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DECEMBER 31, 1997
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VAN ECK
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GLOBAL
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REAL
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ESTATE
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FUND
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ANNUAL
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REPORT
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> > >
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VAN ECK GLOBAL [Logo]
<PAGE>
VAN ECK GLOBAL REAL ESTATE FUND
1997 ANNUAL REPORT
Dear Fellow Shareholder:
We are pleased to report that in its first seven months of operation the Global
Real Estate Fund posted impressive results in seeking to meet its objective of
maximizing total return. From its inception on June 23, 1997, through December
31, 1997, your Fund rose 18.5%*. In addition, the Fund substantially
outperformed the benchmark Salomon Smith Barney World Property Index, which
declined 13.7%. U.S. real estate mutual funds, as measured by Micropal, Inc., a
mutual fund evaluation service, gained 15.1% for the second half of 1997.
Review of Real Estate Market Cycles
A central investment thesis of your Fund is that real estate markets are very
cyclical in nature--shifting from periods of development to oversupply, then
stabilization and recovery, depending on factors such as economic growth,
employment, interest rates, etc. In addition, real estate markets are also
extremely localized; one geographic region or property type may be in recovery
while another is in decline. By actively managing the geographic and sector
weightings in the Fund, we can take advantage of the opportunities presented by
these localized cycles. As of December 31, 1997, approximately 78% of your Fund
was invested in real estate equities of North America, 6% in Europe, 4% in the
Far East, and 12% in cash.
North America
At 58% of net assets on December 31, 1997, the U.S. represented your Fund's
largest country holding. The U.S. currently enjoys a healthy position in both
its economy and the real estate cycle. Strong economic growth, solid corporate
earnings growth, and low interest rates helped propel the U.S. stock market to
new highs in 1997, with the S&P 500 Index gaining 33.4%. The healthy
fundamentals which underpinned the rising equity market last year were also very
supportive to U.S. real estate equities, particularly low interest rates, which
made the cost of borrowing very attractive. U.S. REITs (real estate investment
trusts) posted a return of nearly 20% in 1997.
Throughout the year, the supply/demand dynamics continued to be extremely
favorable in the U.S. full-service hotel and office property sectors, where your
Fund was heavily weighted. These two sectors were among the best industry
performers. Office rents and daily hotel rates increased dramatically as demand
continued to outstrip supply growth. While good news for the hotel business,
many traveling Americans found it increasingly difficult last year to find
rooms, and were forced to pay far more than they were accustomed to as hotel
owners "auctioned off" a limited supply of rooms. By contrast, the retail real
estate sector continued to suffer in 1997 from a glut of space; there are
currently 20 square feet of retail shopping space per capita in America, far
more than in other parts of the world. Given this, your Fund held modest
weightings in U.S. retail real estate stocks. The Fund also had a relatively
small weighting in U.S. apartments, given the shift in favor of home sales in
the low interest rate environment.
Canadian real estate companies, including Canadian REITs, represented
approximately 18% of your Fund at year end. As did the U.S., Canada enjoyed a
very positive real estate market in 1997. The country appears to be
approximately 12 to 18 months behind the U.S. in its economic recovery, and has
been steadily moving from the recovery phase within the development phase of the
real estate cycle. Most real estate sectors in Canada performed well last year,
particularly the office sector where we saw rents spike upwards. Also,
<PAGE>
Canada's resurgent economy and renewed consumer confidence led to higher hotel
occupancy rates and increased demand for retail shopping space. For the year,
the return on Canadian real estate equities matched that of their U.S.
counterparts.
Europe
At year end, your Fund held positions in France, the UK and Sweden, which in
aggregate amounted to approximately 6% of the Fund's portfolio. Europe
experienced steady economic growth in 1997 and generally real estate markets are
at attractive points in their cyclical recovery. The core countries of Europe
marched steadily toward European Monetary Union (EMU), scheduled by the
Maastricht treaty to begin January 1999. This resulted in a continuing
convergence of European interest rates as the region prepares for a single
currency, the "euro." The UK -- although not slated to join EMU at this time --
enjoyed a very healthy economy and real estate sector. Your Fund was primarily
invested in the UK office, hotel and residential sectors. We see growing
interest on the part of U.S. and multinational hotel corporations eager to gain
access to overseas markets. In fact, several of the Fund's U.S. hotel REIT
holdings have announced intentions to expand into Europe in 1998. In the office
sector, several markets stabilized in 1997 and have begun to experience positive
rent growth.
The Far East
The year was a challenging one for Asia. What began in July as a currency
debacle among the Southeast Asian countries spread throughout Asia, and by
October had impacted Hong Kong, South Korea and Japan, and caused a global
sell-off of equities. While the details vary by country, the region continues to
suffer from high current account and fiscal deficits, excessive foreign currency
borrowing to finance inefficient capital spending (including over-investment in
property), and ongoing government interference in banking systems and capital
markets. Even with International Monetary Fund bail-out packages in place for
the region, investors have been wary to return to Asia.
Property stocks in Asia were devastated in 1997, with the region down nearly 40%
in U.S. dollar terms. Several of the markets, most notably Thailand and
Malaysia, continue to be plagued by severe over-investment in real estate.
Singapore, although healthier, is also overbuilt and continues to suffer from
the region's turmoil. Hong Kong is a bit of a paradox; supply/demand
fundamentals in the residential property market, in particular, are strong yet
the overhanging threat of a Hong Kong dollar-peg failure resulted in extremely
high short-term interest rates and a severe correction in property stocks in the
second half of 1997.
We have been cautious about Asia as a whole, and at December 31, 1997, had 4% of
your Fund's portfolio in the Far East, all in Japan and Australia. Although
overall the Far East was battered by economic and financial woes, the real
estate stocks in Japan and Australia had positive returns in 1997. Both markets
demonstrated real estate stocks' low correlation to local equity markets. The
real estate supply/demand fundamentals are generally positive in these markets;
in Tokyo, vacancy rates are below 5% in prime, centrally located office
buildings.
The Outlook
Going forward, we believe that the environment remains very favorable for the
global real estate investments. The sector will continue to offer attractive
opportunities to play local market recoveries. Our preferred investments remain
the North American full-service hotel, office and industrial sectors. We expect
that U.S. REITs will deliver less robust returns than in recent years, as
undervalued real estate becomes more scarce. Nevertheless, relatively strong
earnings growth and outstanding earnings visibility should enable U.S. real
estate stocks to post relatively attractive total returns in 1998. We expect to
increase your Fund's weightings in both Europe and Asia in 1998, as we see
<PAGE>
good values and attractive cyclical recovery opportunities.
We thank you for your participation in the Global Real Estate Fund and look
forward to helping you meet your investment goals in the future.
[Photo omitted] [Photo omitted]
/s/ John C. van Eck /s/ Kevin L. Reid
John C. van Eck Kevin L. Reid
Chairman Portfolio Manager
January 30, 1998
- -------------------------------------------------------------
*PERFORMANCE RECORD AS OF 12/31/97
- -------------------------------------------------------------
After Maximum Before
Total Return Sales Charge+ Sales Charge
- -------------------------------------------------------------
A shares-Life (since 6/23/97) 12.9% 18.5%
- -------------------------------------------------------------
B shares-Life (since 10/9/97) -6.1% -1.5%
- -------------------------------------------------------------
C shares-Life (since 10/9/97) -2.3% -1.4%
- -------------------------------------------------------------
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 Adviser 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 = 5.0%
C shares: 1% redemption charge, 1st year
[The following table was depicted as a pie chart in the printed material]
SECTOR WEIGHTINGS*
AS OF DECEMBER 31, 1997
Hotels 19.5%
Retail 9.8%
Residential 5.9%
Diversified 19.5%
Specialty 7.0%
Cash/Equiv 12.5%
Office/Industrial 25.8%
[The following table was depicted as a pie chart in the printed material]
GEOGRAPHICAL WEIGHTINGS*
AS OF DECEMBER 31, 1997
United States 58.4%
Canada 18.1%
Cash/Equiv 12.5%
United Kingdom 2.0%
Sweden 1.2%
Mexico 1.3%
Japan 2.4%
France 2.5%
Australia 1.6%
* Listed as percentage of total net assets.
<PAGE>
TOP TEN EQUITY HOLDINGS*
------------------------
AS OF DECEMBER 31, 1997
EQUITY RESIDENTIAL PROPERTIES TRUST (EQR)
(U.S. REIT, 3.0%)
Chicago-based EQR is the nation's largest multi-family REIT. EQR's portfolio
includes 480 properties with over 136,000 units in 33 states. Stable occupancy
levels of close to 95% and consistent growth in cash flow are the result of
EQR's strategy to minimize asset and geographic concentration and to direct new
investments into improving markets.
AMB PROPERTY CORPORATION
(U.S. REIT, 3.0%)
Founded in 1983 to acquire and operate industrial properties and community
shopping centers, AMB went public in mid-November and instantly became one of
the largest REITs in the U.S. For its clients, AMB has acquired over 160
properties, representing approximately $3 billion and more than 57 million
square feet. Its current portfolio includes 128 properties, totaling 43.6
million square feet, located in 24 markets.
CADILLAC FAIRVIEW CORPORATION
(CANADIAN C-CORP, 2.8%)
Cadillac Fairview is one of the largest real estate operating companies in North
America, with over two decades of experience and approximately 46 million square
feet owned, co-owned or under management in both the U.S. and Canada. Cadillac
enjoys a significant presence in the Canadian shopping center and office
building sectors. Its diversified portfolio, both by property type and
geography, helps Cadillac weather varying economic cycles.
COLONIAL PROPERTIES TRUST
(U.S. REIT, 2.7%)
Colonial is a fully integrated real estate company focused on the acquisition or
development, ownership and operation of multi-family residential, retail and
office property in eight Southeastern states in the U.S. CLP's property
portfolio includes 13,600 apartment units, 10.3 million square feet of retail
space, and 1.9 million square feet of office space.
PRENTISS PROPERTIES TRUST
(U.S. REIT, 2.5%)
Prentiss Properties Trust is headquartered in Dallas, Texas, and acquires, owns,
manages, leases, develops and builds office and industrial properties throughout
the U.S. Prentiss' diversified portfolio includes 82 office buildings containing
8.7 million square feet, and 76 industrial buildings containing 7.3 million
square feet, located in 18 major markets. Prentiss has offices in Los Angeles,
Dallas, Chicago, Washington, D.C., Atlanta and Philadelphia.
MACK-CALI REALTY CORPORATION
(U.S. REIT, 2.4%)
Mack-Cali Realty Corporation (formerly Cali Realty Corporation) provides
leasing, management, acquisition, development, construction and tenant-related
services for its 213 properties, which are primarily office and office/flex
buildings, and total approximately 23.2 million square feet. These properties
serve more than 2,300 tenants and are located in 10 states, primarily in the
Northeast and Southwest.
LEGACY HOTELS REAL ESTATE INVESTMENT TRUST
(CANADIAN REIT, 2.4%)
Legacy, Canada's leading first-class hotel company, offers high-quality
investment exposure to Canada's first-class hotel industry at a very attractive
time in the industry's cycle. Formed in 1997 by CP Hotels Corporation, Legacy's
portfolio consists of 11 properties including the landmark Royal York Hotel,
Toronto, Hotel Vancouver and Queen Elizabeth, Montreal.
TRIZECHAHN CORPORATION
(CANADIAN C-CORP, 2.3%)
TrizecHahn acquires, develops, manages and owns income-producing commercial real
estate. It is active in the office building sector in the U.S. and Canada,
regional malls in the U.S., and development operations in Europe. TrizecHahn
also holds a 15.7% interest in Barrick Gold. Its property portfolio consists of
interests in 75 income-producing properties containing 58.7 million square feet.
EQUITY OFFICE PROPERTIES TRUST (EOP)
(U.S. REIT, 2.3%)
EOP is a self-administered, self-advised REIT with more than 700 employees. It
owns and operates 114 offices containing 39.8 million square feet and 16 parking
facilities containing 16,304 parking spaces. Its office properties - located in
35 suburban and central business districts - enjoyed 92.5% occupancy rates in
1997. Since its initial public offering in July 1997, EOP has announced more
than $1.2 billion in acquisitions.
PATRIOT AMERICAN HOSPITALITY, INC.
(U.S. REIT, 2.2%)
Patriot American Hospitality, Inc. is based in Dallas, Texas, and is the
nation's second-largest hotel REIT with a portfolio comprised of 197 owned,
managed, leased or franchised upscale hotels and resorts with more than 48,000
rooms. Its properties include Wyndham Hotels, Carefree Resorts, Grand Bay
Hotels, Registry Resorts and ClubHouse Inns, among others. (At the time of this
writing, Patriot's acquisition of Interstate Hotels was pending.)
Note: Equities are listed as percentage of total net assets.
* Portfolio is subject to change.
<PAGE>
GLOBAL REAL ESTATE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1997
- ------------------------------------------------------------------------------
No. of Shares Securities(a) Value (Note 1)
- ------------------------------------------------------------------------------
Australia: 1.6%
7,000 Westfield Holdings Ltd. $ 26,886
----------
Canada: 18.1%
2,500 Avista Real Estate Investment Trust
(Installment Receipts) 11,192
1,500 Brookfield Properties Corp. 25,025
2,000 Cadillac Fairview Corp.+ 47,000
2,000 Cambridge Shopping Centres Ltd. 20,076
1,000 Four Seasons Hotels Inc. 31,625
6,000 Legacy Hotels Real Estate Investment Trust 40,712
3,500 O&Y Properties Corp. (Special Warrants
Expiring 10/9/98) (b)*+ 19,586
1,000 Oxford Properties Canada Ltd. 27,281
5,000 Royal Host Real Estate Investment Trust 25,882
1,700 TrizecHahn Corporation 39,419
2,500 Unihost Corp.+ 17,226
----------
305,024
----------
France: 2.5%
150 ACCOR S.A. 27,866
125 Societe Fonciere Lyonnaise 14,672
----------
42,538
----------
Japan: 2.4%
2,000 Mitsubishi Estate Co. Ltd. 21,779
2,000 Mitsui Fudoson Co. Ltd. 19,325
----------
41,104
----------
Mexico: 1.3%
20,000 Grupo Accion S.A. de C.V. 22,313
----------
Sweden: 1.2%
2,000 Castellum AB 19,914
----------
United Kingdom: 2.0%
2,500 Millenium and Copthorne Hotels PLC 17,320
6,000 Thistle Hotels PLC 15,588
----------
32,908
----------
United States: 58.4%
2,000 AMB Property Corporation 50,250
1,000 Arden Realty Group, Inc. 30,750
1,000 Brandywine Realty Trust 25,125
3,000 Bridgestreet Accommodations, Inc.+ 30,469
2,000 Capital Senior Living Corp.+ 20,875
400 Capstar Hotel Company+ 13,725
. 1,500 Colonial Properties Trust 45,188
1,000 Cornerstone Properties, Inc. 19,188
1,200 Equity Office Properties Trust 37,875
1,000 Equity Residential Properties Trust 50,563
1,000 Excel Realty Trust, Inc. 31,500
1,000 Felcor Suite Hotels, Inc. 35,500
3,300 Grove Property Trust 35,888
1,000 Highwoods Properties, Inc. 37,188
1,000 Interstate Hotels Company 35,063
1,150 Kilroy Realty Corporation 33,063
2,000 Lexington Corporate Properties Trust 30,875
1,000 Macerich Company (The) 28,500
1,000 Mack-Cali Realty Corporation 41,000
1,500 Pan Pacific Retail Properties, Inc. 32,063
500 Parkway Properties, Inc. 17,156
1,300 Patriot American Hospitality, Inc. 37,456
1,500 Prentiss Properties Trust 41,902
600 Public Storage, Inc. 17,625
500 Security Capital Group Inc.+ 16,250
1,400 S.L. Green Realty Corp. 36,313
600 Starwood Hotels & Resorts Trust 34,725
1,400 Storage Trust Realty 36,838
1,000 Tower Realty Trust, Inc. 24,625
500 Trammell Crow Co. 12,875
1,000 United Dominion Realty Trust, Inc. 13,938
1,600 Westfield America, Inc. 27,200
----------
981,551
----------
Total Stocks and Other Investments: 87.5%
(Cost: $1,409,892) 1,472,238
----------
Principal Short-Term
Amount Obligation 5.9%
- ------------------------------------------------------------------------------
$100,000 U.S. Treasury Bill
(Interest Yield of)
5.09% due 2/05/98
(Amortized Cost: $99,505) 99,505
----------
Total Investments: 93.4% (Cost: $1,509,397) 1,571,743
Other Assets Less Liabilities: 6.6% 110,754
----------
Net Assets: 100% $1,682,497
==========
- ---------
(a) Unless otherwise indicated, securities owned are shares of common stock.
(b) Restricted security--See Note 8
+ Non Income Producing
* Fair value as determined by the Board of Trustees.
Summary of
Investments % of
by Industry Net Assets
- ----------- ----------
Diversified 19.5%
Hotels 19.5%
Office/Industrial 25.8%
Residential 5.9%
Retail 9.8%
Specialty 7.0%
U.S. Treasury Bill 5.9%
Other Assets Less
Liabilities 6.6%
-----
100.0%
=====
See Notes to Financial Statements
<PAGE>
GLOBAL REAL ESTATE FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1997
Assets:
Investments at value (cost $1,509,397) (Note 1) $1,571,743
Cash 295,683
Receivables:
Securities sold 38,799
Capital shares sold 17,287
From Adviser 12,168
Dividends and interest 6,606
Deferred organization costs (Note 1) 8,749
----------
Total assets 1,951,035
----------
Liabilities:
Payables:
Securities purchased 236,457
Dividends payable 1,042
Accounts payable 30,589
Unrealized depreciation on open
forward foreign currency contracts (Note 6) 450
----------
Total liabilities 268,538
----------
Net Assets $1,682,497
==========
Class A
Net asset value and redemption price per share
($1,448,614/136,129) $ 10.64
==========
Maximum offering price per share
(NAV/(1-maximum sales commission)) $ 11.17
==========
Class B
Net asset value, offering and redemption price
per share ($115,732/10,891) (Redemption may
be subject to a contingent deferred sales
charge within the first six years of
ownership) $ 10.63
==========
Class C
Net asset value, offering and redemption price
per share ($118,151/11,102) (Redemption may
be subject to a contingent deferred sales
charge within the first year of ownership) $ 10.64
==========
Net assets consist of:
Aggregate paid in capital $1,618,915
Unrealized appreciation of investments, forward
foreign currency contracts and foreign currency
receivables and payables 62,576
Undistributed net investment income 39
Accumulated realized gain 967
----------
$1,682,497
==========
Statement of Operations
For the Period June 23, 1997+ to December 31, 1997
Income:
Dividends (less foreign taxes withheld of $142) $ 21,753
Interest 2,149
---------
Total income 23,902
Expenses:
Management (Note 2) 6,082
Distribution Class A (Note 4) 927
Distribution Class B (Note 4) 76
Distribution Class C (Note 4) 138
Administration (Note 2) 1,200
Registration 34,417
Professional 14,014
Reports to shareholders 8,279
Transfer agent 6,945
Custodian 2,013
Amortization of deferred organization costs 1,022
Other 341
---------
Total expenses 75,454
Expenses assumed by the Adviser and
reduced by a custodian fee arrangement
(Note 2) (75,454)
---------
Net expenses --
---------
Net investment income 23,902
Realized and Unrealized Gain on Investments (Note 3)
Realized gain from security transactions 62,655
Realized gain from foreign currency transactions 682
Unrealized appreciation of investments 62,346
Unrealized appreciation of forward foreign currency contracts
and foreign currency receivables and payables 230
---------
Net Increase in Net Assets Resulting
from Operations $ 149,815
=========
+ Commencement of operations.
See Notes to Financial Statements
<PAGE>
GLOBAL REAL ESTATE FUND
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the
Period
June 23, 1997+ to
December 31, 1997
-----------------
Increase in Net Assets:
Operations:
Net investment income $ 23,902
Realized gain from security
transactions 62,655
Realized gain from foreign
currency transactions 682
Unrealized appreciation of forward foreign
currency contracts and foreign currency
receivables and payables 230
Unrealized appreciation of
investments 62,346
-----------
Increase in net assets resulting
from operations 149,815
-----------
Dividends and distributions to shareholders from:
Net investment income:
Class A Shares (19,044)
Class B Shares (1,541)
Class C Shares (1,571)
-----------
(22,156)
-----------
Net realized gain:
Class A Shares (55,078)
Class B Shares (4,456)
Class C Shares (4,543)
-----------
(64,077)
-----------
Tax return of capital:
Class A Shares (7,134)
Class B Shares (577)
Class C Shares (589)
-----------
(8,300)
-----------
Total Dividends and Distributions (94,533)
-----------
Capital share transactions*:
Net proceeds from sales of shares:
Class A Shares 1,387,893
Class B Shares 114,007
Class C Shares 116,580
-----------
1,618,480
-----------
Reinvestment of dividends:
Class A Shares 80,706
Class B Shares 6,571
Class C Shares 6,214
-----------
93,491
-----------
Cost of shares reaquired:
Class A Shares (84,756)
Class B Shares --
Class C Shares --
-----------
(84,756)
-----------
Increase in net assets resulting from
capital share transactions 1,627,215
-----------
Total increase in net assets 1,682,497
Net Assets:
Beginning of period --
-----------
End of period (including undistributed
net investment income of $39) $ 1,682,497
===========
*Shares of Beneficial Interest Issued and
Redeemed (unlimited number of $.001
par value shares authorized)
For the
Period
June 23, 1997+ to
December 31, 1997
-----------------
Class A
Shares sold 136,149
Reinvestment of dividends 7,585
Shares reacquired (7,605)
-----------
Net increase 136,129
===========
For the
Period
June 23, 1997+ to
December 31, 1997
-----------------
Class B
Shares sold 10,273
Reinvestment of dividends 618
Shares reacquired --
-----------
Net increase 10,891
===========
For the
Period
June 23, 1997+ to
December 31, 1997
-----------------
Class C
Shares sold 10,518
Reinvestment of dividends 584
Shares reacquired --
-----------
Net increase 11,102
===========
+ Commencement of operations.
See Notes to Financial Statements
<PAGE>
GLOBAL REAL ESTATE FUND
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Class A Class B Class C
----------------- ----------------- -----------------
For the Period For the Period For the Period
June 23, 1997+ to October 9, 1997+ to October 9, 1997+ to
December 31, 1997 December 31, 1997 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 10.00 $ 11.46 $ 11.46
------- ------- -------
Income from Investment Operations:
Net Investment Income................................ 0.16 0.04 0.06
Net Gains on Investments
(both realized and unrealized)..................... 1.12 (0.23) (0.24)
------- ------- -------
Total from Investment Operations....................... 1.28 (0.19) (0.18)
------- ------- -------
Less Distributions:
From net investment income........................... (0.13) (0.13) (0.13)
From realized gain................................... (0.44) (0.44) (0.44)
From tax return of capital........................... (0.07) (0.07) (0.07)
------- ------- -------
Total Distributions.................................... (0.64) (0.64) (0.64)
------- ------- -------
Net Asset Value, End of Period......................... $ 10.64 $ 10.63 $ 10.64
======= ======= =======
Total Return (a)....................................... 12.10% (2.27)% (2.18)%
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period (000)........................ $1,449 $116 $118
Ratio of Gross Expenses to Average Net Assets (b)(c)... 12.05% 27.20% 15.13%
Ratio of Net Expenses to Average Net Assets (c)........ 0% 0% 0%
Ratio of Net Investment Income to Average Net Assets (c) 3.95% 6.70% 5.13%
Portfolio Turnover Rate................................ 82% 82% 82%
Average Commission Rate Paid........................... $0.0265 $0.0265 $0.0265
</TABLE>
- ----------
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of distributions,
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 Adviser.
(c) Annualized.
+ Commencement of operations.
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 Real Estate 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.
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 amortized
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 foreign 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 results from fluctuations in foreign currency
exchange rates is 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.
<PAGE>
GLOBAL REAL ESTATE FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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. The effect of these differences
decreased undistributed net investment income by $1,707, increased
accumulated realized gain by $10,007 and decreased aggregate paid in
capital by $8,300.
F. Deferred Organization Costs -- Deferred organization costs are being
amortized over a period of five years beginning on June 24, 1997.
Note 2 -- Van Eck Associates Corporation (the "Adviser") earned fees of $6,082
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 period ended December 31, 1997. For the period ended
December 31, 1997, the Fund's expenses were reduced by $73,441 under this
agreement. In accordance with the advisory agreement, the Fund reimbursed Van
Eck Associates Corporation $1,200 for costs incurred in connection with certain
administrative and operating functions. The Fund has a fee arrangement based on
cash balances left on deposit with the Custodian, which reduced the Fund's
operating expenses by $2,013 for the period ending December 31, 1997. Van Eck
Securities Corporation (the "Distributor") received $116,763 for the period
ended December 31, 1997, from commissions earned on sales of Class A shares
after deducting $663,680 allowed to other dealers. Certain of the officers and
trustees of the Trust are officers, directors or shareholders of Van Eck
Associates Corporation and Van Eck Securities Corporation. As of December 31,
1997, Van Eck Associates Corporation owned 59.7%, 0.8% and 0.8% 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 $2,128,622 and $781,385, respectively, for
the period ended December 31, 1997. For federal income tax purposes, the cost of
investments owned at December 31, 1997 was $1,508,430. As of December 31, 1997,
net unrealized appreciation for federal income tax purposes aggregated $63,313
of which $85,540 related to appreciated investments and $22,227 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% 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.
Class C 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 June 23,
1997 through December 31, 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 December 31, 1997 was $8,881 for Class A shares,
$9,359 for Class B shares and $9,360 for Class C shares.
Note 5 -- 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 6 -- Forward Foreign Currency Contracts:
The Fund bought and sold forward foreign currency contracts to settle purchases
and sales of foreign denominated securities. The Fund may incur additional risk
from investments in forward foreign 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 and unrealized gains and
losses from forward foreign currency contracts are included in realized and
unrealized gain (loss) from foreign currency transactions.
<PAGE>
At December 31, 1997, the Fund had the following outstanding forward foreign
currency contracts:
Value at
Settlement Current Unrealized
Contract Date Value Depreciation
- -------- ---------- ------- ------------
Foreign Currency Buy Contracts:
AUD 41,216 expiring $26,904 $26,832 $ (72)
1/08/98
FRF 167,331 expiring 28,001 27,780 (221)
1/30/98
GBP 3,676 expiring 6,086 6,063 (23)
1/07/98
JPY 5,387,829 expiring 41,452 41,318 (134)
1/07/98 -----
$(450)
=====
Note 7 -- 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 December 31, 1997, the total value of the assets and corresponding
liability of the Fund's portion of the Plan is $0.
Note 8 -- Restricted Security
The following security is restricted as to sale:
Percent of
Date Net Assets at
Acquired Cost Value 12/31/97
- ------------------------------------------------------------------
10/07/97 O&Y Properties Corp
(Special Warrants
expiring 10/08/98) $20,401 $19,586 1.2%
<PAGE>
- --------------------------------------------------------------------------------
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 schedule of portfolio investments, of the Global Real Estate Fund (the
"Fund") (one of the series constituting the Van Eck Funds), as of December 31,
1997, and the related statement of operations, changes in net assets and the
financial highlights for the period June 23, 1997 (commencement of operations)
to December 31, 1997. 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 based on our audit.
We conducted our audit 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 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 audit provides 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 Real Estate Fund series of the Van Eck Funds as of December 31, 1997, and
the results of its operations, changes in its net assets, and the financial
highlights for the period June 23, 1997 (commencement of operations) to December
31, 1997, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 24, 1998
<PAGE>
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.
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
- --------------------------------------------------------------------------------
Capital Appreciation Fund
Global Income Fund
Government Securities Fund
Growth and Income Fund
Tax-Exempt Fund
Total Return Fund
- --------------------------------------------------------------------------------
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, Van Eck Global Funds or Van Eck/Chubb 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
