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VAN ECK FUNDS
99 PARK AVENUE, NEW YORK, N.Y. 10016
SHAREHOLDER SERVICES: TOLL FREE (800) 544-4653
Van Eck Funds (the "Trust") is a mutual fund consisting of eight separate
series: Asia Dynasty Fund (Class A and B), Emerging Markets Growth Fund (Class
A, B and C), Global Balanced Fund (Class A and B), Global Hard Assets Fund
(Class A, B and C), Gold/Resources Fund (Class A), Global Real Estate Fund
(Class A, B and C) International Investors Gold Fund (Class A), and U.S.
Government Money Fund (the "Funds").
TABLE OF CONTENTS Page
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GENERAL INFORMATION............................................ 2
INVESTMENT OBJECTIVES AND POLICIES............................. 2
RISK FACTORS................................................... 7
INVESTING IN FOREIGN
SECURITIES..................................................... 7
FOREIGN CURRENCY
TRANSACTIONS................................................... 9
FUTURES AND OPTIONS
TRANSACTIONS................................................... 11
MORTGAGE-BACKED
SECURITIES..................................................... 11
REAL ESTATE
SECURITIES..................................................... 12
COMMERCIAL
PAPER.......................................................... 12
DEBT SECURITIES................................................ 13
SHORT SALES.................................................... 13
DIRECT INVESTMENTS............................................. 13
REPURCHASE AGREEMENTS.......................................... 14
RULE 144A SECURITIES........................................... 14
INVESTMENT RESTRICTIONS........................................ 15
INVESTMENT ADVISORY SERVICES................................... 20
THE DISTRIBUTOR................................................ 22
PORTFOLIO TRANSACTIONS AND BROKERAGE........................... 24
TRUSTEES AND OFFICERS.......................................... 27
VALUATION OF SHARES............................................ 34
EXCHANGE PRIVILEGE............................................. 37
TAX-SHELTERED RETIREMENT PLANS................................. 37
INVESTMENT PROGRAMS............................................ 41
TAXES.......................................................... 42
REDEMPTIONS IN KIND............................................ 45
PERFORMANCE.................................................... 45
ADDITIONAL INFORMATION......................................... 48
FINANCIAL STATEMENTS........................................... 48
APPENDIX....................................................... 49
MARKET INDEX DESCRIPTIONS...................................... 55
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ IN CONJUNCTION WITH THE FUNDS' CURRENT PROSPECTUS, DATED MAY 1, 1998 (THE
"PROSPECTUS"), WHICH IS AVAILABLE AT NO CHARGE UPON WRITTEN OR TELEPHONE REQUEST
TO THE TRUST AT THE ADDRESS OR TELEPHONE NUMBER AT THE TOP OF THIS PAGE.
SHAREHOLDERS ARE ADVISED TO READ AND RETAIN THIS STATEMENT OF ADDITIONAL
INFORMATION FOR FUTURE REFERENCE.
STATEMENT OF ADDITIONAL INFORMATION May 1, 1998
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GENERAL INFORMATION
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Van Eck Funds (the "Trust") is an open-end management investment company
organized as a "business trust" under the laws of The Commonwealth of
Massachusetts on April 3, 1985. The Board of Trustees has authority to create
additional series or funds, each of which may issue a separate class of shares.
There are currently eight series of Van Eck Funds: Global Balanced Fund (Class
A and B), Asia Dynasty Fund (Class A and B), Emerging Markets Growth Fund (Class
A, B and C) International Investors Gold Fund (Class A), Gold/Resources Fund
(Class A), Global Income Fund (Class A), Global Hard Assets Fund (Class A, B and
C) Global Real Estate Fund (Class A, B and C) and U.S. Government Money Fund,
each of which commenced operations as a series of Van Eck Funds.
International Investors Gold Fund was formerly a mutual fund incorporated
under the laws of the state of Delaware under the name of International
Investors Incorporated. International Investors Incorporated was reorganized as
a series of the Trust on April 30, 1991. International Investors Incorporated
had been in continuous existence since 1955, and had been concentrating in gold
mining shares since 1968.
Each series of the Trust, other than the Global Balanced Fund, Global Hard
Assets Fund and Global Real Estate Fund are classified as a diversified fund
under the Investment Company Act of 1940 (the "1940 Act").
Van Eck Associates Corporation (the "Adviser") serves as investment adviser
to the Funds (except for the Asia Dynasty Fund and Emerging Markets Growth
Fund). Van Eck Global Asset Management (Asia) Limited ("Van Eck-Hong Kong")
serves as the investment adviser to the Asia Dynasty Fund and Emerging Markets
Growth Fund. Fiduciary International, Inc. ("FII") serves as sub-investment
adviser to the Global Balanced Fund.
INVESTMENT OBJECTIVES AND POLICIES
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Asia Dynasty Fund
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Asia Dynasty Fund may invest in equity securities, warrants and equity
options of companies located in, or expected to benefit from the developmental
growth of the economies of countries located in the Asia region ("Asia Growth
Companies"). These countries include Burma, Peoples Republic of China
("China"), Cambodia, Hong Kong, India, Indonesia, Korea, Laos, Malaysia,
Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam
and, when the Fund is in a defensive posture, Australia, Japan and New Zealand.
Equity securities include common and preferred stocks, direct equity interests
in trusts, partnerships, joint ventures and other unincorporated entities or
enterprises, special classes of shares available only to foreign persons in
those markets that restrict ownership of certain classes of equity to nationals
or residents of that country, convertible preferred stocks and convertible debt
instruments. The Fund may buy and sell financial futures contracts and options
on financial futures contracts, forward currency contracts and put or call
options on securities, securities indices and foreign currencies and foreign
currency swaps. The Fund may also lend its portfolio securities and borrow
money for investment purposes (i.e. leverage its portfolio).
CERTAIN POLICIES APPLICABLE TO GLOBAL BALANCED FUND, GLOBAL HARD ASSETS
FUND, ASIA DYNASTY FUND, EMERGING MARKETS GROWTH FUND, INTERNATIONAL INVESTORS
GOLD FUND, GLOBAL INCOME FUND AND GOLD/RESOURCES FUND.
The above Funds may invest in "when issued" securities and "partly paid"
securities. Additionally, Global Balanced Fund, Global Hard Assets Fund, Asia
Dynasty Fund and Global Income Fund may invest in collateralized mortgage
obligations. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's Investors Service and
Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
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Emerging Markets Growth Fund
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The Emerging Markets Growth Fund seeks long-term capital appreciation by
investing primarily in equity securities in emerging markets around the world.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in Emerging Country and emerging market equity securities. An
"emerging market" or "Emerging Country" is any country that the World Bank, the
International Finance Corporation or the United Nations or its authorities has
determined to have a low or middle-income economy. Emerging Countries can be
found in regions such as Asia, Latin America, Africa and Eastern Europe. The
countries that will not be considered Emerging Countries include the United
States, Australia, Canada, Japan, New Zealand and most countries located in
Western Europe such as Austria, Belgium, Denmark, Finland, France, Germany,
Great Britain, Ireland, Italy, the Netherlands, Norway, Spain, Sweden and
Switzerland.
The Fund considers emerging market securities to include securities which
are (i) principally traded in the capital markets of an emerging market country;
(ii) securities of companies that derive at least 50% of their total revenues
from either goods produced or services performed in Emerging Countries or from
sales made in Emerging Countries, regardless of where the securities of such
companies are principally traded; (iii) securities of companies organized under
the laws of, and with a principal office in an Emerging Country; (iv) securities
of investment companies (such as country funds) that principally invest in
emerging market securities; and (v) American Depositary Receipts (ADRs),
American Depositary Shares (ADSs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) with respect to the securities of such
companies.
Equity securities in which the Fund may invest include common stocks;
preferred stocks (either convertible or non-convertible); rights; warrants;
direct equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; convertible debt instruments; and
special classes of shares available only to foreign persons in those markets
that restrict ownership of certain classes of equity to nationals or residents
of that country. These securities may be listed on securities exchanges or
traded over-the-counter. Direct investments are generally considered illiquid
and will be aggregated with other illiquid investments for purposes of the
limitation on illiquid investments. See "Risk Factors - Emerging Market
Securities."
The Adviser and the Sub-Adviser expect that the Fund will normally invest
in at least three different countries. The Fund emphasizes equity securities,
but may also invest in other types of instruments, including debt securities of
any quality (other than commercial paper as described herein). Debt securities
may include fixed or floating rate bonds, notes, debentures, commercial paper,
loans, convertible securities and other debt securities issued or guaranteed by
governments, agencies or instrumentalities, central banks or private issuers.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in securities which are not emerging market securities, such as
high grade, liquid debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in money
market instruments denominated in U.S. dollars or a foreign currency. These
money market instruments include, but are not limited to, negotiable or short-
term deposits with domestic or foreign banks with total surplus and undivided
profits of at least $50 million; high quality commercial paper; and repurchase
agreements maturing within seven days with domestic or foreign dealers, banks
and other financial institutions deemed to be creditworthy under guidelines
approved by the Board of Trustees of the Fund. The commercial paper in which
the Fund may invest will, at the time of purchase, be rated P-1 or better by
Moody's Investors Service, Inc. ("Moody's"); A-1 or better by Standard & Poor's
Corporation ("S&P"); Fitch-1 by Fitch; Duff-1 by Duff & Phelps ("D&P"), or if
unrated, will be of comparable high qualify as determined by the Adviser
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Global Balanced Fund
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Global Balanced Fund may invest in equity securities. Equity securities
include common and preferred stocks; equity and equity index swap agreements;
direct equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; special classes of shares available only
to foreign persons in such markets that restrict the ownership of certain
classes of equity to nationals or residents of the country; convertible
preferred stocks and convertible debt instruments; financial futures contracts
and options on financial futures contracts; forward currency contracts and put
and call options on securities, securities indices and foreign currencies and
foreign currency swaps.
The Fund may also invest in fixed-income securities which include
obligations issued or guaranteed by a government or any of its political
subdivisions, agencies, instrumentalities, or by a supranational organization
such as the World Bank or European Economic Community (or other organizations
which are chartered to promote economic development and are supported by various
governments and government entities), adjustable-rate preferred stock, interest
rate swaps, corporate bonds, debentures, notes, commercial paper, certificates
of deposit, time deposits, repurchase agreements, and debt obligations which may
have a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
government and its agencies having varied maturities. The Fund may invest in
asset-backed securities such as collateralized mortgage obligations and other
mortgage and non-mortgage asset-backed securities. The Fund may also lend its
portfolio securities and borrow money for investment purposes (i.e. leverage its
portfolio).
Global Hard Assets Fund
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Global Hard Assets Fund will, under normal market conditions, invest at
least 65% of its total assets in "Hard Asset Securities." Hard Asset Securities
include equity securities of "Hard Asset Companies" and securities, including
structured notes, whose value is linked to the price of a commodity or a
commodity index. The term "Hard Asset Companies" includes companies that are
directly or indirectly (whether through supplier relationships, servicing
agreements or otherwise) engaged to a significant extent in the exploration,
development, production or distribution of one or more of the following: (i)
precious metals, (ii) ferrous and non-ferrous metals, (iii) gas, petroleum,
petrochemicals or other hydrocarbons, (iv) forest products, (v) real estate and
(vi) other basic non-agricultural commodities which, historically, have been
produced and marketed profitably during periods of significant inflation. Under
normal market conditions, the Fund will invest at least 5% of its assets in each
of the first five sectors listed above. The Fund has a fundamental policy of
concentrating in such industries and up to 50% of the Fund's assets may be
invested in any one of the above sectors. Precious metal and natural resource
securities are at times volatile and there may be sharp fluctuations in prices
even during periods of rising prices.
The Fund may invest in equity securities. Equity securities include common
and preferred stocks; equity and equity index swap agreements; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; special classes of shares available only to foreign
persons in such markets that restrict the ownership of certain classes of equity
to nationals or residents of the country; convertible preferred stocks and
convertible debt instruments. The Fund may also invest in fixed-income
securities which include obligations issued or guaranteed by a government or any
of its political subdivisions, agencies, instrumentalities, or by a
supranational organization such as the World Bank or European Economic Community
(or other organizations which are chartered to promote economic development and
are supported by various governments and government entities), adjustable-rate
preferred stock, interest rate swaps, corporate bonds, debentures, notes,
commercial paper, certificates of deposit, time deposits, repurchase agreements,
and debt obligations which may have a call on a common stock or commodity by
means of a conversion privilege or attached warrants. The Fund may invest in
debt instruments of the U.S. government and its agencies having varied
maturities.
The Fund may purchase securities, including structured notes, whose value
is linked to the price of a commodity or a commodity index. The Fund may
purchase and sell financial and commodity futures contracts and options on
financial futures and commodity futures contracts and may also write, purchase
or sell put or call options on securities, foreign currencies, commodities and
commodity indices. The Fund may invest in asset-backed securities such as
collateralized mortgage obligations and other mortgage and non-mortgage asset-
backed securities. The Fund may also lend its portfolio securities and borrow
money for investment purposes (i.e. leverage its portfolio).
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Global Real Estate Fund
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The Global Real Estate Fund seeks to maximize total return by investing
primarily in equity securities of domestic and foreign companies which are
principally engaged in the real estate industry or which owns significant real
estate assets.
The Fund will, under normal conditions, invest at least 65% (and at times
nearly all) of its total assets in equity securities of domestic and foreign
companies which are principally engaged in the real estate industry or which
owns significant real estate assets ("Real Estate Companies").
The Fund may invest up to 35% of its assets in debt securities of Real
Estate Companies and in equity and debt securities of non-Real Estate Companies,
which may include issuers whose products and services are related to the real
estate industry or which own real estate assets.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in securities which are not emerging markets securities, such as
high grade, liquid debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in money
market instruments dominated in the U.S. dollars or a foreign currency. These
money markets instruments include, but are not limited to, negotiable or short-
term deposits with domestic or foreign banks with total surplus and undivided
profits of at least $50 million; high quality commercial paper, and repurchase
agreements maturing within seven days with domestic or foreign dealers, banks
and other financial institutions deemed to be creditworthy under guidelines
approved by the Board of Trustees of the Trust. The commercial paper in which
the Fund may invest will, at the time of purchase, be rated P-1 or better by
Moody's Investors Service, Inc. ("Moody's"); A-1 or better Standard & Poor's
Corporation ("S&P"); Fitch-1 by Fitch; Duff-1 by Duff & Phelps ("D&P"); or if
unrated, will be of comparable high quality as determined by the Adviser.
Gold/Resources Fund
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Gold/Resources Fund may invest in debt and equity securities of companies
engaged in the exploration, development and production of gold and other natural
resources. Gold, other precious metals and natural resources securities are at
times volatile and there may be sharp fluctuations in prices even during periods
of rising prices.
The Fund may invest in any type of security including, but not limited to,
common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may purchase and sell financial and
commodity futures contracts and options on financial futures and commodity
futures contracts and may also write, purchase or sell put or call options on
securities, foreign currencies, commodities and commodity indices.
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International Investors Gold Fund
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The Fund's primary objective is long-term capital appreciation, while
retaining freedom to take current income into consideration in selecting
investments. The Fund's fundamental policy is to concentrate its investments in
common stocks of gold mining companies. It may invest in that industry up to
100% of the value of its assets. In some future period or periods, due to
adverse conditions in that industry, the Fund may for temporary defensive
purposes have less than 25% of the value of its assets invested in that
industry, however, under normal circumstances the Fund will have at least 65% of
its total assets invested in that industry.
The Fund's policy is to invest primarily in securities of companies,
wherever organized, whose properties, products or services are international in
scope or substantially in countries outside the United States, of foreign
governments, and in United States Treasury securities.
CERTAIN POLICIES APPLICABLE TO GLOBAL BALANCED FUND, GLOBAL HARD ASSETS
FUND, ASIA DYNASTY FUND, EMERGING MARKETS GROWTH FUND, INTERNATIONAL INVESTORS
GOLD FUND, GLOBAL INCOME FUND AND GOLD/RESOURCES FUND.
The above Funds may invest in "when issued" securities and "partly paid"
securities. Additionally, Global Balanced Fund, Global Hard Assets Fund, Asia
Dynasty Fund and Global Income Fund may invest in collateralized mortgage
obligations. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's Investors Service and
Standard & Poor's Corporation relating to the fixed-income securities and
preferred stocks in which the Funds may invest, including a description of the
risks associated with each category.
U.S. Government Money Fund
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U.S. Government Money Fund seeks safety of principal, daily liquidity and
current income through investments in short-term U.S. Treasury securities and
other securities carrying the "full faith and credit" guarantee of the U.S.
Government. The Fund invests in U.S. Treasury bills, notes, and bonds and other
obligations guaranteed by the full faith and credit of the U.S. Government and
repurchase agreements collateralized by such obligations (at least 80% of its
assets will be so invested). All securities mature within thirteen months from
the date of purchase, although repurchase agreements may be collateralized by
securities maturing in more than one year.
Direct obligations issued by the U.S. Treasury include bills, notes and
bonds which differ from each other only in interest rates, maturities and times
of issuance: Treasury bills have maturities of thirteen months or less,
Treasury notes have maturities of one to ten years and Treasury bonds generally
have maturities of greater than ten years. Securities guaranteed by the U.S.
Government include such obligations as securities issued by the General Services
Administration and the Small Business Administration.
U.S. Government Money Fund may also invest in other short-term instruments
(up to 20% of its assets), in all cases subject to the credit quality
requirements of the 1940 Act, including commercial paper, banker's acceptances,
and certificates of deposit. Commercial paper consists of short-term, unsecured
promissory notes issued principally by banks and corporations to finance short-
term credit needs. The commercial paper purchased by the Fund will consist only
of direct obligations of the issuer. Banker's acceptances are drafts or bills of
exchange that have been guaranteed as to payment by a bank or trust
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company. Banker's acceptances are used to effect payment of merchandise sold in
import-export transactions, and are backed by the credit strength of the bank
which assumes the obligation. Time deposits are credit instruments evidencing
the obligation of a bank to repay funds deposited with it for a specified period
of time. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specific period of time.
RISK FACTORS
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Investing In Foreign Securities
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GLOBAL BALANCED FUND, GLOBAL HARD ASSETS FUND, ASIA DYNASTY FUND, EMERGING
MARKETS GROWTH FUND, GLOBAL REAL ESTATE FUND, INTERNATIONAL INVESTORS GOLD FUND
AND GOLD/RESOURCES FUND.
Gold/Resources Fund and U.S. Government Money Fund, as a fundamental
investment policy, may not invest in securities of South African issuers;
Asia Dynasty Fund, Emerging Markets Growth Fund and Global Balanced Fund, Global
Hard Assets Fund, Global Real Estate Fund, International Investors Gold Fund are
not so restricted by their fundamental investment policies.
Investors should recognize that investing in foreign securities involves
certain special considerations which are not typically associated with investing
in United States securities. Since investments in foreign companies will
frequently involve currencies of foreign countries, and since the above Funds
may hold securities and funds in foreign currencies, these Funds may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, if any, and may incur costs in connection with conversions between
various currencies. Most foreign stock markets, while growing in volume of
trading activity, have less volume than the New York Stock Exchange, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. Similarly, volume and liquidity in
most foreign bond markets are less than in the United States, and at times
volatility of price can be greater than in the United States. Fixed commissions
on foreign securities exchanges are generally higher than negotiated commissions
on United States exchanges, although these Funds endeavor to achieve most
favorable net results on their portfolio transactions. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed companies in foreign countries than in the United States. In addition,
with respect to certain foreign countries, there is the possibility of exchange
control restrictions, expropriation or confiscatory taxation, political,
economic or social instability, which could affect investments in those
countries. Foreign securities such as those purchased by these Funds may be
subject to foreign government taxes, higher custodian fees and dividend
collection fees which could reduce the yield on such securities.
Investments may be made from time to time by Global Balanced Fund, Global
Hard Assets Fund, Global Real Estate Fund, Asia Dynasty Fund and Emerging
Markets Growth Fund in companies in developing countries as well as in developed
countries. Asia Dynasty Fund, Emerging Markets Growth Fund and Global Hard
Assets Fund may have a substantial portion of their assets in developing
countries. Although there is no universally accepted definition, a developing
country is generally considered by the Adviser (or FII) to be a country which is
in the initial stages of industrialization. Shareholders should be aware that
investing in the equity and fixed income markets of developing countries
involves exposure to unstable governments, economies based on only a few
industries, and securities markets which trade a small number of securities.
Securities markets of developing countries tend to be more volatile than the
markets of developed countries; however, such markets have in the past provided
the opportunity for higher rates of return to investors.
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Since the Emerging Markets Growth Fund will invest at least 65% of its
total assets in emerging market countries and the Asia Dynasty Fund will invest
at least 65% of its total assets in Asian Region investments, its investment
performance will be especially affected by events affecting emerging market
countries and Asian Region companies. The value and liquidity of emerging market
countries and Asian Region investments may be affected favorably or unfavorably
by political, economic, fiscal, regulatory or other developments in the emerging
market countries and Asian Region or their neighboring regions. The extent of
economic development, political stability and market depth of different
countries in the emerging market countries and Asian Region varies widely.
Certain countries in the Asian Region, including Cambodia, China, Laos,
Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are either
comparatively underdeveloped or are in the process of becoming developed.
Investments typically involve greater potential for gain or loss than
investments in securities of issuers in developed countries. Given the Fund's
investments, the Fund will likely be particularly sensitive to changes in
China's economy as the result of a reversal of economic liberalization,
political unrest or changes in China's trading status.
The securities markets in the emerging market countries and Asian Region
are substantially smaller, less liquid and more volatile than the major
securities markets in the United States. A high proportion of the shares of many
issuers may be held by a limited number of persons and financial institutions,
which may limit the number of shares available for investment by the portfolio.
Similarly, volume and liquidity in the bond markets in the emerging market
countries and Asian Region are less than in the United States and, at times,
price volatility can be greater than in the United States. A limited number of
issuers in emerging market countries and the Asian Region securities markets may
represent a disproportionately large percentage of market capitalization and
trading value. The limited liquidity of securities markets in the emerging
market countries and Asian Region may also affect the Fund's ability to acquire
or dispose of securities at the price and time it wishes to do so. Accordingly,
during periods of rising securities prices in the more illiquid emerging market
countries and Asian Region securities markets, the Fund's ability to participate
fully in such price increases may be limited by its investment policy of
investing not more than 15% of its net assets in illiquid securities.
Conversely, the Fund's inability to dispose fully and promptly of positions in
declining markets will cause the Fund's net asset value to decline as the value
of the unsold positions is marked to lower prices. In addition, emerging market
countries and Asian Region securities markets are susceptible to being
influenced by large investors trading significant blocks of securities.
The Chinese, Hong Kong and Taiwanese stock markets are undergoing a period
of growth and change which may result in trading volatility and difficulties in
the settlement and recording of transactions, and in interpreting and applying
the relevant law and regulations. In particular, the securities industry in
China is not well developed. China has few securities laws of nationwide
applicability. The municipal securities regulations adopted by Shanghai and
Shenzhen municipalities are very new, as are their respective securities
exchanges and other self-regulatory organizations. In addition, Chinese
stockbrokers and other intermediaries may not perform as well as their
counterparts in the United States and other more developed securities markets.
The prices at which the Funds may acquire investments may be affected by trading
by persons with material non-public information and by securities transactions
by brokers in anticipation of transactions by the Funds in particular
securities. The securities markets in Cambodia, Laos and Vietnam are currently
non-existent.
Asia Dynasty Fund will invest in Asian Region countries with emerging
economies or securities markets, and the Emerging Markets Growth Fund will
invest world-wide in countries with emerging economies or securities markets.
Political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of the United States.
Certain of such countries have in the past failed to recognize private property
rights and have at times nationalized or expropriated the assets of private
companies. As a result, the risks described above, including the risks of
nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the value
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of the Funds' investments in those countries and the availability to the Funds
of additional investments in those countries.
Global Real Estate Fund will invest worldwide in countries with emerging
economies or securities markets. Political and economic structures in many of
such countries may be undergoing significant evolution and rapid development,
and such countries may lack the social, political and economic stability
characteristic of the United States. Certain of such countries have in the past
failed to recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a result, the risks described
above, including the risks of nationalization or expropriation of assets may be
heightened. In addition, unanticipated political or social developments may
affect the value of the Fund's investments in those countries and the
availability of the Fund of additional investments in those countries.
Economies in the emerging market countries and the Asian Region may differ
favorably or unfavorably from the United States economy in such respects as rate
of growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. As export-driven
economies, the economies of the emerging market countries and Asian Region are
affected by developments in the economies of their principal trading partners.
Revocation by the United States of China's "Most Favored Nation" trading status,
which the United States President and Congress reconsider annually, would
adversely affect the trade and economic development of China and Hong Kong. Hong
Kong, Japan and Taiwan have limited natural resources, resulting in dependence
on foreign sources for certain raw materials and economic vulnerability to
global fluctuations of price and supply.
China governmental actions can have a significant effect on the economic
conditions in the Asian Region, which could adversely affect the value and
liquidity of the Fund's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain of the other emerging market countries and Asian Region
countries do not have comprehensive systems of laws, although substantial
changes have occurred in China in this regard in recent years. The corporate
form of organization has only recently been permitted in China and national
regulations governing corporations were introduced only in May 1992. Prior to
the introduction of such regulations Shanghai had adopted a set of corporate
regulations applicable to corporations located or listed in Shanghai, and the
relationship between the two sets of regulations is not clear. Consequently,
until a firmer legal basis is provided, even such fundamental corporate law
tenets as the limited liability status of Chinese issuers and their authority to
issue shares remain open to question. Laws regarding fiduciary duties of
officers and directors and the protection of shareholders are not well
developed. China's judiciary is relatively inexperienced in enforcing the laws
that exist, leading to a higher than usual degree of uncertainty as to the
outcome of litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law, or to obtain
enforcement of the judgment by a court of another jurisdiction. The bankruptcy
laws pertaining to state enterprises have rarely been used and are untried in
regard to an enterprise with foreign shareholders, and there can be no assurance
that such shareholders, including the Funds, would be able to realize the value
of the assets of the enterprise or receive payment in convertible currency. As
the changes to the Chinese legal system develop, the promulgation of new laws,
existing laws and the preemption of local laws by national laws may adversely
affect foreign investors, including the Funds. The uncertainties faced by
foreign investors in China are exacerbated by the fact that many laws,
regulations and decrees of China are not publicly available, but merely
circulated internally. Similar risks exist in other emerging market countries
and Asian Region countries.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.
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Foreign Currency Transactions
-----------------------------
ASIA DYNASTY FUND, EMERGING MARKETS GROWTH FUND, GLOBAL BALANCED FUND,
GLOBAL HARD ASSETS FUND, GLOBAL REAL ESTATE FUND, GOLD/RESOURCES FUND AND
INTERNATIONAL INVESTORS GOLD FUND.
Under normal circumstances, consideration of the prospects for currency
exchange rates will be incorporated into the long-term investment decisions made
for the above Funds with regard to overall diversification strategies. Although
the Funds value their assets daily in terms of U.S. Dollars, they do not intend
physically to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. The Funds will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Funds at one rate, while offering a lesser rate of exchange should the
Funds desire to resell that currency to the dealer. The Funds will use forward
contracts, along with futures contracts, foreign exchange swaps (Asia Dynasty
Fund, Emerging Markets Growth Fund, Global Balanced Fund, Global Hard Assets
Fund, and Global Real Estate Fund only) and put and call options (all types of
derivatives), to "lock in" the U.S. Dollar price of a security bought or sold
and as part of their overall hedging strategy. The Funds will conduct their
foreign currency exchange transactions, either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
purchasing put and call options on, or entering into futures contracts or
forward contracts to purchase or sell foreign currencies. See "Futures and
Options Transactions."
A forward foreign currency contract, like a futures contract, involves an
obligation to purchase or sell a specific amount of currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. Unlike foreign
currency futures contracts which are standardized exchange-traded contracts,
forward currency contracts are usually traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for such trades.
The Adviser (or FII) will not commit any Fund to deliver under forward
contracts an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets or obligations denominated in that
currency. The Funds' Custodian will place the securities being hedged, cash or
U.S. government securities or debt or equity securities into a segregated
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward foreign currency contracts to ensure
that the Fund is not leveraged beyond applicable limits. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Funds' commitments with respect to such
contracts. At the maturity of a forward contract, the Funds may either sell the
portfolio security and make delivery of the foreign currency, or they may retain
the security and terminate their contractual obligation to deliver the foreign
currency prior to maturity by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. There can be no assurance, however, that the
Funds will be able to effect such a closing purchase transaction.
It is impossible to forecast the market value of a particular portfolio
security at the expiration of the contract. Accordingly, if a decision is made
to sell the security and make delivery of the foreign currency it may be
necessary for a Fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency that a Fund is obligated to deliver.
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If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Additionally, although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
Futures And Options Transactions
--------------------------------
ASIA DYNASTY FUND, EMERGING MARKETS GROWTH FUND, GLOBAL BALANCED FUND,
GLOBAL HARD ASSETS FUND, GLOBAL REAL ESTATE FUND AND GOLD/RESOURCES FUND.
These Funds may invest in options on futures contracts. Compared to the
purchase or sale of futures contracts, the purchase and sale of options on
futures contracts involves less potential risk to the Funds because the maximum
exposure is the amount of the premiums paid for the options. Futures contracts
and options thereon are both types of derivatives.
The use of financial futures contracts and commodity futures contracts,
options on such futures contracts and commodities ( Global Hard Assets Fund,
Global Real Estate Fund, Gold/Resources Fund and International Investors Gold
Fund), may reduce a Fund's exposure to fluctuations in the prices of portfolio
securities and may prevent losses if the prices of such securities decline.
Similarly, such investments may protect a Fund against fluctuation in the value
of securities in which a Fund is about to invest. Because the financial markets
in the Asia Region countries and other developing countries are not as developed
as in the United States these financial investments may not be available to the
Funds and the Funds may be unable to hedge certain risks.
The use of financial futures and commodity futures contracts and options on
such futures contracts and commodities (Global Hard Assets Fund, Global Real
Estate Fund, Gold/Resources Fund and International Investors Gold Fund) as
hedging instruments involves several risks. First, there can be no assurance
that the prices of the futures contracts or options and the hedged security or
the cash market position will move as anticipated. If prices do not move as
anticipated, a Fund may incur a loss on its investment, may not achieve the
hedging protection anticipated and/or incur a loss greater than if it had
entered into a cash market position. Second, investments in options, futures
contracts and options on futures contracts may reduce the gains which would
otherwise be realized from the sale of the underlying securities or assets which
are being hedged. Third, positions in futures contracts and options can be
closed out only on an exchange that provides a market for those instruments.
There can be no assurances that such a market will exist for a particular
futures contract or option. If a Fund cannot close out an exchange traded
futures contract or option which it holds, it would have to perform its
contractual obligation or exercise its option to realize any profit and would
incur transaction costs on the sale of the underlying assets.
It is the policy of each of the Funds to meet the requirements of the
Internal Revenue Code of 1986, as amended (the "Code") to qualify as a regulated
investment company to prevent double taxation of the Funds and their
shareholders. One of the requirements is that at least 90% of a Fund's gross
income be derived from dividends, interest, payment with respect to securities
loans and gains from the sale or other disposition of stocks or other
securities. Gains from commodity futures contracts do not currently qualify as
income for purposes of the 90% test. The extent to which the Funds may engage
in options and futures contract transactions may be materially limited by this
test.
Mortgage-Backed Securities
--------------------------
The Funds may invest in mortgage-backed securities. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. The value of
mortgage-backed securities may change due to shifts in the market's perception
of issuers. In addition, regulatory or tax changes may adversely affect the
mortgage securities market as a
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<PAGE>
whole. Stripped mortgage-backed securities are created when an U.S. governmental
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security ("PO") receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security ("IO") receives interest payments from
the same underlying security. The prices of stripped mortgage-backed securities
may be particularly affected by change in interest rates. As interest rates
fall, prepayment rates tend to increase, which tends to reduce the price of IOs
and increase prices of POs. Rising interest rates can have the opposite effect.
Changes in interest rates may also affect the liquidity of IOs and POs.
Real Estate Securities
----------------------
Global Real Estate Fund may invest in real estate directly, whereas,
Gold/Resources Fund and Global Hard Assets Fund cannot. However, each of these
Funds may invest a percentage of its assets in equity securities of REITs and
other real estate industry companies or companies with substantial real estate
investments. Global Hard Assets Fund may invest up to 50% of its assets in such
securities. Gold/Resources Fund and Global Hard Assets Fund are therefore
subject to certain risks associated with direct ownership of real estate and
with the real estate industry in general. These risks include, among others:
possible declines in the value of real estate; possible lack of availability of
mortgage funds; extended vacancies of properties; risks related to general and
local economic conditions; overbuilding; increases in competition, property
taxes and operating expenses; changes in zoning laws; costs resulting from the
clean-up of, and liability to third parties for damages resulting from,
environmental problems; casualty or condemnation losses; uninsured damages from
floods, earthquakes or other natural disasters; limitations on and variations in
rents; and changes in interest rates.
REITs are pooled investment vehicles whose assets consist primarily of
interest in real estate and real estate loans. REITs are generally classified
as equity REITs, mortgage REITs or hybrid REITs. Equity REITs own interest in
property and realize income from the rents and gain or loss from the sale of
real estate interests. Mortgage REITs invest in real estate mortgage loans and
realize income from interest payments on the loans. Hybrid REITs invest in both
equity and debt. Equity REITs may be operating or financing companies. An
operating company provides operational and management expertise to and exercises
control over, many if not most operational aspects of the property.
REITS are not taxed on income distributed to shareholders provided they
comply with several requirements of the Internal Revenue Code of 1986, as
amended (the "Code").
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for the exemption from tax for distributed income under the
Code. REITs (especially mortgage REITs) are also subject to interest rate risk
(i.e., as interest rates rise, the value of the REIT may decline).
Commercial Paper
----------------
Emerging Markets Growth Fund, Global Balanced Fund, Global Hard Assets Fund
and Global Real Estate Fund may invest in commercial paper which is indexed to
certain specific foreign currency exchange rates. The terms of such commercial
paper provide that its principal amount is adjusted upwards or downwards (but
not below zero) at maturity to reflect changes in the exchange rate between two
currencies while the obligation is outstanding. The Funds will purchase such
commercial paper with the currency in
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<PAGE>
which it is denominated and, at maturity, will receive interest and principal
payments thereon in that currency, but the amount or principal payable by the
issuer at maturity will change in proportion to the change (if any) in the
exchange rate between two specified currencies between the date the instrument
is issued and the date the instrument matures. While such commercial paper
entails the risk of loss of principal, the potential for realizing gains as a
result of changes in foreign currency exchange rate enables the Funds to hedge
or cross-hedge against a decline in the U.S. dollar value of investments
denominated in foreign currencies while providing an attractive money market
rate of return. The Funds will purchase such commercial paper for hedging
purposes only, not for speculation. The staff of the Securities and Exchange
Commission is currently considering whether the purchase of this type of
commercial paper would result in the issuance of a "senior security" within the
meaning of the 1940 Act. The Funds believe that such investments do not involve
the creation of such a senior security, but nevertheless will establish a
segregated account with respect to its investments in this type of commercial
paper and to maintain in such account cash not available for investment or U.S.
Government securities or other liquid high quality debt securities having a
value equal to the aggregate principal amount of outstanding commercial paper of
this type.
Debt Securities
---------------
The Funds may invest in debt securities. The market value of debt
securities generally varies in response to changes in interest rates and the
financial condition of each issuer. During periods of declining interest rates,
the value of debt securities generally increases. Conversely, during periods of
rising interest rates, the value of such securities generally declines. These
changes in market value will be reflected in the Fund's net asset value. Debt
securities with similar maturities may have different yields, depending upon
several factors, including the relative financial condition of the issuers. For
example, higher yields are generally available from securities in the lower
rating categories of S&P or Moody's. However, the values of lower-rated
securities generally fluctuate more than those of high-grade securities. Many
securities of foreign issuers are not rated by these services. Therefore the
selection of such issuers depends to a large extent on the credit analysis
performed by the Adviser (or FII).
New issues of certain debt securities are often offered on a when-issued
basis, that is, the payment obligation and the interest rate are fixed at the
time the buyer enters into the commitment, but delivery and payment for the
securities normally take place after the date of the commitment to purchase.
The value of when-issued securities may vary prior to and after delivery
depending on market conditions and changes in interest rate levels. However,
the Funds do not accrue any income on these securities prior to delivery. The
Funds will maintain in a segregated account with their Custodian an amount of
cash or high quality securities equal (on a daily marked-to-market basis)
to the amount of its commitment to purchase the when-issued securities.
Short Sales
-----------
Currently, Global Hard Assets Fund and Global Real Estate Fund are the only
Funds that can engage in short sales. The Funds will establish a segregated
account with respect to its short sales and maintain in the account cash not
available for investment or US Government securities or other liquid, high-
quality securities having a value equal to the difference between (i) the market
value of the securities sold short at the time they were sold short and (ii) any
cash, US Government Securities or other liquid, high-quality securities required
to be deposited as collateral with the broker in connection with the short sale
(not including the proceeds from the short sale). The segregated account will
be marked to market daily, so that (i) the amount in the segregated account plus
the amount deposited with the broker as collateral equals the current market
value of the securities sold short and (ii) in no event will the amount in the
segregated account plus the amount deposited with the broker as collateral fall
below the original value of the securities at the time they were sold short.
The total value of the assets deposited as collateral with the broker and
deposited in the segregated account will not exceed 50% of the Global Hard
Assets Fund and 25% of the Global Real Estate Fund's net assets.
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<PAGE>
Direct Investments
------------------
Emerging Markets Growth Fund, Global Balanced Fund, Global Hard Assets
Fund, and Global Real Estate Fund may invest up to 10% of their total assets in
direct investments. Direct investments include (i) the private purchase from an
enterprise of an equity interest in the enterprise in the form of shares of
common stock or equity interests in trusts, partnerships, joint ventures or
similar enterprises, and (ii) the purchase of such an equity interest in an
enterprise from a principal investor in the enterprise. In each case the Funds
will, at the time of making the investment, enter into a shareholder or similar
agreement with the enterprise and one or more other holders of equity interests
in the enterprise. The Adviser (or FII) anticipates that these agreements will,
in appropriate circumstances, provide the Funds with the ability to appoint a
representative to the board of directors or similar body of the enterprise and
for eventual disposition of the Funds' investment in the enterprise. Such a
representative of the Funds will be expected to provide the Funds with the
ability to monitor its investment and protect its rights in the investment and
will not be appointed for the purpose of exercising management or control of the
enterprise.
Certain of the Funds' direct investments will include investments in
smaller, less seasoned companies. These companies may have limited product
lines, markets or financial resources, or they may be dependent on a limited
management group. The Funds do not anticipate making direct investments in
start-up operations, although it is expected that in some cases the Funds'
direct investments will fund new operations for an enterprise which itself is
engaged in similar operations or is affiliated with an organization that is
engaged in similar operations.
Direct investments may involve a high degree of business and financial risk
that can result in substantial losses. Because of the absence of any public
trading market for these investments, the Funds may take longer to liquidate
these positions than would be the case for publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
on these sales could be less than those originally paid by the Funds.
Furthermore, issuers whose securities are not publicly traded may not be subject
to public disclosure and other investor protection requirements applicable to
publicly traded securities. If such securities are required to be registered
under the securities laws of one or more jurisdictions before being resold, the
Funds may be required to bear the expense of the registration. In addition, in
the event the Funds sell unlisted foreign securities, any capital gains realized
on such transactions may be subject to higher rates of taxation than taxes
payable on the sale of listed securities. Direct investments are generally
considered illiquid and will be aggregated with other illiquid investments for
purposes of the limitation on illiquid investments
Repurchase Agreements
---------------------
None of the Funds will enter into a repurchase agreement with a maturity of
more than seven business days if, as a result, more than 10% of the value of a
Fund's total assets would then be invested in such repurchase agreements and
other illiquid securities (except that Global Income Fund may invest no more
than 15% of its assets in such repurchase agreements and other money market
instruments and Asia Dynasty, Emerging Markets Growth Fund, Global Balanced
Fund, Global Hard Assets Fund and Global Real Estate Fund
14
<PAGE>
may invest no more than 15% of their total assets in
illiquid securities). A Fund will only enter into a repurchase agreement where
(i) the underlying securities are of the type which the Fund's investment
policies would allow it to purchase directly, (ii) the market value of the
underlying security, including accrued interest, will be at all times equal to
or exceed the value of the repurchase agreement, and (iii) payment for the
underlying securities is made only upon physical delivery or evidence of book-
entry transfer to the account of the custodian or a bank acting as agent.
Rule 144a Securities And Section 4(2) Commercial Paper
------------------------------------------------------
The Securities and Exchange Commission adopted Rule 144A which allows a
broader institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act of 1933 of
resales of certain securities to qualified institutional buyers. The Adviser (or
FII) anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this new
regulation and the development of an automated system for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers.
The Adviser (or FII) will monitor the liquidity of restricted securities in
the Funds' holdings under the supervision of the Board of Trustees. In reaching
liquidity decisions, the Adviser (or FII) will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanisms of the transfer).
In addition, commercial paper may be issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Such commercial paper is restricted as to disposition
under the federal securities laws and, therefore, any resale of such securities
must be effected in a transaction exempt from registration under the Securities
Act of 1933. Such commercial paper is normally resold to other investors through
or with the assistance of the issuer or investment dealers who make a market in
such securities, thus providing liquidity.
Securities eligible for resale pursuant to Rule 144A under the Securities
Act of 1933 and commercial paper issued in reliance on the Section 4(2)
exemption under the 1940 Act may be determined to be liquid in accordance with
guidelines established by the Board of Trustees for purposes of complying with
investment restrictions applicable to investments by the Funds (except the U.S.
Government Money Fund) in illiquid securities.
Investment Restrictions
-----------------------
The following investment restrictions are in addition to those described in
the Prospectus. Policies that are identified as fundamental may be changed with
respect to a Fund only with the approval of the holders of a majority of the
Fund's outstanding shares. Such majority is defined as the vote of the lesser
of (i) 67% or more of the outstanding shares present at a meeting, if the
holders of more than 50% of a Fund's outstanding shares are present in person or
by proxy, or (ii) more than 50% of a Fund's outstanding shares. As to any of
the following policies, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in value of portfolio securities or amount of net assets will not be considered
a violation of the policy.
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ASIA DYNASTY FUND, EMERGING MARKETS GROWTH FUND, GLOBAL BALANCED FUND,
GLOBAL HARD ASSETS FUND, GLOBAL REAL ESTATE FUND, GOLD/RESOURCES FUND, AND U.S.
GOVERNMENT MONEY FUND.
With respect to Gold/Resources Fund and U.S. Government Money Fund, all of
the following restrictions are fundamental policies except restriction 21,
unless otherwise indicated. With respect to Asia Dynasty Fund, Emerging Markets
Growth Fund, Global Balanced Fund, and Global Hard Assets Fund, restrictions 1,
4, 6, 7, 10, 12, 13, 17, 18, 19 and 20, are not fundamental, unless otherwise
provided for by applicable federal or state law. With respect to Global Real
Estate Fund restrictions 1, 4, 10, 13, 17, 18 and 19 are not fundamental, unless
otherwise provided for by applicable federal or state law.
The Asia Dynasty Fund, Emerging Markets Growth Fund, Global Balanced Fund,
Global Hard Assets Fund, Global Real Estate Fund, Gold/Resources Fund, and
U.S. Government Money Fund may not:
1. Invest in securities which (i) with respect to Gold/Resources Fund,
and U.S. Government Money Fund, are subject to legal or contractual
restrictions on resale ("restricted securities") or for which there is
no readily available market quotation or engage in a repurchase
agreement maturing in more than seven days with respect to any
security if the result is that more than 10% of a Fund's net assets
would be invested in such securities, and (ii) with respect to Global
Balanced Fund, Global Hard Assets Fund, Asia Dynasty Fund, Global Real
Estate Fund and Emerging Markets Growth Fund and are "illiquid"
securities, including repurchase agreements maturing in more than 7
days and options traded over-the-counter if the result is that more
than 15% of Global Balanced Fund's, Global Hard Assets Fund's, Asia
Dynasty Fund's, Global Real Estate Fund's or Emerging Markets Growth
Fund's net assets would be invested in such securities, except that
Global Income Fund may invest an additional 5% of its net assets in
short term money market investments, such as repurchase agreements and
time deposits maturing in more than seven days.
2. Purchase or sell real estate, although the Global Balanced Fund,
Global Hard Assets Fund, Asia Dynasty Fund, Gold/Resources Fund,
Emerging Markets Growth Fund and Global Real Estate Fund may purchase
securities of companies which deal in real estate, including
securities of real estate investment trusts, and may purchase
securities which are collateralized by interests in real estate.
3. Purchase or sell commodities (non-Hard Asset commodities with respect
to Global Hard Assets) or commodity futures contracts (for the purpose
of this restriction, forward foreign exchange contracts are not deemed
to be a commodity or commodity contract) except that Emerging Markets
Growth Fund and Global Real Estate Fund may for hedging and other
purposes, Gold/Resources Fund may, for hedging purposes, buy and sell
financial futures contracts which may include stock and bond index
futures contracts and foreign currency futures contracts and
Gold/Resources Fund may, for hedging purposes only, buy and sell
commodity futures contracts on gold and other natural resources or on
an index thereon. The Fund may not commit more than 5% of their total
assets to initial margin deposits on futures contracts, (however, the
Emerging Markets Growth Fund and Global Real Estate Fund are excluded
from the 5% limitation for margin deposit for futures position entered
into for bona fide hedging purposes). In addition, Gold/Resources
Fund, International Investors Gold Fund and Global Hard Assets Fund
may invest in gold bullion and coins.
4. Exclusive of the Global Balanced Fund, Global Hard Assets Fund,
Global Real Estate Fund, Asia Dynasty Fund and Emerging Markets Growth
Fund purchase securities of other open-end investment companies except
as part of a merger, consolidation, reorganization or acquisition of
assets; Asia Dynasty Fund, Emerging Markets Growth Fund, Global
Balanced Fund, Global Hard
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<PAGE>
Assets Fund, Gold/Resources Fund or Global Real Estate Fund may not
purchase more than 3% of the total outstanding voting stock of any
closed-end investment company if more than 5% of any of these Funds'
total assets would be invested in securities of any closed-end
investment company, or more than 10% of such value in closed-end
investment companies in general. In addition, Global Balanced Fund,
Global Hard Assets Fund, Asia Dynasty Fund, Gold/Resources Fund or
Global Real Estate Fund may not invest in the securities of closed-end
investment companies, except by purchase in the open market involving
only customary broker's commissions.
5. Make loans, except by (i) purchase of marketable bonds, debentures,
commercial paper and similar marketable evidences of indebtedness and
(ii) repurchase agreements. Global Balanced Fund, Global Hard Assets
Fund, Asia Dynasty Fund, Emerging Markets Growth Fund and Global Real
Estate Fund may lend to broker-dealers portfolio securities with an
aggregate market value up to one-third of its total assets.
6. As to 75% of the total assets of each of the Asia Dynasty Fund,
Emerging Markets Growth Fund, Gold/Resources Fund, International
Investors Gold Fund and U.S. Government Money Fund, purchase
securities of any issuer, if immediately thereafter (i) more than 5%
of a Fund's total assets (taken at market value) would be invested in
the securities of such issuer, or (ii) more than 10% of the
outstanding securities of any class of such issuer would be held by a
Fund (provided that these limitations do not apply to obligations of
the United States Government, its agencies or instrumentalities).
This limitation does not apply to the Global Balanced Fund, Global
Hard Assets Fund or Global Real Estate Fund.
7. Invest more than 5 percent of the value of its total assets in
securities of companies having, together with their predecessors, a
record of less than three years of continuous operation. This
restriction does not apply to Global Balanced Fund, Global Hard Assets
Fund, Emerging Markets Growth Fund, Asia Dynasty Fund or Global Real
Estate Fund.
8. Underwrite any issue of securities (except to the extent that a Fund
may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities).
9. Borrow money, except that each of the Gold/Resources Fund and U.S.
Government Money Fund may borrow up to 10% of its total assets valued
at cost for temporary or emergency purposes. These Funds will not
purchase securities for investment while borrowings equaling 5% or
more of their total assets are outstanding. In addition, Global
Balanced Fund, Global Hard Assets Fund, Emerging Markets Growth Fund,
Asia Dynasty Fund and Global Real Estate Fund may borrow up to 30% of
the value of their respective net assets to increase their holdings of
portfolio securities.
10. Mortgage, pledge or otherwise encumber its assets except to secure
borrowing effected within the limitations set forth in restriction
(9).
11. Issue senior securities except insofar as a Fund may be deemed to have
issued a senior security by reason of (i) borrowing money in
accordance with restrictions described above; (ii) entering into
forward foreign currency contracts (Global Balanced Fund, Global Hard
Assets Fund, Emerging Markets Growth Fund, Asia Dynasty Fund,
Gold/Resources Fund and Global Real Estate Fund); (iii) financial
futures contracts purchased on margin (Global Balanced Fund, Global
Hard Assets Fund, Emerging Markets Growth Fund, Asia Dynasty Fund,
Gold/Resources Funds and Global Real Estate Fund), (iv) commodity
futures contracts purchased on margin (Gold/Resources Fund, Global
Hard Assets Fund, Global
17
<PAGE>
Real Estate Fund); (v) foreign currency swaps (Global Balanced Fund,
Global Hard Assets Fund, Asia Dynasty Fund, Global Real Estate Fund
and Emerging Markets Growth Fund); and (vi) issuing multiple classes
of shares (Global Balanced Fund, Global Hard Assets Fund, Emerging
Markets Growth Fund, Global Real Estate Fund and Asia Dynasty
Fund).
12. Except for Emerging Markets Growth Fund, Global Hard Assets Fund,
and Global Real Estate Fund, make short sales of securities, except
that Global Balanced Fund, Emerging Markets Growth Fund, Asia Dynasty
Fund and Gold/Resources Fund may engage in the transactions specified
in restrictions (2), (3) and (14).
13. Purchase any security on margin, except that it may obtain such short-
term credits as are necessary for clearance of securities transactions
and, with respect to Global Balanced Fund, Global Hard Assets Fund,
Emerging Markets Growth Fund, Asia Dynasty Fund, Gold/Resources Fund
and Global Real Estate Fund, may make initial or maintenance margin
payments in connections with options and futures contracts and related
options and borrowing effected within the limitations set forth in
restriction (9).
14. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except that Global Balanced Fund, Global Hard
Assets Fund, Emerging Markets Growth Fund, Asia Dynasty Fund,
Gold/Resources Fund and Global Real Estate Fund may purchase or sell
puts and calls on foreign currencies and on securities described under
"Options Transactions" herein and in the Prospectus and that Global
Balanced Fund, Global Hard Assets Fund, Emerging Markets Growth Fund,
Asia Dynasty Fund, Gold/Resources Fund and Global Real Estate Fund may
write, purchase or sell put and call options on financial futures
contracts, which include bond and stock index futures contracts and
Gold/Resources Fund may write, purchase, or sell put and call options
on gold or other natural resources or an index thereon and on
commodity futures contracts on gold or other natural resources or an
index thereon.
15. Make investments for the purpose of exercising control or management.
16. Invest more than 25 percent of the value of a Fund's total assets in
the securities of issuers having their principal business activities
in the same industry, except the Gold/Resources Fund, Global Hard
Assets Fund, Global Real Estate Fund and Emerging Markets Growth Fund
and as otherwise stated in any Fund's fundamental investment
objective, and provided that this limitation does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
17. Participate on a joint or joint and several basis in any trading
account in securities, although transactions for the Funds and any
other account under common or affiliated management may be combined or
allocated between the Funds and such account.
18. Purchase participations or other interests (other than equity stock
interests in the case of the Global Balanced Fund, Global Hard Assets
Fund, Emerging Markets Growth Fund, Asia Dynasty Fund, Gold/Resources
Fund and Global Real Estate Fund) in oil, gas or other mineral
exploration or development programs.
19. Invest more than 5% of its total assets in warrants, whether or not
the warrants are listed on the New York or American Stock Exchanges
(Global Real Estate Fund), or more than 2% of the value of the assets
of a Fund (except Global Balanced Fund, Global Hard Assets Fund,
Emerging Markets Growth Fund, Global Real Estate Fund and Asia Dynasty
Fund) in warrants which are not listed on those exchanges. Warrants
acquired in units or attached to securities or received as
18
<PAGE>
dividends are not included in this restriction. The U.S. Government
Money Fund will not invest in warrants.
20. Purchase or retain a security of any issuer if any of the officers,
directors or Trustees of a Fund or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer, or
if such persons taken together own more than 5% of the securities of
such issuer (except Emerging Markets Growth Fund and Global Real
Estate Fund).
21. Invest in real estate limited partnerships or in oil, gas or other
mineral leases.
With respect to restriction 3, forward foreign exchange contracts are not
deemed to be a commodity or commodity contract. The following are not
considered fundamental policies. Asia Dynasty Fund, Global Balanced Fund,
Global Hard Assets Fund, Global Real Estate Fund and Emerging Markets Growth
Fund may, for hedging purposes, buy and sell financial futures contracts which
may include stock and bond index futures contracts and foreign currency futures
contracts. These Funds may not commit more than 5% of their total assets to
initial margin deposits on futures contracts not used for hedging purposes.
With respect to restriction 16, companies in different geographical
locations will not be deemed to be in the same industry if the investment risks
associated with the securities of such companies are substantially different.
For example, although generally considered to be "interest rate sensitive,"
investing in banking institutions in different countries is generally dependent
upon substantially different risk factors, such as the condition and prospects
of the economy in a particular country and in particular industries, and
political conditions.
International Investors Gold Fund
- ---------------------------------
Restrictions 1 through 9 are fundamental policies of International
Investors Gold Fund and may not be changed without shareholder approval.
Restrictions 10 through 16 are not fundamental policies and may be changed
without shareholder approval.
International Investors Gold Fund may not:
1. Underwrite securities of other issuers.
2. Invest in real estate, commodity contracts or commodities (except
that, subject to applicable state laws, the Fund may invest up to
12.5% of the value of its total assets as of the date of investment in
gold and silver coins which are legal tender in the country of issue
and gold and silver bullion).
3. Make loans to other persons, except through repurchase agreements or
the purchase of publicly distributed bonds, debentures and other debt
securities.
19
<PAGE>
4. Purchase securities on margin or make short sales.
5. Purchase or retain a security of any issuer if any of the officers or
directors of the Company or its investment adviser own beneficially as
much as 1/2 of 1%, or if such persons taken together own over 5%, of
the issuer's securities.
6. Lend its funds or assets, except through the purchase of securities
the Fund would otherwise be authorized to purchase.
7. Mortgage, pledge or hypothecate more than 15% of the Company's total
assets, taken at cost.
8. Purchase any restricted securities which may not be sold to the public
without registration under the Securities Act of 1933, if by reason of
such purchase the value of the Company's aggregate holdings in all
such securities would exceed 10% of total assets.
9. Issue senior securities. The Fund may (i) borrow money in accordance
with restrictions described above, (ii) enter into forward contracts,
(iii) purchase futures contracts on margin, (iv) issue multiple
classes of securities, and (v) enter into swap agreement or purchase
or sell structured notes or similar instruments.
10. Invest in interests (other than equity stock interests) in oil, gas or
other mineral exploration or development programs or in oil, gas or
other mineral leases.
11. Invest in real estate limited partnerships.
12. Make short sales of foreign currencies.
13. Seek short-term trading profits.
14. Make investments in companies for the purpose of exercising control or
management.
15. Invest more than 10% of its assets in repurchase agreements having
maturities of greater than seven days or in a combination of such
agreements together with restricted securities and securities for
which market quotations are not readily available.
16. Purchase securities for investment while borrowings equal to 5% or
more of the Fund's assets are outstanding.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of net assets will not be considered a violation
of any of the foregoing restrictions.
INVESTMENT ADVISORY SERVICES
----------------------------
The investment adviser and manager of the Funds (except for the Asia
Dynasty Fund and Emerging Markets Growth Fund) is Van Eck Associates Corporation
(the "Adviser"), a Delaware corporation, pursuant to an Advisory Agreement with
the Trust dated as of July 30, 1985, as amended. The Adviser oversees an
investment program for the Funds, subject to the overall supervision and review
of the Board of Trustees. The Adviser is currently the oldest and largest gold
manager investing in gold mining shares. The Adviser's team of gold managers and
analysts average over 25 years of experience.
20
<PAGE>
The investment adviser and manager of the Asia Dynasty Fund and Emerging
Markets Growth Fund is Van Eck Global Asset Management (Asia) Limited (Van Eck-
Hong Kong), which is a wholly-owned subsidiary of the Adviser located at 2
Pacific Place, Hong Kong. Van Eck-Hong Kong has served in this capacity since
October 8, 1996 for Asia Dynasty Fund. Between August 1 and October 8 1996, the
Adviser acted as investment manager and adviser to the Asia Dynasty Fund. Van
Eck-Hong Kong has served as investment manager of Emerging Markets Growth Fund
since February 24, 1998. Between December 30, 1996 and February 24, 1998, the
adviser acted as investment manager and adviser to the Emerging Markets Growth
Fund.
Fiduciary International, Inc. ("FII"), a New York corporation, is sub-
adviser to the Global Balanced Fund pursuant to a Sub-Investment Advisory
Agreement dated October 30, 1993.
The Adviser or Van Eck-Hong Kong (or FII) provides the Funds with office
space, facilities and simple business equipment and provides the services of
consultants, executive and clerical personnel for administering their affairs.
The Adviser or Van Eck-Hong Kong (or FII) compensates all executive and clerical
personnel and Trustees of the Trust if such persons are employees or affiliates
of the Adviser, Sub-Adviser, or its affiliates. The advisory fee is computed
daily and paid monthly at the following annual rates: International Investors
Gold Fund and, and Gold/Resources Fund pay a fee equal to .75 of 1% of the first
$500 million of average daily net assets, .65 of 1% of the next $250 million of
average daily net assets and .50 of 1% of the average daily net assets in excess
of $750 million. Global Balanced Fund pays the Adviser a fee of .75 of 1% of
average daily net assets. From this fee the Adviser pays the FII a fee of .50 of
1% of average daily net assets. Asia Dynasty Fund pays Van Eck-Hong Kong a fee
of .75 of 1% of average daily net assets and Emerging Markets Growth Fund pays
Van Eck-Hong Kong a fee of 1% of average daily net assets. Global Hard Assets
Fund and Global Real Estate Fund each pay the Adviser 1% of average daily net
assets. The U.S. Government Money Fund pays a monthly fee at the annual rate of
.50 of 1% for the first $500 million of average daily net assets, .40 of 1% on
the next $250 million of average daily net assets, and .375 of 1% of the average
daily net assets in excess of $750 million.
The Adviser also performs administrative services for Asia Dynasty Fund,
Global Balanced Fund, Gold/Resources Fund and International Investors Gold Fund
pursuant to a written agreement. The Adviser is also responsible for providing
accounting services to these Funds. For these accounting and administrative
services, Asia Dynasty Fund and Global Balanced Fund each pays .25 of 1% of its
respective average daily net assets. Gold/Resources Fund and International
Investors Gold Fund pay an annual rate of .25 of 1% of the first $750 million of
their respective average daily net assets and .20 of 1% of their respective
average daily net assets in excess of $750 million.
The net assets of the Funds at December 31, 1997, 1996 and 1995 were
approximately: International Investors Gold Fund (Class A) - $232,944,326,
$409,330,944, and $519,795,000, respectively; Gold/Resources Fund (Class A) -
$66,150,715, $132,298 and 375, $155,974,000, respectively; U.S. Government Money
Fund - $76,649,948, $107,697,508 and $70,130,000, respectively; Asia Dynasty
Fund (Class A) - $12,872,516, $44,351,438 and $64,275,000, respectively; Asia
Dynasty Fund (Class B) - $6,913,723, $20,296,022 and $27,234,000, respectively;
Global Balanced Fund (Class A) - $24,630,386, $24,399,362 and $30,632,000,
respectively; Global Balanced Fund (Class B) - $5,054,706, $4,931,669 and
$6,151,000, respectively; Global Hard Assets Fund (Class A) - $61,341,105,
$27,226,101 and $3,820,000, respectively; Global Hard Assets Fund (Class B) -
$10,541,237, $62,429 and $1,805,589 respectively, and Global Hard Assets Fund
(Class C) - $8,698,296, $1,934,906 and $181,000, respectively.
The net assets of Emerging Markets Growth Fund at December 31, 1997 were
approximately: Emerging Markets Growth Fund (Class A) - $2,201,040; Emerging
Markets Growth Fund (Class B) - $165,552 and Emerging Markets Growth Fund (Class
C) - $294,395.
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<PAGE>
The net assets of Global Real Estate Fund at December 31, 1997 were
approximately: Global Real Estate Fund (Class A) - $1,448,614; Global Real
Estate Fund (Class B) - $115,732 and Global Real Estate Fund (Class C) $118,151.
In 1997, 1996 and 1995 the aggregate remuneration received by the Adviser
from International Investors Gold Fund was $2,619,794, $4,087,710 and
$4,256,866, respectively; from Gold/Resources Fund was $752,214, $1,198,836 and
$1,317,580, respectively; from U.S. Government Money Fund was $386,515, $382,786
and $286,736, respectively; from Global Balanced Fund was $219,469, $242,447 and
$141,393, respectively; from Global Hard Assets Fund was $660,306, $121,846 and
$29,887, respectively; from Asia Dynasty Fund was $339,096, $621,605 and
$818,148, respectively.
In 1997, the aggregate remuneration received by the Adviser from Emerging
Markets Growth Fund and Global Real Estate Fund was $24,075 and $6,082,
respectively.
The expenses borne by each of the Funds include: all the charges and
expenses of the transfer and dividend disbursing agent, custodian fees and
expenses, legal, auditors' and accountants' fees and expenses, brokerage
commissions for portfolio transactions, taxes, if any, the advisory fee (and
accounting and administrative services fees, if any), extraordinary expenses (as
determined by the Trustees of the Trust), expenses of shareholders' and
Trustees' meetings, and of preparing, printing and mailing proxy statements,
reports and other communications to shareholders, expenses of preparing and
setting in type prospectuses and periodic reports and expenses of mailing them
to current shareholders, legal and accounting expenses and expenses of
registering and qualifying shares for sale (including compensation of the
Adviser's employees of the Adviser or its affiliates in relation to the time
spent on such matters), expenses relating to the Plan of Distribution (Rule 12b-
1 Plan) exclusive of International Investors Gold Fund, fees of Trustees who are
not "interested persons" of the Adviser (or FII), membership dues of the
Investment Company Institute, fidelity bond and errors and omissions insurance
premiums, cost of maintaining the books and records of each Fund, and any other
charges and fees not specifically enumerated as an obligation of the Distributor
or Adviser or FII.
The Advisory Agreement with respect to Global Hard Assets Fund was approved
at a meeting of the Board of Trustees held on October 18, 1994. The Advisory
Agreement and Sub-Advisory Agreement with respect to Global Balanced Fund were
approved at a meeting of the Board of Trustees held on October 12, 1993. The
Advisory and Sub-Advisory Agreement with respect Emerging Markets Growth Fund
were approved at a meeting of the Board of Trustees held on December 10, 1996.
The Advisory Agreement with respect to Gold/Resources Fund and International
Investors Gold Fund was approved at a meeting of the Board of Trustees held on
May 24, 1994. The Advisory Agreement with respect to Global Real Estate Fund was
approved at a meeting of the Board of Trustees held on April 22, 1997. Advisory
Agreements for all the Funds were reapproved by the
22
<PAGE>
Board of Trustees of the Trust, including a majority of the Trustees who are not
parties to such Agreements or interested persons of any such party at a meeting
held on April 22, 1998.
The Advisory Agreement was approved by shareholders of the U.S. Government
Money Fund on January 23, 1987; and Gold/Resources Fund and International
Investors Gold Fund on July 25, 1994. The Advisory Agreements and Sub-Investment
Advisory Agreements were approved by shareholders of Global Balanced Fund on
December 17, 1993.
The Advisory Agreements and Sub-Advisory Agreement provide that they shall
continue in effect from year to year with respect to a Fund as long as it is
approved at least annually both (i) by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Act) or by the Trustees of the
Trust, and (ii) in either event by a vote of a majority of the Trustees who are
not parties to the Agreement or "interested persons" of any party thereto, cast
in person at a meeting called for the purpose of voting on such approval. The
Agreements may be terminated on 60 days written notice by either party and will
terminate automatically in the event of an assignment within the meaning of the
Act.
Mr. John C. van Eck is Chairman of the Board of Directors of the Adviser as
well as President and Trustee of the Trust. Mr. van Eck offered the first global
mutual fund to U.S. investors in 1955 and offered the first gold fund to U.S.
investors in 1968. Mr. van Eck, Chairman and President of the Trust and Van Eck
Worldwide Insurance Trust, and members of his immediate family, own 100% of the
voting stock of the Adviser.
THE DISTRIBUTOR
---------------
Shares of the Funds are offered on a continuous basis and are distributed
through Van Eck Securities Corporation, 99 Park Avenue, New York, New York (the
"Distributor"), a wholly-owned subsidiary of Van Eck Associates Corporation.
The Trustees of the Trusts have approved a Distribution Agreement appointing the
Distributor as distributor of shares of the Funds. The Distribution Agreement
with respect to all Funds was last reapproved by the action of the Trustees on
April 22, 1998.
The Trust has authorized one or more brokers (who are authorized to
designate other intermediaries) to accept purchase and redemption orders on the
Trust's behalf. The Trust will be deemed to have received a purchase or
redemption order when the authorized broker or its designee accepts the order.
Orders will be priced at the net asset value next computed after they are
accepted by the authorized broker or its designee.
The Distribution Agreement provides that the Distributor will pay all fees
and expenses in connection with printing and distributing prospectuses and
reports for use in offering and selling shares of the Funds and preparing,
printing and distributing advertising or promotional materials. The Funds will
pay all fees and expenses in connection with registering and qualifying their
shares under federal and state securities laws.
Van Eck Securities Corporation retained distributing commissions on sales
of shares of the Funds for the following fiscal years ended December 31 (except
as noted) after reallowance to dealers as follows:
Van Eck Securities Reallowance to
Corporation Dealers
------------------ --------------
International 1997 $122,745 $401,483
Investors Gold Fund 1996 160,019 917,169
1995 161,888 650,766
Gold/Resources Fund 1997 $ 38,280 $156,899
1996 33,278 231,559
1995 64,047 274,644
Asia Dynasty Fund 1997 $ 2,455 $ 13,752
1996 22,269 109,025
1995 25,162 119,247
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<PAGE>
Van Eck Securities Reallowance to
Corporation Dealers
------------------ --------------
Global Balanced 1997 $ 1,726 $ 5,635
Fund 1996 2,382 11,231
1995 1,982 8,982
Global Hard 1997 $151,014 $629,428
Assets Fund 1996 53,056 273,203
1995 8,060 44,788
Emerging Markets 1997 $ 2,985 $ 14,741
Growth Fund
Global Real Estate 1997 $116,763 $663,680
Fund
To compensate the Distributor for the services it provides and for the
expenses it bears under the Distribution Agreement, each of Gold/Resources Fund
(Class A) and U.S. Government Money Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 (the "Plan") under the Act. Fees paid by the Funds under
the Plan will be used for servicing and/or distribution expenses incurred only
during the applicable year. Additionally, Global Balanced Fund (Class A and B),
Asia Dynasty Fund (Class A and B), Global Real Estate Fund (Class A, B and C)
and Global Hard Assets Fund (Class A, B and C) have also adopted a Plan which
provides for the compensation of brokers and dealers who sell shares of these
Funds or provide servicing. The Plan for Asia Dynasty Fund (Class A) is a
reimbursement type plan and provides for the payment of carry-over expenses to
the Distributor, incurred in one year but payable in a subsequent year(s), up to
the maximum for the Fund in any given year. Global Balanced Fund (Class A and
Class B), Asia Dynasty Fund (Class B), Global Real Estate Fund and Global Hard
Assets Fund (Class A, B and C) Plans are compensation type plans with a carry-
forward provision which provides that the Distributor recoup distribution
expenses in the event the Plan is terminated. For the periods prior to April
30, 1999, the Distributor has agreed with respect to Plans with a carry-forward
provision, notwithstanding anything to the contrary in the Plan, to waive its
right to reimbursement of carry-forward amounts in the event the Plan is
terminated unless the Board of Trustees has determined that reimbursement of
such carry-forward amounts is appropriate.
Pursuant to the Plans, the Distributor provides the Funds at least
quarterly with a written report of the amounts expended under the Plans and the
purpose for which such expenditures were made. The Trustees review such reports
on a quarterly basis.
The Plans were reapproved for all Funds, by the Trustees of the Trust,
including a majority of the Trustees who are not "interested persons" of the
Funds and who have no direct or indirect financial interest in the operation of
the Plan, cast in person at a meeting called for the purpose of voting on each
such Plan on April 22, 1998. The Plan was approved by shareholders of the
Gold/Resources Fund (Class A) and U.S. Government Money Fund on January 23,
1987; Asia Dynasty Fund (Class B) on August 31, 1993; Global Balanced Fund
(Class A and B) on December 17, 1993; and Asia Dynasty Fund (Class A) on July
25, 1994.
A Plan shall continue in effect as to each Fund, provided such continuance
is approved annually by a vote of the Trustees in accordance with the Act. A
Plan may not be amended to increase materially the amount to be spent for the
services described therein without approval of the shareholders of the Funds,
and all material amendments to the Plan must
24
<PAGE>
also be approved by the Trustees in the manner described above. A Plan may be
terminated at any time, without payment of any penalty, by vote of a majority of
the Trustees who are not "interested persons" of the Fund and who have no direct
or indirect financial interest in the operation of the Plan, or by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) on written notice to any other party to the Plan. A Plan will
automatically terminate in the event of its assignment (as defined in the Act).
So long as the Plan is in effect, the election and nomination of Trustees who
are not "interested persons" of the Trust shall be committed to the discretion
of the Trustees who are not "interested persons." The Trustees have determined
that, in their judgment, there is a reasonable likelihood that the Plan will
benefit the Funds and their shareholders. The Funds will preserve copies of the
Plan and any agreement or report made pursuant to Rule 12b-1 under the Act, for
a period of not less than six years from the date of the Plan or such agreement
or report, the first two years in an easily accessible place. For additional
information regarding the Plans, see the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
The Adviser, Van Eck-Hong Kong or the FII is responsible for decisions to
buy and sell securities and other investments for the Funds, the selection of
brokers and dealers to effect the transactions and the negotiation of brokerage
commissions, if any. In transactions on stock and commodity exchanges in the
United States, these commissions are negotiated, whereas on foreign stock and
commodity exchanges these commissions are generally fixed and are generally
higher than brokerage commissions in the United States. In the case of
securities traded on the over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
In underwritten offerings, the price includes a disclosed fixed commission or
discount. Most obligations in which the U.S. Government Money Fund invests are
normally traded on a "principal" rather than agency basis. This may be done
through a dealer (e.g. securities firm or bank) who buys or sells for its own
account rather than as an agent for another client, or directly with the issuer.
A dealer's profit, if any, is the difference, or spread, between the dealer's
purchase and sale price for the obligation.
In purchasing and selling the Funds' portfolio investments, it is the
Adviser's, Van Eck-Hong Kong's or FII's policy to obtain quality execution at
the most favorable prices through responsible broker-dealers. In selecting
broker-dealers, the Adviser, Van Eck-Hong Kong or the FII will consider various
relevant factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security or asset
to be purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer's firm; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
commissions.
In addition, the Adviser, Van Eck-Hong Kong or the FII may allocate
brokerage transactions to broker-dealers who have entered into arrangements with
the Adviser, Van Eck-Hong Kong or the FII under which the broker-dealer
allocates a portion of the commissions paid by a Fund toward payment of the
Fund's expenses such as transfer agency, printing or other expenses. The
services of the broker-dealer must be comparable to those of other qualified
broker-dealers.
The Adviser, Van Eck-Hong Kong or the FII may cause the Funds to pay a
broker-dealer who furnishes brokerage and/or research services a commission that
is in excess of the commission another broker-dealer would have received for
executing the transaction if it is determined that such commission is reasonable
in relation to the value of the brokerage and/or research services as defined in
Section 28(e) of the Securities Exchange Act of 1934 which have been provided.
Such research services may include, among other things, analyses and reports
concerning issuers, industries, securities, economic factors and trends, and
portfolio strategy. Any such research and other information provided by brokers
to the Adviser, Van Eck-Hong Kong or the FII are considered to be in addition to
and not in lieu of services required to be performed by the Adviser, Van Eck-
Hong Kong and FII under the relevant Advisory Agreement or Sub-Advisory
Agreement with the Trust. The research services provided by broker-dealers
25
<PAGE>
can be useful to the Adviser, Van Eck-Hong Kong and FII in serving its
other clients or clients of the Adviser, FII or their affiliates.
For the fiscal year ended December 31, 1997, the Global Hard Assets Fund
paid $41,526.50, the Gold/Resources Fund paid $775.00, the Global Real Estate
Fund paid $705.00, the Emerging Markets Growth Fund paid $1,405.31 and the
International Investors Gold Fund paid $11,400.00 in commissions to broker
dealers providing research and other services to the Adviser or its affiliates
representing 12.07, 0.26%, 11.94%, 1.97% and 4.44%, respectively, of the total
commissions paid by such Funds; such payments involved $3,562,413, in the case
of Global Hard Assets Fund, and $741,900, in the case of International Investors
Gold Fund, in portfolio securities purchased and sold on behalf of the relevant
Fund.
The table below shows the commissions paid on purchases and sales of
portfolio securities by each Fund during its respective fiscal year, and the
percentages of such amounts paid to brokers or dealers which furnished daily
quotations to the Funds for the purpose of calculating daily per share net asset
value and to brokers and dealers which sold shares of the Funds. The U.S.
Government Money Fund did not pay brokerage commissions.
FUND (FISCAL YEAR END) 1997
Commissions
International Investors Gold Fund (Class A and C) (12/31) $611,085
Gold/Resources Fund (Class A) (12/31) $327,261
Asia Dynasty Fund (Class A and B) (12/31) $675,167
Global Balanced Fund (Class A and B) (12/31) $ 63,682
Global Hard Assets Fund (Class A, B and C) (12/31) $505,063
Emerging Markets Growth Fund (Class A, B and C) (12/31) $ 37,453
Global Real Estate Fund (Class A, B and C) (12/31) $ 6,191
FUND (FISCAL YEAR END) 1996
Commissions
International Investors Gold Fund (Class A and C) (12/31) $347,781
Gold/Resources Fund (Class A) (12/31) $271,356
Global Income Fund (Class A) (12/31) $ 0
Asia Dynasty Fund (Class A and B) (12/31) $643,451
Global Balanced Fund (Class A and B) (12/31) $ 96,428
Global Hard Assets Fund (Class A and C) (12/31) $110,278
Fund (fiscal year end) 1995
Commissions
International Investors Gold Fund (Class A and C) (12/31) $212,002
Gold/Resources Fund (Class A) (12/31) $235,161
Global Income Fund (Class A) (12/31) $ 31,325
Asia Dynasty Fund (Class A and B) (12/31) $900,977
Global Balanced Fund (Class A and B) (12/31) $ 89,406
Global Hard Assets Fund (Class A and C) (12/31) $ 28,075
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<PAGE>
The Trustees periodically review the Adviser's and FII's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Funds and review the commissions paid by the Funds over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Funds.
Investment decisions for the Funds are made independently from those of the
other investment accounts managed by the Adviser, FII or affiliated companies.
Occasions may arise, however, when the same investment decision is made for more
than one client's account. It is the practice of the Adviser and FII to allocate
such purchases or sales insofar as feasible among its several clients or the
clients of its affiliates in a manner it deems equitable. The principal factors
which the Adviser and FII considers in making such allocations are the relative
investment objectives of the clients, the relative size of the portfolio
holdings of the same or comparable securities and the then availability in the
particular account of funds for investment. Portfolio securities held by one
client of the Adviser or FII may also be held by one or more of its other
clients or by clients of its affiliates. When two or more of its clients or
clients of its affiliates are engaged in the simultaneous sale or purchase of
securities, transactions are allocated as to amount in accordance with formulae
deemed to be equitable as to each client. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, the Adviser or
FII may consider sales of shares of the Funds as a factor in the selection of
broker-dealers to execute portfolio transactions for the Funds.
While it is the policy of the Funds generally not to engage in trading for
short-term gains, the Funds will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser or FII such transactions
are advisable in light of a change in circumstances of a particular company,
within a particular industry or country, or in general market, economic or
political conditions. The Global Hard Assets Fund, Emerging Markets Growth Fund,
Asia Dynasty Fund and Gold/Resources Fund anticipate that their annual portfolio
turnover rates will not exceed 100%.
The annual portfolio turnover rate of the Global Balanced Fund and Global
Real Estate Fund may exceed 100%. Due to the high rate of turnover the Funds
may pay a greater amount in brokerage commissions than a similar size fund with
a lower turnover rate. The portfolio turnover rates of all Funds may vary
greatly from year to year. In addition, since the Funds may have a high rate of
portfolio turnover, the Funds may realize capital gains or losses. Capital
gains will be distributed annually to the shareholders. Capital losses cannot
be distributed to shareholders but may be used to offset capital gains at the
Fund level. See "Taxes" in the Prospectus and the Statement of Additional
Information.
The Adviser and related persons, may from time to time, buy and sell for
their own accounts securities recommended to clients for purchase or sale. The
Adviser recognizes that this practice may result in conflicts of interest.
However, to minimize or eliminate such conflicts a Code of Ethics has been
adopted by the Adviser which requires that all trading in securities suitable
for purchase by client accounts must be approved in advance by a person familiar
with purchase and sell orders or recommendations. Approval will be granted if
the security has not been purchased or sold or recommended for purchase or sale
on behalf of a client account within seven days; or if the security has been
purchased or sold or recommended for purchase or sale by a client account, it is
determined that the trading activity will not have a negative or appreciable
impact on the price or market of the security or the activity is of such a
nature that it does not present the dangers or potential for abuses or likely to
result in harm or detriment to a client account. At the end of each calendar
quarter, all related personnel of the Adviser are required to file a report of
all transactions entered into during the quarter. These reports are reviewed by
a senior officer of the Adviser.
27
<PAGE>
TRUSTEES AND OFFICERS
---------------------
The Trustees and Officers of the Van Eck Funds, their address, position
with the Trust and principal occupations during the past five years are set
forth below.
Trustees of Van Eck Funds:
@ * JOHN C. van ECK, C.F.A. (82) - Chairman of the Board and President
- ----------------------------
270 River Road, Briarcliff Manor, New York; Chairman of the Board and
President of another investment company advised by the Adviser; Chairman,
Van Eck Associates Corporation (investment adviser) and Van Eck Securities
Corporation (broker-dealer); Director, Eclipse Financial Asset Trust
(mutual fund); Former President of the Adviser and its affiliated
companies; Former Director (1992-1995), Abex Inc. (aerospace); Former
Director (1983-1986), The Signal Companies, Inc. (high technology and
engineering); Former Director (1982-1984), Pullman Transportation Co., Inc.
(transportation equipment); Former Director (1986-1992) The Henley Group,
Inc. (technology and health).
@ # + JEREMY H. BIGGS (62) - Trustee
- ---------------------
1220 Park Avenue, New York, NY 10128; Trustee of another investment company
advised by the adviser; Vice Chairman, Director and Chief Investment
Officer, Fiduciary Trust Company International (investment manager), parent
company of Fiduciary International, Inc.; Chairman of Davis Funds Group
(mutual fund management company); Treasurer and Director of the Royal Oak
Foundation (the UK National Trust); Director and former Chairman of the
Union Settlement Association (the community service organization); First
Vice President, Trustee and Chairman of the Financial Committee of St.
James School, St. James, Maryland; Former Director, International Investors
Incorporated (1990-1991).
# + RICHARD C. COWELL (70) - Trustee
- ---------------------
240 El Vedado Way, Palm Beach, Florida 33480; Trustee of another investment
company advised by the Adviser; Private Investor; Director, West Indies &
Caribbean Development Ltd. (real estate); Former Director, Compo
Industries, Inc. (machinery manufacturer); Former Director, International
Investors Incorporated (1957-1991); Former Director (1978-1981), American
Eagle Petroleums, Ltd. (oil and gas exploration); Former President and
Director (1968-1976), Minerals and Industries, Inc. (petroleum products);
Former Director (1978-1983) Duncan Gold Resources, Inc. (oil exploration
and gold mining); Former Director (1981-1984), Crested Butte Silver Mining
Co.; Former Chairman and Member of Executive Committee (1974-1981),
Allerton Resources, Inc. (oil and gas exploration); Former Director (1976-
1982), Western World Insurance Co.
@ PHILIP D. DEFEO (52) - Trustee
- ------------------
99 Park Avenue, New York, NY 10016; Trustee of another investment company
advised by the Adviser; President, Chief Executive Officer and Director of
Van Eck Associates Corporation (investment adviser) and Van Eck Securities
Corporation (broker-dealer) since September 1996; Former Executive Vice
President and Director of Marketing and Customer Services (June 1994 -
August 1996), Cedel International (finance and settlements); Former
Managing Director (July 1992 - April 1994), Lehman Brothers (investment
bank and broker-dealer); Former Senior Vice President, Fidelity Investments
and Former President, Fidelity Services Company (financial services);
(1987-1992).
# + WESLEY G. McCAIN (55) - Trustee
- --------------------
144 East 30th Street, New York, New York 10016; Trustee of other affiliated
investment companies advised or administered by the Adviser; Chairman and
Owner, Towneley Capital Management, Inc.,
28
<PAGE>
(investment adviser since 1971); Chairman, Eclipse Funds (mutual fund since
1986); Chairman and Owner, Eclipse Financial Services, Inc.(since 1986;
General Partner, Pharaoh Partners, L.P. (since 1992); Principal, Pharaoh
Partners (Cayman) LDC (since 1996); President and Owner, Millbrook
Associates, Inc. (economic and marketing consulting, since 1989); Trustee,
Libre Group Trust (since 1994) Director, Libre Investments (Cayman)
Ltd.(since 1996); Former Director, International Investors
Incorporated.
# DAVID J. OLDERMAN (62) - Trustee
- -------------------
40 East 52nd Street, New York, New York 10022; Trustee of another
investment company advised by the Adviser; Chairman of the Board, Chief
Executive Officer and Owner, Carret & Company, Inc. (since 1988); Chairman
of the Board, American Copy Equipment Co. (1991-present); Chairman of the
Board, Brighton Partners, Inc. (1993-present); Principal, Olderman &
Raborn, Inc., (investment advisers-1984-1988); Chairman of the Board,
Railoc, Inc., (farm equipment manufacturing-1979-1984); Head of Corporate
Finance, Halsey Stuart (investment banking-1974-1975); Vice Chairman of the
Board, Stone and Webster Securities Corp. (investment banking, retail sales
and investment advisory divisions-1964 to 1974).
# * RALPH F. PETERS (69) - Trustee
- -------------------
66 Strimples Mill Road, Stockton, New Jersey 08559-1703; Trustee of another
investment company advised by the Adviser; Former Chairman of the Board,
Former Chairman of the Executive Committee and Chief Executive Officer of
Discount Corporation of New York (dealer in U.S. Treasury and Federal
Agency Securities) (1981-1988); Director, Sun Life Insurance and Annuity
Company of New York; Director, U.S. Life Income Fund, Inc., New York;
Former Director, International Investors Incorporated.
# RICHARD D. STAMBERGER (38) - Trustee
- -----------------------
888 17th Street, N.W., Washington, D.C. 20006; Trustee of two other
investment companies advised or administered by the Adviser; Principal,
National Strategies, Inc., a public policy firm in Washington, D.C.;
Partner and Co-founder, Quest Partners, L.L.C. (management consulting
firm/since 1988); Executive Vice President, Chief Operating Officer, and a
Director of NuCable Resources Corporation (technology firm/since 1988);
associated with Anderson Benjamin & Reed, a regulatory consulting firm
based in Washington, D.C. (1985-1986); White House Fellow-Office of Vice
President (1984-1985); Director of Special Projects, National Cable
Television Association (1983-1984).
@**JAN van ECK (34) Trustee
-----------
99 Park Avenue, New York, New York 10016; Director of Van Eck Associates
Corporation; Executive Vice President and Director of Van Eck Securities
Corporation and other affiliated companies; President and Director of Van
Eck Capital, Inc.; President and Director of Van Eck Absolute Return
Advisers Corporation; Co-President and Director of Shenyin Wanguo Van Eck
Asset Management (Asia) Limited and President, Chief Executive Officer and
Director of Van Eck Global Asset Management (Asia) Ltd.
@**DEREK van ECK (33) - Trustee and Executive Vice President
-------------
99 Park Avenue, New York, New York 10016; President of the Global Hard
Assets Fund series of Van Eck Funds and Worldwide Hard Assets Fund series
of Van Eck Worldwide Insurance Trust; Vice President of Global Balanced
Fund series of Van Eck Funds; Executive Vice President, Director, Global
Investments and Director of Van Eck Associates Corporation and Executive
Vice President and Director of Van Eck Securities Corporation and other
affiliated companies.
Officers of the Trust:
29
<PAGE>
LUCILLE PALERMO (51) - Executive Vice President
- ---------------
99 Park Avenue, New York, New York 10016; Executive Vice President of
another investment company advised by the Adviser; Associate Director,
Mining Research of the Adviser.
BRUCE J. SMITH (43) - Vice President and Treasurer
- --------------
99 Park Avenue, New York, New York 10016; Officer of two other investment
companies advised or administered by the Adviser; Senior Managing Director,
Portfolio Accounting of Van Eck Associates Corporation and Senior Managing
Director of Van Eck Securities Corporation.
THOMAS H. ELWOOD (50) - Vice President and Secretary
----------------
99 Park Avenue, New York, New York 10016; Officer of three other investment
companies advised or administered by the Adviser; Vice President, Secretary
and General Counsel of Van Eck Associates Corporation, Van Eck Securities
Corporation and other affiliated companies. Former Assistant Counsel of
Jefferson Pilot Insurance company and officer of other investment companies
distributed by Jefferson Pilot and its affiliates. Former Associate
Counsel of New York Life Insurance company
JOSEPH P. DiMAGGIO (41) - Controller
- ------------------
99 Park Avenue, New York, New York 10016; Controller of another investment
company advised by the Adviser; Director of Portfolio Accounting of Van Eck
Associates Corporation (since 1993); Former Accounting Manager, Alliance
Capital Management (1985-1993).
CHARLES CAMERON (38) - Vice President
- ---------------
99 Park Avenue, New York, New York 10016; Vice President of another
investment company advised by the Adviser; Director of Trading of Van Eck
Securities Corporation
SUSAN C. LASHLEY (43) - Vice President
- ----------------
99 Park Avenue, New York, New York 10016; Vice President of another
investment company advised by the Adviser; Managing Director, Mutual Fund
Operations of Van Eck Securities Corporation.
KEVIN REID (35) - Vice President
- ----------
99 Park Avenue, New York, New York 10016; President of the Global Real
Estate Fund series and Vice President of the Global Hard Assets Fund series
of Van Eck Funds and President of the Worldwide Real Estate Fund and Vice
President of the Worldwide Hard Assets Fund series of Van Eck Worldwide
Insurance Trust; Officer of another investment company advised by the
Adviser; Director, Real Estate Research, of Van Eck Associates Corporation;
Former Chief Financial Officer of E.P. Reid, Inc (construction 1993 to
1994); Former Chief Financial Officer and Chief Operating Officer (1991
1993) and Former Vice President and portfolio manager (1998 1991) of
Trammell Crow Company (real estate).
30
<PAGE>
BARBARA J. ALLEN (41) - Assistant Secretary
- ----------------
99 Park Avenue, New York, New York 10016; Assistant Secretary of another
investment company advised by the Adviser; Compliance Officer of Van Eck
Associates Corporation and Van Eck Securities Corporation; Former Senior
Counsel, Arizona Corporation Commission, Securities Division (1990-1994).
SUSAN I. GRANT (45) Assistant Secretary
- -------------------
99 Park Avenue, New York, New York 10016; Assistant Secretary of other
investment companies advised or administered by the Adviser, Senior
Attorney of Van Eck Associates Corporation; formerly employed by the Royce
Funds (1994 1996) and First Investors Corporation (1989 1994).
GREGORY KRENZER (25) President of Van Eck U.S. Government Money Fund
- ---------------
99 Park Avenue, New York, New York 10016, Research Analyst and Portfolio
Assistant (Global Fixed Income) of Van Eck Associates Corporation since
1994.
- -------------------------
@ An "interested person" as defined in the 1940 Act.
* Member of Executive Committee -exercises general powers of Board of
Trustees between meetings of the Board.
** Son of Mr. John C. van Eck.
# Member of the Nominating Committee.
+ Member of the Audit Committee -reviews fees, services, procedures,
conclusions and recommendations of independent auditors.
31
<PAGE>
COMPENSATION TABLE
------------------
<TABLE>
<CAPTION>
Van Eck Funds Van Eck Funds Total Fund Complex
(Current Trustees Fees) (Deferred Compensation) Compensation(a)
----------------------- ----------------------- -------------------
<S> <C> <C> <C>
John C. van Eck $ 0 $ 0 $ 0
Jeremy H. Biggs $ 0 $21,686 $34,750
Richard C. Cowell $21,686 $ 0 $33,500
Philip D. DeFeo $ 0 $ 0 $ 0
Wesley G. McCain $ 0 $21,686 $34,750
David J. Olderman $ 0 $20,066 $32,250
Ralph F. Peters $17,478 $ 0 $27,000
Richard D. Stamberger $10,034 $10,034 $31,000
Fred M. van Eck $ 0 $ 0 $ 0
</TABLE>
(a) The term "fund complex" refers to the Funds of the Trust, the series of the
Van Eck Worldwide Insurance Trust and the Van Eck/Chubb, Funds, Inc., which are
also managed by the Adviser. The Trustees are paid a fee for their services to
the Trust. No other compensation, including pension or other retirement
benefits, is paid to the Trustees by the fund complex.
As of April 17, 1998, all of the Officers and Trustees of the Trust as a
group owned the number of shares indicated of each Fund: 112,134.341 shares of
Global Balanced Fund-A, equal to approximately 5.01% of shares outstanding;
1,185,996.77 shares of the U.S. Government Money Fund, equal to approximately
2.23% of the shares outstanding; 56,871.741 shares of Global Hard Assets Fund-A,
equal to approximately 1.57% of shares outstanding; 78,755.586 of the Emerging
Markets Growth Fund-A, equal to approximately 31.38% of shares outstanding;
986.3480 shares of Emerging Markets Growth FundB, equal to approximately 6.14%
of the shares outstanding; 988.6800 shares of Emerging Markets Growth FundC,
equal to approximately 2.47% of the shares outstanding; 115,378.744 shares of
Global Real Estate FundA, equal to approximately 73.72% of the shares
outstanding. As of April, 30, 1998, all of the Officers and Trustees of the
Trust as a group owned less than 1% of shares outstanding of each of the other
Funds and Classes.
As of April 17, 1998, the following persons owned 5% or more of the shares
of the Fund(s) indicated below:
<TABLE>
<CAPTION>
International Investors Gold Fund (Class A shares) Asia Dynasty Fund (Class B shares)
- --------------------------------------------------------- -------------------------
<S> <C> <C> <C>
MLPF&S for the sole benefit 5.96% MLPF&S for the sole benefit 45.61%
of its customers of its customers
4800 Deer Lake Drive East 4800 Deer Lake Drive East
3rd Floor 3rd Floor
Jacksonville, FL 32246-6484 Jacksonville, FL 32246-6484
U.S. Government Money Fund Global Balanced Fund (Class B shares)
- ------------------------------- -----------------------------
J.C. Bradford & Co. Cust. FBO 13.46% MLPF&S for the sole benefit 19.33%
RCIP Limited Partners I of its customers
330 Commerce St. 4800 Deer Lake Drive East
Nashville, TN 37201-1805 3rd Floor
Jacksonville, FL 32246-6484
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Merrill Lynch FBO 7.19% M. Club Foundation 6.48%
Confidential A/C #626-07A23 University of Maryland Inc
141 W. Jackson Blvd. P.O. Box 273
Room 290 College Park, MD 20741-0273
Chicago, IL 60604-2904
LLT Limited 5.19% Global Hard Assets Fund (Class A shares)
----------------------------------
Washington Mall I Reid St.
4th Floor Charles Schwab & Co. Inc. 19.73%
Hamilton HM 11 Bermuda Special Custody Acct. FEBO
Customers Instl. Onesource
Edward M. Miller & Edward W. 5.12% 101 Montgomery St.
Rodier & Michael Reddington TR San Francisco, CA 94104-4122
Meridian Venture Partners II LTD
c/o Meridian Venture Group MLPF&S for the sole benefit 7.81%
57 Plandome Rd of its customers
Manhasset, NY 11030-2330 4800 Deer Lake Drive East
3rd Floor
Gold/Resources Fund (Class A Shares) Jacksonville, FL 32246-6484
- --------------------------------------
MLPF&S for the sole benefit 6.76%
of its customers KAS Associate NV 5.48%
4800 Deer Lake Drive East Stitching Vermogensgiro
3rd Floor Beleggingsrekening
Jacksonville, FL 32246-6484 c/o RAJ Sporri/Internal Code 24893
P.O. Box 178/1000 AD Amsterdam
Asia Dynasty Fund (Class A shares) The Netherlands
- --------------------------------------
MLPF&S for the sole benefit 17.56%
of its customers Global Hard Assets Fund (Class B shares)
----------------------------------
4800 Deer Lake Drive East MLPF&S for the sole benefit 24.24%
3rd Floor of its customers
Jacksonville, FL 32246-6484 4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
Global Hard Assets Fund (Class C shares)
----------------------------------------
MLPF&S for the sole benefit 29.32%
of its customers
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Emerging Markets Growth Fund (Class A shares) Emerging Markets Growth Fund (Class C shares)
- --------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Van Eck Associates Corp. 20.61% Bear Stearns Securities Corp. 28.97%
99 Park Avenue FBO 183-97769-19
8th Floor 1 Metrotech Center North
New York, NY 10016-1501 Brooklyn, NY 11201-3870
Charles Schwab & Co. Inc. 5.56% INV Fiduciary Trust Co CUST 25.30%
Special Custody Acct. FEBO IRA A/C Barton B. Antista
Customer Instl. Onesource 2622 Katherine St.
Attn: Mutual Funds El Cajon, CA 92020-2036
101 Montgomery St.
San Francisco, CA 94104-4122 Bear Stearns Securities Corp. 14.49%
FBO 183-70596-15
Emerging Markets Growth Fund (Class B shares) 1 Metrotech Center North
- --------------------------------------------- Brooklyn, NY 11201-3870
Gloria Dublon 21.61%
86 Sycamore Avenue Bear Stearns Securities Corp 8.66%
Mt. Vernon, NY 10553-1216 FBO 183-70610-17
1 Metrotech Center North
Merrill Lynch Pierce 16.16% Brooklyn, NY 11201-3870
Fenner & Smith Inc.
Mutual Funds Operations First Trust Corp., as Trustee 5.14%
P.O. Box 45286 U/A 4-18-96
Jacksonville, FL 32232-5286 FBO Abraham Michael Bernstein IRA
P.O. Box 173301
XLN Enterprises Inc. 13.98% Denver, CO 80217-3301
Target Benefit Pension Pla
U/A 7/2/84 Global Real Estate Fund (Class A shares)
----------------------------------------
181 East Industry Court
Deer Park, NY 11729-4718 Van Eck Securities Corporation 51.90%
99 Park Avenue
Inv. Fiduciary Trust Co. 10.91% New York, NY 10016
Custodian IRA A/C Linda K. Brown
132 Saxton St.
Patchogue, NY 11772-1826 Philip DeFeo 5.33%
1151 Oenoke Ridge Road
Steven C. Shapiro TR 7.84% New Canaan, CT 06840-2609
U/A 06/15/78
Steven C. Shapiro MD INC PEN PL
1938 State Street
New Orleans, LA 70118-6252
Van Eck Associates Corp. 6.14%
99 Park Avenue
8th Floor
New York, NY 10016-1501
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Global Real Estate Fund (Class B shares) Global Real Estate Fund (Class C shares)
- ----------------------------------------------- --------------------------------
<S> <C> <C> <C>
Cowen & Co CUST 13.59% Bear Stearns SEC Corp. Cust. 33.55%
FBO #6B-00174-7 FBO 183-97769-19
Financial Square 1 Metrotech Center North
New York, NY 10005 Brooklyn, NY 11201-3870
Cowen & Co CUST 9.75% Bear Stearns SEC Corp. Cust. 28.75%
FBO #6B-000383 FBO 183-70688-14
Financial Square, 25th Floor 1 Metrotech Center North
New York, NY 10005 Brooklyn, NY 11201-3870
Olde Discount 9.43% Bear Stearns SEC Corp. Cust. 17.90%
FBO 13108822 FBO 183-70610-17
751 Griswold Street 1 Metrotech Center North
Detroit, MI 48226-3274 Brooklyn, NY 11201-3870
Cowen &Co CUST 6.83% Donaldson Lufkin Jenrette 9.41%
FBO #6B-00050-6 Securities Corporation Inc.
Financial Square P.O. Box 2052
New York, NY 10005 Jersey City, NJ 07303-2052
Cowen &Co CUST 6.64% MLPF&S for the sole benefit 7.97%
FBO #6B-00057-9 of its customers
Financial Square Attn: Fund Administration
New York, NY 10005 4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246- 6484
Cowen & Co CUST 6.40%
FBO #6B-00137-3
Financial Square
New York, NY 10005
Cowen & Co CUST 6.35%
FBO #6B-00040-9
Financial Square
New York, NY 10005
Herzog Heine Geduld Inc. 5.58%
FBO #064-49191-10
Attn: Mutual Fund Dept.
525 Washington Blvd.
Jersey City, NJ 07310-1600
</TABLE>
35
<PAGE>
VALUATION OF SHARES
-------------------
The net asset value per share of each of the Funds is computed by dividing
the value of all of a Fund's securities plus cash and other assets, less
liabilities, by the number of shares outstanding. The net asset value per share
is computed as of the close of the New York Stock Exchange, Monday through
Friday, exclusive of national business holidays. The Funds will be closed on
the following national business holidays: New Years Day, Martin Luther King
Jr.'s birthday, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas. The net asset values need not be
computed on a day in which no orders to purchase, sell or redeem shares of the
Funds have been received.
Dividends paid by a Fund with respect to Class A, Class B and Class C
shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the higher distribution services
fee and any incremental transfer agency costs relating to Class B or Class C
shares will be borne exclusively by that Class. The Trustees have determined
that currently no conflict of interest exists between the Class A and Class B
shares or Class A and Class C shares. On an ongoing basis, the Board of
Trustees, pursuant to their fiduciary duties under the 1940 Act and state laws,
will seek to ensure that no such conflict arises.
Shares of International Investors Gold Fund-A, Emerging Market Growth Fund-
A, Global Real Estate Fund-A, Gold/Resources Fund-A, Global Hard Assets Fund-A,
Asia Dynasty Fund-A and Global Balanced Fund-A are sold at the public offering
price which is determined once each day the Funds are open for business and is
the net asset value per share plus a sales charge in accordance with the
schedule set forth in the Prospectus. Shares of the U.S. Government Money Fund
are sold without a sales charge. Shares of Asia Dynasty Fund-B, Global Balanced
Fund-B, Emerging Markets Growth Fund-B, Global Real Estate Fund-B, and Global
Hard Assets Fund-B are sold with a contingent deferred sales charge. Shares of
Emerging Markets Growth Fund-C and Global Hard Assets Fund-C and Global Real
Estate Fund-C are sold with a redemption fee.
Set forth below is an example of the computation of the public offering
price for shares of the Emerging Markets Growth FundA, Global Real Estate Fund-
A, International Investors Gold Fund-A, Gold/Resources Fund-A, Asia Dynasty
Fund-A, Global Hard Assets Fund-A and Global Balanced Fund-A on December 31,
1997 under the then-current maximum sales charge:
36
<PAGE>
<TABLE>
<CAPTION>
Gold/ Global International Asia Global Global Emerging
Resources Hard Investors Dynasty Balanced Real Estate Markets Growth
Fund-A Assets Gold Fund-A Fund-A Fund-A Fund-A Fund-A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value and repurchase $3.47 $15.50 $7.54 $7.82 $10.38 $10.64 $8.13
price per share on $.001 par
value capital shares
outstanding
Maximum sales charge (as .21 .77 .46 .39 .52 .53 .41
described in the Prospectus)
Maximum offering price
per share $3.68 $16.27 $8.00 $8.21 $10.90 $11.17 $8.54
</TABLE>
In determining whether a contingent deferred sales charge is applicable to
a redemption of Class B shares or a redemption charge is applicable to Class C
shares, the calculation will be determined in the manner that results in the
lowest possible rate being charged. Therefore, it will be assumed that the
redemption is first of any Class A shares in the shareholder's Fund account
(unless a specific request is made to redeem a specific class of shares), second
of Class B shares held for over six years, Class C shares held for over one
year, shares attributable to appreciation or shares acquired pursuant to
reinvestment, and third of any Class C shares or Class B held longest during the
applicable period.
To provide two examples, assume an investor purchased 100 Class B shares of
Global Hard Assets Fund at $10 per share (at a cost of $1,000) and in the second
year after purchase, the net asset value per share is $12 and, during such time,
the investor has acquired 10 additional shares upon dividend reinvestment. If
at such time the investor makes his first redemption of 50 shares (proceeds
$600), 10 shares or $120 will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is not
applied to the $80 attributable to appreciation but is applied only to the
original cost of $10 per share and not to the increase in net asset value of $2
per share. Therefore, $200 of the $600 redemption proceeds will be charged at a
rate of 4% (the applicable rate in the second year after purchase). Instead,
assume an investor purchased 100 Class C shares of Global Hard Assets Fund at
$10 per share (at a cost of $1,000) and six months after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If at such time the investor makes
his first redemption of 50 shares (proceeds $600), 10 shares or $120 will not be
subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is not applied to the $80 attributable to
appreciation but is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 1%.
The value of a financial futures or commodity futures contract equals the
unrealized gain or loss on the contract that is determined by marking it to the
current settlement price for a like contract acquired on the day on which the
commodity futures contract is being valued. A settlement price may not be used
if the market makes a limit move with respect to a particular commodity.
Securities or futures contracts for which market quotations are readily
available are valued at market value, which is currently determined using the
last reported sale price. If no sales are reported as in the case of most
securities traded over-the-counter, securities are valued at the mean of their
bid and asked prices at the close of trading on the New York Stock Exchange (the
"Exchange"). In cases where securities are traded on more than one exchange,
the securities are valued on the exchange designated by or under the authority
of the Board of Trustees as the primary
37
<PAGE>
market. Short-term investments having a maturity of 60 days or less are valued
at amortized cost, which approximates market. Options are valued at the last
sales price unless the last sales price does not fall within the bid and ask
prices at the close of the market, in which case the mean of the bid and ask
prices is used. All other securities are valued at their fair value as
determined in good faith by the Trustees. Foreign securities or futures
contracts quoted in foreign currencies are valued at appropriately translated
foreign market closing prices or as the Board of Trustees may prescribe.
Generally, trading in foreign securities and futures contracts, as well as
corporate bonds, United States government securities and money market
instruments, is substantially completed each day at various times prior to the
close of the Exchange. The values of such securities used in determining the
net asset value of the shares of the Funds may be computed as of such times.
Foreign currency exchange rates are also generally determined prior to the close
of the Exchange. Occasionally, events affecting the value of such securities
and such exchange rates may occur between such times and the close of the
Exchange which will not be reflected in the computation of the Fund's net asset
values. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value as
determined in good faith by the Trustees.
U.S. Government Money Fund
- --------------------------
It is the policy of the U.S. Government Money Fund to use its best efforts
to maintain a constant per share price equal to $1.00.
The portfolio instruments of the U.S. Government Money Fund are valued on
the basis of amortized cost. This involves valuing an instrument at its cost
initially and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which the value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument.
The valuation of the Fund's portfolio instruments based upon their
amortized cost and simultaneous maintenance of the Fund's per share net asset
value at $1.00 are permitted by a rule adopted by the Securities and Exchange
Commission. Under this rule, the Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less, and invest only in securities
determined by the Trustees to be of high quality with minimal credit risks. In
accordance with the rule, the Trustees have established procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Trustees, at such
intervals as they may deem appropriate, to determine whether the net asset value
of the Fund calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. The rule
also provides that the extent of any deviation between the Fund's net asset
value based upon available market quotations or market equivalents and $1.00 per
share net asset value based on amortized cost must be examined by the Trustees.
In the event the Trustees determine that a deviation exists which may result in
material dilution or is otherwise unfair to investors or existing shareholders,
they must cause the Fund to take such corrective action as they regard as
necessary and appropriate, including: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per share by
using available market quotations.
38
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EXCHANGE PRIVILEGE
------------------
Class A, Class B and Class C shareholders of a Fund may exchange their
shares for shares of the same class of other of the funds in the Van Eck Global
Group of Funds. The Exchange Privilege will not be available if the proceeds
from a redemption of shares of a Fund whose shares qualify are paid directly to
the shareholder. The Exchange Privilege is not available for shares which are
not on deposit with DST or Investors Fiduciary Trust Company ("IFTC"), or shares
which are held in escrow pursuant to a Letter of Intent. If certificates
representing shares of a Fund accompany a written exchange request, such shares
will be deposited into an account with the same registration as the certificates
upon receipt by DST.
The Funds each reserve the right to (i) charge a fee of not more than $5.00
per exchange payable to a Fund or charge a fee reasonably intended to cover the
costs incurred in connection with the exchange; (ii) establish a limit on the
number and amount of exchanges made pursuant to the Exchange Privilege and (iii)
terminate the Exchange Privilege without written notice. In the event of such
termination, shareholders who have acquired their shares pursuant to the
Exchange Privilege will be afforded the opportunity to re-exchange such shares
for shares of the Fund originally purchased without sales charge, for a period
of not less than three (3) months.
By exercising the Exchange Privilege each shareholder whose shares are
subject to the Exchange Privilege will be deemed to have agreed to indemnify and
hold harmless the Trust and each of its series, their investment adviser, sub-
investment adviser (if any), distributor, transfer agent, IFTC and the officers,
directors, employees and agents thereof against any liability, damage, claim or
loss, including reasonable costs and attorneys' fees, resulting from acceptance
of, or acting or failure to act upon, or acceptance of unauthorized instructions
or non-authentic telephone instructions given in connection with, the Exchange
Privilege, so long as reasonable procedures are employed to confirm the
authenticity of such communications. (For more information on the Exchange
Privilege, see the Prospectus).
TAX-SHELTERED RETIREMENT PLANS-
-------------------------------
The Trust offers several prototype tax-sheltered retirement plans through
which shares of a Fund may be purchased. These plans are more fully described
below. IFTC, P.O. Box 418407, Kansas City, Missouri acts as the trustee and/or
custodian (the "Trustee") under the retirement plans offered by the Trust.
Persons who wish to establish a tax-sheltered retirement plan should consult
their own tax advisors or attorneys regarding their eligibility to do so and the
laws applicable thereto, such as the employee coverage and nondiscrimination
rules, fiduciary responsibility provisions and diversification requirements and
the reporting and disclosure obligations under the Employee Retirement Income
Security Act of 1974 and applicable state tax law. The Trust is not responsible
for compliance with such laws. Further information regarding the retirement
plans, including applications and fee schedules, may be obtained upon request to
the Trust.
Regular Individual Retirement Account and Spousal Individual Retirement Account.
- -------------------------------------------------------------------------------
The Regular IRA is available to all individuals under age 70 1/2, including
self-employed individuals, who receive compensation for services rendered and
wish to purchase shares of a Fund. Spousal Individual Retirement Accounts
("SPIRA") are available to individuals who are otherwise eligible to establish
a Regular IRA for themselves and whose spouses are treated as having no
compensation of their own.
In general, the maximum deductible contribution to an IRA which may be made
for any one year is $2,000 or 100% of annual compensation includible in gross
income, whichever is less. The amount an individual contributes to a Regular IRA
reduces the amount the individual can contribute to a Roth IRA for the same
year. If an individual establishes a SPIRA, the maximum aggregate deductible
amount that the individual may contribute annually is the lesser of $4000 or
100%. However, that no more than $2,000 per year for either the individual or
the spouse may be contributed to either the IRA or SPIRA.
39
<PAGE>
In the case of a taxpayer who is deemed to be an active participant in an
employer-sponsored retirement plan, no deduction is available for contributions
to a Regular IRA or SPIRA if his adjusted gross income exceeds the annual
maximum. For 1998, the annual maximum is $60,000 for married taxpayers filing
jointly, $40,000 for single taxpayers, and $10,000 for married taxpayers filing
separately. For each year after 1998 and before 2006, the annual maximum for
married taxpayers filing jointly and single taxpayers is increased $1,000. In
2006, the annual maximum for married filing jointly increases $5,000 and in 2007
increases $15,000. (Married taxpayers who file joint tax returns will not be
deemed to be active participants solely because their spouse is an active
participant under an employer-sponsored retirement plan. However, when one
spouse is an active participant and the other is not, no deduction is available
for contributions to a Regular IRA by the nonactive participant spouse if the
spouses' combined adjusted gross income exceeds $160,000.) Taxpayers, who are
active participants in employer-sponsored retirement plans, will be able to make
fully deductible IRA contributions at the same levels discussed above, if their
adjusted gross income is less than the annual minimum. For 1998, the annual
minimum is $50,000 for married taxpayers filing jointly and $30,000 for single
taxpayers. For married taxpayers filing jointly and single taxpayers, the annual
minimum is increased at the same rate as the annual maximum through the year
2005. After 2005, the annual minimum for married taxpayers filing jointly is
increased $5,000 in 2006 and for 2007.
In the case of taxpayers who are active participants in employer-sponsored
retirement plans and who have adjusted gross income between the applicable
annual minimum and maximum, deductible IRA contributions will be phased out. In
general and before 2007, the $2,000 IRA deduction is reduced by $200 for each
$1,000 of adjusted gross income in excess of the applicable minimum In general,
in the case of a taxpayer who contributes to an IRA and a SPIRA, the $4000 IRA
deduction is reduced by $400 for each $1,000 of adjusted gross income in excess
of the applicable minimum.
Individuals who are ineligible to make fully deductible contributions
maymake nondeductible contributions up to an aggregate of $2,000 in the case of
contributions (deductible and nondeductible) to a Regular IRA and up to an
aggregate of $4,000 in the case of contributions (deductible and nondeductible)
to a Regular IRA and SPIRA and the income upon all such contributions will
accumulate tax free until distribution.
In addition, a separate rollover IRA may be established by a "rollover"
contribution, which may permit the tax-free transfer of assets from qualified
retirement plans under specified circumstances. A "rollover contribution" from a
qualified retirement plan includes a lump sum distribution received by an
individual, because of severance of employment, from a qualified plan and paid
into an individual retirement account within 60 days after receipt or
transferred directly in a trust-to-trust transfer. A rollover IRA can be
established even if the individual is over age 70 1/2.
Dividends and capital gains earned on amounts invested in either an IRA or
SPIRA are automatically reinvested by the Trustee in shares of a Fund and
accumulate tax-free until distribution. Distributions from either an IRA or
SPIRA prior to age 59-1/2, may result in adverse tax consequences and penalties.
In addition, there may be a penalty on contributions in excess of the
contribution limits and other penalties are imposed on insufficient payouts
after age 70-1/2.
Roth Individual Retirement Account and Spousal Individual Retirement Account.
- ----------------------------------------------------------------------------
The Roth IRA is available to all individuals who wish to purchase Fund
shares regardless of their age, including self-employed individuals, and whose
adjusted gross income is less than $160,000 for married taxpayers filing
jointly, $10,000 for married taxpayers filing separately, and $110,000 for
single taxpayers. Spousal Roth IRAs ("SPRIRA") are available to individuals who
are otherwise eligible to establish a Roth IRA for themselves and whose spouses
are treated as having no compensation of their own.
Contributions to a Roth IRA or SPRIRA are not deductible. In general, the
maximum annual contribution to a Roth IRA which may be made for any one year is
$2,000 or 100% of annual compensation includible in gross income, whichever is
less, minus any contributions made for the year to a Regular IRA. If an
-----
individual establishes a SPRIRA, the aggregate maximum amount that the
individual may contribute annually is the lesser of $4,000 or 100% of the
combined compensation of individual and spouse minus any deductible Regular IRA
or Roth IRA contributions made by the individual to his own Regular or Roth IRA
for the taxable year. The amount an individual contributes to a Roth IRA reduces
the amount such individual can contribute to a Regular IRA for the same
year.
Taxpayers can make the full annual contribution to a Roth IRA if their
adjusted gross income for the year is less than $150,000 if married filing
jointly, or less than $95,000 if single.
Taxpayers who are eligible to establish a Roth IRA, but whose adjusted
gross incomes exceed the amount for making a full annual contribution, can make
a reduced contribution to the Roth IRA. In general, to determine the reduced
contribution: (i) subtract the base amount ($95,000 for single, $150,000 for
married filing jointly, $0 for married filing separately) from adjusted gross
income; (ii) subtract the amount in (i) above from $15,000 ($10,00 if married
filing jointly or married filing separately); (iii) divide the amount in (ii) by
$15,000 ($10,000 if married filing jointly or married filing separately); and
(iv) multiply the fraction from (iii) by $2,000 ($4,000 for a SPRIRA).
In addition, if the adjusted gross income of married taxpayers who file
joint returns or a single taxpayer is less than $100,000, they may convert a non
Roth IRA to a Roth IRA. Married couples filing separate returns cannot make such
a conversion. A taxpayer converts a non Roth IRA into a Roth IRA by withdrawing
the funds from his non Roth IRA and rolling them over to a Roth IRA by
withdrawing the funds from his non Roth IRA and rolling them over to a Roth IRA
within 60 days, or by directing his non Roth IRA trustee or custodian to convert
the existing non Roth IRA with such custodian or trustee. Except for
conversions made during 1998, the amount rolled over from the non Roth IRA to
the Roth IRA is includible in income and subject to income tax in the year of
conversion. For non Roth IRAs converted into Roth Conversion IRAs during 1998,
special rules apply. The amount rolled over is includeable in Federal gross
income (and subject to Federal income taxes) over a four year period.
In addition, an individual can rollover a Roth IRA into another Roth IRA
within 60 days after receipt of the funds (or directly in a trustee-to-trustee
transfer).
Dividends and capital gains earned on amounts invested in either a Roth
IRA or SPRIRA are automatically reinvested by the Trustee in shares of a Fund
and accumulate tax free until distribution.
"Qualified distributions" from either a Roth IRA or SPRIRA are not
included in federal gross income and not subject to federal income tax. Any
non-qualified distribution is includible in federal gross income and subject to
federal income tax only to the extent it is a distribution of earnings. These
earnings are taxable as ordinary income. To be a "qualified distribution" the
amounts must be withdrawn after the "5-year holding period" and must be
---
withdrawn when you are age 59 1/2 or older, because of death or permanent
disability, or to pay for qualifying "first-time homebuyer expenses." For Roth
IRAs, SPRIRAs and rollover Roth IRAs, the "5-year holding period" is the five
tax year period beginning with the first tax year for which the taxpayer made a
contribution to his or her Roth IRA. For non Roth IRAs converted into Roth IRAs,
the "5-year holding period" is the five tax year period beginning with the first
tax year in which the non Roth IRA was converted to a Roth IRA.
Withdrawals are deemed to be made first from contributions to the Roth
IRA and then from earnings. Thus, until the full amount contributed has been
withdrawn, withdrawals are not includible in federal gross income. Special
rules apply to withdrawals from Regular IRAs converted in 1998 to a Roth
IRA.
The taxable portion of distributions from either a Roth IRA or SPRIRA
prior to age 59 1/2 may result in adverse tax consequences and penalties. In
addition, there may be a penalty on contributions in excess of the contribution
limits.
Simplified Employee Pension Plan. A SEP may be utilized by employers to
--------------------------------
provide retirement income to employees by making contributions to employee SEP
IRAs. Owners and partners may qualify as employees. The employee is always 100%
vested in contributions made under a SEP. Subject to certain limitations, an
employer may also make contributions to a SEP-IRA under a salary reduction
arrangement by which the employee elects contributions to a SEP-IRA in lieu of
immediate cash compensation. After December 31, 1997, contributions under a
salary reduction arrangement are permitted only into SEP plans in existence on
December 31, 1997. The maximum contribution to a SEP-IRA (an IRA established to
receive SEP contributions) is the lesser of $30,000 or 15% of taxable
compensation from the employer, excluding contributions made pursuant to a
salary reduction arrangement.
Contributions by employers under a SEP arrangement up to the maximum
permissible amounts are deductible by employers for federal income tax
purposes. Contributions up to the maximum permissible amounts are not includible
in the gross income of the employee. Dividends and capital gains on amounts
invested in SEP-IRAs are automatically reinvested by the Trustee in shares of
the mutual fund that paid such amounts
40
<PAGE>
and accumulate tax-free until distribution. Withdrawals of amounts prior to age
59 1/2, may result in adverse tax consequences. In addition, there may be a
penalty on contributions in excess of the contribution limits and other
penalties are imposed on insufficient payouts after age 70 1/2.
Qualified Pension Plans. International Investors Fund offers forms of
------------------------
prototype profit sharing and money purchase pension plans (together, the
"qualified Pension Plans") that can be utilized by self-employed individuals,
partnerships and corporations (for this purpose called "Employers") and their
employees who wish to purchase shares of a Fund under a retirement program.
The maximum combined contribution which may be made to all Qualified
Pensions Plan in any one year on behalf of a participant is, depending on the
types of plans and benefit formula selected by the Employer, up to the lesser of
$30,000 or 25 percent of compensation (net earned income in the case of a self-
employed individual). Amounts contributed by Employers on behalf of employees
are not taxed to the employees until the time of distribution, except that
contributions by Employers to Qualified Pension Plans up to the maximum
permissible amounts are deductible for Federal income tax purposes.
Contributions in excess of permissible amounts may result in adverse tax
consequences and penalties to the Employer. Dividends and capital gains earned
on amounts invested in Qualified Pension Plans are automatically reinvested by
the Trustee in shares of a Fund and accumulate tax-free until distribution.
Amounts contributed by Employers on behalf of employees are not taxed to the
employees until the time of distribution, except that withdrawals of
contributions prior to age 59-1/2, may result in adverse tax consequences and
penalties.
403(b)(7) Program. The Tax-Deferred Annuity Program and Custodial Account
-----------------
offered by the Fund (the "403(b)(7) Program") allows employees of certain tax
exempt organizations and schools to have a portion of their compensation set
aside for their retirement years in shares held in an investment company
custodial account.
In general, the maximum limit on annual contributions for each employee is
the lesser of $30,000 per year (as adjusted by the IRS for cost-of-living
increases), 25% of the employee's compensation or the employee's exclusion
allowance specified in Section 403(b) of the Code. However, an employee's salary
reduction contributions to a 403(b)(7) Program may not exceed $9,500 a year (as
adjusted for cost of living expenses). Amounts contributed by Employers on
behalf of employees are not taxed to the employees until the time of
distribution, except that contributions in excess of permissible amounts may
result in adverse tax consequences and penalties. Dividends and capital gains on
amounts invested in the 403(b)(7) Program are automatically reinvested in shares
of a Fund. It is intended that dividends and capital gains on amounts invested
in the 403(b)(7) Program will accumulate tax-free until distribution.
Employees will receive distributions from their accounts under the
403(b)(7) Program following termination of employment by retirement or at such
other time as the employer shall designate, but in no case later than an
employee's reaching age 65. Withdrawals of contributions prior to age 59-1/2,
may result in adverse tax consequences and penalties. Employees will also
receive distributions from their accounts under the 403(b)(7) Program in the
event they become disabled.
INVESTMENT PROGRAMS
-------------------
Dividend Reinvestment Plan. Reinvestments of dividends of the Funds,
--------------------------
except for U.S. Government Money Fund, will occur on a date selected by the
Board of Trustees. Reinvestment of U.S. Government Money Fund will occur on the
last day of the month.
Automatic Exchange Plan. Investors may arrange under the Exchange Plan to
-----------------------
have DST collect a specified amount once a month or quarter from the investor's
account in one of the Funds and purchase full and fractional shares of another
Fund at the public offering price next computed after receipt of the
41
<PAGE>
proceeds. Further details of the Automatic Exchange Plan are given in the
application which is available from DST or the Funds. This does not apply to
Class B or Class C shares.
An investor should realize that he is investing his funds in securities
subject to market fluctuations, and accordingly the Automatic Exchange Plan does
not assure a profit or protect against depreciation in declining markets. The
Automatic Exchange Plan contemplates the systematic purchase of securities at
regular intervals regardless of price levels.
The expenses of the Automatic Exchange Plan are general expenses of a Fund
and will not involve any direct charge to the participating shareholder. The
Automatic Exchange Plan is completely voluntary and may be terminated on fifteen
days notice to DST.
Automatic Investment Plan. Investors may arrange under the Automatic
-------------------------
Investment Plan to have DST collect a specified amount once a month or quarter
from the investor's checking account and purchase full and fractional shares of
a Fund at the public offering price next computed after receipt of the proceeds.
Further details of the Automatic Investment Plan are given in the application
which is available from DST or the Funds.
An investor should realize that he is investing his funds in securities
subject to market fluctuations, and accordingly the Automatic Investment Plan
does not assure a profit or protect against depreciation in declining markets.
The Automatic Investment Plan contemplates the systematic purchase of securities
at regular intervals regardless of price levels.
The expenses of the Automatic Investment Plan are general expenses of a
Fund and will not involve any direct charge to the participating shareholder.
The Automatic Investment Plan is completely voluntary. The Automatic Investment
Plan may be terminated on thirty days notice to DST.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan is designed to
-------------------------
provide a convenient method of receiving fixed redemption proceeds at regular
intervals from shares of a Fund deposited by the investor under this Plan. This
Plan is not available to Class B or Class C shareholders. Further details of the
Automatic Withdrawal Plan are given in the application which is available from
DST or the Funds.
In order to open an Automatic Withdrawal Plan, the investor must complete
the Application and deposit, or purchase for deposit, with DST, agent for the
Automatic Withdrawal Plan, shares of a Fund having a total value of not less
than $10,000 based on the offering price on the date the Application is
accepted.
Income dividends and capital gains distributions on shares under an
Automatic Withdrawal Plan will be credited to the investor's Automatic
Withdrawal Plan account in full and fractional shares at the net asset value in
effect on the reinvestment date.
Periodic checks for a specified amount will be sent to the investor, or any
person designated by him, monthly or quarterly (January, April, July and
October). A Fund will bear the cost of administering the Automatic Withdrawal
Plan.
Redemption of shares of a Fund deposited under the Automatic Withdrawal
Plan may deplete or possibly use up the initial investment plus income dividends
and distributions reinvested, particularly in the event of a market decline. In
addition, the amounts received by an investor cannot be considered as an actual
yield or income on his investment since part of such payments may be a return of
his capital. The redemption of shares under the Automatic Withdrawal Plan may
give rise to a taxable event.
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<PAGE>
The maintenance of an Automatic Withdrawal Plan concurrently with purchases
of additional shares of a Fund would be disadvantageous because of the sales
charge payable with respect to such purchases. An investor may not have an
Automatic Withdrawal Plan in effect and at the same time have in effect an
Automatic Investment Plan or an Automatic Exchange Plan. If an investor has an
Automatic Investment Plan or an Automatic Exchange Plan, such service must be
terminated before an Automatic Withdrawal Plan may take effect.
The Automatic Withdrawal Plan may be terminated at any time (1) on 30 days
notice to DST or from DST to the investor, (2) upon receipt by DST of
appropriate evidence of the investor's death or (3) when all shares under the
Automatic Withdrawal Plan have been redeemed. Upon termination, unless
otherwise requested, certificates representing remaining full shares, if any,
will be delivered to the investor or his duly appointed legal representatives.
TAXES
-----
Taxation of the Funds -- In General
- -----------------------------------
Each of the Funds intends to continue to continue to qualify and elect
to be treated each taxable year as a "regulated investment company" under
Subchapter M of the Code. To so qualify, each Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) satisfy certain diversification
requirements.
As a regulated investment company, a Fund will not be subject to
federal income tax on its net investment income and capital gain net income
(capital gains in excess of its capital losses) that it distributes to
shareholders if at least 90% of its net investment income and short-term capital
gains for the taxable year are distributed. However, if for any taxable year a
Fund does not satisfy the requirements of Subchapter M of the Code, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distribution to shareholders, and such distributions will be
taxable to shareholders as ordinary income to the extent of the Fund's current
or accumulated earnings or profits.
Every Fund will be liable for a nondeductible 4% excise tax on amounts
not distributed on a timely basis in accordance with a calendar year
distribution requirement. To avoid the tax, during each calendar year the Fund
must distribute, or be deemed to have distributed, (i) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (ii) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the twelve month period ending
on October 31 (or December 31, if the Fund so elects), and (iii) all ordinary
income and capital gains for previous years that were not distributed during
such years. For this purpose, any income or gain retained by the Fund that is
subject to corporate tax will be considered to have been distributed by
year-end. The Funds intend to make sufficient distributions to avoid this 4%
excise tax.
TAXATION OF THE FUNDS' INVESTMENTS
ORIGINAL ISSUE DISCOUNT. For federal income tax purposes, debt
securities purchased by the Funds may be treated as having an original issue
discount. Original issue discount
43
<PAGE>
represents interest for federal income tax purposes and can generally be defined
as the excess of the stated redemption price at maturity of a debt obligation
over the issue price. Original issue discount is treated for federal income tax
purposes as income earned by the Funds, whether or not any income is actually
received, and therefore is subject to the distribution requirements of the Code.
Generally, the amount of original issue discount included in the income of the
Funds each year is determined on the basis of a constant yield to maturity which
takes into account the compounding of accrued interest.
Debt securities may be purchased by the Funds at a discount which
exceeds the original issue discount remaining on the securities, if any, at the
time the Funds purchased the securities. This additional discount represents
market discount for income tax purposes. In the case of any debt security issued
after July 18, 1984, having a fixed maturity date of more than one year from the
date of issue and having market discount, the gain realized on disposition will
be treated as interest to the extent it does not exceed the accrued market
discount on the security (unless the Funds elect to include such accrued market
discount in income in the tax year to which it is attributable). Generally,
market discount is accrued on a daily basis. The Funds may be required to
capitalize, rather than deduct currently, part or all of any direct interest
expense incurred or continued to purchase or carry any debt security having
market discount, unless the it makes the election to include market discount
currently. Because the Funds must include original issue discount in income, it
will be more difficult for the Funds to make the distributions required for them
to maintain their status as a regulated investment company under Subchapter M of
the Code or to avoid the 4% excise tax described above.
OPTIONS AND FUTURES TRANSACTIONS. Certain of the Funds' investments may
be subject to provisions of the Code that (i) require inclusion of unrealized
gains or losses in the Funds' income for purposes of the 90% test, the excise
tax and the distribution requirements applicable to regulated investment
companies, (ii) defer recognition of realized losses, and (iii) characterize
both realized and unrealized gain or loss as short-term or long-term gain or
loss. Such provisions generally apply to options and futures contracts. The
extent to which the Funds make such investments may be materially limited by
these provisions of the Code.
FOREIGN CURRENCY TRANSACTIONS. Under Section 988 of the Code, special
rules are provided for certain foreign currency transactions. Foreign currency
gains or losses from foreign currency contracts (whether or not traded in the
interbank market), from futures contracts that are not "regulated futures
contracts," and from unlisted options are treated as ordinary income or loss
under Section 988. The Funds may elect to have foreign currency-related
regulated futures contracts and listed options subject to ordinary income or
loss treatment under Section 988. In addition, in certain circumstances, the
Funds may elect capital gain or loss for foreign currency transactions. The
rules under Section 988 may also affect the timing of income recognized by the
Funds.
TAXATION OF THE SHAREHOLDERS
Distributions of net investment income and the excess of net short-term
capital gain over net long-term capital loss are taxable as ordinary income to
shareholders. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Any loss realized upon a taxable
disposition of shares within six months from the date of their purchase will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received by shareholders during such period. In addition, any loss
realized upon a taxable disposition of shares of the Tax-Exempt Fund within six
months from the date of their purchase will be disallowed to the extent of any
tax-exempt dividends previously paid with respect to such shares.
Distributions of net investment income and capital gain net income will
be taxable as described above whether received in cash or reinvested in
additional shares. When distributions
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<PAGE>
are received in the form of shares issued by the Funds, the amount of the
distribution deemed to have been received by participating shareholders is the
fair market value of the shares received rather than the amount of cash which
would otherwise have been received. In such case, participating shareholders
will have a basis for federal income tax purposes in each share received from
the Funds equal to the fair market value of such share on the payment date.
Distributions by the Funds result in a reduction in the net asset value
of the Funds' shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain as described above,
even though, from an investment standpoint, it may constitute a partial return
of capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a distribution will then receive
a return of their investment upon distribution which will nevertheless be
taxable to them.
If a shareholder (i) incurs a sales load in acquiring shares in the
Funds, and (ii) by reason of incurring such charge or making such acquisition
acquires the right to acquire shares of one or more regulated investment
companies without the payment of a load or with the payment of a reduced load
("reinvestment right"), and (iii) disposes of the shares before the 91st day
after the date on which the shares were acquired, and (iv) subsequently acquires
shares in that regulated investment company or in another regulated investment
company and the otherwise applicable load charge is reduced pursuant to the
reinvestment right, then the load charge will not be taken into account for
purposes of determining the shareholder's gain or loss. To the extent such
charge is not taken into account in determining the amount of gain or loss, the
charge will be treated as incurred in connection with the subsequently acquired
shares and will have a corresponding effect on the shareholder's basis in such
shares.
Income received by the Funds may give rise to withholding and other
taxes imposed by foreign countries. If more than 50% of the value of the Funds'
assets at the close of a taxable year consists of securities of foreign
corporations, the Funds may make an election that will permit an investor to
take a credit (or, if more advantageous, a deduction) for foreign income taxes
paid by the Funds, subject to limitations contained in the Code. As an investor,
you would then include in gross income both dividends paid to you and the
foreign taxes paid by the Funds on their foreign investments.
The Funds cannot assure investors that they will be eligible for the
foreign tax credit. The Funds will advise shareholders annually of their share
of any creditable foreign taxes paid by the Funds.
The Funds may be required to withhold federal income tax at a rate of
31% from dividends made to any shareholder who fails to furnish a certified
taxpayer identification number ("TIN") or who fails to certify that he or she is
exempt from such withholding or who the Internal Revenue Service notifies the
Funds as having provided the Funds with an incorrect TIN or failed to properly
report for federal income tax purposes. Any such withheld amount will be fully
creditable on each shareholder's individual federal income tax return.
The foregoing discussion is a general summary of certain of the current
federal income tax laws affecting the Funds and investors in the shares. The
discussion does not purport to deal with all of the federal income tax
consequences applicable to the Funds, or to all categories of investors, some of
which may be subject to special rules. Investors should consult their own
advisors regarding the tax consequences, including state and local tax
consequences, to them of investment in the Funds.
REDEMPTIONS IN KIND
-------------------
Each Fund has elected to have the ability to redeem its shares in kind,
committing itself to pay in cash all requests for redemption by any shareholder
of record limited in amount with respect to each shareholder of record during
any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of the net asset
value of such company at the beginning of such period.
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<PAGE>
PERFORMANCE
-----------
U.S. Government Money Fund
- --------------------------
The U.S. Government Money Fund may advertise performance in terms of yield
based on a seven day yield or an effective yield.
Seven-day yield is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
(365/7) with the resulting yield figure carried to at least the nearest
hundredth of one percent.
Effective yield quotation is based on the seven days ended on the date of
the calculation and is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: EFFECTIVE YIELD = [(BASE
PERIOD RETURN + 1)365/7]-1 with the resulting yield figure carried to at least
the nearest hundredth of one percent.
In calculating yield or effective yield quotations, the net change in an
account value includes: (a) the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares; (b) all fees, other than nonrecurring
account or sales charges, that are charged to all shareholder accounts in
proportion to the length of the base period. The calculation excludes realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation.
The seven day yield and seven day effective yield for the U.S. Government
Money Fund at December 31, 1997 were 3.58% and 3.64%, respectively.
ASIA DYNASTY FUND, GLOBAL BALANCED FUND, GLOBAL HARD ASSETS FUND, GLOBAL
REAL ESTATE FUND, GOLD/RESOURCES FUND, AND INTERNATIONAL INVESTORS GOLD FUND.
The above Funds may advertise performance in terms of average annual total
return for 1, 5 and 10 year periods, or for such lesser periods as any of such
Funds have been in existence. Average annual total return is computed by
finding the average annual compounded rates of return over the periods that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
- --------------------------------------------------------------------------------
P(1+T)n = ERV
Where: P=A hypothetical initial payment of $1,000
T=Average annual total return
n=Number of years
ERV=Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the year or
period;
================================================================================
46
<PAGE>
The calculation assumes the maximum sales load (or other charges deducted
from payments) is deducted from the initial $1,000 payment and assumes all
dividends and distributions by the Fund are reinvested at the price stated in
the prospectus on the reinvestment dates during the period, and includes all
recurring fees that are charged to all shareholder accounts.
Average Annual Total Return for the Period ended December 31, 1997 (after
maximum sales charge).
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life
<S> <C> <C> <C> <C>
International Investors
Gold Fund (Class A) (39.70)% 1.00% (4.09)% 9.65%
Gold/Resources Fund (Class A) (42.83)% (1.70)% (5.31)% 0.64%
Global Real Estate Fund (Class A) -- -- -- 25.75%
Global Real Estate Fund (Class B) -- -- -- (24.05)%
Global Real Estate Fund (Class C) -- -- -- (9.73)%
Asia Dynasty Fund (Class A) (35.33)% -- -- (1.49)%
Asia Dynasty Fund (Class B) (35.79)% -- -- (5.42)%
Global Balanced Fund (Class A) 9.29% -- -- 7.92%
Global Balanced Fund (Class B) 9.26% -- -- 8.10%
Global Hard Assets Fund (Class A) 8.86% -- -- 22.15%
Global Hard Assets Fund (Class B) 8.73% -- -- 20.81%
Global Hard Assets Fund (Class C) 12.71% -- -- 24.00%
Emerging Markets Growth Fund (Class A) (16.35)% -- -- (16.35)%
Emerging Markets Growth Fun d(Class B) (16.28)% -- -- (15.43)%
Emerging Markets Growth Fund (Class C) (13.07)% -- -- (12.22)%
</TABLE>
The Global Balanced Fund, Asia Dynasty Fund, Gold/Resources Fund,
Global Real Estate Fund, Global Hard Assets Fund, Emerging Markets Growth Fund,
and International Investors Gold Fund may advertise performance in terms of
a 30-day yield quotation. The 30-day yield quotation is computed by dividing the
net investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
- --------------------------------------------------------------------------------
YIELD = 2[(A-B/CD + 1)6-1]
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during
the period that were entitled to receive dividends
D = the maximum offering price per share on the last day
of the period after adjustment for payment of dividends
within 30 days thereafter
================================================================================
The Global Balanced Fund, Global Hard Assets Fund, Asia Dynasty Fund,
Gold/Resources Fund, Global Real Estate Fund, Emerging Markets Growth Fund, and
International Investors Gold Fund may also advertise performance in terms of
aggregate total return. Aggregate total return for a specified period of time
is determined by ascertaining the percentage change in the net asset value of
shares of the Fund initially acquired assuming reinvestment of dividends and
distributions and without giving effect to the length of time of the investment
according to the following formula:
47
<PAGE>
- --------------------------------------------------------------------------------
[(B-A)/A](100)=ATR
Where: A=initial investment
B=value at end of period
ATR=aggregate total return
===============================================================================
The calculation assumes the maximum sales charge is deducted from the initial
payment and assumes all distributions by the Funds are reinvested at the price
stated in the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
Aggregate Total Return for the period ended December 31, 1997 (after maximum
sales charge).
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Life
<S> <C> <C> <C> <C>
International Investors
Gold Fund (Class A) (39.70)% 5.10% (34.16)% 4,694.49%
Gold/Resources Fund (Class A) (42.83)% (8.20)% (42.05)% 7.90%
Global Real Estate Fund (Class A) -- -- -- 12.91%
Global Real Estate Fund (Class B) -- -- -- (6.13)%
Global Real Estate Fund (Class C) -- -- -- (2.33)%
Asia Dynasty Fund (Class A) (35.33)% -- -- (6.92)%
Asia Dynasty Fund (Class B) (35.79)% -- -- (21.44)%
Global Balanced Fund (Class A) 9.29% -- -- 35.94%
Global Balanced Fund (Class B) 9.26% -- -- 36.85%
Global Hard Assets Fund (Class A) 8.86% -- -- 88.17%
Global Hard Assets Fund (Class B) 8.73% -- -- 37.64%
Global Hard Assets Fund (Class C) 12.71% -- -- 97.32%
Emerging Markets Growth Fund (Class A) (16.35)% -- -- (16.35)%
Emerging Markets Growth Fun d(Class B) (16.28)% -- -- (15.43)%
Emerging Markets Growth Fund (Class C) (13.07)% -- -- (12.22)%
</TABLE>
Advertising Performance
- -----------------------
As discussed in the Funds' Prospectus, the Funds may quote performance
results from recognized publications which monitor the performance of mutual
funds, and the Funds may compare their performance to various published
historical indices. These publications are listed in Part B of the Appendix. In
addition, the Funds may quote and compare their performance to the performance
of various economic and market indices and indicators, such as the S&P 500,
Financial Times Index, Morgan Stanley Capital International Europe, Australia,
Far East Index, Saloman Brothers World Property Index, Morgan Stanley Capital
International World Index, Morgan Stanley Capital International Real Estate
Index, NAREIT Equity Index, Wilshire Real Estate Securities Index, Morgan
Stanley REIT Index, Saloman Brothers World Property Index, Morgan Stanley
Capital International Combined Far East (ex-Japan) Free Index, Salomon Brothers
World Bond Index, Salomon Brothers World Government Bond Index, GNP and GDP
data. Descriptions of these indices are provided in Part B of the Appendix.
ADDITIONAL INFORMATION
----------------------
Custodian. The Chase Manhattan Bank, Chase Metrotech Center, Brooklyn, New
---------
York is the custodian of the Trust's portfolio securities, cash, coins and
bullion. The Custodian is authorized, upon the approval of the Trust, to
establish credits or debits in dollars or foreign currencies with, and to cause
portfolio securities of a Fund to be held by its overseas branches or
subsidiaries, and foreign banks and foreign securities depositories which
qualify as eligible foreign custodians under the rules adopted by the Securities
and Exchange Commission.
48
<PAGE>
Independent Accountants. Coopers & Lybrand L.L.P., 1301 Avenue of the
-----------------------
Americas, New York, New York 10019, serve as the independent accountants for
the Trust.
Counsel. Goodwin, Procter & Hoar, LLP Exchange Place, Boston,
-------
Massachusetts 02109 serves as counsel to the Trust.
FINANCIAL STATEMENTS
--------------------
The financial statements of Asia Dynasty Fund, Emerging Markets Growth Fund,
Global Hard Assets Fund, Global Balanced Fund, International Investors Gold
Fund, Global Real Estate Fund, Gold/Resources Fund and U.S. Government Money
Fund for the fiscal year ended December 31, 1997, are hereby incorporated by
reference from the Funds' Annual Reports to Shareholders, which are available at
no charge upon written or telephone request to the Trust at the address or
telephone numbers set forth on the first page of this Statement of Additional
Information.
49
<PAGE>
APPENDIX
--------
PART A.
Corporate Bond Ratings
- ----------------------
Description of Moody's Investors Service, Inc. corporate bond ratings:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors given security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Description of Standard & Poor's Corporation corporate bond ratings;
AAA --Bonds rated AAA have the highest rating assigned by S&P to a debt
obligations. Capacity to pay interest and repay principal is extremely strong.
AA --Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A --Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB --Bonds rated BBB are regarding as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
50
<PAGE>
Preferred Stock Ratings
- -----------------------
Moody's Investors Service, Inc. describes its preferred stock ratings as:
aaa -An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of convertible preferred stocks.
aa -An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a -An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa -An issue which is rated baa is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba -An issue which is rated ba is considered to have speculative elements,
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safe-guarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b -An Issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payment.
ca -An issue which is rated ca is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual payment.
c -This is the lowest rated class of preferred or preference stock. Issues
so rated can be regarded as having extremely poor prospects of every attaining
any real investment standing.
Standard & Poor's Corporation describes its preferred stock ratings as:
AAA -This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A -An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions.
51
<PAGE>
BBB -An issue rated BBB is regarded as backed by an adequate capacity to
play the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB,B,CCC -Preferred stocks rated BB,B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Short-Term Debt Ratings
- -----------------------
Description of Moody's short-term debt ratings:
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by may of the following characteristics:
leading market positions in well-established industries, higher rates of return
of funds employed, conservative capitalization structure with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected be external conditions. Ample alternate liquidity is maintained.
Prime-3--Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime--Issuers rated Not Prime do not fall within any of the Prime
rating categories.
Description of Standard & Poor's short-term debt ratings:
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated `A-1'.
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
B--Issues rated B are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
52
<PAGE>
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
PART B
- ------
The publications and services from which the Funds will quote performance
are: Micropal, Ltd. (an international investment fund information service),
Fortune, Changing Times, Money, U.S. News & World Report, Money Fund Scorecard,
Morningstar, Inc., Business Week, Institutional Investor, The Wall Street
Journal, Wall Street Transcripts, New York Post, Investment Company Institute
publications, The New York Times, Barron's, Forbes magazine, Research magazine,
Donaghues Money Fund Report, Donaghue's Money Letter, The Economist, FACS, FACS
of the Week, Financial Planning, Investment Daily, Johnson's Charts, Mutual Fund
Profiles (S&P), Powell Monetary Analysis, Sales & Marketing Management Magazine,
Life magazine, Black Enterprise, Fund Action, Speculators Magazine, Time,
NewsWeek, U.S.A Today, Wiesenberger Investment Service, Mining Journal
Quarterly, Mining Journal Weekly, Northern Miner, Gold Gazette, George Cross
Newsletter, Engineering and Mining Journal, Weekly Stock Charts-Canadian
Resources, Jeweler's Circular Keystone, Financial Times, Journal of Commerce,
Mikuni's Credit Ratings, Money Market Directory of Pension Funds, Oil and Gas
Journal, Pension Funds and Their Advisers, Investment Company Data, Inc., Mutual
Funds Almanac, Callan Associates, Inc., Media General Financial Services,
Financial World, Pensions & Investment Age, Registered Investment Advisors, Aden
Analysis, Baxter Weekly, Congressional Yellow Book, Crain's New York Business,
Survey of Current Business, Treasury Bulletin, U.S. Industrial Outlook, Value
Line Survey, Bank Credit Analyst, S&P Corporation Records, Euromoney, Moody's,
Investment Dealer's Digest, Financial Mail, Financial Post, Futures, Grant's
Interest Rate Observer, Institutional Investor, International Currency Review,
International Bank Credit Analyst, Investor's Daily, German Business Weekly,
GATT Trade Annual Report, and Dimensional Fund Advisers, Inc.
53
<PAGE>
PERFORMANCE CHARTS
Best Performing World Government Bond Markets*
1986 THROUGH DECEMBER, 1997
1986 JAPAN 47.4%
1987 U.K. 46.6%
1988 AUSTRALIA 28.8%
1989 CANADA 16.2%
1990 U.K. 30.9%
1991 AUSTRALIA 23.5%
1992 JAPAN 10.8%
1993 JAPAN 27.6%
1994 BELGIUM 12.2%
1995 SWEDEN 34.8%
1996 ITALY 27.2%
1997 U.K. 10.3%
*in U.S. dollar terms
Source: Salomon Smith Barney World Government Bond Index, a market
capitalization weighted total return index of developed world government
bonds with remaining maturities of one year or more.
_________________________
ANNUAL REAL (INFLATION-ADJUSTED) GDP GROWTH
(IN LOCAL CURRENCY TERMS)
1989 1990 1991 1992 1993 1994 1995 1996
----- ----- ----- ----- ------------ ------ ----- -----
HONG KONG 2.6% 3.4% 5.1% 6.3% 6.4% 5.4% 4.7% 7.9%
SINGAPORE 9.4% 8.1% 7.3% 6.2% 10.4% 10. 8% 7.0%
THAILAND 12.2% 11.6% 8.4% 7.8% 8.3% 8.8% 8.6% -0.4%
MALAYSIA 9.2% 9.7% 8.4% 7.8% 8.3% 9.2% 9.5% 8.6%
INDONESIA 7.5% 7.2% 7.0% 6.5% 6.5% 7.7% 8.2% 8.0%
PHILIPPINES 6.2% 3.0% -0.5% 0.3% 2.1% 4.4% 4.8% 5.7%
SOUTH KOREA 6.4% 9.5% 9.1% 5.1% 5.8% 8.6% 9.0% 7.1%
CHINA 4.3% 3.9% 9.2% 14.2% 13.5% 12.7% 10.6% N/A
Source: All Countries except Hong Kong: International Financial Statistics
(International Monetary Fund) - 2/96 and 4/98
Hong Kong: Datastream 1989-1995
GROSS DOMESTIC PRODUCT: The market value of all final goods and services
produced by labor and property supplied by residents of the applicable country
in a given period of time, usually one year. Gross Domestic Product comprises
(1) purchases of persons (2) purchases of governments (Federal, State & Local)
(3) gross private domestic investment (includes change in business inventories)
and (4) international trade balance from exports.
54
<PAGE>
ASIAN STOCK MARKET TOTAL RETURNS**
The chart below provides returns for the key developing Asian stock markets
for the given periods. While these markets can be volatile, the long-term
returns may be greater than those achieved by more mature equity markets.
<TABLE>
<CAPTION>
5YR. COMPOUNDED 10YR. COMPOUNDED
avg. annual return avg. annual return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 (1992- 1996) 12/31/97
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----------- --------
Hong Kong 28.1% 8.4% 9.2% 49.5% 32.3% 116.7% -28.9% 22.6% 33.1% -23.3% 14.0% 21.5%
INDONESIA 258.1% 81.9% 6.4% -44.5% -0.2% 105.7% -25.9% 9.2% 27.5% -74.1% -11.3% 8.7%
MALAYSIA 26.5% 55.8% -7.9% 4.9% 17.8% 110.0% -19.9% 5.2% 25.9% -68.1% -6.6% 5.3%
PHILIPPINES 43.1% 65.0% -45.6% 85.5% 39.0% 122.3% -7.9% -11.5% -17.8% -62.6% -11.0% 7.0%
SINGAPORE 34.2% 44.9% -14.6% 43.6% 4.5% 73.4% 5.8% 12.2% 0.3% -40.5% 4.2% 13.2%
SO. KOREA 96.6% 1.7% -27.3% -15.5% 1.6% 31.4% 23.7% -3.3% -38.1% -66.7% -20.2% -9.6%
TAIWAN 119.7% 84.9% -55.2% 12.7% -23.7% 84.6% 20.8% -29.3% 40.3% -6.3% 15.7% 14.0%
THAILAND 47.3% 114.4% -27.3% 22.7% 35.4% 103.6% -9.0% -3.8% -36.6% -73.4% -21.4% 1.5%
</TABLE>
Source: Morgan Stanley & Co. Incorporated
Performance provided in U.S. dollar terms and includes reinvestment of gross
dividends. Past performance is not indicative of future results.
**These are unmanaged indices and are not the investment results of the Fund nor
are they the results the Fund would have obtained, which may vary from returns
of these markets. Value of shares of the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
<TABLE>
<CAPTION>
- ----------------------------
MORGAN STANLEY CAPITAL INTERNATIONAL STOCK MARKET INFORMATION
(IN US CURRENCY WITH NET DIVIDENDS REINVESTED)
AS OF DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
----- ----- ---- ----- ----- ----- ----- ----- ----- ----
AUSTRALIA -10.4% 16.5% 11.2% 5.4% 35.2% -10.8% 33.6% -17.5% 9.3% 36.4%
AUSTRIA 1.6% 4.5% -4.7% -6.3% 28.1% -10.7% -12.2% 6.3% 103.9% 0.6%
BELGIUM 13.6% 12.0% 25.9% 8.2% 23.5% -1.5% 13.8% -11.0% 17.3% 53.6%
CANADA 12.8% 28.5% 18.3% -3.0% 17.6% -12.2% 11.1% -13.0% 24.3% 17.1%
DENMARK 34.5% 21.8% 18.8% 3.8% 32.8% -28.3% 16.6% -0.9% 43.9% 52.7%
FINLAND 17.3% 33.9% 4.6% 52.2% 82.7% -13.0% -18.1% -31.7% -9.6% 13.7%
FRANCE 11.9% 21.2% 14.1% -5.2% 20.9% 2.8% 17.8% -13.8% 36.2% 37.9%
GERMANY 24.6% 13.6% 16.4% 4.7% 35.6% -10.3% 8.2% -9.4% 46.3% 20.6%
HONG KONG -23.3% 33.1% 22.6% -28.9% 116.7% 32.3% 49.5% 9.2% 8.4% 28.1%
IRELAND 15.8% 32.0% 22.4% 14.5% 42.4% -21.2% 12.2% -16.7% 41.2% 25.1%
ITALY 35.5% 12.6% 1.0% 11.6% 28.5% -22.2% -1.8% -19.2% 19.4% 11.5%
JAPAN -23.7% -15.5% 0.7% 21.4% 25.5% -21.5% 8.9% -36.1% 1.7% 35.4%
MALAYSIA -68.1% 25.9% 5.2% -19.9% 110.0% 17.8% 5.0% -7.9% 55.8% 26.5%
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ----- ----- ----- ----- ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Netherlands 23.8% 27.5% 27.7% 11.7% 35.3% 2.3% 17.8% -3.2% 35.8% 14.2%
NEW ZEALAND -14.2% 17.2% 20.9% 8.9% 67.7% -1.4% 18.3% -37.7% 11.4% -13.8%
NORWAY 6.2% 28.6% 6.0% 23.6% 42.0% -22.3% -15.5% 0.7% 45.5% 42.4%
SINGAPORE -40.5% -6.9% 6.5% 6.7% 68.0% 6.3% 25.0% -11.7% 42.3% 33.3%
SPAIN 25.4% 40.1% 29.8% -4.8% 29.8% -21.9% 15.6% -13.7% 9.8% 13.5%
SWEDEN 17.9% 37.2% 33.4% 18.3% 37.0% -14.4% 14.4% -21.0% 31.8% 48.3%
SWITZERLAND 44.3% 2.3% 44.1% 3.5% 45.8% 17.2% 15.8% -6.2% 26.2% 6.2%
UNITED KINGDOM 22.6% 27.4% 21.3% -1.6% 24.4% -3.7% 16.0% 10.3% 21.9% 6.0%
US 33.4% 23.2% 37.1% 1.1% 9.1% 6.4% 30.1% -3.2% 30.0% 14.6%
</TABLE>
Morgan Stanley Capital International Index
(IN US CURRENCY WITH NET DIVIDENDS REINVESTED)
AS OF DECEMBER 31, 1997
10 year annual total return
---------------------------
Australia 9.3%
AUSTRIA 7.6%
BELGIUM 14.4%
CANADA 9.2%
DENMARK 17.2%
FINLAND 8.6%
FRANCE 13.3%
GERMANY 13.8%
HONG KONG 19.2%
IRELAND 14.8%
ITALY 6.1%
JAPAN -2.9%
MALAYSIA 4.8%
NETHERLANDS 18.6%
NEW ZEALAND 4.5%
NORWAY 13.3%
SINGAPORE 8.9%
SPAIN 10.6%
SWEDEN 17.6%
SWITZERLAND 18.5%
UNITED KINGDOM 14.0%
USA 17.4%
MARKET INDEX DESCRIPTIONS
Morgan Stanley Capital International Europe, Australia, Far East Index (US$
terms): An arithmetic, market value-weighted average of the performance of over
1,079 companies listed on the stock exchanges of Europe, Australia, New Zealand
and the Far East. The index is calculated on a total return basis, which
includes reinvestment of gross dividends before deduction of withholding taxes.
MORGAN STANLEY CAPITAL INTERNATIONAL REAL ESTATE INDEX: An arithmetic,
market value-weighted average of the performance of property shares worldwide.
MORGAN STANLEY REIT INDEX: A capitalization-/weighted index with dividends
reinvested of most actively traded real estate invest trusts.
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NAREIT EQUITY INDEX: A capitalization-weighted index comprised of publicly
traded equity real estate investment trusts excluding mortgages REITS.
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX (US$ TERMS): An
arithmetic, market value-weighted average of the performance of over 1,515
companies listed on the stock exchanges of the following countries: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland, the United Kingdom and the United States. The index is
calculated on a total return basis, which includes reinvestment of gross
dividends before deduction of withholding taxes. The combined market
capitalization of these countries represents approximately 60% of the aggregate
market value of the stock exchanges of the above 22 countries.
MORGAN STANLEY CAPITAL INTERNATIONAL COMBINED FAR EAST EX-JAPAN FREE INDEX:
An arithmetic, market value-weighted average of the performance of companies
listed on the stock exchanges of the following countries: Hong Kong, Indonesia,
Korea (Korea is included at 20% of its market capitalization in the Combined
Free Index), Malaysia, Philippines Free, Singapore Free and Thailand. The
combined market capitalization of these countries represents approximately 60%
of the aggregate market value of the stock exchanges of the above seven
countries.
SALOMON BROTHERS WORLD BOND INDEX (US$ TERMS): Measures the total return
performance of high quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
Australian Dollars, Canadian Dollars, European Currency Units, French Francs,
Japanese Yen, Netherlands Guilder, Swiss Francs, UK pounds Sterling, US Dollars
and German Deutsche Marks. Only high-quality, straight issues are included.
The index is calculated on both a weighted basis and an unweighted basis.
Generally, index samples for each market are restricted to bonds with at least
five years' remaining life.
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (US$ TERMS): The WGBI
includes the Government bonds markets of the United States, Japan, Germany,
France, the United Kingdom, Canada, Italy, Australia, Belgium, Denmark, the
Netherlands, Spain, Sweden and Austria. Country eligibility is determined based
on market capitalization and investability criteria. A market's eligible issues
must total at least US$20 billion, Y2.5 trillion and DM30 billion for three
consecutive months for the market to be considered eligible for inclusion. Once
a market satisfies this criteria, it will be added at the end of the following
quarter. Guidelines by which a market may be excluded from the index have also
been established. A market will be excluded if the market capitalization of
eligible issues falls below half of all of the entry levels for six consecutive
months. Once again, the market will be removed at the end of the following
quarter. In addition, market entry barriers are a reason for exclusion despite
meeting the size criteria (for example, if a market discourages foreign investor
participation).
SALOMON BROTHERS WORLD PROPERTY EQUITY INDEX: A top-down, float
capitalization-weighted index that includes shares of approximately 380
companies in 19 countries.
WILSHIRE REIT SECURITIES INDEX: A capitalization-weighted index comprised
of publicly traded equity real estate investment trusts excluding mortages
REITS.
GPR LIFE GLOBAL REAL ESTATE SECURITIES INDED: A market capitalization-
weighted index of property companies in 33 countries.
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GROSS DOMESTIC PRODUCT: The market value of all final goods and services
produced by labor and property supplied by residents of the United States in a
given period of time, usually one year. Gross Domestic Product comprises (1)
purchases of persons (2) purchases of governments (Federal, State & Local) (3)
gross private domestic investment (includes change in business inventories) and
(4) international trade balance from exports. Nominal GDP is expressed in 1993
dollars. Real GDP is adjusted for inflation and is currently expressed in 1987
dollars.
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