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D E C E M B E R 3 1 , 1 9 9 7
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VAN ECK
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U.S. GOVERNMENT
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MONEY
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FUND
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ANNUAL
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REPORT
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VAN ECK U.S. GOVERNMENT MONEY FUND
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1997 ANNUAL REPORT
Dear Fellow Shareholder:
The U.S. Government Money Fund continues to meet its objectives of providing
shareholders with a high degree of safety and daily liquidity. It also serves to
assist investors who wish to employ our exchange privileges or checkwriting
privileges. The Fund's seven-day average yield was 3.58%* and its 30-day average
yield was 3.98% on December 31, 1997. The Fund's total net assets were $76.6
million at year end.
THE YEAR IN REVIEW
In 1997, yields on three-month Treasury bills averaged 5.20%, peaking at 5.40%
in late March and at year end, and dipping to 4.85% in early June. In the early
part of the year, the Federal Reserve made a proactive move to combat signs of
accelerating wage inflation by raising the federal funds target rate from 5.25%
to 5.50%. Shortly thereafter, however, new data indicated that wages were not
accelerating and that economic growth was moderate; in response, money market
yields declined. Lower rates were also supported by the federal government's
slight reduction in new issuance because of the shrinking U.S. federal budget
deficit.
Events in the second half of the year were dominated by Asia's unfolding
financial crisis. By year end, money market yields were on the rise again as
central banks in Asia sold or redeemed Treasury bills in order to defend their
battered currencies.
INVESTMENT STRATEGY
The Fund's investment strategy continues to emphasize safety by investing in
short-term United States Treasury obligations and repurchase agreements
collateralized by United States Treasury obligations. These obligations are the
most conservative money market investments and offer the highest degree of
security since they are backed by the United States government. Of course,
shares of the Fund are not guaranteed by the United States government and there
can be no guarantee that the price of the Fund's shares will not fluctuate.**
Repurchase agreements allow us to take advantage of higher yields without
significantly increasing risk. The Fund's repurchase agreements are
collateralized 102% by United States Treasury obligations with maturities of
less than five years. In addition, your Fund has possession of the collateral.
We plan to continue our current investment strategy, keeping an equal weighting
between U.S. Treasury bills and repurchase agreements over time.
The U.S. Government Money Fund offers daily liquidity and checkwriting
privileges, providing the kind of convenient access to cash not available in
many other types of investments. The Fund also provides an excellent base from
which investors may transfer money into or out of other Funds within the Van Eck
Family of Funds and the Van Eck/Chubb Funds.***
We appreciate your participation in the U.S. Government Money Fund and look
forward to helping you meet your investment objectives in the future.
[PHOTO] [PHOTO]
/s/ John C. van Eck /s/ Gregory F. Krenzer
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John C. van Eck Gregory F. Krenzer
Chairman Portfolio Manager
January 20, 1998
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* Performance data represents past performance and is not indicative of future
results.
** There can be no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share.
*** Currently, there is no charge imposed on exchanges or limits as to frequency
of exchanges for this Fund. However, shareholders are limited to six
exchanges per calendar year for other Funds in the Van Eck Family of Funds
and the Van Eck/Chubb Funds. The Funds reserve the right to modify or
terminate the terms of the Exchange Privilege.
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U.S. GOVERNMENT MONEY FUND
FINANCIAL STATEMENTS
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SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1997
Annualized Yield at
Principal Maturity Time of Purchase Value
Amount Date or Coupon Rate (Note 1)
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U.S. Treasury Bills: 66.9%
$ 15,000,000 1/22/98 5.32% $ 14,954,500
20,000,000 2/26/98 5.30% 19,838,844
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Total U.S. Treasury Bills
(Amortized Cost: $34,793,344) 34,793,344
Repurchase Agreements 33.1% (Note 4):
Cost $8,687,506 purchased on
12/31/97; maturity value--
$8,690,281 (with HSBC
Securities Incorporated
collateralized by $8,511,000
U.S. Treasury Note due
11/30/99 with an interest
rate of 6.25% and a value
of $8,885,008) 1/02/98 5.75% 8,687,506
Cost $8,500,000 purchased on
12/31/97; maturity value--
$8,502,833 (with Merrill
Lynch, Pierce, Fenner &
Smith Incorporated
collateralized by $8,240,000
U.S. Treasury Note due
2/09/00 with an interest
rate of 7.13% and a
value of $8,681,200)1/02/98 6.00% 8,500,000
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Total investments: 100% (Amortized
Cost: $51,980,850*) $ 51,980,850
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STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS:
Investments at value,
(amortized cost $51,980,850) $ 51,980,850
Receivables:
Capital shares sold 37,112,414
Interest 2,804
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Total assets 89,096,068
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Liabilities:
Payables:
Capital shares repurchased 12,333,052
Dividends payable 31,808
Due to custodian 118
Accounts payable 81,142
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Total liabilities 12,446,120
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Net Assets $ 76,649,948
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Shares of beneficial interest out-
standing (unlimited number
of $0.001 par value shares
authorized) ............................ 76,649,948
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Net asset value, redemption
and offering price per
share ($76,649,948/76,649,948) ......... $1.00
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*The cost is the same for federal income tax purposes.
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STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
INTEREST INCOME (Note 1): $4,018,173
EXPENSES:
Management (Note 2) $386,515
Distribution (Note 3) 193,258
Administration (Note 2) 87,564
Custodian 114,732
Transfer agent 64,478
Registration 28,466
Professional 37,478
Reports to shareholders 15,380
Trustees fees 13,964
Other 44,082
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Total expenses 985,917
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Net investment income $3,032,256
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STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1997 1996
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INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income paid to
shareholders as dividends
(Note 1) $ 3,032,256 $ 3,074,318
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CAPITAL SHARE
TRANSACTIONS
(at net asset value of $1.00
per share):
Net proceeds from sales of
shares $3,630,786,246 $3,402,354,646
Shares issued on reinvestment
of dividends from net
investment income 1,557,341 2,046,708
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3,632,343,587 3,404,401,354
Cost of shares reacquired (3,663,391,147) (3,366,833,860)
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Increase (Decrease) in net
assets resulting from
capital share transactions (31,047,560) 37,567,494
NET ASSETS:
Beginning of year 107,697,508 70,130,014
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End of year $ 76,649,948 $ 107,697,508
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See Notes to Financial Statements
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U.S. GOVERNMENT MONEY FUND
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FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ....................... $1.00 $1.00 $1.00 $1.00 $1.00
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Income from Investment Operations:
Net Investment Income .................................... 0.0377 0.0385 0.0456 0.0311 0.0183
Less Distributions:
Dividends from Net Investment Income ..................... (0.0377) (0.0385) (0.0456) (0.0311) (0.0183)
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Net Asset Value, End of Year ............................. $1.00 $1.00 $1.00 $1.00 $1.00
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Total Return ............................................. 3.77% 3.85% 4.56% 3.11% 1.83%
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Year (000) ............................ $76,650 $107,698 $70,130 $47,078 $31,109
Ratios of Expenses to Average Net Assets ................. 1.28% 1.23% 1.25% 1.12% 1.24%
Ratio of Net Income to Average Net Assets ................ 3.91% 4.02% 4.45% 3.07% 1.83%
</TABLE>
See Notes to Financial Statements.
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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 as an open-ended management investment
company. The following is a summary of significant accounting policies
consistently followed by the U.S. Government Money Fund series, a 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.
A. SECURITY VALUATION--The Fund uses the amortized cost method to value
securities. The amortized cost method involves valuing a security at its cost
initially and, thereafter, a constant amortization to maturity of any
discount or premium. Generally, the amortized cost of the security
approximates the market value.
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. DIVIDEND DISTRIBUTIONS--The Fund declares dividends from its net
investment income on each day the Fund is open for business and distributes
dividends on the last day of each month.
D. OTHER--Security transactions are accounted for on the date the
securities are purchased or sold. Interest income is recorded as earned.
Realized gains and losses from security transactions are recorded on a
specific identification basis.
NOTE 2--Van Eck Associates Corporation earned fees of $386,515 for the year
ended December 31, 1997 for investment management and advisory services. The fee
is based on an annual rate of .50 of 1% of the first $500 million of average
daily net assets, .40 of 1% on the next $250 million and .375 of 1% of the
excess over $750 million. In accordance with the advisory agreement, the Fund
reimbursed Van Eck Associates Corporation $87,564 for costs incurred in
connection with certain administrative and operating functions for the year
ended December 31, 1997. Certain of the officers and trustees of the Trust are
officers, directors or stockholders of Van Eck Associates Corporation and Van
Eck Securities Corporation.
NOTE 3--Pursuant to a Plan of Distribution (Rule 12b-1), the Fund accrues fees
of .25 of 1% of the average daily net assets of the Fund. The fees are intended
to be used principally for payments to securities dealers who have sold shares
and service shareholder accounts of the Fund and the remainder will be used for
other actual promotion and distribution expenses incurred by Van Eck Securities
Corporation, the distributor. Distribution fees for the year ended December 31,
1997 were $193,258.
NOTE 4--Collateral for repurchase agreements, the value of which must be at
least 102% of the underlying debt obligation, is held by the Fund's custodian.
In the remote chance the counterparty should fail to complete the repurchase
agreement, realization and retention of the collateral may be subject to legal
proceedings and the Fund would become exposed to market fluctuation on the
collateral.
NOTE 5--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. The Fund has elected to show this
deferred liability net of the corresponding asset for financial statement
purposes. The Plan has been approved by the Internal Revenue Service.
As of December 31, 1997, the total value of the liability of the Fund's portion
of the Plan is $15,735.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Trustees of the Van Eck Funds:
We have audited the accompanying statement of assets and liabilities of the U.S.
Government Money Fund (the "Fund") (one of the series constituting the Van Eck
Funds), including the schedule of portfolio investments, as of December 31,
1997, 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 five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. 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
U.S. Government Money Fund of the Van Eck Funds as of December 31, 1997, 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 five years in the period then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 25, 1998
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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.
GLOBAL REAL ESTATE FUND
This Fund seeks long-term capital appreciation by investing in equity securities
of domestic and foreign companies which are principally engaged in the real
estate industry or which own significant real estate assets.
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.
VAN ECK/CHUBB FUNDS
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CAPITAL APPRECIATION FUND
GLOBAL INCOME FUND
GOVERNMENT SECURITIES FUND
GROWTH AND INCOME FUND
TAX-EXEMPT FUND
TOTAL RETURN FUND
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This report must be accompanied or preceded by a Van Eck Gold and Money Funds
prospectus, which includes more complete information, such as charges and
expenses and the risks associated with international investing, including
currency fluctuations or controls, expropriation, nationalization and
confiscatory taxation. For a free Van Eck Global or Van Eck/Chubb Funds
prospectus, please call the number listed below. Please read the prospectus
before investing. Van Eck Securities Corporation 99 Park Avenue, New York, NY
10016 www.vaneck.com For account assistance please call (800) 544-4653
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Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
www.vaneck.com
For account assistance please call (800) 544-4653
