Van Eck Asia Dynasty Fund
-------------------------
1997 Annual Report
Dear Fellow Shareholder:
It was an unforgettable and difficult year for investors in Asian stock markets,
particularly in the second half of 1997. The turmoil in Asia was the global
investment story that eclipsed all others in 1997--although at the time of this
writing, Asian markets had begun to rebound. For the year, the Morgan Stanley
Capital International (MSCI) Far East Free ex-Japan Index fell 45.5%+. Mutual
funds invested in Asian markets also suffered. The group of 59 Asian ex-Japan
equity funds measured by Micropal, Inc., a mutual fund evaluation service, fell
an average 36.3% for the year. By comparison, the Asia Dynasty Fund outperformed
the Index and its peers by declining 32.1%*.
ASIA'S ECONOMIC AND FINANCIAL TURMOIL
No one fully anticipated the magnitude of the financial crisis that swept
through Asia in 1997. In recent years, the region, in general, has been buffeted
by high national savings rates, government budget surpluses (or minimal
deficits), and stable macroeconomics as evidenced by low inflation rates.
What started as a local problem in Thailand quickly spread to its ASEAN (the
Association of Southeast Asian Nations) neighbors -- Malaysia, Indonesia and the
Philippines -- and eventually to countries in the north. The severe devaluation
of Thailand's baht in July sent shockwaves through Asia, and Asian currencies,
anticipating much higher levels of inflation, plunged as much as 50% against the
U.S. dollar. In large part, Asia's rapid currency depreciations were triggered
by ballooning current account deficits and the strengthening U.S. dollar. The
impact of the currency crisis was far reaching. Investor sentiment turned sour
overnight, sparking massive capital outflows throughout the region. Domestic
interest rates rose to unprecedentedly high levels and pushed Asia's economies
toward recession. Public expenditures were scaled back and private capital
investment was postponed on the back of rising national and corporate debt
burdens.
By October, the crisis had gathered enough momentum to move north, battering
both Hong Kong and South Korea, and to precipitate a global sell-off of
equities. Although Asia's markets were the hardest hit, markets were affected
across the globe. Japan's already fragile market and economy took a beating, as
did the previously healthy markets of Latin America and Eastern Europe. Europe,
the UK and the U.S., although impacted by the turmoil, were more resilient and
able to recover from serious bouts of investor jitters.
While each country in Asia is different, the general problems in the region
remain high current account and fiscal deficits, excessive foreign currency
borrowing, over-investment in commercial property and other unproductive assets,
and government interference in banking systems and capital markets. By year end,
the International Monetary Fund (IMF) had promised to inject fresh liquidity
into the beleaguered region via bail-out packages to Korea, Thailand, Indonesia
and the Philippines. Nonetheless, investors remain hesitant to return to Asia,
and await the region's positive embrace of IMF-imposed economic reforms. From
our point of view, liberalization of economies and a deregulation of financial
markets are critical to the area's turnaround.
The Greater China markets -- namely China, Hong Kong and Taiwan -- were able to
weather the storms in the first half, but suffered dramatically when the
contagion from the ASEAN markets spread to Northern Asia in the second half.
Taiwan was least affected by Asia's plight and was the region's best performer
in 1997 gaining 11.3% in local currency terms. Taiwan benefited from
higher-than-expected economic growth, broadly stable interest rates, and a
strong export market. Increased demand for Taiwanese exports from China and the
U.S. offset the fall-off in demand from Japan and the ASEAN. China, although
currently unpredictable, will remain pivotal in the near future. Hong Kong,
which reverted from colonial status to China's rule this past July, will
continue to play an important role in China's
<PAGE>
development, providing the funding and management expertise critical to its
modernization. Given that China accounts for one-third of the world's
population, its long-term potential as one of the global economy's true super
powers should not be underestimated.
PORTFOLIO STRATEGY
In the first half of 1997, the Fund achieved good absolute and relative
performance by investing heavily in the Greater China region. As Asia's
financial plight deepened at the start of the third quarter, we adopted a more
defensive strategy. The Fund's holding in cash increased substantially, from
1.6% at June 30 to 27% at December 31, and its equity holdings were pared from
64 to 38. These portfolio shifts in the second half helped the Fund outperform
for the year.
With regard to country allocation, the Fund maintained an overweighted position
in Hong Kong, but was heavily underweighted in the ASEAN markets throughout
1997. In terms of sector allocations, the banking and telecommunication
industries were emphasized. At year end, The Hong Kong and Shanghai Banking
Corporation (HSBC Holdings) and Hong Kong Telecom accounted for nearly 10% and
7% of total net assets, respectively, and both outperformed the market by a wide
margin last year. If Asian countries move closer to recession in the coming
year, we may increase the Fund's holdings in more recession-proof shares,
including those of utilities, foods, pharmaceuticals and consumer non-durables.
THE OUTLOOK
The full impact of Asia's financial turmoil has yet to be felt, and events are
still unfolding. We expect markets to continue to be volatile in the short run.
However, thus far the crisis has provided a much-needed wake-up call for Asian
corporations to better safeguard shareholders' interests. This is particularly
critical as equity financing becomes the cheapest method of corporate fund
raising. Also, management quality is likely to improve as companies enter a more
competitive market environment and are less protected by governments. The crisis
is also compelling Asian governments to become more proactive on monetary and
fiscal policy, and less restrictive with financial markets; they need to create
and support free, open and market-driven economic systems. We expect to see
increased liberalization and deregulation in 1998; Korea and Thailand already
seem to be moving in the right direction. With this tremendous "house cleaning"
process in place, we are confident that good value will be restored to Asia's
market in the upcoming year, and that investors will benefit over the long term.
We appreciate your participation in the Asia Dynasty Fund and look forward to
helping you meet your investment goals in the future.
/s/John C. van Eck /s/Timothy Chan
- ------------------ -----------------
John C. van Eck Timothy Chan
Chairman Portfolio Manager
February 3, 1998
+ Market performance source: Morgan Stanley Capital International Indices. All
returns in U.S. dollar terms unless otherwise stated.
- --------------------------------------------------------------------------------
*Performance Record as of 12/31/97
- --------------------------------------------------------------------------------
AVERAGE ANNUAL AFTER MAXIMUM BEFORE
TOTAL RETURN SALES CHARGE++ SALES CHARGE
- --------------------------------------------------------------------------------
A shares-Life (since 3/22/93) (1.5)% (0.5)%
- --------------------------------------------------------------------------------
1 year (35.3)% (32.1)%
- --------------------------------------------------------------------------------
B shares-Life (since 9/1/93) (5.4)% (5.1)%
- --------------------------------------------------------------------------------
1 year (35.8)% (32.9)%
- --------------------------------------------------------------------------------
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.
At certain times in the past, the Adviser waived certain or all
expenses on the Fund. Had the Fund incurred all expenses, investment returns
would have been reduced.
++ A shares: maximum sales charge = 4.75%
B shares: maximum contingent deferred sales charge = 5.00%
(Prior to 4/30/97, the maximum CDSC was 6.00%)
<PAGE>
TOP EQUITY HOLDINGS*
-----------------------
AS OF DECEMBER 31, 1997
THE HONG KONG AND SHANGHAI BANKING
CORPORATION, LTD. (HSBC HOLDINGS PLC)
(HONG KONG, 9.8%)
HSBC is the largest international bank listed on the Hong Kong stock exchange
and one of the largest banking and financial services organizations in the
world. Regionally, the Bank holds 61% of the largest local bank in Hong Kong,
the Hang Seng Bank, and also lists other major banks in Singapore and Malaysia
among its subsidiaries.
HONG KONG TELECOMMUNICATIONS LTD.
(HONG KONG, 7.2%)
This utility holds the international telephone franchise in Hong Kong for most
sectors of telecommunications, including data, fax and voice transmission.
China-related businesses have become important growth components of Hong Kong
Telecommunications.
TAIWAN INDEX FUND
(TAIWAN, 7.0%)
The Taiwan Index Fund was established in 1991 to provide investors with an
efficient way to gain exposure to Taiwan. The objective of the Fund is to track
the Taiwan Stock Exchange (TSE) Capitalization Weighted Stock Index.
HANG SENG BANK LIMITED
(HONG KONG, 5.4%)
Hang Seng Bank Limited offers commercial banking and related financial services.
The Bank has 145 branches in Hong Kong, the U.S. and Canada.
CHINA LIGHT & POWER COMPANY LTD.
(HONG KONG, 4.8%)
China Light & Power (CLP) has a monopoly on power distribution in Hong Kong's
New Territories and the Kowloon Peninsula. CITIC Pacific, a Hong Kong-listed
company controlled by the Chinese government, owns a 20% stake in CLP. CLP is
also involved in power projects in China, India and Taiwan.
SUN HUNG KAI PROPERTIES LTD.
(HONG KONG, 4.2%)
Principally a property development and investment company, Sun Hung Kai has
broadened its businesses to include hotel, construction, finance, insurance,
cinema, public transportation, telecommunications and trading. The company is
developing the fourth digital cellular phone network in Hong Kong.
HONG KONG AND CHINA GAS COMPANY LTD.
(HONG KONG, 4.1%)
Hong Kong and China Gas produces, distributes and markets gas and gas appliances
to residential and industrial customers. The company markets through the Towngas
brand name for domestic and commercial cooking and water heating, as well as
heating fuel for the industrial market. Its subsidiaries develop and manage
commercial properties and gas projects in China.
PTT EXPLORATION AND PRODUCTION PUBLIC COMPANY LIMITED
(THAILAND, 2.7%)
PTT is an affiliate of the state-owned Petroleum Authority of Thailand. The
company explores for natural gas in the Gulf of Thailand.
SINGAPORE AIRLINES LTD.
(SINGAPORE, 2.5%)
Singapore Airlines Ltd. provides air transportation, engineering, airport
terminal, pilot training, air charter and tour wholesaling services. The
company's airline operation covers Asia, Europe, North and South America, the
Southwest Pacific and Africa.
* Portfolio is subject to change.
Note: Equities are listed as percentage of total net assets.
<PAGE>
ASIA DYNASTY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- -------------------------------------------------------------------------
No. of Shares Securities (a) Value (Note 1)
------------------------------------------------------------------------
CHINA: 1.6%
230,000 Shanghai Dazhong Taxi $ 172,040
581,700 Shanghai Tyre and Rubber Co. 145,425
----------
317,465
----------
HONG KONG: 43.8%
100,000 Bank of East Asia Ltd. 234,260
25,000 Cheung Kong (Holdings) Ltd. 163,756
61,000 Cheung Kong Infrastructure Ltd. 172,423
170,000 China Light & Power Co. Ltd. 943,493
110,000 Hang Seng Bank Ltd. 1,061,269
250,000 Henderson Investment Ltd. 196,830
420,000 Hong Kong and China Gas Co. Ltd. 813,134
138,000 Hong Kong Electric Hldg. 524,549
690,000 Hong Kong Telecommunications Ltd. 1,420,468
78,400 HSBC Holdings 1,932,729
53,000 Hutchison Whampoa Ltd. 332,456
138,000 Lung Kee (Bermuda) Hldg. 37,404
118,000 Sun Hung Kai Properties Ltd. 822,427
100,000 Yaohan Int'l. Caterers Ltd. 18,199
----------
8,673,397
----------
INDONESIA: 0.9%
500 P.T. Bank Dagang Nasional
(Warrants Expiring 2/14/00)+ 5
120,000 P.T. Daya Guna Samudera 90,270
160,000 P.T. London Sumatra Indonesia 90,090
----------
180,365
----------
MALAYSIA: 4.4%
12,500 Commerce Asset-Holding Bhd
(Warrants Expiring 5/30/02)+ 1,802
55,000 Golden Hope Plantations Bhd 63,715
41,000 Kuala Lumpur Kepong Bhd 88,132
42,000 Malayan Banking Bhd 122,178
46,000 Malaysian International Shipping Co. Bhd 67,499
17,000 Rothmans of Pall Mall "B" 132,385
134,000 Telekom Malaysia Bhd 396,705
----------
872,416
----------
PHILIPPINES: 1.0%
21,000 Manila Electric Co. "B" 80,746
82,000 San Miguel Corp. Cl. "B" 116,471
----------
197,217
----------
SINGAPORE: 8.5%
25,000 DBS Bank "F " 213,967
39,080 Overseas-Chinese Banking Corp., Ltd. "F" 227,628
75,000 Singapore Airlines Ltd. "F" 490,342
22,400 Singapore Press Holdings Ltd. 280,915
135,000 Singapore Telecommunications Ltd. 251,947
38,000 United Overseas Bank Ltd. 211,174
----------
1,675,973
----------
<PAGE>
No. of Shares Securities (a) Value (Note 1)
------------------------------------------------------------------------
TAIWAN: 10.0%
26,431 Macronix International Company Ltd.
(ADR) $ 370,034
200,000 Sincere Navigation Convertible Bond
3.75% due 5/26/2003 228,500
127,669 Taiwan Index Fund (Liquidity Sub-Fund) 1,384,315
----------
1,982,849
----------
THAILAND: 3.1%
20,000 Ban Pu Coal Co. Ltd. "F " 82,040
45,000 PTT Exploration and Production "F " 529,862
----------
611,902
----------
TOTAL STOCKS AND OTHER
INVESTMENTS: 73.3% (Cost: $14,041,541) 14,511,584
----------
Principal
Amount Short-Term Obligations:
- -------------------------------------------------------------------------
$850,000 American Express Corp. Commercial
Paper, 1/02/98
Interest Yield of 6.45% 849,848
850,000 General Electric Corp.
Commercial Paper, 1/02/98
Interest Yield of 5.65% 849,866
----------
TOTAL SHORT-TERM OBLIGATIONS: 8.6%
(Amortized Cost: $1,699,714) 1,699,714
----------
TOTAL INVESTMENTS: 81.9% (Cost: $15,741,255) 16,211,298
OTHER ASSETS LESS LIABILITIES: 18.1% 3,574,941
----------
NET ASSETS: 100% $19,786,239
==========
- -----------------
(a) Unless otherwise indicated, securities owned are shares of common stock.
Glossary:
ADR--American Depositary Receipt
"F"--Foreign registry
+ Non-income producing
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Summary of Investments By Industry % of Net Assets
- ----------------------------------------------------------
Agriculture 0.4%
Air Transportation 2.5%
Banking 9.8%
Coal 0.4%
Commercial Paper 8.6%
Computers 1.9%
Conglomerates 0.6%
Engineering & Construction 0.9%
Financial Services 10.4%
Fisheries 0.4%
Foreign Government Bonds 7.0%
Holding Cos. Diversified 1.7%
Industrials 0.2%
Natural Gas--Pipelines 4.1%
Oil & Gas Exploration 2.7%
Publishing 1.4%
Real Estate 6.7%
Restaurants 0.1%
Shipping 1.5%
Telecommunications 10.5%
Tire & Rubber Goods 0.7%
Tobacco 0.7%
Transportation 0.9%
Utilities 7.8%
Other Assets Less Liabilities 18.1%
------
100.0%
======
See Notes to Financial Statements.
<PAGE>
ASIA DYNASTY FUND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
ASSETS:
Investments at value (cost, $15,741,255) (Note 1) $16,211,298
Cash and foreign currency (cost, $2,285,105) 2,284,648
Receivables:
Securities sold 3,186,471
Capital shares sold 690,947
Dividends and interest 19,630
Deferred organization costs 289
----------
Total assets 22,393,283
----------
LIABILITIES:
Payables:
Securities purchased 1,174,813
Dividends payable 997,631
Capital shares redeemed 295,098
Accounts payable 139,502
----------
Total liabilities 2,607,044
----------
NET ASSETS $19,786,239
==========
CLASS A
Net asset value and redemption price
per share ($12,872,516/1,645,824) $7.82
====
Maximum offering price per share
(NAV/(1-maximum sales commission)) $8.21
====
CLASS B
Net asset value, offering and redemption price
per share ($6,913,723/906,472)(Redemptions
may be subject to a contingent deferred sales
charge within the first six years of ownership) $7.63
====
Net assets consist of:
Aggregate paid in capital $19,378,291
Unrealized appreciation of investments
and foreign currency 492,213
Distributions in excess of net investment income (84,265)
----------
$19,786,239
==========
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
INVESTMENT INCOME:
INCOME:
Dividends (less foreign taxes withheld of $58,196) $ 677,180
Interest 58,995
----------
Total income 736,175
EXPENSES:
Management (Note 2) $339,096
Distribution - Class A (Note 4) 155,924
Distribution - Class B (Note 4) 140,251
Administration (Note 2) 132,412
Transfer agent 127,013
Custodian 107,967
Professional 50,161
Reports to shareholders 37,571
Registration 30,043
Trustees fees 16,721
Amortization of deferred organization costs 1,507
Other 24,262
--------
Total expenses 1,162,928
----------
Net investment loss (426,753)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3)
Realized gain from security transactions 6,040,708
Realized loss from foreign currency transactions (263,828)
Change in unrealized appreciation
of investments (17,313,597)
Change in unrealized appreciation
of foreign currency denominated assets
and liabilities 24,674
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(11,938,796)
===========
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
----------- -----------
DECREASE IN NET ASSETS:
Operations:
Net investment loss $ (426,753) $ (709,851)
Realized gain from
security transactions 6,040,708 3,091,974
Realized loss from foreign
currency transactions (263,828) (88,962)
Change in unrealized appreciation
of investments (17,313,597) 4,166,380
Change in unrealized appreciation
of foreign currency denominated
assets and liabilities 24,674 (1,672)
----------- -----------
Increase (Decrease) in net assets
resulting from operations (11,938,796) 6,457,869
----------- -----------
Distributions to shareholders from:
Tax return of capital:
Class A Shares (195,520) --
Class B Shares (109,980) --
Realized gain:
Class A Shares (1,662,423) --
Class B Shares (938,539) --
----------- -----------
Total distributions (2,906,462) --
----------- -----------
CAPITAL SHARE TRANSACTIONS:*
Net proceeds from sales of shares:
Class A Shares 41,432,873 90,933,104
Class B Shares 706,347 830,989
----------- -----------
42,139,220 91,764,093
----------- -----------
Reinvestment of dividends:
Class A Shares 1,419,527 --
Class B Shares 487,470 --
----------- -----------
1,906,997 --
----------- -----------
Cost of shares reacquired:
Class A Shares (64,685,031) (115,835,457)
Class B Shares (9,377,149) (9,248,038)
----------- -----------
(74,062,180) (125,083,495)
----------- -----------
Decrease in net assets
resulting from capital share
transactions (30,015,963) (33,319,402)
----------- -----------
Total decrease in net assets (44,861,221) (26,861,533)
NET ASSETS:
Beginning of year 64,647,460 91,508,993
----------- -----------
End of year (including
distributions in excess of net
investment income of ($84,265)
and ($627,790), respectively) $ 19,786,239 $ 64,647,460
=========== ===========
*SHARES OF BENEFICIAL INTEREST ISSUED
AND REDEEMED (UNLIMITED NUMBER
OF $.001 PAR VALUE SHARES AUTHORIZED)
CLASS A CLASS A
----------- -----------
Shares sold 3,318,502 7,042,544
Reinvestment of dividends 181,760 --
Shares reacquired (5,211,712) (8,869,627)
----------- -----------
Net decrease (1,711,450) (1,827,083)
=========== ===========
CLASS B CLASS B
----------- -----------
Shares sold 77,616 64,372
Reinvestment of dividends 63,889 --
Shares reacquired (786,465) (722,245)
----------- -----------
Net decrease (644,960) (657,873)
=========== ===========
<PAGE>
ASIA DYNASTY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A Class B
------------------------------------------ -----------------------------------------
For the For the
Period Period
Year Ended March 22, Year Ended September 1,
December 31, 1993(a) December 31, 1993(a)
------------------------------ to December 31,------------------------------ to December 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period ........... $13.21 $12.40 $12.13 $15.28 $9.53 $13.08 $12.33 $12.09 $15.25 $11.33
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Loss .......... (0.28) (0.20) (0.02) -- (0.06)(b) (0.30) (0.24) (0.08) (0.06) (0.07)(b)
Net Gains (Loss) on
Securities (both realized
and unrealized) ............ (3.82) 1.01 0.40 (2.86) 5.88 (3.86) .99 0.40 (2.86) 4.06
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Total from Investment
Operations .................... (4.10) 0.81 0.38 (2.86) 5.82 (4.16) 0.75 0.32 (2.92) 3.99
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net
Investment Income ............ -- -- (0.09) (0.07) -- -- -- (0.06) (0.02) --
Distributions from Capital
Gains ........................ (1.15) -- -- (0.22) (0.07) (1.15) -- -- (0.22) (0.07)
Tax Return of Capital ......... (0.14) -- (0.02) -- -- (0.14) -- (0.02) -- --
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Total Distributions ............ (1.29) -- (0.11) (0.29) (0.07) (1.29) -- (0.08) (0.24) (0.07)
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Net Asset Value, End of Period . $7.82 $13.21 $12.40 $12.13 $15.28 $ 7.63 $13.08 $12.33 $12.09 $15.25
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return(c) ................ (32.10%) 6.53% 3.13% (18.72%) 61.16% (32.87%) 6.08% 2.65% (19.15%) 35.22%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTARY DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets, End of Period (000) $12,873 $44,351 $64,275 $83,787 $108,661 $6,914 $20,296 $27,234 $35,024 $26,205
Ratio of Gross Expenses to
Average Net Assets 2.38% 2.42% 2.03% 1.85% 2.09%* 3.00% 2.86% 2.41% 2.38% 3.04%
Ratio of Net Expenses to
Average Net Asset 2.38% 2.42% 2.03% 1.85% 1.92%(d) 3.00% 2.86% 2.41% 2.38% 3.04%(d)
Ratio of Net Investment Loss
to Average Net Assets (0.76%) (0.73%) (0.08%) -- (0.68%)(d) (1.36%) (1.14%) (0.52%) (0.50%) (2.17%)(d)
Portfolio Turnover Rate 200.45% 52.99% 57.06% 51.08% 14.63% 200.45% 52.99% 57.06% 51.08% 14.63%
- -----------------------------
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividends
and capital gains at net asset value during the period and a redemption on
the last day of the period. A sales charge is not reflected in the
calculation of total dividends and return. Total return for the period of
less than one year is not annualized.
(d) Annualized.
(e) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose the average commission rate per share it paid for trades in
which a commission is charged.
* Had the Adviser not agreed to assume a portion of expenses for Class A.
See Notes to Financial Statements.
<PAGE>
</TABLE>
ASIA DYNASTY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Asia Dynasty 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 -- Securities traded on national or foreign exchanges are
valued at the last sales prices reported at the close of business on the
last business day of the year. Over-the-counter securities and listed
securities for which no sale was reported are valued at the mean of the bid
and asked prices. Short-term obligations are valued at 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 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 and the
appreciation (depreciation) attributable to foreign currency fluctuations on
other foreign denominated assets and liabilities are recorded as net
realized and unrealized gains and losses from foreign currency transactions
and foreign denominated assets and liabilities, respectively.
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. DISTRIBUTIONS 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
security and currency transactions. The effect of these differences for the
year ended December 31, 1997 decreased distributions in excess of net
investment income by $970,278, decreased undistributed realized gain by
$65,773 and decreased aggregate paid in capital by $904,505.
F. Deferred organization costs are being amortized over a period of five years
beginning March 22, 1993 (commencement of operations).
NOTE 2 -- Van Eck Associates Corporation (the "Adviser") earned fees of
$339,096 for the year ended December 31, 1997 for investment management and
advisory services. The fee is based on an annual rate of .75 of 1% of the Fund's
average daily net assets. Van Eck Associates Corporation also earned fees of
$113,032 for the year ended December 31, 1997 for administrative and operating
services. The fee is based on an annual rate of .25 of 1% of the Fund's average
daily net assets. In accordance with the advisory agreement, the Fund reimbursed
Van Eck Associates Corporation $19,380 for costs incurred in connection with
certain administrative and operating functions. Van Eck Securities Corporation
received $2,455 for the year ended December 31, 1997 from commissions earned on
sales of shares of beneficial interest of the Fund after deducting $13,752
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.
NOTE 3 -- Purchases and proceeds from sales of investments, other than
short-term obligations, aggregated $81,365,594 and $119,957,742, respectively,
for the year ended December 31, 1997. For federal income tax purposes, the cost
of investments owned at December 31, 1997 was $15,825,570. As of December 31,
1997, net unrealized appreciation for federal income tax purposes aggregated
$385,728 of which $1,266,765 related to appreciated investments and $881,037
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 Class B shares (the
"Annual Limitation"). Distribution expenses incurred under the Plan that have
not been paid because they exceed the Annual Limitation may be carried forward
to future years and paid by the Fund within the Annual Limitation. VESC has
waived its right to reimbursement for the carried forward amounts incurred
through December 31, 1997 in the event the Plan is terminated, unless the Board
of Trustees determines that reimbursement of carried forward amounts is
appropriate. The cumulative amount of excess distribution expenses incurred over
the Annual Limitation as of December 31, 1997 was $1,123,147 for Class A shares
and $1,473,877 for Class B shares.
NOTE 5 -- The Fund invests in foreign securities. Investments in foreign
securities may involve a greater degree of risk than investments in domestic
securities due to political, economic or social instability. In addition, some
foreign companies are not generally subject to the same uniform accounting,
auditing and financial rules as are U.S. companies, and there may be less
governmental supervision and regulation. Foreign investments may also be subject
to foreign taxes, dividend collection fees and settlement delays.
The Fund may concentrate its investments in companies which are located in,
or expect to benefit from the growth of the economies of countries located in
Asia. The Fund may, but generally does not invest in Japan, Australia, or New
Zealand. The emerging market countries in Asia may present the risk of
nationalization of businesses or prohibitions of repatriation of assets and may
have less protection of property rights than more developed countries. Since the
Fund may so concentrate, it may be subject to even greater economic, social and
political risks and greater market fluctuations than other more diversified
domestic and foreign portfolios.
<PAGE>
ASIA DYNASTY FUND
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- 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
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 $10,324.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Trustees of the Van Eck Funds:
We have audited the accompanying statement of assets and liabilities,
including the schedule of portfolio investments, of the Asia Dynasty Fund (the
"Fund") (one of the series constituting the Van Eck Funds) 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 four years in the period
then ended and the period March 22, 1993 (commencement of operations) to
December 31, 1993. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 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 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
Asia Dynasty Fund series 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 four years in the period then ended and the period March 22,
1993 (commencement of operations) to December 31, 1993, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 25, 1998
<PAGE>
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<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 Van Eck Global Funds
prospectus, which includes more complete information, such as charges and
expenses and the risks associated with international investing, including
currency fluctuations or controls, expropriation, nationalization and
confiscatory taxation. For a free Van Eck Gold and Money or Van Eck/Chubb Funds
prospectus, please call the number listed below. Please read the prospectus
before investing.
VAN ECK GLOBAL
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
www.vaneck.com
For account assistance please call (800) 544-4653
<PAGE>
D E C E M B E R 3 1 , 1 9 9 7
Van Eck
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Asia
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Dynasty Fund
Annual Report
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VAN ECK GLOBAL
