<PAGE> 1
VAN ECK GLOBAL BALANCED FUND
1997 ANNUAL REPORT
Dear Fellow Shareholder:
Once again, as they did in 1995 and 1996, global equity markets registered
strong gains in 1997, with western markets considerably more upbeat than those
in Asia. Although global bond markets benefited from falling inflation
expectations in the wake of Asia's turmoil, the strength of the U.S. dollar
limited gains to unhedged investors. The Global Balanced Fund had a strong year
in 1997, achieving a total return of 14.8%*. This compares very favorably to the
average 8.6% return posted by the 72 global asset allocation/global market funds
as measured by Micropal, Inc., a mutual fund evaluation service. The Fund's
limited exposure to Japanese and Asian Pacific equities contributed to its
superior performance in 1997.
WORLD EQUITY MARKETS
In aggregate, global equity markets turned in a solid performance in 1997,
gaining 15.8%+. However, as has been the norm throughout the 1990s, performance
varied significantly among individual regions. Strong earnings growth and a
favorable interest rate environment propelled the U.S. stock market to a 33.4%
gain, as measured by the S&P 500 Index. The UK, Europe and Latin America turned
in solid 20%-plus returns; unfortunately, Asian countries posted returns of a
similar magnitude in negative territory. This was largely due to the meltdown of
Asian currencies, equities and economies -- the investment story that eclipsed
all others this past year. The fallout soon spread to Japan's already fragile
market and economy, as well as to Latin America's previously healthy markets.
Europe, the UK and the U.S., although affected by the turmoil, were more
resilient and thus able to recover from an initial bout of investor jitters.
THE UNITED STATES
The U.S.'s robust equity returns were achieved in an environment of increased
volatility, particularly in October when the sell-off of global equities caused
a 10% U.S. market correction. Nonetheless, many sectors enjoyed record gains.
Pharmaceuticals, financial services and technology were notably strong sectors
and are three areas where the Fund had substantial holdings (e.g., Merck, AIG
and Compaq). Looking ahead, we anticipate a slowing economic environment where
bottom-up stock picking, rather than sector selection, will be the key to
outperformance. In addition, we will focus more on domestic-oriented names,
rather than multi-nationals, in order to minimize exposure to Asia's problems.
THE UNITED KINGDOM AND CONTINENTAL EUROPE
Compared to the gyrations in Asia, the UK and European equity markets were quite
calm in 1997. The elections in the UK and France were the only notable political
events and both were eventually accepted by financial markets. Confidence in
European Monetary Union (EMU) grew over the course of the year; what once
seemed unlikely now appears attainable by January 1999. The success in lowering
budget deficits and inflation increased EMU's credibility in the financial
markets and widened the probable membership from a narrow few to eleven
countries. With a stronger political consensus in place for EMU, interest rate
convergence continued with higher rates declining in some peripheral countries,
such as Spain, Italy and parts of Scandinavia. Europe's low interest-rate
environment, coupled with strong growth across the Atlantic, led to further
strengthening of the U.S. dollar, igniting export-led growth on the Continent
and providing strong support for European equity markets.
Spain (+25.4%) and Italy (+35.5%) were the flag-bearers for the interest-rate
convergence theme, while Switzerland (+44.3%), Germany (+24.6%) and the
Netherlands (+23.8%) benefited from newfound competitiveness in their export
markets. The much anticipated start of consolidation among European banks and
insurance companies led to strong outperformance by these sectors. Viewing this
as a multi-year investment theme, the Fund's portfolio is heavily exposed to
European financials through positions in Amvescap, ForeningsSparbanken, Credito
Italiano and Scor, among others.
<PAGE> 2
JAPAN
Investing in Japan was difficult in 1997 even without considering the impact of
Asia's crisis. The Nikkei 225 started the year in typical '90s fashion, with an
11% sell-off in the face of an anticipated slowdown in economic growth. The
market staged a temporary comeback in April and May, rallying 16%, as investors
anticipated a relatively benign reaction to April tax hikes. By June, however,
Japanese equities sold off sharply as investors comprehended the negative impact
of the tax hikes on consumption and corporate capital investment plans. In
hindsight, the early positive readings were clearly misguided; Japan's economy
declined at an 11% annualized rate in the second quarter.
Prior to Asia's crisis, the one positive factor for Japan over the past two
years had been the competitiveness of its currency. However, as Asia's woes
intensified, the yen became overvalued relative to its neighboring currencies,
which had devalued as much as 50% in just three months. Japan's already weak
domestic economy and crippled banking system, coupled with Asia's currency
devaluations, led to renewed weakness in Japanese equities, which declined 23.7%
for the year (14.5% in yen terms). On the positive side, the Fund's investments
in Japanese technology and exporters (i.e., Sony and Rohm) produced strong
returns for the period, contributing to significant outperformance versus the
Japanese market.
ASIA PACIFIC
Although our outlook for Asia Pacific had been negative since midyear, we --
along with most investment professionals and investors -- clearly did not
anticipate the currency and market meltdown that occurred. What started as a
local problem in Thailand quickly spread to Malaysia, Indonesia and the
Philippines, eventually working north towards Hong Kong and South Korea.
Although the specifics vary by country, the general problems in the region were
and continue to be high current account and fiscal deficits, excessive foreign
currency borrowing used to fund inefficient capital spending (e.g., empty office
towers), and government interference in banking systems and capital markets.
Even with International Monetary Fund (IMF) bail-out packages in place for
specific countries, investors have been hesitant to return to the region until
the long-term causes, such as government intervention in the free market system,
have been addressed. The magnitude of the currency and equity market declines
certainly exceeded investors' pessimistic expectations; in 1997, the MSCI Far
East Emerging Markets Free Index declined 56.2% (34.6% in local terms). We
currently maintain minimal exposure to the region, focusing on defensive
companies like Telstra (Australian telecom), and long-term investments such as
HSBC Holdings (based in Hong Kong, but more appropriately classified as a global
banking group).
LATIN AMERICA
Unlike their Asian counterparts, Latin American equities generated impressive
returns in 1997, rising 31.6%. The primary differences between the two regions
were: 1) growth was accelerating in Latin America while decelerating in
Southeast Asia; 2) investment spending in Latin America had been geared to more
productive areas; and 3) Latin American governments have been pursuing
pro-market policies while trying to shrink the government's role.
While growth prospects were indeed better in Latin America, the region was not
immune to the Asian sell-off. Brazil was the main target, as investors focused
on the country's relatively high current account deficit, questioning whether
the Brazilian real would be able to maintain its link to the U.S. dollar. The
jury is still out on this issue; one could argue that the controlled, 7% annual
devaluation versus the dollar would eliminate the currency's 15% to 20%
overvaluation within a few years. Further, the government continues to take
appropriate steps to reform the public sector and reduce the fiscal deficit.
Nonetheless, if the pressure on its currency becomes excessive, the Brazilian
government may have no choice. While this is unlikely, we recognize the
increased risk in Latin American equities. Subsequently, we have reduced the
Fund's exposure to the region, maintaining core holdings in public utilities
(Telebras, Cemig, Telecom Argentina) which are less dependent on domestic growth
and tied more to efficiency gains and upcoming privatizations.
WORLD BOND MARKETS
For global fixed income markets, 1997 was marked by four major themes: 1) the
fall of global inflation rates and expectations; 2) the continued strength of
the U.S. dollar; 3) the march towards EMU; and most
<PAGE> 3
recently, 4) Asia's turbulence. While not well positioned for the first of these
trends, the Fund was and remains well placed to profit from the latter three.
THE UNITED STATES
The absence of inflationary pressures in the U.S., in what was the seventh year
of economic expansion, is remarkable. Indeed, recent data show inflation under
2.0%, a new low for this cycle. This is especially notable given the buoyant
stock market and low levels of unemployment. The strong dollar and weak demand
in Asia were in part responsible for this situation; this prevented the Federal
Reserve from taking further action following its 0.25% hike in short-term
interest rates in March, even as economic growth approached 4.0%. This
environment, which also reflects the advantages of a shrinking federal budget
deficit, drove long-term bond yields below 6.5% (eventually falling through
6.0%), even as unemployment fell to its lowest levels in 24 years. Early in the
year, we were underweight in our duration exposure (a measure of the portfolio's
sensitivity to changing interest rates) relative to the Salomon Smith Barney
World Government Bond Index, as we believed that a continuation of above-trend
growth (which did happen) would cause the Federal Reserve to continue to raise
interest rates (which didn't happen). As Asia's crisis intensified and inflation
continued to decline, we aggressively increased the Fund's duration exposure and
its overall fixed income exposure.
THE UNITED KINGDOM AND CONTINENTAL EUROPE
In 1997, Europe made the steady march toward EMU, slated to begin in January
1999. Long-term yields in the "EMU-11" continued to converge, with rates
declining the most in the peripheral markets of Italy and Spain. The UK bond
market took top honors in performance, rising 14.8% in local terms. The Bank of
England was granted freedom to set interest rates by the victorious Labour
Party, leading to a sharp fall in government bond yields. The new government
also signaled its preference for joining EMU in the future, further boosting
bond prices. For much of the year, we maintained overweight positions in both
the UK and Italy.
JAPAN
In Japan, bond yields fell to the lowest levels in a developed country since
World War II, with ten-year yields declining to 1.8%. The economy weakened once
more as government efforts to reduce the budget deficit depressed final demand.
With short-term rates already at 0.5%, the authorities looked to a weaker yen to
boost exports. With such low yields and the risk of a policy shift (which
seemingly began at year end) throughout the year, we saw little value in
Japanese bonds and maintained a large underweight position. Additionally, as the
U.S. dollar rose to new cyclical highs against the yen, we maintained a minimal
exposure to the yen.
ASIA PACIFIC
It is likely that 1997 will most be remembered for the collapse of the "Asian
miracle." At the start of 1997, the currencies of Thailand, Malaysia, the
Philippines, Indonesia (the ASEAN 4: the Association of South East Asian
Nations), Taiwan, South Korea and Hong Kong were either tied directly to the
U.S. dollar or more loosely linked. By year end, Hong Kong was the only country
able to maintain its peg, while its neighbors' previously stable currencies
plunged more than 50% against the dollar. As long as the currency problems were
limited to the ASEAN 4, a group of countries with a small share of global trade,
western markets were unaffected. However, as one currency after another sank,
pressure built on Hong Kong and South Korea, two nations with more sizable
economies and which have larger roles in global trade. As Hong Kong stocks
plummeted and the Korean won sank, Western markets shuddered. The ensuing
flight-to-quality pushed U.S. and European bond yields lower and led the U.S.
dollar sharply higher. Additionally, falling gold and other commodity prices
reignited fears that Asia's crisis would push the global economy into deflation,
providing a further boost to bond prices.
THE OUTLOOK
In 1998, the international investment arena promises to be quite challenging.
The two most pressing issues are: 1) how Japan will address its economic and
banking system woes; and 2) the willingness of Asian governments to work with
the IMF and the eventual success of the rescue packages. Although it is too
early to render a verdict on Japan, the recently released bank rescue plan,
similar to the U.S. savings and loan rescue plan, and the tax cut package are
clearly steps in the right direction. More important, however, are the
implementation details, which should be ironed out over the next couple of
months.
<PAGE> 4
As a result of Asia's financial crisis, growth prospects in the region are quite
poor for 1998. Even if Asian governments work with the IMF, the medicine will be
painful for their domestic economies. The economies will have to depend on
exports for growth next year, thereby all but eliminating any global
inflationary worries. Investors will not be lured back to the region any time
soon in anticipation of a sharp pick-up in economic growth. Rather, a change in
the fundamental interrelationships between governments and businesses and a more
pro-market stance should provide impetus for investors to make long-term
investments in the region's equities and currencies.
While Japan and Asia Pacific may begin to sort out their problems in the first
half of 1998, at this stage, we are hesitant to give them the benefit of the
doubt. Given this, the Fund continues to focus on U.S., UK and European
equities, which will benefit from relatively strong earnings growth in 1998 (the
U.S. should benefit more from low interest rates). Additionally, Asia's problems
are likely to warrant a scarcity premium for UK and European equities. Lastly,
while the risk of investing in Latin America has increased, the return potential
merits the Fund's exposure.
With regard to currency exposure in 1997, the Fund's bond currency allocations
were overweight (relative to the Salomon Smith Barney World Government Bond
Index) in dollar bloc allocations, underweight in European currencies and
underweight in Japanese yen. Correspondingly, 35% to 40% of the Fund's yen and
core-European equity exposure was hedged back into dollars. Overall, we remain
overweight in the U.S. dollar, acknowledging, however, that any additional
appreciation is unlikely to match last year's advance. We have made more
significant changes in bond market exposures, increasing duration exposures in
both the dollar bloc and Europe.
The outlook for fixed income markets will be greatly impacted by how soon Asia's
currency volatility ends. A worsening of the situation would reduce global
growth prospects, as well as impart a further deflationary influence on
commodity and product prices. This would be unambiguously good news for
developed bond markets, particularly the U.S. and European markets, where more
than 90% of the Fund's fixed income holdings are currently invested. If the
crisis abates, we may add exposure to select emerging markets in Latin America
and Eastern Europe, which now offer outstanding long-term value. On the other
hand, if it deepens, the Fund's current fixed income portfolio of high-quality,
largely government securities should continue to perform well.
We appreciate your participation in the Global Balanced Fund and look forward to
helping you meet your investment goals in the future.
[PHOTO ANNE M. TATLOCK] [PHOTO STEVEN J. MILLER] [PHOTO ANTHONY. S GOULD]
Anne M. Tatlock Steven J. Miller Anthony S. Gould
Global Strategist Global Equity Global Bond
Manager Manager
January 20, 1998
+ Unless otherwise stated, all stock market returns are Morgan Stanley Capital
International (MSCI) Indices, measured in U.S. dollar terms, and reflect the
reinvestment of net dividends. The MSCI Far East Emerging Markets Free Index and
the MSCI Latin America Emerging Markets Free Index reflect the reinvestment of
gross dividends.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
*PERFORMANCE RECORD AS OF 12/31/97
- ----------------------------------------------------------------
AVERAGE ANNUAL AFTER MAXIMUM BEFORE
TOTAL RETURN SALES CHARGE++ SALES CHARGE
- ----------------------------------------------------------------
<S> <C> <C>
A shares - Life (since 12/20/93) 7.9% 9.2%
- ----------------------------------------------------------------
1 year 9.3% 14.8%
- ----------------------------------------------------------------
B shares - Life (since 12/20/93) 8.1% 8.5%
- ----------------------------------------------------------------
1 year 9.3% 14.3%
- ----------------------------------------------------------------
</TABLE>
THE PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NOT INDICATIVE OF FUTURE
RESULTS. Investment return and principal value of an investment in the Fund will
vary so that shares, when redeemed, may be worth more or less than their
original cost.
The Adviser is currently waiving certain or all expenses on the Fund. Had the
Fund incurred all expenses, investment returns would have been reduced.
++ A shares: maximum sales charge = 4.75%
B shares: maximum contingent deferred sales charge = 5.00%
<PAGE> 5
REPRESENTATIVE EQUITY HOLDINGS*
DECEMBER 31, 1997
AMERICAN INTERNATIONAL GROUP, INC. (AIG)
(U.S.)
AIG is the premier growth participant in the global insurance business with over
50% of its revenues generated overseas. AIG's earnings predictability is related
to its superior financial strength, market leadership in numerous insurance and
financial segments and its balanced mix of domestic and international
businesses. Also, AIG is well positioned to benefit from the increased demand
for financial service products from the world's aging population.
BANK OF IRELAND
(IRELAND)
The Bank of Ireland is Ireland's largest bank. It is currently experiencing
strong growth in demand for traditional banking services as a very young Irish
population enters the workforce and the Irish economy continues to receive a
disproportionate share of foreign direct investment into Europe. The Bank is
also well positioned with leading investment management and brokerage divisions.
We expect strong profit growth to continue for the Bank, given our positive
outlook for the Irish economy.
COMPASS GROUP PLC
(UK)
Compass Group is one of the leading international contract caterers, with
operations in the UK, U.S., Continental Europe and Scandinavia. This industry is
undergoing secular growth as private businesses, educational institutions and
government entities continue to outsource in-house dining services. Also,
Compass has made several well-timed acquisitions in major markets outside of the
UK, and is solidly positioned to deliver strong future earnings growth.
FORENINGSSPARBANKEN AB
(SWEDEN)
ForeningsSparbanken AB is Sweden's leading retail bank, and resulted from the
1997 merger of Sparbanken and Foreningsbank, two of Sweden's largest banks. The
merger has created much potential for cost reductions and increased revenues,
both of which should drive strong earnings growth in the coming years. Cost
reductions will come from branch closures and the integration of back-office
activities. Increased revenues should result from the selling of Sparbanken's
diverse product offerings through the previously underutilized Foreningsbank
branch network. An improving Swedish economy also supports a positive outlook
for the Bank.
MERCK & CO., INC.
(U. S.)
Merck is a leading manufacturer of human and animal health care and specialty
products. From the standpoint of research productivity, relations with
regulators and the medical profession, Merck is one of the leaders in the global
drug sector. Merck is well positioned to benefit from the world's aging
population and increased demand for healthcare products. Industry fundamentals,
along with Merck's strong product pipeline, will ensure continued double-digit
revenue growth over the medium term.
NOVARTIS AG
(SWITZERLAND)
Novartis emerged from the merger of Ciba-Geigy and Sandoz as the world's largest
life science company. Novartis is now in a position to deliver rapid and
accelerating growth, well above the already high industry average. The company
has three main businesses: health care, nutrition and agribusiness. Cost
synergies from the merger should continue to boost operating margins over the
next three years. The strength and quality of Novartis' combined drug portfolio,
its unrivaled market position in agribusiness, and compelling long-term
innovation potential across the life science operations should sustain earnings
momentum through the millennium.
SONY CORPORATION
(JAPAN)
Sony is enjoying impressive sales rejuvenation with the introduction of new
electronics products such as the digital camera, the digital camcorder and the
highly successful Sony Playstation. This trend is expected to accelerate over
the next few years with the global launch of digital television. Sony's strong
earnings growth and reasonable valuation offer strong support for its stock,
even in a very volatile market environment.
TELECOMUNICACOES BRASILEIRAS S/A-TELEBRAS
(BRAZIL)
Telebras is the monopoly telephone operator in Brazil for both cellular and
fixed line service and is Latin America's largest company by market
capitalization. Brazil's very low penetration of telephone lines per capita
gives Telebras significant growth potential. Telebras is valued at a large
discount to other Latin American telecom companies and should be fully
privatized in 1988, thus supporting efficiency gains and increased value to
shareholders.
* Portfolio is subject to change.
<PAGE> 6
GLOBAL BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (a) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
ARGENTINA: 0.6%
4,700 Telecom Argentina (ADR) $ 168,025
-----------
AUSTRALIA: 1.7%
Government of Australia Bond
AUD 500,000 10.00% 10/15/2007 419,400
36,000 Telstra Corp. (Installment
Receipts)+ 75,933
-----------
495,333
-----------
AUSTRIA: 0.9%
ATS 3,200,000 Republic of Austria Bond
7.00% 9/20/99 263,975
-----------
BRAZIL: 1.0%
3,200 Cemig S.A. (ADR) 137,950
1,350 Telecomunicacoes Brasileiras
S.A. (ADR) 157,191
-----------
295,141
-----------
CANADA: 2.1%
Government of Canada Bond
USD 600,000 6.75% 8/28/2006 629,298
-----------
DENMARK: 1.1%
Denmark Government Bond
DKK 460,000 8.00% 3/15/2006 77,721
5,000 ISS International Service
System A.S 183,944
DKK 435,000 Unikredit Bond 8.00% 10/01/2016 65,505
-----------
327,170
-----------
FINLAND: 0.5%
6,000 Metra Oy (Class B) 140,977
-----------
FRANCE: 1.4%
3,700 Lagardere S.C.A. 122,238
2,900 Scor S.A. 138,561
2,600 SGS-Thomson Microelectronic+ 160,787
-----------
421,586
-----------
GERMANY: 8.0%
260 Buderus AG 116,519
Bundesrepublik Obligation Bond
DEM 380,000 5.75% 8/22/2000 218,194
Bundesrepublik Coupon Strip
DEM 400,000 6.50% 7/04/2021 53,978
Bundesschatzan Bond
DEM 180,000 6.25% 1/04/2024 104,330
Deutschland Republic Bonds
DEM 934,000 6.00% 1/05/2006 542,966
DEM 399,000 7.125% 12/20/2002 243,380
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (a) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
910 Fresenius AG (Pfd.) $ 167,478
German Unity Bond
DEM 1,010,000 8.50% 2/07/2001 624,268
8,200 Lufthansa AG 157,298
2,350 VEBA AG 160,064
-----------
2,388,475
-----------
HONG KONG: 0.8%
10,000 Cheung Kong (Holdings) Ltd. 65,502
7,048 HSBC Holdings PLC 173,748
-----------
239,250
-----------
INDIA: 0.4%
3,400 India Magnum Fund "B"+ 130,900
-----------
IRELAND: 1.1%
21,553 Bank of Ireland 330,808
-----------
ITALY: 4.1%
BTPS Bonds
ITL 970,000,000 6.25% 3/01/2002 572,443
ITL 110,000,000 9.00% 11/01/2023 85,933
33,000 Credito Italiano Spa 101,758
31,000 Eni S.p.A.+ 175,761
76,000 Parmalat Finanziaria S.p.A. 108,691
25,000 Telecom Italia S.p.A. 159,690
-----------
1,204,276
-----------
JAPAN: 5.4%
11,000 Banyu Pharmaceutical Co. 121,472
7,000 Canon Inc. 163,190
2,200 Circle K Japan Co. Ltd. 105,445
Export-Import Japan Bond
JPY 30,000,000 2.875% 7/28/2005 248,186
3,000 Fuji Machine 72,469
Japanese Government Bonds
JPY 600,000 3.40% 3/22/2004 #168 5,113
JPY 45,000,000 6.40% 3/20/2001 #138 404,896
2,000 Rohm Co. 203,988
1,800 Sony Corp (ADR) 163,350
20,000 Sumitomo Trust & Banking Co.,
Ltd. 103,988
-----------
1,592,097
-----------
MEXICO: 0.4%
4,000 Panamerican Beverages Inc. "A" 130,500
-----------
NETHERLANDS: 3.4%
2,322 Aegon N.V. 206,820
1,300 Akzo Nobel N.V. 224,268
5,520 Nutricia Verenigde Bedrijven
N.V. 167,520
1,600 Philips Electronics N.V. 96,008
3,900 Polygram N.V. 186,677
2,100 Royal Dutch Petroleum Co. (New
York Registry Shares) (ADR)* 113,794
-----------
995,087
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE> 7
GLOBAL BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1997 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (a) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
PHILIPPINES: 0.9%
National Power Bonds
USD 150,000 8.40% 12/15/2016 $ 128,395
USD 150,000 7.875% 12/15/2016 132,114
-----------
260,509
-----------
PORTUGAL: 0.9%
5,300 Banco Comercial Portugese 108,449
1,410 Telecel-Comunicacaoes Pessoasis
S.A.+ 150,313
-----------
258,762
-----------
SOUTH KOREA: 0.8%
Export/Import Bank Bond
USD 320,000 6.375% 2/15/2006 234,426
-----------
SPAIN: 1.70%
9,000 Banco de Santander S.A. 300,541
6,200 Mapfre Vida Seguros 218,022
-----------
518,563
-----------
SWEDEN: 3.8%
7,000 ForeningsSparbanken AB
(Class A) 159,249
6,200 Svenskt Stal AB (Series B) 102,368
Swedish Government Bond
SEK 6,300,000 10.25% 5/05/2000 877,113
-----------
1,138,730
-----------
SWITZERLAND: 1.7%
146 Novartis AG 236,676
26 Roche Holding AG 257,955
-----------
494,631
-----------
UNITED KINGDOM: 11.1%
26,000 Amvescap PLC 223,343
16,000 Argos PLC 145,156
7,042 British Aerospace PLC 202,231
10,254 British Petroleum Co. PLC 135,396
19,100 Compass Group PLC 234,401
15,000 Hays PLC 201,157
16,134 Lloyds TSB Group PLC 202,126
2,300 Misys PLC 69,522
38,000 Rentokil Initial PLC 150,434
10,531 Siebe PLC 198,028
22,924 SmithKline Beecham Corp. 236,114
United Kingdom Treasury Notes
GBP 550,000 7.50% 12/07/2006 976,972
GBP 166,000 8.00% 12/07/2015 324,388
-----------
3,299,268
-----------
<CAPTION>
NO. OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITIES (a) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
UNITED STATES: 40.5%
3,500 American Express Company* $ 312,375
10,000 American International Group,
Inc.* 1,087,500
5,000 Baker Hughes Inc.* 218,125
5,400 Bank of New York Co. Inc.* 312,188
3,600 Boeing Co. (The)* 176,175
2,500 Burlington Northern Santa Fe* 232,344
5,000 CBS Corp. 147,188
1,500 Chase Manhattan Corp. 164,250
10,500 Cisco Systems, Inc. 585,375
3,800 Coastal Corp. 235,363
2,500 Compaq Computer Corp. 141,094
1,300 CPC International Inc. 140,075
3,500 Deere & Co. 204,094
12,000 Federal Home Loan Mortgage
Corp. 503,250
8,500 Federal National Mortgage
Association 485,031
3,200 Federated Department Stores,
Inc.* 137,800
8,250 Fort James Corp. 315,563
4,000 General Electric Co. 293,500
USD 215,000 GNMA 7.00% 1/15/28 215,672
5,000 Home Depot Inc. 294,375
2,500 Intel Corp. 175,625
1,400 International Business Machines
Corp. 146,388
5,000 Lucent Technologies Inc. 399,375
2,500 MCI Communication Corp. 107,031
9,000 Merck & Co. 956,250
4,000 Mobil Corp. 288,750
6,000 Oracle Systems Corp. 133,875
6,800 Pfizer Inc. 507,025
3,000 Procter & Gamble Co.* 239,438
3,000 Starwood Hotels & Resorts 173,625
2,500 Travelers Group Inc. 134,688
2,000 Union Pacific Corp. 124,875
U.S. Treasury Bond
USD 235,000 6.25% 8/15/2023 242,270
USD 200,000 6.375% 8/15/2027 210,938
USD 20,000 7.25% 05/15/2016 22,775
USD 110,000 7.875% 2/15/2021* 135,094
U.S. Treasury Notes
USD 280,000 6.25% 6/30/2002 285,775
USD 990,000 6.50% 10/15/2006 1,037,026
USD 495,000 7.00% 7/15/2006* 534,601
-----------
12,056,761
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE> 8
GLOBAL BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1997 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE
CONTRACTS SECURITIES (A) (NOTE 1)
------------------------------------------------------------
<C> <S> <C>
TOTAL STOCKS AND OTHER INVESTMENTS: 94.3%
(Cost: $20,578,307) $28,014,548
OPTION PURCHASED: 0.2%
19,664 Eurostyle Put Option (strike @
DEM 1.77 expiring 3/01/1998)
(Cost: $20,577)+ 47,254
-----------
TOTAL INVESTMENTS: 94.5% (Cost: $20,598,884) 28,061,802
OTHER ASSETS LESS LIABILITIES: 5.5% 1,623,290
-----------
NET ASSETS: 100% $29,685,092
===========
</TABLE>
- ---------------
(a) Unless otherwise indicated, securities owned are shares of common
stock.
* These securities are segregated for forward foreign currency
contracts.
+ Non-Income producing
Glossary:
ADR -- American Depositary Receipt
<TABLE>
<CAPTION>
SUMMARY OF
INVESTMENTS % OF
BY INDUSTRY NET ASSETS
---------- ----------
<S> <C>
Aerospace & Defense 1.3%
Banks 4.8%
Beverages 0.4%
Chemicals 0.8%
Commercial Services 0.6%
Diversified 1.2%
Domestic Oil & Gas 0.4%
Drug & Healthcare 8.4%
Durables 0.6%
Electrical
Equipment 1.0%
Electronic Data
Processing &
Office Equipment 1.8%
Electronics 3.2%
Electronics &
Electrical
Equipment 1.0%
Financial Services 7.8%
Food & Household
Products 3.0%
Foreign Government
Bonds 23.2%
Housing &
Construction 0.5%
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF
INVESTMENTS % OF
BY INDUSTRY NET ASSETS
---------- ----------
<S> <C>
Insurance 6.0%
International Oil 2.0%
Machinery 1.3%
Metals & Mining 0.3%
Natural Gas --
Pipelines 0.8%
Office Equipment 0.5%
Oil & Gas Equipment
& Services 0.7%
Option purchased 0.2%
Paper And Forest
Products --
Diversified 1.1%
Publishing &
Broadcasting 1.1%
Real Estate 0.8%
Retail 2.3%
Science &
Technology 2.0%
Telecommunications 2.8%
Transportation 1.7%
U.S. Government
Agencies &
Obligations 9.0%
Utilities 1.9%
Other Assets Less
liabilities 5.5%
------
100.0%
======
</TABLE>
See Notes to Financial Statements.
<PAGE> 9
GLOBAL BALANCED FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost, $20,598,884) (Note 1).............................................................. $28,061,802
Cash........................................................................................................... 2,392,849
Receivables:
Capital shares sold.......................................................................................... 410,921
Securities sold.............................................................................................. 228,017
Interest and dividends....................................................................................... 288,978
Unrealized appreciation on open forward foreign currency contracts (Note 5).................................... 188,457
Deferred organization costs and other assets................................................................... 4,672
-----------
Total assets............................................................................................. 31,575,696
-----------
LIABILITIES:
Payables:
Securities purchased......................................................................................... 1,179,313
Dividends payable............................................................................................ 445,202
Accounts payable............................................................................................. 177,762
Unrealized depreciation on open forward foreign currency contracts (Note 5).................................... 88,327
-----------
Total liabilities........................................................................................ 1,890,604
-----------
Net assets................................................................................................... $29,685,092
==========
CLASS A
Net asset value and redemption price per share
($24,630,386/2,372,567)...................................................................................... $10.38
=====
Maximum offering price per share:
(NAV/1-maximum sales commission)............................................................................. $10.90
=====
CLASS B
Net asset value, offering price and redemption price per share ($5,054,706/490,249) (Redemption may be subject
to a contingent deferred sales charge within the first six years of ownership)............................... $10.31
=====
Net assets consist of:
Aggregate paid in capital.................................................................................... $22,401,246
Unrealized appreciation of investments, forward foreign currency contracts and foreign currency receivables
and payables............................................................................................... 7,554,975
Overdistributed net investment income........................................................................ (226,027)
Accumulated realized loss.................................................................................... (45,102)
-----------
$29,685,092
==========
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
GLOBAL BALANCED FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INCOME
Interest................................................................................ $ 604,647
Dividends (less foreign taxes withheld of $26,818)...................................... 230,840
-----------------
Total income...................................................................... 835,487
EXPENSES:
Management (Note 2)..................................................................... $ 219,469
Distribution--Class A (Note 4).......................................................... 121,885
Distribution--Class B (Note 4).......................................................... 48,855
Administration (Note 2)................................................................. 84,137
Transfer agent.......................................................................... 107,174
Professional............................................................................ 39,998
Reports to shareholders................................................................. 33,962
Custodian............................................................................... 23,296
Registration............................................................................ 19,697
Trustees................................................................................ 4,161
Amortization of deferred organization costs (Note 1).................................... 6,888
Other................................................................................... 10,816
------------
Total expense..................................................................... 720,338
Expenses assumed by the Adviser and reduced by a custodian fee arrangement (Note 2)..... (109,622)
------------
Net expenses...................................................................... 610,716
-----------------
Net investment income............................................................. 224,771
Realized and Unrealized Gain (Loss) on Investments (Note 3)
Realized gain from security transactions................................................ 3,653,554
Realized loss from foreign currency transactions........................................ (327,252)
Realized gain on options................................................................ 9,621
Change in unrealized appreciation of investments........................................ 320,862
Change in unrealized appreciation of forward foreign currency contracts and foreign
currency receivables and payables..................................................... 76,540
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $ 3,958,096
================
</TABLE>
See Notes to Financial Statements.
<PAGE> 11
GLOBAL BALANCED FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income..................................................................... $ 224,771 $ 311,618
Realized gain from security transactions.................................................. 3,653,554 3,755,314
Realized loss (gain) from foreign currency transactions................................... (327,252) 251,979
Realized gain (loss) on options........................................................... 9,621 (5,023)
Change in unrealized appreciation (depreciation) of investments........................... 320,862 (733,232)
Change in unrealized appreciation of forward foreign currency contracts and foreign
currency receivables and payables....................................................... 76,540 13,058
------------ ------------
Increase in net assets resulting from operations.......................................... 3,958,096 3,593,714
------------ ------------
Dividends and distributions to shareholders from:
Net investment income:
Class A Shares.......................................................................... (176,328) (266,076)
Class B Shares.......................................................................... (12,007) (27,916)
Net realized gain:
Class A Shares.......................................................................... (3,002,402) (2,388,543)
Class B Shares.......................................................................... (628,805) (478,173)
Tax Return of capital from:
Net investment income
Class A Shares.......................................................................... (15,618) --
Class B Shares.......................................................................... (1,064) --
Net realized gain:
Class A Shares.......................................................................... (3,505) --
Class B Shares.......................................................................... (734) --
------------ ------------
Total dividends and distributions (3,840,463) (3,160,708)
------------ ------------
Capital share transactions (Note 6):
Net proceeds from sales of shares:
Class A Shares.......................................................................... 2,863,588 2,010,892
Class B Shares.......................................................................... 695,993 489,537
------------ ------------
3,559,581 2,500,429
------------ ------------
Reinvestment of dividends:
Class A Shares.......................................................................... 2,878,160 2,328,070
Class B Shares.......................................................................... 481,142 372,827
------------ ------------
3,359,302 2,700,897
------------ ------------
Cost of shares reacquired:
Class A Shares.......................................................................... (5,622,810) (10,938,566)
Class B Shares.......................................................................... (1,059,645) (2,147,338)
------------ ------------
(6,682,455) (13,085,904)
------------ ------------
Increase (decrease) in net assets resulting from capital share transactions................. 236,428 (7,884,578)
------------ ------------
Total increase (decrease) in net assets............................................... 354,061 (7,451,572)
NET ASSETS:
Beginning of year........................................................................... 29,331,031 36,782,603
------------ ------------
End of year (including overdistributed investment income of $(226,027) and $(14,809),
respectively)............................................................................. $29,685,092 $29,331,031
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE> 12
GLOBAL BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------------ -----------------
FOR THE PERIOD
DECEMBER 20, Year Ended
Year Ended December 31, 1993(a) TO December 31,
------------------------------------- DECEMBER 31, -----------------
1997 1996 1995 1994 1993 1997 1996
------- ------- ------- ------- -------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $10.37 $10.31 $9.07 $9.53 $9.53 $10.32 $10.28
------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income............................. 0.10 0.12 0.07+ 0.19+ -- 0.04 0.06
Net Gain (Loss) on Securities (both realized and
unrealized)................................... 1.43 1.15 1.31 (0.56) -- 1.43 1.14
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations.................... 1.53 1.27 1.38 (0.37) -- 1.47 1.20
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income(e)........... (0.08) (0.11) (0.14) (0.09) -- (0.03) (0.06)
Distribution from Capital Gains................... (1.43) (1.10) -- -- -- (1.45) (1.10)
Tax return of Capital............................. (0.01) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
(1.52) (1.21) (0.14) (0.09) -- (1.48) (1.16)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period...................... $10.38 $10.37 $10.31 $9.07 $9.53 $10.31 $10.32
======= ======= ======= ======= =========== ======= =======
Total Return(b)..................................... 14.77% 12.28% 15.30% (3.90%) 0% 14.26% 11.49%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000)..................... $24,630 $29,331 $30,632 $13,986 $562 $5,055 $4,932
Ratio of Gross Expenses To Average Net Assets....... 2.45% 2.54% 2.69% 2.59% 7.76% 2.51% 3.19%
Ratio of Net Expenses to Average Net Assets......... 2.00% 2.17%(c) 2.69% 1.06%(c) 0.25%*(c) 2.50% 2.71%(c)
Ratio of Net Investment Income (Loss) to Average Net
Assets............................................ 0.85% 1.05% 0.68% 1.99% (0.25%)* 0.36% 0.51%
Portfolio Turnover Rate............................. 78.07% 114.30% 196.69% 174.76% 0% 78.07% 114.30%
Average Commissions Rate Paid(d).................... $0.0399 $0.0399 $0.0399 $0.0399
<CAPTION>
Class B
----------------------------------
FOR THE PERIOD
DECEMBER 20,
1993(a) to
December 31,
1995 1994 1993
------- ------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................ $9.02 $9.53 $9.53
------- ------- -------
Income from Investment Operations:
Net Investment Income............................. 0.01 0.11+ --
Net Gain (Loss) on Securities (both realized and
unrealized)................................... 1.28 (0.57) --
------- ------- -------
Total from Investment Operations.................... 1.29 (0.46) --
------- ------- -------
Less Distributions:
Dividends from Net Investment Income(e)........... (0.03) (0.05) --
Distribution from Capital Gains................... -- -- --
Tax return of Capital............................. -- -- --
------- ------- -------
(0.03) (0.05) --
------- ------- -------
Net Asset Value, End of Period...................... $10.28 $9.02 $9.53
======= ======= ===========
Total Return(b)..................................... 14.54% (4.84%) 0%
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA
Net Assets, End of Period (000)..................... $6,151 $5,628 $130
Ratio of Gross Expenses To Average Net Assets....... 3.20% 3.21% 8.51%
Ratio of Net Expenses to Average Net Assets......... 3.20% 1.88%(c) 1.00%*(c)
Ratio of Net Investment Income (Loss) to Average Net
Assets............................................ 0.14% 1.14% (1.00%)*
Portfolio Turnover Rate............................. 196.69% 174.76% 0%
Average Commissions Rate Paid(d)....................
</TABLE>
- ---------------
(a) Commencement of operations.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of distributions at
net asset value during the period and a redemption on the last day of the
period. A sales charge is not reflected in the calculations of total return.
Total return for a period of less than one year is not annualized.
(c) After expenses reduced by a custodian fee, directed brokerage or Advisory
fee waiver arrangement.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades in which a
commission is charged.
(e) Net of foreign taxes withheld (to be included in income and claimed as a tax
credit on deduction by the shareholder for federal income tax purposes) of
$0.01 for 1997.
* Annualized.
+ Based on average shares outstanding.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
<PAGE> 13
GLOBAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Global Balanced Fund series, a non-diversified fund (the "Fund") of the
Trust, in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements, in conformity with generally accepted accounting
principles, requires the use of management's estimates and the actual amounts
could differ.
A. SECURITY VALUATION--Securities traded on national or foreign exchanges are
valued at the last sales prices reported at the close of business on the last
business day of the year. Over-the-counter securities and listed securities for
which no sale was reported are valued at the mean of the bid and asked prices.
Short-term obligations are valued at cost which with accrued interest
approximates value. Securities for which quotations are not available are stated
at fair value as determined by the Board of Trustees.
B. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
C. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and asked prices of
such currencies. Purchases and sales of investments are translated at the
exchange rates prevailing when such investments were acquired or sold. Income
and expenses are translated at the exchange rates prevailing when accrued.
Recognized gains or losses on security transactions and other foreign currency
denominated assets and liabilities attributable to foreign currency fluctuations
are recorded as realized gains and losses from foreign currency transactions.
The portion of unrealized gains and losses on investments that result from
fluctuations in foreign currency exchange rates are not separately disclosed.
D. DISTRIBUTIONS--Dividends to shareholders from net investment income and
realized gains, if any, are recorded on the ex-dividend date. Income and capital
gains distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatment of foreign currency
transactions, post-October losses and wash sales. The effect of these
differences for the year ended December 31, 1997 decreased undistributed net
investment income by $230,972, decreased accumulated realized loss by $251,893
and decreased aggregate paid in capital by $20,921.
E. OTHER--Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date. Interest
income is accrued as earned. Premiums paid on bonds purchased are not amortized.
F. DEFERRED ORGANIZATION COSTS--Deferred organization costs are being amortized
over a period not exceeding five years.
G. USE OF DERIVATIVE INSTRUMENTS
OPTION CONTRACTS--The Fund may invest, for hedging and other purposes, in call
and put options on securities, currencies and commodities. Call and put options
give the Fund the right but not the obligation to buy (calls) or sell (puts) the
instrument underlying the option at a specified price. The premium paid on the
option, should it be exercised, will, on a call, increase the cost of the
instrument acquired and, on a put, reduce the proceeds received from the sale of
the instrument underlying the option. If the options are not exercised, the
premium paid will be recorded as a capital loss upon expiration. The Fund may
incur additional risk to the extent the value of the underlying instrument does
not correlate with the movement of the option value.
The Fund may also write call or put options. As the writer of an option, the
Fund receives a premium. The Fund keeps the premium whether or not the option is
exercised. The premium will be recorded, upon expiration of the option, as a
short-term capital gain. If the option is exercised, the Fund must sell, in the
case of a written call, or buy, in the case of a written put, the underlying
instrument at the exercise price. The Fund may write only covered puts and
calls. A covered call option is an option in which the Fund owns the instrument
underlying the call. A covered call sold by the Fund exposes it during the term
of the option to possible loss of opportunity to realize appreciation in the
market price of the underlying instrument or to possible continued holding of an
underlying instrument which might otherwise have been sold to protect against a
decline in the market price of the underlying instrument. A covered put exposes
the Fund during the term of the option to a decline in price of the underlying
instrument. A put option sold by the Fund is covered when, among other things,
cash or short-term liquid securities are placed in a segregated account to
fulfill the obligations undertaken. The Fund may incur additional risk from
investments in written currency options if there are unanticipated movements in
the underlying currencies.
FORWARD FOREIGN CURRENCY CONTRACTS--The Fund may buy and sell forward currency
contracts to settle purchases and sales of foreign denominated securities. In
addition, the Fund may enter into forward foreign currency contracts to hedge
foreign denominated assets. The Fund may incur additional risk from investments
in forward foreign currency contracts if the counterparty is unable to fulfill
its obligations or there are unanticipated movements of the foreign currency
relative to the U.S. dollar. Realized gains and losses from forward currency
contracts are included in realized gain (loss) from foreign currency
transactions.
NOTE 2--Van Eck Associates Corporation (the "Adviser") earned fees of $219,469
for the year ended December 31, 1997 for investment management and advisory
services. The fee is based on an annual rate of .75 of 1% of the Fund's average
daily net assets. Van Eck Associates Corporation also earned fees for accounting
and administrative services in the amount of $73,156 for the year ended December
31, 1997. The fee is based on an annual rate of .25 of 1% of the Fund's average
daily net assets. For the year ended December 31, 1997, the Adviser has agreed
to assume expenses in excess of 2% of the average daily net assets of Class A
shares and 2.5% of daily average net assets for Class B shares. The Fund's
expenses were reduced by $61,769 under this agreement. Fiduciary International,
Inc., the sub-investment advisor, earned fees of $146,313 for the year ended
December 31, 1997 for investment management. The fee is based on an annual rate
of .50 of 1% of the Fund's average daily net assets and is paid by the Advisor
from the advisory fees it receives from the Fund. The Fund has a fee arrangement
based on cash balances left on deposit with the custodian, which reduced the
Fund's operating expenses by $47,853 for the year ending December 31, 1997. Van
Eck Securities Corporation received $1,726 for the year ended December 31, 1997
from commissions earned on sales of Class A shares after deducting $5,635
allowed to other dealers. In accordance with the advisory agreement, the Fund
reimbursed Van Eck Associates Corporation $10,981 for costs incurred in
connection with certain administrative and operating functions. Certain of the
officers and trustees of the Trust are officers, directors or stockholders of
Van Eck Associates Corporation and Van Eck Securities Corporation.
NOTE 3--Purchases and proceeds from sales of investments other than short-term
obligations, aggregated $21,878,904 and $26,619,514, respectively, for the year
ended December 31, 1997. For federal income tax purposes the cost of investments
owned at December 31, 1997 was $20,614,069. As of December 31, 1997 net
unrealized appreciation for federal income tax purposes aggregated $7,447,733 of
which $8,210,811 related to appreciated investments and $763,078 related to
depreciated investments.
<PAGE> 14
GLOBAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTE 4--Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund is
authorized to incur distribution expenses which will principally be payments to
securities dealers who have sold shares and service shareholder accounts and
payments to Van Eck Securities Corporation ("VESC"), the distributor, for
reimbursement of other actual promotion and distribution expenses incurred by
the distributor on behalf of the Fund. The amount paid under the Plan in any one
year is limited to .50% of average daily net assets for Class A shares, and
1.00% of average daily net assets for Class B shares (the "Annual Limitation").
Distribution expenses incurred under the Plan that have not been paid because
they exceed the Annual Limitation may be carried forward to future years and
paid by the Fund within the Annual Limitation. VESC has waived its right to
reimbursement for the carried forward amounts through December 31, 1997 in the
event the Plan is terminated, unless the Board of Trustees determines that
reimbursement of carried forward amounts is appropriate. The excess of
distribution expenses incurred over the Annual Limitation at December 31, 1997
was $724,845 for Class A shares and $399,702 for Class B shares.
NOTE 5--FORWARD FOREIGN CURRENCY CONTRACTS--The Fund may buy and sell forward
currency contracts to settle purchases and sales of foreign denominated
securities. In addition, the Fund may enter into forward currency contracts to
hedge foreign denominated assets. Realized gains and losses from forward foreign
currency contracts are included in realized loss from foreign currency
transactions. At December 31, 1997, the Fund had the following outstanding
forward foreign currency contracts all of which settled nearly 1998:
<TABLE>
<CAPTION>
VALUE AT UNREALIZED
SETTLEMENT CURRENT APPRECIATION
CONTRACTS DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY PURCHASE CONTRACTS:
AUD 282,000 expiring 3/18/98 $ 614,899 $ 606,808 $ (8,091)
CAD 1,224,000 expiring 03/19/98 862,822 858,221 (4,601)
CHF 100,275 expiring 01/12/98 70,000 68,691 (1,309)
DEM 3,079,497 expiring 02/20/98 1,745,921 1,717,312 (28,609)
DKK 162,000 expiring 01/14/98 24,217 23,667 (550)
ESP 32,486,000 expiring 02/17/98 224,506 213,391 (11,115)
FRF 581,780 expiring 02/20/98 100,000 96,868 (3,132)
GBP 84,443 expiring 1/08/98 166,816 166,311 (505)
ITL 1,534,440,000 expiring 02/20/98 887,187 867,087 (20,100)
JPY 22,267,000 expiring 01/09/98 171,946 170,989 (957)
NLG 273,994 expiring 02/20/98 140,000 135,632 (4,368)
NOK 1,580,000 expiring 01/12/98 219,445 214,455 (4,990)
FOREIGN CURRENCY SALE CONTRACTS:
ATS 3,352,000 expiring 02/23/98 277,483 266,184 11,299
AUD 650,000 expiring 03/18/98 430,375 423,887 6,488
CAD 141,205 expiring 01/20/98 100,000 98,847 1,153
CHF 369,000 expiring 01/12/98 257,250 252,774 4,476
DEM 2,623,235 expiring 02/20/98 1,516,613 1,462,873 53,740
FRF 1,478,000 expiring 02/20/98 256,153 246,093 10,060
GBP 330,000 expiring 01/08/98 552,424 544,124 8,300
ITL 1,205,437,000 expiring 02/20/98 708,560 681,173 27,387
JPY 204,662,000 expiring 01/09/98 1,572,643 1,571,609 1,034
NLG 1,189,000 expiring 02/20/98 613,424 588,574 24,850
SEK 5,231,000 expiring 02/13/98 699,799 660,129 39,670
------
$ 100,130
================
</TABLE>
The Fund may incur additional risk from investments in forward currency
contracts if the counterparty is unable to fulfill its obligation or there are
unanticipated movements of the foreign currency relative to the U.S. dollar.
NOTE 6--Shares of beneficial interest issued and redeemed (unlimited number of
$.001 par value shares authorized):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
CLASS A
Shares sold 254,371 188,315
Reinvestment of dividends 275,587 224,134
------------ ------------
529,958 412,449
Shares reacquired (511,329) (1,028,397)
------------ ------------
Net increase (decrease) 18,629 (615,948)
=============== ===============
CLASS B
Shares sold 62,268 46,481
Reinvestment of dividends 46,594 36,074
------------ ------------
108,862 82,555
Shares reacquired (96,388) (202,890)
------------ ------------
Net increase (decrease) 12,474 (120,335)
=============== ===============
</TABLE>
NOTE 7--The Fund invests in foreign securities. Investments in foreign
securities may involve a greater degree of risk than investments in domestic
securities due to political, economic or social instability. Foreign investments
may also be subject to foreign taxes and settlement delays.
The Fund will attempt to maintain an asset allocation of 60% in equity
securities and 40% in debt securities. Since the Fund may have significant
investments in foreign debt securities it may be subject to greater credit and
interest risks and greater currency fluctuations than portfolios with
significant investments in domestic debt securities.
NOTE 8--TRUSTEE DEFERRED COMPENSATION PLAN. The Trust established a Deferred
Compensation Plan (the "Plan") for trustees. Commencing January 1, 1996, the
Trustees can elect to defer receipt of their trustee fees until retirement,
disability or termination from the board. The Fund's contributions to the Plan
are limited to the amount of fees earned by the participating Trustees. The fees
otherwise payable to the participating trustees are invested in shares of the
Van Eck Funds as directed by the Trustees. If a Trustee has directed all or a
portion of his fee to be invested in the Fund, the unfunded liability remains
outstanding in the Fund's records since the Fund can not invest in itself. The
Fund has elected to show this deferred liability net of the corresponding asset
for financial statement purposes. The Plan has been approved by the Internal
Revenue Service.
As of December 31, 1997 the total liability of the Fund's portion of the Plan is
$5,251.
<PAGE> 15
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of the
Van Eck Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Global Balanced Fund (the "Fund")
(one of the series constituting the Van Eck Funds) as of December 31, 1997, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the four years in the period then ended and
for the period December 20, 1993 (commencement of operations) to December 31,
1993. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Global Balanced Fund series of the Van Eck Funds as of December 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the four years in the period then ended and for the period December
20, 1993 (commencement of operations) to December 31, 1993, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 23, 1998
<PAGE> 16
VAN ECK FAMILY OF FUNDS
GLOBAL HARD ASSETS FUND
Seeks long-term capital appreciation by investing globally, primarily in "Hard
Asset Securities." Income is a secondary consideration.
INTERNATIONAL INVESTORS GOLD FUND
Founded in 1955, this Fund is the oldest gold-oriented mutual fund in the U.S.
It invests in gold-mining shares globally and seeks long-term capital
appreciation, moderate yield and protection against monetary uncertainties.
GOLD/RESOURCES FUND
Seeking a long-term global hedge against inflation and other risks, this Fund
invests in gold-mining and natural resources companies outside South Africa.
GLOBAL REAL ESTATE FUND
This Fund seeks long-term capital appreciation by investing in equity securities
of domestic and foreign companies which are principally engaged in the real
estate industry or which own significant real estate assets.
EMERGING MARKETS GROWTH FUND
This Fund seeks long-term capital appreciation by investing primarily in equity
securities in emerging markets around the world.
ASIA DYNASTY FUND
This Fund seeks long-term capital appreciation by investing in the equity
securities of companies that are expected to benefit from the development and
growth of the economies in the Asia Region.
GLOBAL BALANCED FUND
This Fund seeks long-term capital appreciation together with current income by
investing in stocks, bonds and money market instruments worldwide.
GLOBAL INCOME FUND
This Fund seeks high total return through a flexible policy of investing
globally, primarily in debt securities.
U.S. GOVERNMENT MONEY FUND
This Fund seeks the highest safety of principal and daily liquidity by investing
in U.S. Treasury bills and repurchase agreements collateralized by U.S.
Government obligations.
VAN ECK / CHUBB FUNDS
CAPITAL APPRECIATION FUND
GLOBAL INCOME FUND
GOVERNMENT SECURITIES FUND
GROWTH AND INCOME FUND
TAX-EXEMPT FUND
TOTAL RETURN FUND
This report must be accompanied or preceded by a Van Eck Global Funds
prospectus, which includes more complete information, such as charges and
expenses and the risks associated with international investing, including
currency fluctuations or controls, expropriation, nationalization and
confiscatory taxation. For a free Van Eck Gold & Money or Van Eck/Chubb Funds
prospectus, please call the number listed below. Please read the prospectus
before investing.
[VAN ECK GLOBAL LOGO] FR 1998-0123-0057
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
www.vaneck.com
FOR ACCOUNT ASSISTANCE PLEASE CALL (800) 544-4653
DECEMBER 31, 1997
VAN ECK
GLOBAL
BALANCED
FUND
ANNUAL
REPORT
[VAN ECK GLOBAL LOGO]
