advisor (Note 2) (42,939)
---------
Net expenses 0
--------
Net investment income 16,266
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Realized gain from security transactions 28,112
Realized loss from foreign currency transactions (988)
Change in unrealized appreciation of investments,
swaps and foreign denominated assets
and liabilities 286,858
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $330,248
========
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS
ENDED
JUNE 30, 1997
(UNAUDITED)
-----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 16,266
Realized gain from security
transactions 28,112
Realized loss from foreign
currency transactions (988)
Change in unrealized appreciation of
investments, swaps, and foreign
denominated assets and liabilities 286,858
---------
Increase in net assets resulting
from operations 330,248
---------
DIVIDENDS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME:
Class A Shares (12,020)
Class B Shares (570)
Class C Shares (273)
---------
(12,863)
---------
CAPITAL SHARE TRANSACTIONS*:
Net proceeds from sales of shares
Class A Shares 2,606,348
Class B Shares 105,265
Class C Shares 44,110
---------
2,755,723
---------
Reinvestment of dividends:
Class A Shares 11,237
Class B Shares 390
Class C Shares 273
---------
11,900
---------
Cost of Shares reaquired:
Class A Shares (120,795)
Class B Shares (66)
Class C Shares (11)
---------
(120,872)
---------
Increase in net assets resulting from
capital share transactions 2,646,751
---------
Total increase in net assets 2,964,136
NET ASSETS:
Beginning of period (Note 1) 30,000
---------
End of period (including undistributed
net investment income of $3,404) $2,994,136
=========
*SHARES OF BENEFICIAL INTEREST ISSUED AND
REDEEMED (UNLIMITED NUMBER OF $.001
PAR VALUE SHARES AUTHORIZED)
CLASS A
Shares sold 256,443
Reinvestment of dividends 989
Shares reacquired (11,937)
---------
Net increase 245,495
=========
CLASS B
Shares sold 10,348
Reinvestment of dividends 34
Shares reacquired (6)
---------
Net increase 10,376
=========
CLASS C
Shares sold 4,406
Reinvestment of dividends 24
Shares reacquired (1)
---------
Net increase 4,429
=========
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- -------
FOR THE FOR THE FOR THE
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 9.52 $ 9.52 $ 9.52
--------- -------- -------
Income from Investment Operations:
Net Investment Income .......................... 0.06 0.06 0.06
Net Gains on Investments
(both realized and unrealized) ................ 1.83 1.86 1.83
-------- -------- ------
Total from Investment Operations ................ 1.89 1.92 1.89
-------- -------- ------
Less Distributions:
From net investment income ..................... (0.05) (0.05) (0.05)
From realized gains ............................ -- -- --
-------- -------- ------
Total Distributions ............................. (0.05) (0.05) (0.05)
-------- -------- ------
Net Asset Value, End of Period .................. $11.36 $11.39 $11.36
========= ======== =======
Total Return (a) ................................ 19.85% 20.17% 19.85%
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000) $2,802 $130 $62
Ratio of Gross Expenses to Average Net Assets (b) 4.56%(c) 14.36%(c) 22.48%(c)
Ratio of Net Expenses to Average Net Assets 0%(c) 0%(c) 0%(c)
Ratio of Net Investment Income to Average
Net Assets 2.01%(c) 2.26%(c) 2.08%(c)
Portfolio Turnover Rate 33.2% 33.2% 33.2%
Average Commission Rate Paid $0.0011 $0.0011 $0.0011
- -------------
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period and a redemption on the last day
of the period. A sales charge is not reflected in the calculation of total
return. Total return for a period of less than one year is not annualized.
(b) If the expenses had not been assumed by the Advisor.
(c) Annualized.
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Emerging Markets Growth Fund series, a non-diversified 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 results could differ.
The Fund had no operations prior to January 1, 1997 except for sales to Van Eck
Associates Corporation ("the Advisor") in the amount $10,000 in each of the
classes at a net asset value of $9.52.
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 period. 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 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. 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.
D. 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.
E. DISTRIBUTION TO SHAREHOLDERS -- Distributions from net investment income
and realized gains, if any, are recorded on the ex-dividend date. Income
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.
<PAGE>
EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
F. DEFERRED ORGANIZATION COSTS--Deferred organization costs are being
amortized over a period of five years beginning on January 1, 1997.
NOTE 2 -- Van Eck Associates Corporation (the "Advisor") earned fees of $8,094
for investment management and advisory services. The fee is based on an annual
rate of 1% of the Fund's average daily net assets. The Advisor agreed to assume
all expenses for the six months ended June 30, 1997. For the six months ended
June 30, 1997, the Fund's expenses were reduced by $42,939 under this agreement.
Van Eck Securities Corporation (the "Distributor") received $14,026 for the six
months ended June 30, 1997, from commissions earned on sales of Class A shares
after deducting $1,853 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. As of June 30, 1997
Van Eck Associates Corporation owned 20.5%, 9.2% and 19.3% of the outstanding
shares of Class A, Class B and Class C, respectively.
NOTE 3--Purchases and proceeds from sales of investments, other than short-term
obligations, aggregated $2,957,974 and $472,329, respectively, for the six
months ended June 30, 1997. For federal income tax purposes, the cost of
investments owned at June 30, 1997 was $2,485,646. As of June 30, 1997, net
unrealized appreciation for federal income tax purposes aggregated $280,807 of
which $373,571 related to appreciated investments and $92,764 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 Classes B and C shares (the "Annual
Limitations"). For Class C shares, the Fund will pay to the selling broker at
the time of sale 1% of the amount of the purchase. Such 12b-1 advanced fees will
be expensed by the Fund over the course of the first twelve months from the time
of purchase. Should the payments to the brokers made by the Fund exceed, on an
annual basis, 1% of average daily net assets, VESC will reimburse the Fund for
any excess. Shareholders redeeming within one year of purchase will be subject
to a 1% redemption charge which will be retained by the Fund. After the first
year, the 1% 12b-1 fee will be paid to VESC which will retain a portion of the
fee for distribution services and pay the remainder to brokers.
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 of the carried forward amounts incurred for the period January 1,
1997 through September 30, 1997 in the event the Plan is terminated, unless the
Board of Trustees determines that reimbursement of the carried forward amounts
is appropriate. The cumulative amount of excess distribution expenses incurred
over the Annual Limitation at June 30, 1997 was $6,708 for Class A shares,
$4,321 for Class B shares and $4,332 for Class C shares.
NOTE 5--The Fund entered into the following equity swaps to gain investment
exposure to the relevant market of the underlying securities. A swap is an
agreement that obligates the parties to exchange cash flows at specified
intervals. In the case of the following swaps, the Fund is obligated to pay the
counterparty an amount based upon the value of the underlying instrument and at
termination date. Final payment is settled based on the value of the underlying
securities on trade date versus the value on termination date plus accrued
dividends.
Risks may arise as a result of the failure of the other party to the contract to
comply with the terms of the swap contract. The losses incurred on the following
swaps are limited to the payments made on the purchase date by the Fund.
Therefore, the Fund considers the credit worthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in the value of the swaps relative to the
underlying securities.
The Fund records a net receivable or payable daily, based on the change in the
value of the underlying securities. The net receivable or payable for financial
statement purposes is shown as due to and from broker.
At June 30, 1997, the Fund had the following outstanding swaps with a single
counterparty (stated in U.S. dollars):
UNREALIZED
UNDERLYING NUMBER OF NOTIONAL TERMINATION APPRECIATION
SECURITY SHARES AMOUNT DATE (DEPRECIATION)
- ------- --------- -------- --------- -------------
Appreciated
Swaps:
Associated
Cement
Companies Ltd. 1,600 $51,519 June 26, 1998 $ 992
Asian Paints 5,000 42,581 May 2, 1998 7,838
------
8,830
Depreciated
Swap:
Tata Engineering
and Locomotive
Company 4,000 51,751 June 26, 1998 (2,693)
-----
Net appreciation $6,137
=====
<PAGE>
EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
NOTE 6--The Fund may purchase securities on foreign exchanges. Securities of
foreign issuers involve special risks and considerations not typically
associated with investing in U.S. issuers. These risks include devaluation of
currencies, less reliable information about issuers, different securities
transactions clearance and settlement practices, and future adverse political
and economic developments. These risks are heightened for investments in
emerging market countries. Moreover, securities of many foreign issuers and
their markets may be less liquid and their prices more volatile than those of
comparable U.S. issuers.
NOTE 7--The Fund invests in warrants whose values are linked to indices or
underlying instruments. The Fund uses these warrants to gain exposure to markets
that might be difficult to invest in through conventional securities. Warrants
may be more volatile than their linked indices or underlying instruments.
Potential losses are limited to the amount of the original investment.
NOTE 8 -- TRUSTEE DEFERRED COMPENSATION PLAN
The Trust established a Deferred Compensation Plan (the "Plan") for trustees.
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 cannot invest in itself. The
Plan has been approved by the Internal Revenue Service.
As of June 30, 1997, the total value of the assets and corresponding liability
of the Fund's portion of the Plan is $32.
